In December 2019, a federal spending bill reinstated the Patient-Centered Outcomes Research Institute (PCORI) fee that was set to expire, as such the PCORI fee has been reinstated through 2029. The PCORI fee is a fee on health insurance issuers and plan sponsors of applicable self-insured health plans that is used to help fund the PCORI’s research to assist patients, and those who care for them, in making better-informed decisions about their healthcare.
Given the reinstatement of the fee, the Internal Revenue Service (IRS) issued Notice 2020-44 that details the applicable fee increase for plan years ending on or after October 1, 2019, and before October 1, 2020, from $2.45 to $2.54. Notice 2020-44 also provides transition relief which allows employers to use any reasonable method to determine the average number of covered lives within a 12-month period and the discretion to utilize one of three defined calculation methodologies: :
- Actual Count Method: For policy years that end on or after October 1, 2019, issuers using the actual count method may begin counting lives covered under a policy as
May 14, 2019, rather than the first day of the policy year, and divide by the appropriate number of days remaining in the policy year.
- Snapshot Method: For policy years that end on or after October 1, 2019, but began before May 14, 2018, issuers using the snapshot method may use counts from the quarters beginning on or after May 14, 2018 to determine the average number of lives covered under the policy.
- Member Months and State Form Method: The member months data and the data reported on state forms are based on the calendar year. To adjust for 2019, issuers will use a pro rata approach for calculating the average number of lives covered using the member months method or the state form method for 2019. For example, the issuers using the member months number for 2019 will divide the member months number by 12 and multiply the resulting number by one quarter to arrive at the average number of lives covered for October through December 2019.
The PCORI fee filing deadline for plan years ending on or after October 1, 2019 is July 31, 2020 and must be filed using Form 720. Employers that fail to file and make the required payment by the due date will be charged interest on any unpaid balance and may also be subject to failure-to-file and failure-to-pay penalties.
Contact your Cowden representative for more information on this or other compliance issues.