Funding Patient-Centered Outcomes Research
The Patient Protection and Affordable Care Act of 2010 (the Act), established the Patient-Centered Outcomes Research Trust Fund (the PCORTrust). This Fund carries out the provisions of the Act relating to comparative clinical research which helps health care providers evaluate the effectiveness and risks of medical treatments and procedures.
To fund the PCORTrust, a new fee is imposed on a "specified health insurance policy" or an "applicable self-insured health plan." The first funding of the PCORTrust will happen shortly, will you be affected?
The new fee is payable for each policy or plan year ending after September 30, 2012, and before October 1, 2019, and is reportable on IRS Form 720 (Quarterly Federal Excise Tax Return).
Annual Reporting Required
According to the instructions for Form 720, the new fee is required to be reported annually. It is to be paid, via the second quarter Form 720, by July 31 of the calendar year immediately following the last day of the policy or plan year to which the new fee applies. Form 720, for the transition policy or plan years ended in October, November or December 2012, will be due no later than July 31, 2013. For a policy or plan year that ends in 2013, the first Form 720 would be filed not later than July 31, 2014, with subsequent policy or plan years filed in similar manner. In addition, if Form 720 is filed only to report the new PCORTrust fee, Form 720 is not filed for the first, third or fourth quarters of the year. There is no requirement to make deposits related to the PCORTrust fee. Therefore, the fee is not required to be paid utilizing the government's electronic payment system EFTPS.
Fees
For policy or plan years ending before October 1, 2013, the fee is $1.00, multiplied by the average number of lives covered under the policy or plan, for that particular policy or plan year.
For policy or plan years ending on or after October 1, 2013 and before October 1, 2019, the fee amount is $2.00. The $2.00 fee amount is subject to adjustment for policy or plan years beginning after September 30, 2014, based on increases in health care spending provided in per capita projections of National Health Expenditures.
Determining Coverage
To determine the average number of lives covered under a policy year for a specified health insurance policy, one of the following four alternative methods must be used:
- Actual count method
- Snapshot method
- Member month method
- State form method
For plan sponsors of applicable self-insured health plans, one of the following three alternative methods must be used:
- Actual count method
- Snapshot method
- Form 5500 method
However, for applicable self-insured health plan years beginning before July 11, 2012 and ending on or after October 1, 2012, plan sponsors may determine the average number of lives covered under the plan for the plan year using any reasonable method.
Definitions of Effected Policies
A "specified health insurance policy" is any accident or health insurance policy (including a policy under a group plan) issued to individuals residing in the United States. The issuer of the policy is liable for and must pay the PCORTrust fee. A "prepaid health coverage arrangement" will be treated as a specified health insurance policy.
An applicable "self-insured health plan" is any plan providing accident or health coverage, if any portion of the coverage is provided other than through an insurance policy, and meets one of the six defined purposes for establishing or maintaining such plan.
A plan sponsor of an applicable self-insured health plan is liable for and must pay the PCORTrust fee. The plan sponsor is the employer for a plan established or maintained by a single employer, or the employee organization for a plan established or maintained by an employee organization.
Final Guidance Has Been Issued
Final Treasury (IRS) regulations providing guidance for implementing the fees imposed to funding the PCORTrust were issued and are effective as of December 6, 2012.
The first PCORTrust reporting requirement related to filing information and paying the fees for funding the PCORTrust will be due by July 31, 2013.
If you have any questions concerning the filing of Form 720 to report the PCORTrust information and fees, please contact your Eide Bailly account representative.
