Tuesday, July 29, 2014

PCORI Fees Due July 31

Recently there has been discussion on our Google Group about the requirement under the Affordable Care Act (ACA) for certain entities to pay the PCORI trust fees. This is the second year that the fees have been required.

The PCORI fee, which must be paid for "lives insured" under health plans, is due on Thursday, July 31. The question is, are religious institutes exempt under the provision that allows them to not count members as employees under the employer mandate piece of the ACA? The answer is not clear.

Earlier this year, the IRS issued the final regulations on the employer mandate provisions of the ACA. Therein the IRS gave the option for religious institutes to not count their members as employees for purposes of determining whether the religious institute meets the threshold for falling under the employer mandate (at least 50 employees).

Because that provision specifically deals with counting members for purposes of determining application of the employer mandate, it cannot necessarily be applied to all section of the ACA. The PCORI fee is a different section of the ACA, and it is quite possible the exception does not "translate over" since the exception deals with (not) counting the numbers of hours worked by members. In addition even if the exception could be said to apply, it is not clear that it would exempt religious institutes from the PCORI fee. That is because the PCORI fee is not tied to hours worked, but rather to actual lives covered by a plan, regardless of employment.

If you are liable for the fee, you must use IRS Form 720 to pay it for all "lives insured." This means that if your employees have plans that cover dependents, the fee must be paid for those family members (as "lives insured"). Likewise, if  your members are self-insured and you have a third party administrator for that plan, then you could be required to pay the PCORI fee for your members also. If you have an insurance company, most likely they are paying this fee from the premiums that you pay to them. Make sure to clarify this with the insurer. Note also that if you have health reimbursement accounts (HRA) set up for your employees in addition to an insurance plan, the PCORI fee is due for each of these HRAs also.

This chart on the IRS website might help: http://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements. There is a PCORI fee due on each life covered by the HRA in addition to the fee on each fully-insured plan. In essence the same “life” causes the fee to be paid twice if there are two different coverage arrangements on that one life.

For more on the method for determining the average number of lives covered, go to the IRS website at http://www.irs.gov/uac/Newsroom/Patient-Centered-Outcomes-Research-Institute-Fee, under the heading "Calculating the Fee." 

Instructions for IRS Form 720 (which you use to pay the fee) includes an explanation of the fee starting on page 8 (http://www.irs.gov/pub/irs-pdf/i720.pdf). There is also information at http://www.irs.gov/uac/Application-of-the-Patient-Centered-Outcomes-Research-Trust-Fund-Fee-to-Common-Types-of-Health-Coverage-or-Arrangements.The fee can be paid electronically through the EFTPS (http://www.irs.gov/uac/Patient-Centered-Outcomes-Research-Trust-Fund-Fee:-Questions-and-Answers).

At this point in time RCRI has not taken a definitive position on this issue. If you conclude that you will not pay the fee, you should be prepared to back up the decision with a legal opinion from experts on the ACA.

Whatever you and your legal counsel decide to do after examining your own situation, be aware that you should discuss whether your decision will have repercussions with regard to the “reinsurance fee” that kicks in this November. That fee is $63 per member per year and will be imposed by the Department for Health and Human Services rather than the IRS. (See, e.g., the explanation at http://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/proposed-2015-payment-notice.html.) Another webpage that may help in keeping straight the difference between the PCORI fee and the reinsurance fee is http://www.shrm.org/hrdisciplines/benefits/articles/pages/pcori-reinsurance-fees.aspx.

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