Released June 4, 2013I Download as a PDF
June 4, 2013 -- One of the fees imposed on both insured and self-funded health plans by the Affordable Care Act is the Patient Centered Outcome Research (PCOR) fee. The purpose of this fee is to fund a Patient-Centered Outcome Research Trust Fund. This Trust Fund, in turn, supports a Patient-Centered Outcomes Research Institute to assist patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing comparative clinical effectiveness research. This fee and types of plans subject to the fee are more fully described in the CBIZ Health Reform Bulletin,
Final Regulations Issued: Patient-Centered Outcomes Research Fees and Medical Device Tax (12/11/12).
The form to be used for reporting and paying the fee is the second quarter IRS Form 720 filing. A revised Form 720 has been made available via the IRS website: http://www.irs.gov/pub/irs-pdf/f720.pdf.
For insured plans, the insurer is responsible for this reporting. A self-funded plan sponsor is responsible for its own reporting. The fees are based on the average number of lives covered under the policy or plan.
The first report is due July 31, 2013 for plan years ending between October 1, 2012 and December 31, 2012.
Part II of the instructions to the Form 720 (available in pdf version or html version) describe how covered lives are to be counted. Note in particular, the rules for applicable self-funded plans for the first year of compliance.
Addendum (June 17, 2013)
Since the issuance of this Bulletin on June 4, 2013, some important information applicable to self-funded plans has been issued. The IRS’ Office of Chief Counsel recently issued Technical Advice Memorandum (TAM) AM2013-002. This TAM affirms that an employer who pays a PCOR fee can deduct this expense as a reasonable necessary business expense. It is important to note that all TAMs do not carry the force of law; however, they do provide guidance on how the IRS will administer a provision.
It is also very important to remember that 1) payment of the PCOR fees is a plan sponsor’s responsibility; and 2) PCOR fees cannot be paid by plan assets (see PCOR discussion in this CBIZ Health Reform Bulletin, Sub-Regulatory Guidance and FAQs Issued, 1/25/13).
About the Author: Karen R. McLeese is Vice President of Employee Benefit Regulatory Affairs for CBIZ Benefits & Insurance Services, Inc., a division of CBIZ, Inc. She serves as in-house counsel, with particular emphasis on monitoring and interpreting state and federal employee benefits law. Ms. McLeese is based in the CBIZ Leawood, Kansas office.
The information contained herein is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations. The information contained herein is provided as general guidance and may be affected by changes in law or regulation. The information contained herein is not intended to replace or substitute for accounting or other professional advice. Attorneys or tax advisors must be consulted for assistance in specific situations. This information is provided as-is, with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein. As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained herein is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.