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Person putting money into a piggy bank: PCORI fees and what you need to know

PCORI Fees & What You Need to Know

The Patient-Centered Outcomes Research Trust Fund (PCORTF) fee is a cost charged to those who issue specific health insurance policies and to those who are plan sponsors of qualifying self-insured healthcare plans. It is the main fee that helps to fund the Patient-Centered Outcomes Research Institute (PCORI).

The funds from those fee payments benefit the nonprofit PCORI group in their study of the healthcare world and in finding ways to help consumers make better healthcare decisions by providing them with access to relevant information.

In 2019, these fees were set to expire legally, but they were renewed for another decade and will now be upheld through 2029. Let’s dive into the specifics of this fee, the extension, how it may be calculated moving forward, and how you may report and pay your fee.

Ten-Year PCORTF Extension in Effect

In December of 2019, an extension submitted on the Further Consolidated Appropriations Act was passed into law requiring the PCORTF to be charged to applicable parties through 2029. The fee must only be reported once per year–typically in the second quarter–and must be paid no later than July 31st of the current year.

This fee only influences policies and plans that end on or after October 1, 2012, and before October 1, 2029.

Calculating Your PCORTF Fees

When it comes to your PCORTF fees, the way they are calculated is related specifically to the average number of lives that are covered under qualifying healthcare policies. For specified health insurance policies, there are a few basic methods health insurance policy issuers may choose from when they’re determining their policy’s average number of covered lives including the actual count method, the snapshot method, the member months method, and the state form method.

Applicable self-insured health plans must calculate the same average number of lives covered under the plan type, but they are limited to three different calculation methods: the actual count method, the snapshot method, and the Form 5500 method.

Additionally, for policies that end between October 1, 2019, and October 1, 2020, issuers are allowed to use any reasonable method they want to calculate their average number of covered lives. But once they choose a method, they must stick with it consistently for the duration of that policy year and apply it to all of their policies that have liability reported on Form 720 in the same year.

Let’s take a quick look at a few of the most popular method types to better understand how they work.

Actual Count Method

This method may be one of the most time-consuming and painstaking as it requires plan sponsors to count every individual life covered by their plans and then divide that number by the number of days in the plan year.

Snapshot Method

This faster method only requires policy sponsors to choose a day or two at random from each quarter and add up those lives to divide them by the number of days you counted. However, if you choose two days in the first quarter, you must follow suit in the remaining three to maintain consistency.

Additionally, note that plan sponsors may also follow the snapshot method if they choose to count their actual number of plan participants who have individual coverage and then add 2.35 times the number of their participants who do not have individual coverage plans.

Form 5500 Method

This method requires sponsors who offer only individual coverage to calculate the total number of policy members at the beginning and end of the policy term and divide that number in half to find the appropriate number. The number determined in the end must be reported on a Form 5500 rather than a Form 720, but the due date of July 31st will be the same with no room for extensions.

How to Report and Pay Your Fees

As mentioned earlier, you are required to file a form 720 in the second quarter to report your numbers, and then you must pay the resulting fee no later than July 31st of the current calendar year. This fee only covers the previous policy year, not the upcoming one, so it’s important to pay off these fees in a timely fashion every year.

If you are an issuer or plan sponsor who is required to pay the PCORTF but isn’t required to report other liabilities on Form 720, then you only have to worry about paying these fees and filing 720s once a year. However, if you have additional liabilities, you may be required to file appropriate forms quarterly.

Upgrade Your Policy Today

We hope you found this guide to PCORI fees helpful. At Beckham Insurance Group, we understand that a lot goes into choosing the best healthcare coverage for your employees. If you’re curious about switching plans so that you and your employees can make the most of their coverage, contact us today for a free quote!