Over the past few months we have received several questions on what role a Third Party Administrator will play when it comes to PCORI Trust Fund Fee. This communication will summarize what PCORI entails, associated fees, Mid-American Benefits, Inc. role, and timeframes.

Employers with effective dates of November 1, 2012, December 1, 2012, and January 1, 2013 must have their PCORI fees paid by July 31, 2013. Effective dates starting February 1, 2013 – October 1, 2013 have until July 31, 2014 to pay the PCORI fees.

What is the Patient-Centered Outcomes Research Trust Fund fee?
The Patient-Centered Outcomes Research Trust Fund fee is a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI). The institute will assist, through research, patients, clinicians, purchasers and policy-makers, in making informed health decisions by advancing the quality and relevance of evidence-based medicine. The institute will compile and distribute comparative clinical effectiveness research findings.

Which plans are subject to the fees?
Fully-insured and self-funded group health and accident plans are subject to the fees, with some exceptions as well as individual fully-insured policies.

When are the fees effective?
The regulations are effective immediately and will apply when employers determine the PCORI Fee for the current plan year. The first PCORI Fee applies to the first plan year which ends on or after October 1, 2012. For example, a calendar year plan will end on December 31, 2012. The PCORI Fee must be paid by July 31 of the year following the last day of the policy or plan year. Thus, a calendar year plan must pay its first PCORI Fee by July 31, 2013.

Employers with effective dates of November 1, 2012, December 1, 2012, and January 1, 2013 must have their PCORI fees paid by July 31, 2013. Effective dates starting February 1, 2013 – October 1, 2013 have until July 31, 2014 to pay the PCORI fees.

How much is the PCORI fee?

  • 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 the year.
  •  For policy and plan years ending after Sept. 30, 2012, and before Oct. 1, 2013, the applicable dollar amount is $1.
  • For policy and plan years ending after Sept. 30, 2013, and before Oct.1, 2014, the applicable dollar amount is $2.
  •  For policy and plan years beginning on or after Oct. 1, 2014, and before Oct. 1, 2019, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

Who is responsible for reporting and paying the PCORI fee?
For fully-insured annual conference plans, insurers will file reports and pay the PCORI Fees. However, plan sponsors of self-insured (self-funded) plans must do these tasks themselves and cannot delegate this work to third parties or vendors.

How are plans and policies defined for purposes of the fee?
The final regulations define an applicable self-funded plan as a plan that provides accident and health coverage and is established or maintained: A) By one or more employers for the benefit of their employees or former employees; B) By one or more employee organizations for the benefit of their members or former members; C) Jointly by one or more employers and one or more employee organizations for the benefit of employees or former employees; D) By a voluntary employees’ beneficiary association, as described in section 501(c)(9); E) By an organization described in section 501(c)(6); or F) By a multiple employer welfare arrangement (as defined in section 3(40) of ERISA), a rural electric cooperative, or a rural cooperative association.

Who is liable for the fee?
For a self-funded plan, the plan sponsor is the entity responsible for the payment of the fee. For multiemployer plans, the joint board of trustees is the plan sponsor.  For a MEWA, the committee is the plan sponsor.

For a fully-insured plan, the insurer is responsible for paying the fee.

Stop-loss policies are not subject to the fee.

How is the fee calculated?
The PCORI fee for the first year is $1 multiplied by the average number of covered individuals. For the second through seventh years, the fee rises to $2 multiplied by the average number of covered participants.

Plans have several methods available to calculate the average number of covered individuals. For the first year, the regulations permit the plan to use any reasonable method for this calculation. For all other years, plans may pick one of the following methods:

  1. Actual count: The plan would count the total covered individuals for each day of the year and divide that number by the total number of days in the plan year.
  2. Snapshot Method: The plan would count the number of covered employees on one date each quarter of the plan year and divide by four.
  3. Snapshot Factor Method: The plan would count the number of covered employees plus 2.35, multiplied by the number of covered employees that also have at least one covered family member, and divide that number by four.
  4. Form 5500 Method: For plans that offer single coverage, the plan would add the number of participants recorded on Form 5500 for the start and end of the plan year and divide by two. If the plan offers coverage beyond self-only, then the plan would make the same calculation, but would not divide the number of participants by two.

Are dental and vision plans subject to the fees?
Dental and vision plans are not subject to the PCORI fees.

Are HRAs subject to the fees?
If a plan sponsor provides a health reimbursement arrangement (HRA) and a major medical self-funded plan that have the same plan year, the HRA and the major medical plan may be treated as one plan.  The HRA would not be subject to a separate fee.  The HRA and the major medical plan need not be consolidated into one plan document.

Plan sponsors providing HRAs and a fully-insured group health plan are given different treatment.

Section 4375 imposes a separate fee on the issuer of a health insurance policy. An HRA that is offered along with an insured group health plan is subject to a fee, as well as the insurer of the group health plan, even though the HRA and the insured group health plan are maintained by the same plan sponsor. The regulations do not permit a plan sponsor to treat the HRA and a fully-insured plan as a single plan for purposes of the PCORI fee.

If the only plan maintained by the plan sponsor is a HRA, then the plan sponsor may treat each participant’s HRA as covering a single life (therefore the plan sponsor is not required to include any dependents as covered lives).

What PCORI Services are offered by Mid-American Benefits, Inc.?
The services that Mid-American Benefits, Inc. will be offering associated with PCORI will be the Review and Fee Calculation. The regulation clearly states that the filing and reporting of PCORI cannot be outsourced to a Third Party; therefore this will not be part of that service.

Mid-American Benefits, Inc. will provide services for the following:

  • PCORI Fee Review and Calculation (utilizing two of the calculation methods)

If you would like assistance with this piece of the process the following fees will apply:

  • Onetime Annual Fee of $275.00

If we don’t hear from you by July 9, 2013 we will assume that you will not need our assistance in the PCORI fee review and calculation process.

The Mid-American Benefits, Inc. Team