Federal health care reform, known as the Affordable Care Act (commonly referred to as “ACA”) added a temporary fee on health insurance carriers and self-funded plans used to fund clinical effectiveness research. The function gives the fee its name – Patient-Centered Outcomes Research (sometimes referred to as “PCOR fee or assessment”). The PCOR fee is not intended to be permanent. Under current law the fee is effective for plan years ending after September 30, 2012, and before October 1, 2019. Of course, Congress holds the authority to extend the fee cycle by enacting new legislation to do so.
- Insured carriers (for fully-insured plans); and
- Employers (for self-funded plans).
- This includes employers sponsoring self-funded plans alongside insured plans. For example, a fully-insured medical plan offering a Health Reimbursement Arrangement (HRA). The employer directly pays the PCOR fee for the HRA while the carrier pays the fee for the major medical plan. The fee paid by the carrier for the insured plan is then passed along to the employer in the form of increased insurance premiums.
- Includes retiree-only plans.
How to Pay
- Plan fees must be paid via IRS Form 720 Quarterly Federal Excise Tax Return.
- The fee is only reported annually; report and pay the fee on the second quarter Form 720.
- Payment may be submitted electronically or through the mail with the fee reported on Form 720 for the second quarter.
- This particular ACA-related fee is tax deductible as a business expense.
Plans Not Subject to the Fee
- HIPAA-excepted benefits.
- Excepted benefits refers to a specific category of limited benefits including, among others, most health FSAs, stand-alone dental and vision plans and most supplemental coverage.
Editable version of the Form 720
Accompanying Instructions for the Form 720
NOTICE OF DISCLAIMER
HUB International Insurance Services Inc. is not a law or tax firm. The information herein is intended as educational information only as provided in the capacity of an insurance brokerage consultant. This information is not intended as legal or tax advice. Consult your attorney and/or tax professional as to your organization’s specific circumstances and legal requirements.