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Jun 2013
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June 28, 2013

PCORI FEES: Who Pays and Should Plans Be Amended?


Starting this July, many insurers and employers will have to begin paying fees to fund the Patient Centered Outcomes Research Institute (PCORI fees). For employer-sponsored group health plans, who pays the fees will vary depending on whether the plan offers insured or self-insured benefits (or both), and even on how many employers are participating in the plan. If your company sponsors a plan with multiple participating employers, you may want to amend your plan before July 31 to designate which entity is responsible for submitting these payments.

Employer-sponsored group health plans with plan years that ended between October 1 and December 31, 2012, will have to submit the first year’s fees by July 31, 2013 using IRS Form 720; all other plans can wait until July 31, 2014. For the first year, the PCORI fees are $1 per covered life, and then increase to $2 in the second year (and may be adjusted for inflation annually) until the fees expire. Plans are required to pay the PCORI fees for a total of seven plan years. These fees are deductible business expenses, according to the IRS.

Impacted plans

PCORI fees only apply to certain “specified health insurance” policies and plans, including retiree-only coverage and COBRA coverage. The fee does not apply to the following types of policies or plans:
 
  • “Excepted benefits," defined under HIPAA, such as stand-alone vision or dental plans
  • Most employee assistance programs, disease management or wellness programs
  • Health FSA plans that meet the excepted benefits test
  • Limited-purpose HRAs that qualify as excepted benefits
  • Expatriate coverage
  • Stop-loss policies, where the issuer is liable for all losses in excess of a specified amount and where the plan sponsor retains its liability for losses
  • Indemnity reinsurance policies, where the reinsuring company accepts all or part of the risk of loss under the policy and the issuing company retains its liability for covered lives
  • Medicare
  • Medicaid
  • CHIP
  • TRICARE
  • Non-insurance health programs for members (spouses or dependents) of the Armed Forces or veterans
  • Federally recognized Indian Health Services and programs under the Indian Health Care Improvement Act
Insured benefits

If an employer-sponsored group health plan provides insured coverage, then the insurer is responsible for paying the fee based on the total number of lives covered by the plan. We’ve heard that some insurers will cover the fees for the first year, but then plan to pass the fees through to the plan sponsor in subsequent years.

Self-insured benefits

If an employer-sponsored group health plan offers self-insured benefits (or a mix of insured and self-insured benefits), the plan will have to pay a fee for those who participate in the self-insured benefit programs. There is no set-off for fees paid by an insurer, so if an employee participates in insured coverage (for example, HMO medical coverage) and a self-insured program (for example, a general-purpose HRA or a self-insured prescription-drug program), both the insurer and the employer will end up paying a fee for that same employee and his or her covered dependents. But where the plan offers multiple self-insured benefits, the plan can treat all benefit programs with the same plan year as one plan and only count the number of lives collectively covered by these programs. Also, a self-insured plan does not have to include in its count individuals who are covered only under an insured program.

Plans with more than one participating employer

In cases where multiple employers participate in a plan, the regulations may require each participating employer to separately file and pay the fees for its own employees and their covered dependents where the plan does not clearly designate a single plan sponsor or an employer who will be treated as the plan sponsor for purposes of paying the fees. However, the plan can be amended to designate a single plan sponsor responsible for filing and paying the fee on behalf of the plan, as long as the amendment is adopted by the filing deadline (July 31, 2013 for plans that must file this year).

If you need help amending your plan, calculating the number of covered lives, or addressing any other issues pertaining to PCORI fees or Health Care Reform, please contact Norbert  Kugele (616.752.2186 or nkugele@wnj.com), April Goff (616.752.2154 or agoff@wnj.com) or any other member of the Warner Norcross & Judd Employee Benefits Group.

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