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.
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.
Oct. 1, 2019
PCORI fees were scheduled to expirefor plan or policy years ending on or after Oct. 1, 2019.
2020-2029 Fiscal Years
PCORI fees now apply for the 2020-2029 fiscal years.
June 8, 2020
PCORI fee amount was increased for plan years ending on or after Oct. 1, 2019, and before Oct. 1, 2020.
July 31, 2020
PCORI fees are due for plan years ending in 2019.
This Legal Update is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2020 Zywave, Inc. All rights reserved.