The basis for PCORI fee calculation is the average number of lives covered under the plan. This fee is usually due by July 31st every year. All health reimbursement (HRAs) are considered as self-funded health plans and are subject to paying the PCORI fee. Employees, dependents, retirees, and COBRA participants are covered under the insurance plan. It is important to be aware of the special rules that apply to HRAs while calculating PCORI fee. The special rules are -
In case the plan sponsor also maintains a self-funded medical plan with the same plan year, the medical plan and HRA can be treated as a single entity for PCORI fee calculation. In case the medical plan is fully insured, then the medical plan and HRA are treated as separate entities for calculating the PCORI fee. In this situation, the insurer pays the fee for the medical plan and the plan sponsor or employer pays the fee for the HRA.
When calculating the number of covered lives for HRAs, employees alone should be taken into consideration, excluding their spouses and dependents.
This method considers the actual number of employees covered on each day of the plan year. This count is divided by the number of days in the plan year.
Example: A company has 20 employees employed for 365 days and 2 employees for 180 days.
Sum of employees = 20*365 + 2*180
= 7660
Current PCORI fee = 3.22
Total PCORI fee = (7660/365)*3.22
Total PCORI fee = $67.57
A plan sponsor may determine the average number of lives covered under a self-insured plan for a plan year by adding the total lives covered during the first,second or third month of each quarter. The date used for the second, third, and fourth quarter must be within 3 days of the date in that quarter corresponding to the date used in the first quarter. Once the dates are clear, the fee is calculated by the formula below:
Formula - Total number of participants = Self-coverage participant count + (participants with non-self only coverage * current PCORI fee).
Total PCORI Fee = ((Total number of participants from designated dates)/4)*current PCORI fee per life
Example: Say the total number of participants covered on a designated date in each quarter are : 50, 45,55, and 35.
Sum of covered employees = 50+45+55+35 = 185
Current PCORI fee = 3.22
Total PCORI Fee = ((185/4)*3.22))
Total PCORI fee = $148.92The Form 5500 method for PCORI fee calculation is based on the number of participants reported in the Form 5500. This form is filed for the applicable self-insured health plan for that plan year. However, if you are currently with a level self-funded option, this method may not be viable, because you need not file the Form 5500.
Example: Say the total number of employees at the beginning of the year is 50 and at the end of the year is 60.
Total PCORI fee = ((50+60)/2)*3.22)
Total PCORI fee = $177.1
Wrapping it up:
We have explored PCORI fee calculation methods in detail through this blog. A thorough understanding of PCORI fee calculation is a must for self-insured health plans. Companies need to pay the PCORI fee on their second quarter Form 720 filing. The PCORI fee calculation methods elaborated in this blog serve as a guide on how to calculate PCORI fee.