(by Andres Rojas)
Have you ever wondered who funds healthcare research in America? Well, the answer is: we all do.
Thanks to PCORI, Americans can have reliable information they can use to make informed healthcare decisions. Healthcare providers, policymakers, and Medicare all take the institute’s research into account when deciding what therapies they’ll cover.
But what is PCORI, and how does it affect your business? In this article, we’ll address basic questions about patient-centered medical research that all employers should know.
What Is PCORI?
The PCORI, or Patient-Centered Outcomes Research Institute, is an independent research organization created by the 2010 Affordable Care Act.
PCORI compares multiple treatment options to give patients, doctors, and healthcare providers the information they need to make an informed decision.
The institute’s research focuses on answering questions raised by patients and doctors. PCORI’s programs do this by evaluating the clinical effectiveness of different treatment options and assessing disparities in healthcare delivery according to race, gender, age, etc.
The resulting evidence is used to improve the efficiency of the healthcare system and save patients excess costs.
How Does PCORI Work?
PCORI is funded by the Patient-Centered Outcomes Research Trust Fund (PCORTF), which has two income sources: the U.S. Department of the Treasury and a small fee levied on health insurance providers and eligible self-insurance plan sponsors.
The money is used to fund clinical effectiveness studies through the National Patient-Centered Clinical Research Network (PCORnet) – a nationwide network of research clinics modeled after PCORI.
How Does PCORI Affect Employers?
A good amount of the institute’s income comes from plan sponsors who must pay a small fee every year – $2.66, as of January 2021 – for every person covered in a group plan.
Each year, employers who are plan sponsors must pay this fee to the IRS on July 31. PCORI’s regulations don’t specify any penalties for filing or paying the fees late. However, since the PCORI fee is an excise tax, not filing or paying it on time might make plan sponsors subject to penalties by the IRS.
What Are the PCORI 2021 Fees?
The PCORI fee is a tax-deductible contribution that plan sponsors must make to the IRS every year. The money is used to fund the PCORI’s research programs, which in turn help improve the healthcare system.
Each year, employers sponsoring group plans must pay this fee for every employee, retiree, and dependent enrolled in their health plan. As of 2021, the fee stands at $2.66 for plans that end on or after October 1 2020 and before October 1 2021.
Who Has to Pay PCORI Fees?
The fee must be paid by insurance carriers and plan sponsors. If a company sponsors a self-funded group health plan, like an HRA, then they are responsible for filing and paying the PCORI fees for their workers.
However, if multiple employers share a single plan, each of them must file and pay their fees separately unless one of them is the designated plan sponsor.
Who Doesn’t Have to Pay PCORI Fees?
The fees apply to any employer sponsoring a medical plan. The statutes only make exemptions for:
- Federal health programs like Medicare.
- Policies covering excepted benefits, like vision or dental care, that aren’t covered by ACA.
- Some types of flexible spending arrangements.
For more details about PCORI exemptions, read the IRS’s questions and answers page.
Do PCORI Fees Apply to Short-Term Health Plans?
Yes, any employer-sponsored plan that covers medical costs is subject to this fee – this includes short-term health plans running for less than 12 months. Likewise, the due date for short-term plans is also the same (July 31) as for 12-month plans.
How Do You Calculate Your PCORI Fees?
Since carriers include the fees as part of your fully-insured plan’s premiums, you only have to pay PCORI fees if you sponsor a self-insured plan. Furthermore, if any of your covered lives are enrolled in more than one of your plans, you only need to count them once.
To calculate your fee, you must take the total number of covered lives in your plan – this includes employees, dependents, covered retirees, and COBRA members – and use any of the following methods.
Actual Count method
Count the lives covered on each day of the plan year and then divide that between the total number of days in your plan year.
To calculate your fees with the Snapshot method, follow this steps:
- Choose at least one day from each calendar quarter (they must be the same dates across all quarters).
- Count the number of lives with self-insured coverage on those dates.
- Count the number of lives without self-insured coverage on the same dates and then multiply the number by 2.35.
- Add both tallies together (self-insured and not self-insured) and divide that number by the number of days you used.
Members Month method
Using this method, the average number of lives covered under your plan are equal to the number of member months reported on the NAIC Supplemental Health Care Exhibit report you filed for that calendar year divided by 12.
Form 5500 method
Count the number of people covered by the plan at the beginning and end of the plan year – only applies to employers who filed a Form 5500 for the plan year.
What Form Is Used to Pay PCORI Fees?
Form 720 is the quarterly excise tax return form used to file and pay the PCORI fee. You must submit this form on July 31 of the year following the last day of the policy year or plan year.
Do you still have questions about PCORI? Then contact Zupnick and Associates, and let our knowledgeable staff clear away your doubts.