What Businesses Need to Know

8/7/2013, noon
A record high 50.7 million Americans went without health insurance in 2009 amidst the heated debate regarding President Barack Obama's health care reform.

Q: How do I determine Large Employer Status?

A: To be subject to the employer shared responsibility provisions in Health Care Reform, an employer must employ at least 50 full-time employees or a combination of full- and part-time employees that equals at least 50. For example, you employ 40 full-time employees that work 30 or more hours per week on average plus 20 half-time employees employed 15 hours per week on average are equivalent to 50 full-time employees. Employers will determine each year, based on their current number of employees, whether they will be considered a large employer for the next year. For example, if an employer has at least 50 full-time employees (including full-time equivalents) for 2013, it will be considered a large employer for 2014.

Q: I own several businesses. Are they accounted for separately?

A: Consistent with standards that apply for other tax and employee benefit purposes, companies that have a common owner or are otherwise related generally are combined together for purposes of determining whether or not they employ at least 50 full-time employees (or an equivalent combination of full- and part-time employees). If the combined total meets the threshold, then each separate company is subject to the employer shared responsibility provisions—even those companies that individually do not employ enough employees to meet the threshold The proposed regulations provide information on the rules for determining whether companies are related and how they are applied for purposes of the employer shared responsibility provisions.

Q: What is the Patient-centered Outcomes Research Institute (PCORI) fee?

A: The Affordable Care Act (ACA) established a private, nonprofit corporation called the Patient-Centered Outcomes Research Institute (Institute). The Institute’s task is to help patients, policymakers and health care providers make informed health decisions by advancing evidence-based medicine through comparative clinical effectiveness research. ACA requires health insurance issuers and sponsors of self-insured health plans to pay fees to help finance the Institute’s research. The final regulations require issuers and plan sponsors to pay the PCORI fees once a year on IRS Form 720 (Quarterly Federal Excise Tax Return).

Q: Does my company need to comply?

A: The PCORI fees generally apply to insurance policies providing accident and health coverage and self-insured group health plans. The final regulations contain some exceptions and special rules for HRAs and Health FSAs to this rule and also clarify how the PCORI fees apply to certain types of health coverage arrangements. It is the responsibility of the issuers of fully-insured plans or self-insured plan sponsors to pay the fee, which will be treated like an excise tax by the IRS and not tax-deductible. Under the IRS proposal, third parties cannot file the Form 720 or pay the fee to the IRS on behalf of plan sponsors.

Q: How do I calculate the fee for my company?

A: The PCORI fees are based on the average number of covered lives under the plan or policy. This generally includes employees and their enrolled spouses and dependents. The IRS has provided several methods to calculate the fee, ranging from using regulatory filings that contain estimate the number of covered lives, to an actual count of the number of lives that are covered on each day of the policy year or on a quarterly basis.