The IRS has recently provided an update on Patient-Centered Outcomes Research Institute fees, which funds the Patient-Centered Outcomes Research Institute (PCORI), a nonprofit organization funding research needed to make better-informed healthcare decisions.
The ACA created PCORI to help patients, clinicians, payers, and the public make informed health decisions by advancing comparative effectiveness research. The research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans that include health reimbursement arrangements (HRAs) and some other health plan types that do not qualify as excepted benefits. The PCORI fees were scheduled to expire for policy or plan years ending on or after Oct. 1, 2019, but under a new law enacted at the end of 2019, PCORI fees have been extended and will now apply for the 2020-2029 fiscal years.
PCORI fees are considered an excise tax and are calculated based on the average number of lives covered PCORI fees apply to:
- Self-insured plans
- Health Reimbursement Arrangement (HRA) plans that are not an excepted benefit (Employer contribution is greater than $500) – or an excepted benefit if it only reimburses for limited-scope dental and vision expenses or long-term care coverage and is not integrated with a group health plan.
- Health Flexible Spending Account (FSA) plans that are not an excepted benefit (plans are excepted if employer contributions are greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
Fees for fully insured major medical coverage will be paid by the insurance carrier, whereas fees for Health Reimbursement Arrangements (HRA’s), some Flexible Spending Accounts (FSA’s), and self-funded major medical coverage must be paid by the employer.
The IRS recently released the new fee rate and the revised Form 720 that insurers and sponsors of self-insured plans will use. The fee for plans ending between January 2020 and September 2020 will be $2.54, a 9-cent increase over previous fees, and files must be returned no later than July 31, 2021, using Tax Form 720. The IRS has also confirmed health insurers and self-insured health plan sponsors can deduct PCORI fees as ordinary and necessary business expenses.
For many of our HR clients, Insource Services will complete the PCORI filing. If you would like assistance or have any questions about completing your application, email us at firstname.lastname@example.org or call us on (781) 235-1490.