The Administration announced that it will provide an additional year, until January 1, 2015, before the Affordable Care Act's mandatory employer and insurer reporting requirements begin. Since this will make it impractical to determine which employers do not provide minimum essential health coverage, and therefore would owe "shared responsibility payments," the transition relief is also being extended for those payments. Under the provision, companies with 50 or more "full-time equivalent" workers face a fine of up to $3,000 per employee if they don't offer affordable insurance to their full-time employees and their dependents.

The July 31st deadline, by which issuers of health insurance policies and sponsors of self-insured health plans with a plan year that ended after September 30, 2012 and before January 1, 2013 must report and pay these amounts, is quickly approaching. The new PCOR fee will be $1.00 per covered life under the plan in the first year of payment and $2.00 per covered life in the second year. For years following, the amount will increase with inflation. The PCOR fee will be made and information will be reported annually on Form 720.

Background

The Patient-Centered Outcomes Research Institute (Institute) was established by the Patient Protection and Affordable Care Act (ACA) to assist patients, clinicians, purchasers, and policy-makers in making informed health decisions by advancing comparative clinical effectiveness research. The Institute is to be funded by a Patient-Centered Outcomes Research Trust Fund, which in turn is to be funded in part by fees to be paid by issuers of health insurance policies and sponsors of self-insured health plans.

The fees, which are based on the average number of lives covered under the policy or plan, became effective for policy and plan years ending after September 30, 2012, and before October 1, 2019. They are treated as taxes for purposes of the procedure and administration provisions of the Code.

Who has to file?

For employers with fully-insured plans subject to the PCOR fee, the health insurer (or carrier) will pay the PCOR fee and provide all necessary reporting for the PCOR fee.

Employers with self-insured plans or who sponsor a Health Reimbursement Arrangement (HRA) will need to pay the PCOR fee and file form 720. This includes employers who offer both fully-insured plans and HRAs. In this case, the insurer pays the PCOR fee for the employees on the fully-insured plan and the employer pays the PCOR fee on employees with HRAs.

Plans Exempt from the PCOR Fee: 

*  Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions

*  Most flexible spending accounts

*  Health savings accounts (HSAs)

*  Employee assistance programs (EAPs)

What Should Employers Do Now:

First, determine if you have any self-insured plans that require direct payment for the PCOR fee as a plan sponsor. Next, verify the due date of the PCOR fee and Form 720 based upon the last day of your plan year. The PCOR fee applies to each policy or plan year ending after September 30, 2012. With the help of your insurance broker and third-party administrators, you should next determine how you intend to calculate the number of covered lives under the plan. Finally, with the assistance of your tax professional, complete Form 720 and the payment voucher which for the vast majority will be due July 31, 2013.