PCORI or CERF? Whatever you call it, remember that the IRS raised the fee.

PCORI or CERF? Whatever you call it, remember that the IRS raised the fee.


With the release of Internal Revenue Service Notice 2014-56, the IRS provided the adjusted applicable dollar amount for the third filing of the Patient-Centered Outcomes Research Institute fee [Research Fee, PCORI or CERF (Comparative Effectiveness Research Fee)].

The adjusted dollar amount for plan years beginning November 1, 2013 through October 1, 2014 is $2.08 (that’s an 8 cent increase).

As you will recall, for self-insured plans and HRAs, the Research Fee is due by July 31st of the calendar year following the end of the applicable plan year. It is paid on the 2nd quarter Form 720 filing. The next payment and filing deadline is July 31, 2015.


Prior guidance, updates and background reading follows.


Update! IRS Rule for PPACA’s “Comparative Effectiveness Research Fee” (CERF/PCORI/IRS Form 720)

Patrick C. Haynes, Jr., Esq., LL.M.

Update (June 4, 2013)IRS Form 720 now includes, at Part II (page 2 of 7) at line 133, a space to include your headcount, multiply it by $1 (for this year) and $2 for all subsequent years (until it sunsets with the 2019 plan year).  Your completed, signed Form 720 is due by July 31, 2013, along with your payment.

Original Article posted June 11, 2012, 7:36 a.m.

Key Dates for Self-Funded Plans to Keep in Mind

  • 07-15-2012   Comments due to the IRS
  • 08-08-2012   Public Hearing
  • 10-01-2012   $1 per life fee assessed for plan years ending on/after 10-01-2012.
  • 07-31-2013   Date upon which a 1/1 Plan must file an IRS Form 720 and pay fee  [I’m not a 1/1 Plan – when is my form due?].

The Affordable Care Act (PPACA) includes a provision imposing an annual assessment on insurers and group health plans to fund a Patient-Centered Outcomes Research Institute (PCORI), which will assist patients, clinicians, purchasers and policy-makers in making informed health decisions by advancing comparative clinical effectiveness research.

The Institute is funded by a trust fund, which, in turn, is partially funded by fees paid by issuers of health insurance policies and sponsors of self-insured health plans. This “comparative effectiveness research fee” applies to policy/plan years ending on or after 10/1/2012.

Proposed regulations were published on April 12 and, although not yet final, this Proposed Rule provides more information on calculation, reporting and payment of the fee.  Read the IRS’ proposed rules here: http://www.gpo.gov/fdsys/pkg/FR-2012-04-17/pdf/2012-9173.pdf

The fee applies to fully insured and self-funded medical plans covering U.S. residents; expatriate plans are excluded. It also applies to individual/family plans, voluntary/mini-med plans and retiree-only plans.

Health Reimbursement Accounts (HRAs) linked to a self-insured health plan are exempt; the employer will pay one fee for the medical plan only. But if the HRA is linked to an insured health plan, the employer will pay the fee for the health plan and the carrier will pay for the insured plan – two fees will be collected.

The fee does not apply to Medicare, Health Savings Accounts (HSAs) or ERISA excepted benefits (such as non-bundled dental and vision).

Fees, Payment and Reporting
The initial annual fee is $1 per average covered life.  The fee is not assessed only upon employees, but includes a complicated series of calculations designed to capture the total number of covered lives (including spouses and dependents).  The fee increases to $2 in 2013, then to an amount indexed to national health expenditures until 2019, when it is scheduled to end.

Reporting and payment using IRS Form 720 is required by July 31 of the calendar year immediately following the last day of the policy or plan year. For example, the fee for the policy or plan year ending on December 31, 2012 must be filed by July 31, 2013. Liability for a plan year ending on June 30, 2013 must be filed by July 31, 2014.

Comment Period and Public Hearing
Comments are due on 7/15/2012 (90 days after official publication). There will also be a public hearing on August 8, 2012. Anyone wishing to present oral arguments must submit written or electronic comments, an outline of topics to be discussed and the time to be devoted to each topic by July 30, 2012.

Fee Calculation Methodologies
Employers and health plans may choose one option from the following:

  1. Actual Count Method: Add the total number of covered lives for each day of the policy year and divide by the number of days in the policy year.
  2. Snapshot Method:  Add the totals of lives covered on one date in each quarter of the policy year (or more dates if an equal number of dates is used for each quarter) and divide by number of dates on which a count was made. The date(s) for each quarter must be the same (e.g., 1st day of quarter, last day of quarter, or 1st day of each month).
  3. Member Months Method: The sum of the totals of lives covered on pre-specified days in each month of the reporting period) as reported on the National Association of Insurance Commissioners (NAIC) Supplemental Health Care Exhibit filed for that calendar year. The average number of covered lives under the policies in effect for the calendar year equals the member months divided by 12.
  4. State Form Method:  An insurer not required to file NAIC annual financial statements may calculate covered lives for the calendar year using a form filed with the insurer’s state of domicile and a method similar to the member months method, if the form reports the number of covered lives in the same manner as member months are reported on the NAIC Supplemental Health Care Exhibit.

Supreme Court Decision Looms

The U.S. Supreme Court’s decision on PPACA’s constitutionality (among the other items/issues that were debated) is due by the end of the court’s current term, June 30th.  Assuming PPACA remains the law of the land, the next step for this fee will be the close of the comment period (July 15, 2012), a public hearing August 8, 2012 and then IRS Form 720 completion and payment of the fee in July of 2013 (for 1/1 plans).  Please contact your Account Executive or Account Manager for additional information or assistance.


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