Despite Delay Other PPACA Provisions Move Forward, PCORI Fees Due July 31

While the delay of the play-or-pay mandate and employer reporting requirements about coverage offered to workers takes much of the pressure off employers for 2014, other provisions of the Patient Protection and Affordable Care Act (PPACA) are moving forward. 

The Internal Revenue Service has released revised Form 720 with instructions for health insurers and sponsors of self-insured health plans to use to comply with the provision that establishes and funds the Patient-Centered Outcomes Research Institute (PCORI). Health insurers and self-insured plan sponsors must pay the first PCORI fees by July 31, 2013 using this form.

PCORI  is an independent, non-profit organization charged with “evaluating and comparing health outcomes and the clinical effectiveness, risks, and benefits of medical treatments, services, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.” PCORI will be funded by a fee on health insurers and sponsors of self-insured plans. The fee is $1 per covered life for plan years that ended after September 30, 2012 and before October 1, 2013. The fee increases to $2 per covered life for plan years that will end between October 1, 2013 and September 30, 2014. For plans that end after that date, the fee will rise based upon projected increases in national health expenditures. The fee will stop being collected for plan years that end after September 30, 2019.

Insurers and sponsors of self-insured plans must calculate how many covered lives are under their plans to determine the applicable fee. Federal regulations have been issued to assist employers with this calculation. Issuers of specified health insurance policies can choose from four calculation methods: 1) Actual count method, 2) Snapshot method, 3) Member Months method, and 4) State Form method. Sponsors of self-insured plans can choose from: 1) Actual count method, 2) Snapshot method, and 3) Form 5500 method.

For more on PCORI fees, visit MSEC’s Health Care Reform Learning Zone, and click here to view a Q&A from the IRS.