The Affordable Care Act (ACA) requires health insurance issuers and sponsors of self-insured health plans to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720 (Quarterly Federal Excise Tax Return). PCORI fees will be due by July 31, 2015, for plan years ending in 2014. IRS instructions for filing form 720, which were revised in January 2015, include information on reporting and paying the PCORI fees.

For plan sponsors of applicable self-insured health plans, the fee for a plan year ending on or after October 1, 2014, but before October 1, 2015, is $2.08; and it’s $2.00 for a policy year ending on or after October 1, 2013, but before October 1, 2014). These fees are multiplied by the average number of lives covered under the plan for that plan year. Generally, plan sponsors of applicable self-insured health plans must use one of the following four alternative methods to determine the average number of lives covered under a plan for the plan year.

Four Alternative Methods:

1. Actual Count Method – takes the average number of subscribers over the plan year and multiplies it by the average contract size.
2. Snapshot Method – takes the average number of subscribers over a three quarter period and multiplies it by the average contract size.
3. Snapshot Factor Method – takes the average number of subscribers over a three quarter period and multiples by a factor of 2.35.
4. Form 5500 Method – the plan can use the most recent form 5500 filings to determine how many plan participants to remit payment on. Add the first and last month’s lives together. Only the employee would be counted, not the number of covered lives.

With the July 31 deadline rapidly approaching, you might be overwhelmed and in need of guidance. Reach out to your insurance broker for help as they’ll be able to expedite and simplify the process.