2023 PCORI Fee Update

Important ARPA update:

Identifying Assistance Eligible Individuals (AEIs)

and providing notices.

The U.S. Department of Labor (DOL) issued guidance under the American Rescue Plan Act of 2021 (ARPA) and provided the model notices to assist with fulfilling notice obligations for the COBRA subsidy.

We need you to identify individuals who may be subsidy eligible. There are two options, outlined below to assist you in identifying the potential AEIs.  We have provided a video and written instructions if preferred, indicating how you will update the subsidy status:

Video: How to update subsidy statuses for the American Rescue Plan Act (ARPA)

Written Instructions: How to update COBRA subsidy statuses

Option 1: HRC Total Solutions has technology available to help you identify subsidy-eligible individuals.  The QB AEI 2021 Report and import feature is available as of today.

These tools will assist you in identifying the participants in the lookback period (anyone eligible for COBRA before April 1, 2021 who may or may not have elected and/or paid for COBRA coverage but is still within their COBRA continuation period) who may be Assistance Eligible Individuals (AEIs) and updating their eligibility status.

• The report will include a column labeled AEI 2021 Status, which will default to the status of Unknown when it is initially generated.
• Complete that column with a status of Unknown, Eligible (for the subsidy), or Ineligible (for the subsidy), to update the participant record.
• Upload the completed report to the import in your employer portal.
• You can use this same process to identify subsidy-eligible individuals throughout the subsidy period.

Option 2: If you already know your subsidy-eligible population, you can:

• Gather participant data and complete the attached QB AEI 2021 Report template. Then you can import the information in the employer portal.
• You can use the existing QB Plan Members and QB Summary reports in your employer portal to gather this information and update the template.
• The first 4 columns are required and need to be completed (or left as is) in order to update the status of the participant record, including Last Name, First Name, Member ID (MID), and the AEI 2021 Status. All other columns are optional and for information purposes only.
• Upload your completed template to the import in your employer portal.
• You can use this same process to identify subsidy-eligible individuals throughout the subsidy period.
• If you are a NEWER COBRA CLIENT with HRCTS (meaning you haven’t been with HRCTS through all of the look back period) you will need to use option 2 to provide us with all the individuals that we need to notify from the look back period as HRCTS will not have all those individuals in our system so the report in Option 1 will not be complete.

Subsidy-eligible individuals are those who meet all of the following criteria: 

• Any qualified beneficiary who experienced a reduction in hours or an involuntary termination of employment.
• Has at least one medical, dental, vision, EAP, or HRA plan (not including Health FSA or QSEHRA).
• Has a Last Day of Coverage (LDOC) of April 1, 2021 or later.
• The individual must not be eligible for other group health coverage. HRCTS will collect this information from qualified beneficiaries on behalf of the employer).

Attestation

• HRCTS will include attestation information in the AEI notice unless you tell your Account Manager that you do not want it included.  
• The attestation form will have the QB attest that they are an AEI eligible individual, and they are not eligible for other group health coverage.
• They will be required to notify us if that changes during the subsidy period as well.

Next Steps

HRC Total Solutions needs the above information imported no later than May 7th in order to identify AEIs in the lookback period and mail them the required notices as outlined by the DOL.

• If you choose to notify your lookback period AEI eligible participants on your own, you do not need to take the actions outlined above. You will need to provide the DOL notice to affected participants on your own. We will redirect any affected participants back to you.
• Please notify your Account Management Team that you will not be having HRCTS send out the AEI notices.  If we do not receive the above information from you by May 7th, we will assume you will be notifying lookback period AEI eligible participants on your own.
• HRCTS will begin notifying all potential AEIs between May 14th and May 31st for all clients who have identified potential AEIs and imported the updated information into the COBRA system in order for the new AEI notice to be sent out.
• If an AEI was on a previous plan that you no longer offer, they can enroll in another plan that is offered provided the cost of the plan is the same or less than the one they were on originally, unless all the plans available through the employer now have higher premiums.
• Please make sure while entering new QBS moving forward that you are indicating under their AEI status if they are eligible or ineligible so the proper notice can be sent out to them.  You will do this for anyone that is eligible for COBRA while the subsidy is active between April 1, 2021-September 30, 2021.
• If you are using the COBRA notification form instead of entering a new QB online please use the updated form which can be found here: COBRA Notification Form
• If you have an EDI file sent to HRCTS with your COBRA information you will need to provide the AEI status for each person to the COBRA department each time a file is sent since the files do not have the status listed and this is a temporary change.  You can use the QB AEI 2021 Report template updating the 1st 5 columns (last name, first name, middle initial, AEI status, and SSN).  The report will be sent to COBRAdepartment@hrcts.com so that we may update the status for the individuals when they are entered in the system.  Not providing this spreadsheet in a timely fashion will delay notices to QBS.
• If you as the employer are providing an employer subsidy for a QB between April 1, 2021-September 30, 2021 the ARPA subsidy will replace your employer subsidy.  We will have a report of clients who have a subsidy in place for someone that is removed so that we can identify who might need the employer subsidy to start again after the ARPA subsidy has ended.

We appreciate your patience and partnership as we navigate and support these regulatory changes.  If you have any questions, please do not hesitate to reach out to your Account Management Team for assistance.

PCORI Fee Overview and Guidance

The Affordable Care Act imposes fees on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans to help fund the Patient-Centered Outcomes Research Institute. The fees, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, are based on the average number of lives covered under the policy or plan. The fees apply to policy or plan years ending on or after October 1, 2012, and before October 1, 2029. HRCTS will make available an Average Covered Lives Report to all clients that are responsible to file and pay the PCORI fee each year. This report will be sent to you automatically this year and you do not need to request it.

The IRS recently released the revised Form 720 that insurers and sponsors of self-insured plans will use to pay the Patient-Centered Outcomes Research Institute (PCORI) fee. The fee is due by July 31 of the year following the calendar year in which the plan/policy year ended. Sponsors of any plans that ended in 2020 must pay the 2020 fee by July 31, 2021.  Plan sponsors can now complete their planning for payment of this fee. The IRS has also confirmed health insurers and self-insured health plan sponsors can deduct PCORI fees as ordinary and necessary business expenses. The fee is based on the number of covered lives including employees, retirees and COBRA participants along with their covered dependent spouses and children are all counted. However, only the employee, retiree or COBRA participant needs to be counted for an HRA or a health flexible spending account (health FSA) -- dependents covered by these accounts can be excluded.

The types of plans that must pay the PCORI Fees by July 31, 2021 include:

• Health/accident plans
• Health Reimbursement Arrangement (HRA) plans that are not an excepted benefit (Employer contribution is greater than $500)
• Health Flexible Spending Account (FSA) plans that are not an excepted benefit (Plan has employer contributions with the maximum reimbursement greater than two times an employee’s salary reduction election or employer contribution is greater than $500)
• Retiree plans

Calculating the Fee:

The amount of the PCORI fee is equal to the average number of lives covered during the policy year or plan year multiplied by the applicable dollar amount for the year.

• For plan years that end on or after October 1, 2018 and before October 1, 2019, the fee is $2.45 per covered life.
• For plan years that end on or after October 1, 2019 and before October 1, 2020, the fee is $2.54 per covered life.
• For plan years that end on or after October 1, 2020 and before October 1, 2021, the fee is $2.66 per covered life.

For policy and plan years beginning on or after Oct. 1, 2021, and before Oct. 1, 2022, the applicable dollar amount is further adjusted to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services.

IRS Form 720 and Instructions:

IRS Form 720 can be accessed at http://www.irs.gov/pub/irs-pdf/f720.pdf which is an interactive document so that can be completed online.

The PCORI fees are entered on line 133 for the appropriate plans. See pages 8 - 9 of the IRS Instructions for completing these fields. Instructions can be found at http://www.irs.gov/pub/irs-pdf/i720.pdf.

Complete the fields on page 8 and make your check or money order payable to “United States Treasury”.

Additional information on the PCORI fees can be found here:
 • Patient-Centered Outcomes Research Trust Fund Fee (IRC 4375, 4376 and 4377): Questions and Answers

• An IRS chart that shows which types of benefits the fee applies to:  Application of the Patient-Centered Outcomes Research Trust Fund Fee to Common Types of Health Coverage or Arrangements

• IRS Form 720 Overview

• IRS Form 720 instructions (see pages 8 - 9)

Please Note:
 This information is provided for educational purposes only. It reflects the understanding of HRC Total Solutions and our partners using the available guidance as of the date shown and is subject to change. It is not intended to provide legal advice.  You should not act on this information without consulting legal counsel or tax advisors. (Updated April 2021)

AMERICAN RESCUE PLAN ACT OF 2021

COBRA PREMIUM SUBSIDY OF 100%

On March 11, 2021, the American Rescue Plan Act of 2021 (ARPA) was signed by President Biden. ARPA is a $1.9 trillion economic stimulus package proposed by Biden to speed up the United States' recovery from the economic and health effects of the COVID-19 pandemic.  

ARPA includes a provision for a COBRA continuation coverage premium subsidy of 100 percent for individuals and families who experienced an involuntary termination of employment or reduction in hours.

This subsidy will be available for Assistance Eligible Individuals (AEIs), as determined by the Act, from April 1, 2021 through September 30, 2021. COBRA participants must meet the below criteria in order to be an AEI:

1. Coverage was lost due to involuntary termination of employment or reduction in hours.
2. The COBRA participant is still within the COBRA eligibility period as of April 1, 2021.
3. Eligible COBRA participants who do not have an election in place will have the opportunity to make an election during an Extended Election Period and will be able to take advantage of the subsidy effective April 1, 2021. This will be referred to as the “lookback period” in determining member eligibility.
4. Eligible COBRA participants who have an election in place as of April 1, 2021 will be able to take advantage of the subsidy effective April 1, 2021.
5. Eligible COBRA participants who become eligible for COBRA continuation coverage on or after April 1, 2021 will be eligible for the subsidy while it is in effect.  

What else you need to know regarding this change:

• The Act creates a new extended election period for individuals who would qualify for the subsidy if they had elected COBRA before April 1, 2021.  The Act also permits individuals who would otherwise be eligible for the subsidy but who discontinued coverage before April 1, 2020 to re-elect COBRA.
• The Act limits continuing eligibility for the premium subsidy. If an individual becomes eligible for health coverage under any other group health plan, flexible spending arrangement, qualified small employer health reimbursement arrangement or Medicare, they are no longer eligible for the premium subsidy and must notify the plan sponsor. There are fines for failing to notify an employer of coverage. The Act is clear that the premium subsidy does not extend the duration of COBRA coverage an individual is eligible to receive, so if the individual’s maximum coverage period ends between April and September 2021, they are no longer eligible.
• HRCTS will be complying with the new laws below by mailing all required notices per the new law 
  1. The Act also requires employers and plan administrators to provide beneficiaries eligible for the premium subsidy with notice of the premium subsidy and the extended election period described above.
  2. If an employer has sent out COBRA election notices and the individual was involuntarily terminated or had a reduction in hours, the administrator has 60 days to notify the individual of the premium subsidy and the extended election period.  We will review all terminations and reduction in hours for the last 18 months where COBRA notices were issued to identify who will receive the required premium subsidy notice.
  3. The Act also requires employers to provide notice to beneficiaries between 45 and 15 days before the subsidy is expected to end (September 30, 2021).  (The Act directs that the DOL to begin creating model notices.)
  4. ARPA requires the Department of Labor (DOL) to provide model notices within 30 days from the date of enactment — on or before April 10. We will then have the model notices incorporated with the DOL’s language into a set of new standard subsidy notices, referred to as AEI Notices.
  5. The Act requires that individuals in the lookback period, as well as those currently enrolled, receive a notification regarding the subsidy within 60 days of April 1, 2021.  Newly eligible COBRA participants should be notified within the current standard COBRA time frames.
  6. Prepare for when notice of the end of the premium subsidy will be required (45 to 15 days before September 30, 2021).
• The Act allows a payroll tax credit to employers (in the case of self-insured plans) and insurers (in the case of insured plans) to offset the unpaid premium payments.  It remains unclear, however, how the mechanics of the tax credit will work.  It is anticipated that this question will be addressed by regulatory guidance.  

The Act and EBSA Disaster Relief Notice 2021-01 Extending Timeframes

• The Act does not replace the COBRA timeframe extensions based on the 2020 guidance from the IRS, DOL and HHS (“Joint Notice”).  Instead, plan administrators will need to reconcile the Act with the EBSA Disaster Relief Notice 2021-01 (“Notice 2021-01”), the DOL issued guidance indicating that the COVID-19 extensions would continue and that all timeframe extensions must be calculated on a person-by-person basis.
• The original Joint Notice required that health and retirement plans effectively pause certain deadlines until 60 days after the announced end to the national emergency (the Outbreak Period).  The deadlines impacted by the Joint Notice included:
  1. Deadline to elect COBRA;
  2. Deadline to pay COBRA premiums;
  3. Deadline to elect HIPAA special enrollment;
  4. Deadlines to file claims, appeals, and requests for external review; and
  5. Deadline for plan to provide COBRA election notice.
• ERISA and the Internal Revenue Code limit deadline extensions to one year.  Instead, Notice 2021-01 directs that the “pause” period created in the Joint Notice ends on the earlier of: One year from the date the deadline would have begun running for that individual; or 60 days from the end of the National Emergency (which is still ongoing).   This means plans need to calculate the extensions based on each individual’s date of eligibility.  Someone who was first eligible for COBRA in February 2020 has a different deadline from someone who was first eligible in May 2020.  The Act’s special election period adds to the confusion.
  1. HRCTS will be reaching out to COBRA beneficiaries that have been in the pause period updating them on the changes and when their pause period will end and when premiums will be due.

• Example Incorporating Notice 2021-01 and the Act 
  1. A beneficiary became eligible for COBRA on March 1, 2020.  The one year “pause” ended on February 28, 2021, which, under Notice 2021-01, leaves the beneficiary 60 days to elect COBRA.  If the beneficiary is not eligible for the COBRA subsidy because the qualifying event was not a termination or a reduction in hours, the beneficiary can still elect COBRA, but they will then need to pay the premiums for the past 12 months of retroactive coverage and can then continue to receive coverage for the next six months (without the subsidy!) to complete 18 months of COBRA.
  2. If the beneficiary is eligible for the COBRA subsidy, they could elect COBRA, pay the past premiums and they would then be eligible for the premium subsidy for April through September 2021. The beneficiary could also elect COBRA based on the Act’s special election period and receive the premium subsidy from April through July 2021 without paying retroactive benefits (although no claims could be made for months where premiums were not paid).

Please note that while we wanted you to be aware of the provisions in the law and have a chance to review them, the law is quite voluminous and additional IRS guidance may be forthcoming. In addition, HRCTS cannot provide legal or tax advice regarding this law or its requirements. For those questions, you should consult your own counsel.  HRCTS will continue to keep you updated on any new changes to the law affecting the benefit plans we are administering for you.