Fees Due from Employers of Self-Funded Health Insurance Plans 

by RaeAnne Marsh


July 31 is the upcoming deadline for insurers and sponsors of self-insurance health plans to pay the annual Patient-Centered Outcomes Research Trust Fund fees (usually referred to as PCORI fees for the Patient-Centered Outcomes Research Institute they fund). Fees are due for plan years that end on or between October 1, 2013 and September 30, 2014, inclusive. They are imposed on both the issuer of specified health insurance policies and the sponsor of applicable self-insurance plans, and apply to even tax-exempt organizations. “I think the PCORI fee may take some employers by surprise,” says Chris P. Scherzer, benefits practice leader with Brown & Brown Insurance of AZ, Inc. “With many clients transitioning from fully insured to self-funded health plans, they may not realize this fee is due at the end of July. In a fully insured arrangement, the carrier pays this fee on their behalf. In a self-funded program, the employer needs to pay this fee directly to the IRS on form 720.”

The PCORI fees are part of the Patient Protection and Affordable Care Act, which created the research institute to help patients, clinicians, health insurance purchasers and policymakers make informed decisions on healthcare by advancing both the quality and the relevance of evidence-based medicine. Funding for the trust fund supporting the research institute went into effect on health insurance policies with policy years ending after September 30, 2012 and will continue through policy years ending before October 1, 2019.

According to the government website, the amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year, multiplied by the applicable dollar amount for that year, which for the current payment period is $2. The “number of lives” is determined by actual count or from calculations using either the number of lives covered on a specified date or on the Annual Return/Report of Small Employee Benefit Plan (Form 5500, standard or short form). Generally, everyone is counted who has coverage during the policy year, including dependent children and former employees who receive COBRA (Consolidated Omnibus Budget Reconciliation Act) benefits.

This is a once-yearly assessment, although it is filed on Form 720, the Quarterly Federal Excise Tax Return, and payment is due at the same time as the Form 720.

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