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The health reform law imposes a number of fees, taxes and other assessments on health insurance companies and sponsors of self-funded health plans to help subsidize a number of endeavors. One such fee funds the Patient-Centered Outcomes Research Institute (PCORI).
The PCORI fee is $2.17 per covered life for plan years ending on or after Oct. 1, 2015, and must be reported on (and remitted with) IRS Form 720 by Aug. 1, 2016 (the deadline is July 31, but since July 31 falls on a weekend, the form is due by the next business day, Aug. 1). For self-funded plans, the employer/plan sponsor will be responsible for submitting the fee and accompanying paperwork to the IRS. Third-party reporting and payment of the fee is not permitted for self-funded plans.
The process for remitting payment by sponsors of self-funded plans is described in more detail below.
The IRS will collect the fee from the insurer or, in the case of self-funded plans, the plan sponsor in the same way many other excise taxes are collected. The fees are reported and paid annually on IRS Form 720 by July 31 of the year following the last day of the plan year. This year the fee is due by Aug. 1.
The fee due on Aug. 1, 2016 is $2.17 per covered life for plan years ending before Oct. 1, 2016, and on or after Oct. 1, 2015. For plan years ending before Oct. 1, 2015, the fee due on Aug. 1, 2016, is $2.08 per covered life under the plan. IRS regulations provide three options for determining the average number of covered lives (actual count, snapshot and Form 5500 method).
The Form 720 must be filed by July 31 (Aug. 1 in 2016) of the calendar year immediately following the last day of the plan year. For example, calendar year plans will owe a fee of $2.17 per covered life by Aug. 1, 2016. Plans that operate on years that begin the first day of any month from February through October will be paying a $2.08 per covered life fee with the Aug. 1, 2016, filing.
The U.S. Department of Labor believes the fee cannot be paid from plan assets. In other words, the PCORI fee must be paid by the plan sponsor; it is not a permissible expense of a self-funded plan and cannot be paid in whole or part by participant contributions. The PCORI expense should not be included in the plan’s cost when computing the plan’s COBRA premium. The IRS has indicated the fee is, however, a tax-deductible business expense for employers with self-funded plans.
The filing and remittance process to the IRS is straightforward and is largely unchanged from last year. On page two of Form 720, under Part II, the employer needs to designate the average number of covered lives under its “applicable self-insured plan.” The number of covered lives is multiplied by $2.17 (for plan years ending on or after Oct. 1, 2015) to determine the total fee owed to the IRS.
The Payment Voucher (720-V) should indicate the tax period for the fee is “2nd Quarter.” Failure to properly designate “2nd Quarter” on the voucher will result in the IRS’s software generating a tardy filing notice, with all the incumbent aggravation on the employer to correct the matter with IRS.
Health Care Reform requires most self-funded and fully-insured group health plans to obtain a Health Plan Identifier (HPID). The HPID is a 10-digit number that will be used to identify the plan in covered electronic HIPAA transactions (for example,electronic communications between the plan and certain third parties regarding health care claims, health plan premium payments, or health care electronic fund transfers).
Large health plans (plans with annual receipts in excess of $5 million) must obtain an HPID by November 5, 2014. Small health plans have until November 5, 2015 to comply. “Receipts” for this purpose appear to be claims paid.
Who is Responsible? For self-funded plans, the plan sponsor is responsible for obtaining an HPID (third-party administrators cannot obtain an HPID on behalf of a self-funded plan sponsor). Although it appears that most insurers will obtain the HPID on behalf of fully-insured plans, some insurers are requiring the plan sponsor to obtain an HPID.
Application Process. To sign up for an HPID, plan sponsors must first be registered within the Centers for Medicare & Medicaid Services’ (CMS) Health Insurance Oversight System (HIOS) .
The individual responsible for applying will need to sign up as an individual and request to be linked to the relevant company. The individual will then complete the requested information (including company name, address, and EIN, authorizing official information, and the plan’s “Payer ID” number or “NAIC” number).
Some self-funded plan sponsors have reported difficulty with the registration process because self-funded plans do not have a Payer ID or NAIC number. Although CMS has not yet released any formal guidance on this issue, it is expected that self-funded plans will enter “not applicable” for the Payer ID and either leave the NAIC number blank or use the plan sponsor’s EIN in lieu of the NAIC number.
Once the required information has been submitted, an authorized individual within the company must request access to the HIOS. CMS will then grant access to the HIOS system by electronically sending an authorization code to the authorized individual.
The CMS website has step-by-step instructions via a “cheat sheet” and a YouTube video explaining the entire process.
Next Steps. The registration process can be time consuming as there are a number of different registration screens to work through, the collection of the required data may be cumbersome, and delays have been reported within the CMS registration portal. Accordingly, plan sponsors of large self-funded group health plans may wish to begin the registration process as soon as possible in order to meet the November 5, 2014 deadline. Plan sponsors for fully-insured plans should contact the plan’s insurer to see if the insurer will apply for the HPID on behalf of the plan.