PCORI/CERF Requirement…Year 2

A little over a year ago, I posted a blog addressing the Affordable Care Act’s (ACA) – Patient Centered Outcomes Research Institute (PCORI) fee requirement, also referred to as the Comparative Effectiveness Research Fee (CERF).  Click here to access this post – http://sstevenshealthcare.blogspot.com/2013/06/to-pcori-feeor-not-to-fee-that-is.html
Last year, affected plans were required to remit a fee equal to $1 per plan participant.  This year, affected plans owe $2 per plan participant, based on their plan date.  Since last year’s PCORI/CERF related post addressed the “who” and “what” of this particular ACA requirement; this post will address the “how“, as in how to calculate the average number of affected lives, and then calculate and remit the applicable fee.

Plans that are fully insured (as opposed to partially or fully self funded) generally do not have to worry about calculating or remitting the fee.  Insurance companies are taking care of this ACA compliance task.  Employers that have fully insured plans who are curious about the direct cost impact of this fee on their premium can calculate their cost using any one of four prescribed methods:

  1. Actual Count
  2. Snapshot
  3. Member Months
  4. State Form

If interested, click here for the specific details on each of these approved PCORI/CERF counting methods – http://www.irs.gov/uac/Newsroom/Patient-Centered-Outcomes-Research-Institute-Fee

Health insurance plans that are partially or fully self funded (including HRAs and some FSAs) generally must calculate and remit their PCORI/CERF fee themselves.  Since the fee is remitted on IRS form 720, a self funded plan’s administrator is not able to take care of this requirement on the client’s behalf.  Here are the approved alternative methods of calculating the appropriate PCORI/CERF fee for self funded plans:

  1. Actual Count Method: Add the total number of covered lives (members, not employees) for each day of the plan year and divide that total by the total number of days in the plan year.
  2. Snapshot Method: Add the total number of covered lives (members, not employees) on a particular date during the first, second, and third month of each quarter, and divide that total by three.  For example, using January 1, April 1, and July 1 as the calculation dates, assuming there were 150, 155, and 159 covered lives on each respective date, the calculation would be 150 + 155 + 159 = 464/3 = 155 x $2 = $310.
  3. Form 5500 Method: (Note, from my experience, this is the simplest and lowest cost result method of the three.) Add the number of covered employees (sometimes referred to as participants or subscribers) at the beginning of the year, as indicated on IRS form 5500, to the number of covered employees at the end of the plan year.  For example, if there were 100 employees on January 1, and 150 employees on December 31, the calculation would be 100 + 150 = 250 x $2 = $500.

To access the IRS’ final regulations addressing PCORI/CERF, click here – http://www.gpo.gov/fdsys/pkg/FR-2012-12-06/pdf/2012-29325.pdf

Remember, this fee is due and filed with the second quarter IRS form 720, no later than July 31st of the calendar year immediately following the last day of the policy year or plan year to which the fee applies.  For the majority of affected plans which start/renew on January 1, 2013 through December 31, 2013, the fee is due by July 31, 2014.