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PCORI fee calculation methods for self-insured plans

The PCORI fee is a Patient-Centered Outcomes Research Institute (PCORI) initiative whereby health plans of a certain type are financially required to carry out respective research. This research helps patients and doctors make informed choices. A significant part of the self-insured health plans that include health reimbursement arrangements (HRAs) is the proper estimation of the PCORI fee, which is in accordance with the IRS rules and regulations. Thus, proper calculation methods knowledge can guide the plan sponsors to no mistakes and accurate reporting on the IRS 720 form.

Understanding Applicable Self-Insured Plans

By and large, self-insured plans refer to employer-sponsored group health plans whereby the employer takes the financial risk of providing healthcare benefits. The plans may either be stand-alone or combined with HRAs or flexible spending accounts (FSAs). A PCORI fee is applicable to all major medical plans, with minor exceptions of dental and vision benefits being offered on a stand-alone basis. A required step in the process is for the plan sponsors to determine the average number of covered lives during the year of the plan, by which the entire fee will be known.

Three Approved Calculation Methods

The service allows for three different methods for the plan sponsor to use in order to calculate the average number of lives covered:

The Actual Count Method

The Snapshot Method

The Form 5500 Method

The method of counting actual cans off one human (the Actual Count Method) is about counting the total number of covered lives each day and then dividing by the number of days in the plan year. Another method that is different than the first method, the Snapshot Method, utilizes the use of a specific date each quarter to figure out an average on a quarterly basis. The third formula, on the other hand, depends on Form 5500's timely filing and the participant counts there are. If successful, then the process could be rather simple.

How to Choose the Best Method and Make the Right Entry

The people responsible for the plan can go for any methodology that gives them the most correct and easiest calculation, but they must be using it uniformly for a specific plan year. The PCORI fee should be submitted to the IRS by July 31st and be reflected on the Form 720 schedule. The precise assessment of the fee for the last day of the plan year, considering the applicable rate, is very vital. Successful communication by the IRS of any alterations in the fee amount and keeping in line with the right calculation methods could help sponsors do away with penalties and also comply with the rules.