Effective for plan years ending on or after 10/1/12 and before 10/1/29 (e.g., beginning with 2012 plan year for calendar year plans), health insurance issuers and plan sponsors of self-funded health plans are required to pay an excise tax to fund the Patient Centered Outcomes Research Institute – often referred to as the “PCORI fee.” The fee is calculated based on the average
number of lives covered under the plan (including employees, dependents, COBRA participants, and covered retirees) and is due by July 31 following the end of each applicable year.
Health reimbursement arrangements (HRAs) are considered self-funded health plans and are subject to the PCORI fee. However, special rules apply to HRAs for purposes of calculating the PCORI fee:
- If the plan sponsor also maintains a self-funded medical plan with the same plan year, the medical plan and HRA may be treated as one plan for purposes of the PCORI fee. However, if the medical plan is fullyinsured, the medical plan and HRA must be treated as separate plans for purposes of the PCORI fee, with the insurer paying the fee for the medical plan and the
employer/plan sponsor paying the fee for the HRA.
- For purposes of counting covered lives for HRAs, only employees need to be counted; spouses/dependents are not included. There are multiple methods available to determine the fee for HRAs that must be treated as separate plans from a fully-insured medical plan, which we’ll go into below.
Methods for Determining the Fee
The following information is intended ONLY for HRAs that must be treated as seperate plans from a fully-insured medical plan. *
Below is a worksheet outlining the calculation methods available under the PCORI fee final regulations,** modified as applicable for HRAs that must be treated as separate plans from a fully-insured medical plan. HRA plan sponsors must choose one method to be used for the entire plan year; however, a different method may be chosen for subsequent plan years.
For plan years beginning before 7/11/12 and ending on or after 10/1/12, the average number of covered employees for purposes of the PCORI fee may be determined using “any reasonable method.” Otherwise, one of the following methods must be used: (1) the Actual Count Method, (2) the Snapshot Method or (3) the Form 5500 Method.
* Use the PCORI Fee for Self-Funded Plans worksheet to calculate the PCORI fee for self-funded plans and HRAs that may be treated as a single plan.
** Starting in 2014, health insurance issuers and plan sponsors of self-funded plans must also make contributions to a temporary reinsurance program, which will also be based on the number of covered lives. Proposed regulations indicate that the methods to calculate the temporary reinsurance program fee will be
similar to those required for the PCORI fee. Different methods may be used to determine the PCORI fee and the temporary reinsurance program fee. HRAs that are integrated with self-funded or fully-insured medical coverage are not subject to the temporary reinsurance program fee.