PCORI Fees: Are They Back Again?

A Patient-Centered Outcomes Research Institute (PCORI) fee is imposed by the Affordable Care Act (ACA) on certain health insurance policies and self-funded plans to help fund the Patient-Centered Outcomes Research Institute, which is a non-profit institute organized to fund research into the comparative effectiveness of medical treatments and services.

The IRS treats the fee as an excise tax and is a requirement for self-funded and fully insured customers. For fully insured plans, the insurance carrier pays the PCORI fees. If the plan is self-insured, however, the plan sponsor or employer would pay the fees directly to the IRS along with the filing of the Form 720 for reporting.

Under the ACA, the PCORI fees were scheduled to end in 2019; however, they have been extended through the signing of the Further Consolidated Appropriation Act of 2020 (the “Act”) by President Trump on December 20, 2019. The reinstatement of the PCORI fees extends to 2029, covering plan years ending on or before September 30, 2029. The last payment for calendar year plans will be July 31, 2029.

The PCORI fee is determined by calculating the average number of covered lives for the plan year multiplied by the applicable dollar amount. The fee is paid annually to the IRS using Form 720 (Quarterly Federal Excise Tax Return).

PLAN/POLICY YEAR END DATE FILE NO LATER DATE APPLICABLE RATE
January 2018 – September 2018 7/31/19 $2.39
October 2018 – December 2018 7/31/19 $2.45
January 2019 – September 2019 7/31/20 $2.45

A plan sponsor has three methods that they can use to calculate their average number of covered lives. Only one method can be used during that plan year to determine the average total number of covered lives.

  • Actual Count Method. Calculating the total number of lives covered for each day of the plan year and dividing it by the number of days in the plan year.
  • Snapshot Method. Adding the total number of lives covered on a date during the first, second, and third month in each quarter, or an equal number of dates for each quarter, and dividing the total by the number of dates on which a count was made.
  • Form 5500 Method. Based on the number of participants reported on the Form 5500.

For additional information about calculating and paying the PCORI fees, please visit the IRS website at https://www.irs.gov/newsroom/patient-centered-outcomes-research-institute-fee.

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