Under the Patient Protection and Affordable Care Act (PPACA), certain types of health insurance arrangements are required to pay a special fee. This fee is called the Comparative Effectiveness Research Fee, also referred to as the PCORI fee, and it will be used to help fund the Patient-Centered Outcomes Research Institute. The types of arrangements subject to this fee include:
- Fully insured medical plans
- Self-insured medical plans
- Employer plans sponsored by private, government, churches, and not-for-profit organizations
- Individuals on a temporary U.S. visa who reside in the U.S.
- Retiree only plans
- Health Reimbursement Accounts (HRAs)
- Certain Flexible Spending Accounts (FSAs), if the employer contribution is greater than $500 and is more than the employee contribution
The PCORI fee is reported and remitted to the IRS through Form 720. The 2016 fees are detailed below:
The PCORI fee is based on the average number of covered lives during the plan year. Covered lives include covered employees of the plan sponsor and all other covered dependents. The IRS has prescribed four methods for counting average number of employees.
In fully insured arrangements, insurance companies are required to pay the fee and file Form 720. Self-insured plan sponsors are also required to both pay the fee and submit Form 720. Unlike other aspects of the Act, the PCORI fee requirement is applicable to all affected plans regardless of the employer’s size. Furthermore, the Department of Labor has indicated that the fee must be paid by the employer and not from plan assets.