PCORI Fee Amount Adjusted for 2020
The Affordable Care Act (ACA) imposes a fee on health insurance issuers and self-insured plan sponsors in order to fund comparative effectiveness research. These fees are widely known as Patient-Centered Outcomes Research Institute (PCORI) fees and were originally scheduled to expire for plan or policy years ending on or after Oct. 1, 2019. However, a federal spending bill enacted at the end of 2019 extended the PCORI fees for an additional 10 years. As a result, on June 8, 2020, the Internal Revenue Service (IRS) issued Notice 2020-44, which increases the PCORI fee amount for plan years ending on or after Oct. 1, 2019, and before Oct. 1, 2020, to $2.54 multiplied by the average number of lives covered under the plan. It also provides transition relief for calculating the average number of lives covered under the plan or policy (which is what the PCORI fee is based on).
Because of the anticipated termination of the PCORI fee prior to its extension, issuers and plan sponsors may not have anticipated the need to identify the number of covered lives for plan years ending on or after Oct. 1, 2019, and before Oct. 1, 2020. Thus, IRS Notice 2020-44 provides transition relief for this period. Specifically, issuers and plan sponsors may use any reasonable method for calculating the average number of covered lives for this period, in addition to existing methods, so long as it is applied consistently for the duration of the plan year.
The new amounts and due dates by plan year end-date are:
|Policy or Plan Ending Date in Month of:||File Return no Later Than:||Applicable Rate|
|Jan. 2019||July 31, 2020||$2.45|
|Feb. 2019||July 31, 2020||$2.45|
|Mar. 2019||July 31, 2020||$2.45|
|April 2019||July 31, 2020||$2.45|
|May 2019||July 31, 2020||$2.45|
|June 2019||July 31, 2020||$2.45|
|July 2019||July 31, 2020||$2.45|
|Aug. 2019||July 31, 2020||$2.45|
|Sept. 2019||July 31, 2020||$2.45|
|Oct. 2019||July 31, 2020||$2.54|
|Nov. 2019||July 31, 2020||$2.54|
|Dec. 2019||July 31, 2020||$2.54|
Also, please remember that the wording on the fee date is based upon a plan year’s end-date, not the start date as most employers normally use (i.e., a plan that renewed on Jan. 1, 2020, technically ended its previous year on Dec. 31, 2019, and it would owe a fee of $2.54 based upon the row for Dec. 2019 above). Also, because it’s based on a plan’s end-date, any plan that was started in calendar year 2019 in any other month than January would not have had a plan that ended in 2019, so it would not owe any PCORI fees until July of 2021.
PCORI fees are required to be paid annually on IRS Form 720 by July 31 of each year. For plans ending in 2019, the next PCORI fee payment will be due July 31, 2020. Form 720 has not yet been updated for plan years ending on or after Oct. 1, 2019. Click here for additional information on reporting and paying PCORI fees.
IRS Proposes Regulations on Direct Primary Care, Other Medical Arrangements
The IRS has issued proposed regulations regarding the treatment under Code § 213 of amounts paid for direct primary care arrangements, health care sharing ministries and certain other medical care arrangements. Here are highlights:
- Direct Primary Care Arrangements. The proposed regulations define a direct primary care arrangement as a contract between an individual and one or more primary care physicians to provide medical care for a fixed annual or periodic fee without billing a third party. Generally, these payments would be medical care expenses under Code § 213(d) and thus could be reimbursed by an HRA. The preamble cautions that individuals covered by direct primary care arrangements are generally not eligible to contribute to an HSA, and if the employer pays the fee for the arrangement, the payment arrangement will be a group health plan that potentially disqualifies the individual from making HSA contributions.
- Health Care Sharing Ministries. A health care sharing ministry (HCSM) is an organization that meets specified requirements, such as that its members share a common set of ethical or religious beliefs and share medical expenses among members in accordance with those beliefs. Payments for membership in HCSM that share expenses for medical care would be treated as payments for medical insurance. While such payments could be reimbursed by an HRA, membership would preclude an individual from contributing to an HSA.
While employers and administrators may welcome this guidance — which was issued in response to a 2019 executive order — comments have been requested on a variety of issues and are due by Aug. 10, 2020. Of particular note, health FSAs are not mentioned in the proposal. However, they would seem to be prohibited from reimbursing amounts paid for direct primary care arrangements or HCSMs to the extent these expenses are treated as payments for insurance. Further, while an HRA might reimburse direct primary care expenses, care should be taken to ensure that the arrangement does not otherwise fail to comply with health care reform mandates and requirements. Finally, employers that wish to reimburse for coverage under a HCSM must use caution, as a QSEHRA offered by a small employer requires an individual provide proof of Minimum Essential Coverage — which HCSMs generally do not provide — and large employers subject to the ACA ALEs (Applicable Large Employers) that wish to offer an ICHRA are required to offer Minimum Essential Coverage or face penalties under the ACA.