By now, I am sure you have heard or read that the Supreme Court of the United States has recently agreed to revisit the Affordable Care Act to determine its constitutionality. If you have not, the Court agreed to hear the case of California, et al., Petitioners v. Texas, et al., No. 19-840 to determine whether the Patient Protection and Affordable Care Act (ACA) is unconstitutional. The specific question before the Court is whether the elimination of the individual mandate renders the rest of the ACA unconstitutional. The individual mandate was invalidated by the 2017 Tax Cuts and Jobs Act. Conjunctively, plan administrators and insurance providers are wondering whether any of the fees paid are refundable to the self-insured plans and insurers?
Many multiemployer health and welfare funds were required to pay fees pursuant to the ACA. The PCORI fee is one of those. In general, the PCORI fee is a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans that helps to fund the Patient-Centered Outcomes Research Institute (PCORI). Through research, the institute assists patients, clinicians, purchasers, and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine. The institute compiles and distributes comparative clinical effectiveness research findings.
If the United States Supreme Court holds that the requirement to maintain minimum essential coverage provision of the ACA is unconstitutional and not severable from the rest of the ACA, the Patient-Centered Outcomes Research Institute Fee (“PCORI”), commonly known as the PCORI fee(s) would be eliminated and no longer valid. These fees, which were assessed pursuant to the ACA, if repealed, may then be refundable.
The most recent amount of the PCORI fee was $2.45 (after September 30, 2018 and before October 1, 2019). The amount 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. The applicable dollar amount is adjusted yearly to reflect inflation in National Health Expenditures, as determined by the Secretary of Health and Human Services. This may help you put into perspective how much could be refunded to your health plan or insurance company if the ACA is repealed.
If the United States Supreme Court holds that the minimum coverage provision of the ACA is unconstitutional and not severable from the rest of the ACA, such a holding may be applicable to the PCORI fee(s) paid for tax years 2016 through 2019. As a result, some plans and insurers have requested a full refund of the taxes paid and interest on the principal amount of the tax overpayment by filing a Protective Claim for a Refund (PCR).
A Protective Claim for a Refund is used when requesting a refund that is contingent upon future events and may not be determinable until after the time period for filing a claim for refund expires. This is commonly used in instances related to litigation. That is the case here. As stated above, the PCORI fee is contingent on the case pending before the United States Supreme Court, California, et al., Petitioners v. Texas.
Although many professional firms and scholars have determined that the repeal of the entire ACA is remote, multiemployer health and welfare plans may have benefited from filing a PCR with the Internal Revenue Service (IRS). Under current tax law, the last three years are open to re-examination. The PCR filing was due by July 31, 2020. Some certified tax and accounting professionals have advised their clients to not file the PCR due to the unlikelihood of the ACA being repealed. Others suggest there is no harm in being safe. We agree with the latter. Submitting the PCR does exactly what the title states, it protects our claim for a refund if the ACA is repealed. Our firm sees no harm in this. Better safe than sorry, right?