Effective Outcomes become a very important part of a company’s strategy to be profitable and continue to grow. The Health Industry constantly struggles with the best way to keep outcomes high. The Affordable Care Act has a section of the law that established a way to begin to study effective outcomes. Wouldn’t it be nice to have all doctors, hospitals and providers be able to have access to consistent data to keep medical outcomes at its highest? The PCORI Fee started in 2012 to help accomplish this goal.
Initially the PCORI fee was supposed to end in 2020. However, in December of 2019 the Consolidated Appropriations Act of 2020 extended the fee to continue to be collected. The fee is collected annually from all Medical Insurance Plans. Employers will need to evaluate again this year if they will need to file this fee.
What is the timing to pay the fee?
Usually, the fee is due on July 31, but this year it was moved to August 2. Generally, you will pay for the plan year after it ends, on the following July 31 deadline. Example: Your plan is effective July 1, 2019, and ends June 30, 2020, you will file this plan year PCORI fee before August 2, 2021. Here is a chart you can use to figure out how much to pay, and for which time-period:
Which members does it apply to?
The fee is generally paid by the carrier for Fully Insured Plans. Employers that are Level Funded or Self-Funded will need to file this fee. The fee is paid per covered life per year. Employees, retirees, COBRA participants, spouses and children that are on the plan will be counted.
How do I calculate the fee?
Employers need to calculate the number of members on their plan for the given plan year. It will be the average number, calculated in one of many suggested ways. Employers can use one of these methods, or “any reasonable method” to calculate. Many Carriers and TPA’s have reports available for employers to assist. Also, many payroll providers now have calculation methods that are automated. You should start with your carrier and payroll provider 1st to see if these reports are available to you.
Here are the IRS Suggested Methods. Click the UBA FAQ link below to see a description of these methods:
· Actual Count Method
· Snapshot Method
· Snapshot Factor Method
· Form 5500 Method
How do I pay the Fee?
Employers should use IRS Form 720, which is a general use form. You only need to fill out the relevant parts of the form. Fill out the beginning of the form, Part II line 133, Part III items 3 and 10, and signature line.