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Health Care Reform Blog: PCOR Fee Rules Finalized - December 6, 2012

Yesterday the IRS finalized regulations implementing the Patient-Centered Outcomes Research fees imposed by the Affordable Care Act.  The rules require employers sponsoring self-insured health plans, including HRAs, to pay a fee based on the average number of covered lives (including dependents) in the plan.  For HRAs integrated with fully-insured plans, both the health insurance issuer and employer would be assessed a fee. Health FSAs qualifying as excepted benefits, stand-alone dental and vision plans, employee assistance programs, wellness programs and health savings accounts are excluded and not subject to the new fee.  For fully-insured plans, the fee is paid by the applicable insurance carrier.  For plan years ending on or after October 1, 2012, the fee is $1.00 multiplied by the average number of covered lives (including dependents). The fee is increased to $2.00 for plan years ending on or after October 1, 2013 and may be further increased thereafter based on an increase in the projected per capita amount of national health expenditures.

The "average number of covered lives" can be determined in one of three ways:

  1. The number of lives covered for each day of the plan year divided by the number of days in the plan year;
  2. the total lives covered on one day in each quarter divided by the sum of the number of dates on which a count was made; or
  3. using the plan sponsor's Form 5500 participant counts.


Covered lives include any participants on the plan because of COBRA continuation coverage.  Employers who sponsor self-insured plans, such as HRAs, are required to report and pay the fee once per year on Form 720, the Quarterly Federal Excise Tax Return. The Form must be filed by July 31 of each year for the plan year ending in the preceding calendar year.  The fee expires with plan years ending after October 1, 2019.  A copy of the final rules can be accessed here.