Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like Reviews.com.

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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The lowdown...

  • Specified health insurance policy provides coverage for all illnesses and accidents to the United States resident only. It does not cover citizens living in other countries
  • Affordable Care Act has imposed a fee on the specified health insurance providers to help fund the Patient-Centered Outcomes Research Institute (PCORI)
  • The PCORI uses the number of lives covered under an insurance plan in calculating the total fee that every insurance company should pay

U.S. residents have different types of insurance policies including home, auto, and health among others. Some unpredicted diseases happen any time leading to very high expenses on the family members. The standard medical insurance would cover your medical bills and payment of the doctors leaving the other financial burden to the household.

Specified health insurance policy comes in handy to provide coverage for any accident and health issues to the United States residents. The insurance coverage also covers anyone under a group health care plan as well as the citizens’ possessions.

Find the extra cover you need for the ultimate protection; enter your zip code above for free health insurance quotes!

Exempted Cases for the Specified Health Insurance Coverage

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The specified health insurance policy includes all current and former employees as well any retiree who qualifies for the continued coverage under the federal law or the Consolidated Omnibus Budget Reconciliation Act (COBRA). However, the policy exempts the following cases:

  • Any indemnity reinsurance or stop loss policy- in stop-loss policy, the insurance company is liable for all or part of the losses that a self-insured policyholder incurs while covering the applicable lives. The indemnity insurance policy, on the other hand, is applicable when the reinsurance company accepts to compensate the issuing company for all the losses incurred under the specified agreement. The issuing company maintains its contractual relationship with the policyholders and their dependents.
  • Any group policy designed to cover employees who reside and work out of U.S.
  • The specified insurance policy does not include any insurance coverage that provides the wellness program, disease management, and employee assistance program, but does not offer medical care or treatment.
  • An insurance policy that provides coverage for all the expected benefits described in the Code Section 9832 – the expected benefits covers the automobile liability and workers compensations. Other benefits include the long-term care, general liability policies, dental or vision coverage, disability benefits, specified illnesses, and the onsite medical covers.

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PCORI Fee

In 2012, the ACA imposed fees on the plan sponsors and the self-insured health plans. ACA uses the fee to fund the Patient-Centered Outcomes Research Institute (PCORI).

The health plans required to pay the fee include the self-insured health plans and the specified health insurance policies with the exemptions of the dental and vision plans.

The plan sponsor is in charge of the fee payment for the self-insured plans while the insured plans require the insurer to pay the PCORI fee. In this case, the specified health insurance provider is responsible for the fee payment. For the multi-employer plans, the participating employers will be in charge of the fee payment.

The Fee Payment

Payment of the fee depends on the number of people covered under an insurance plan. The insurers should pay the fee once a year and not later than July 31st of every plan year.

The PCORI fee is $1 multiplied by the number of lives covered under a plan after which it increases to $2 in the subsequent years.

The policies beginning on or after October 1, 2014, and earlier than October 1, 2019, will have a different charge on their fee. This is due to increasing in the total amount of the National Health Expenditure.

Report the Fee

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Specified health insurance providers should file the IRS Form 720 to pay the PCORI fee annually. Fee payment is due only after the Form 720 is due. No rule prevents the insurers from recovering the fee from the policyholder. Therefore, the insurance companies are free to increase the premium to recover their PCORI fee. Unlike the reinsurance fee, the PCORI fee applies to the specified health insurance policies that provide health and accident cover to the retirees.

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Calculating the Number of Covered Lives

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The PCORI uses the number of the lives covered by the specified health insurance policy to calculate the overall fee that everyone should pay. The four methods used in the calculation of the number of lives covered include:

  • Actual count method It is the easiest way that the insurance companies use to determine the number of lives covered under the plan. It involves adding the total number of lives covered under a plan every day in a plan year and dividing it by the total number of the days in the insurance policy year.
  • Member months It requires registration of members to the NAIC Supplemental Health Care Exhibit. The calculation involves dividing member months by 12. The member months are the total number of lives covered under specified policies in every month of the reporting date.
  • Snapshot method The insurer adds the number of individuals covered on a particular date on the first, second and third quarters in every plan year and then divides the total by the total number of the dates when they made the count. In this case, all the dates used in the quarters must be within three days of the date that matches the first quarter. Remember that all of the dates must be within the same policy year. An insurer may use the Form 5500 to calculate the number of individuals covered under a particular plan. 30th and 31st day of the month are usually the last days of the month hence the three-day difference.
  • State Form Method It is similar to the member months with the only difference being that they use the state forms to determine the number of lives covered instead of NAIC. The reports filed in the state forms are the same as the ones reported on the NAIC Exhibit.

The state form and the member month’s method do not depend on the actual policy years to calculate the individuals covered under the specified health insurance policy. However, the actual count and the snapshot method rely on the policy-reporting period to determine the number of lives covered. The fee due date should be on July 31st every year from the last day of the covered plan year.

Summary

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Patient-Centered Outcomes Research Institute (PCORI) requires every insurer to pay the required amount in every plan year. The policyholders should be ready for increased rates on their specified medical coverage to cover for the PCORI fee. However, they should consider checking on the financial status of an insurance company and their ability to cover all payments in the case of a claim.

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