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ACA: PCORI Fee


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The Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute (PCORI) to study clinical effectiveness and health outcomes. To finance the Institute’s work, a small annual fee—commonly called the PCORI fee—is charged on group health plans. Grandfathered health plans are not exempt.

Fee Basics

The PCORI fee applies for each plan year based on the plan year end date. The fee is an annual amount multiplied by the number of plan participants.

In recent years, the fee amount has been:

  • $2.79 per year per participant for plan year ending between October 1, 2021, and September 30, 2022.

  • $3 per year per participant for plan year ending between October 1, 2022, and September 30, 2023.

Insurers are responsible for calculating and paying the fee for insured plans. Employers sponsoring self-insured (self-funded) plans are responsible for calculating and paying the fee with respect to those plans.

The fee generally applies to all group health plans, except:

  • HIPAA-excepted benefits.

  • Plans that do not provide significant benefits for medical care or treatment (e.g., employee assistance, disease management, and wellness programs).

  • Stop-loss insurance policies.

  • Health savings accounts (HSAs).

A health reimbursement arrangement (HRA) that is integrated with another self-insured plan sponsored by the same employer (e.g., major medical plan or high deductible health plan) is not subject to a separate fee. If, however, the HRA stands alone, or the HRA is integrated with an insured plan, or the HRA is integrated with a different sponsor’s self-insured plan, then the HRA plan sponsor must calculate and pay the fee.


A qualified small employer health reimbursement arrangement (QSEHRA) is a new type of tax-advantaged arrangement that may be offered by small employers that meet strict conditions. A QSEHRA is not the same as an HRA. The PCORI fee applies to QSEHRAs.


Payment is due by July 31 following the calendar year in which the plan year ends. Use IRS Form 720, Quarterly Federal Excise Tax Return.

IRS FAQs

The IRS administers the PCORI fee process and provides guidance to plans and employers responsible for reporting and paying the fee. The following information is compiled from material provided by the IRS.


1. What is the Patient-Centered Outcomes Research Trust Fund fee?

The Patient-Centered Outcomes Research Trust Fund 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). The institute will assist, through research, patients, clinicians, purchasers and policy-makers, in making informed health decisions by advancing the quality and relevance of evidence-based medicine. The institute will compile and distribute comparative clinical effectiveness research findings.


2. When did the PCORI fee go into effect?

The PCORI fee applies to specified health insurance policies with policy years ending after Sept. 30, 2012, and applicable self-insured health plans with plan years ending after Sept. 30, 2012. [Note: The fee was scheduled to sunset after 2019, but legislation enacted in late 2019 reinstated the fee to extend for another 10 years.]


3. How much is the PCORI 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. [Note: The fee amount is based on the plan year end date and is adjusted each year for inflation.]


4. How does an issuer of a specified health insurance policy or plan sponsor of an applicable self-insured health plan determine the average number of lives covered under the policy or plan in order to calculate the PCORI fee for the year?

The PCORI fee is imposed on an issuer of a specified health insurance policy and a plan sponsor of an applicable self-insured health plan based on the average number of lives covered under the policy for the policy year or the plan for the plan year.

The PCORI fee final regulations were published on Dec. 6, 2012. The final regulations require issuers of specified health insurance policies to use one of four alternative methods — the actual count method, the snapshot method, the member-months method or the state form method — to determine the average number of lives covered under a specified health insurance policy for a policy year. The final regulations require plan sponsors of applicable health plans to use one of three alternative methods — the actual count method, the snapshot method or the Form 5500 method — to determine the average number of lives covered under the applicable self-insured health plan for a plan year. (Note: For the plan year ending in 2019, in addition to the three standard counting methods, the IRS is allowing plans to use any reasonable method to determine the average number of lives covered.)


[Note: For details regarding self-insured health plans, see “Counting Methods” below.]


5. Which individuals are taken into account for determining the lives covered under a specified health insurance policy or applicable self-insured health plan?

Generally, all individuals who are covered during the policy year or plan year must be counted in computing the average number of lives covered for that year. Thus, for example, an applicable self-insured health plan must count an employee and his dependent child as two separate covered lives unless the plan is a health reimbursement arrangement (HRA) or flexible spending arrangement (FSA).


6. If an employer provides COBRA coverage or otherwise provides coverage to its retirees or other former employees, do covered individuals (and their beneficiaries) count as ‘lives covered’ for purpose of calculating the PCORI fee?

Yes. These covered individuals and their beneficiaries must be taken into account in calculating the average number of lives covered.


7. Who is responsible for reporting and paying the PCORI fee?

Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans are responsible for reporting and paying the PCORI fee. [Note: Self-insured plan sponsors (e.g., employers) cannot use ERISA plan assets to pay the PCORI fee. That is because the fee is imposed on the plan sponsor and not on the plan itself. Special rules apply, however, in the case of a multi-employer plan.]


8. What form will be used to report and pay the PCORI fee?

Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans will file annually Form 720, Quarterly Federal Excise Tax Return, to report and pay the PCORI fee. The Form 720 will be due on July 31 of the year following the last day of the policy year or plan year. Electronic filing is available but not required. Payment will be due at the time the Form 720 is due. Deposits are not required for the PCORI fee.


Issuers and plan sponsors who are required to pay the PCORI fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the other quarters of the year.

Issuers and plan sponsors who are required to pay the PCORI fee as well as other liabilities on a Form 720 will use their Form 720 for the 2nd quarter to report and pay the PCORI fee that is due July 31. Only one Form 720 should be filed for each quarter.

Form 720 was revised to provide for the reporting and payment of the PCORI fee.


9. What exceptions to the PCORI fee apply?

The PCORI fee does not apply to exempt governmental programs, including Medicare, Medicaid, Children’s Health Insurance Program (CHIP) and any program established by federal law for providing medical care (other than through insurance policies) to members of the Armed Forces, veterans and members of Indian tribes (as defined in section 4(d) of the Indian Health Care Improvement Act).


Also, health insurance policies and self-insured plans that provide only excepted benefits, such as plans that offer benefits limited to vision or dental benefits and most flexible spending arrangements (FSAs), are not subject to the PCORI fee. Further, health insurance policies or self-insured plans that are limited to employee assistance programs, disease management programs or wellness programs are not subject to the PCORI fee if these programs do not provide significant benefits in the nature of medical care or treatment.


The PCORI fee applies only to policies and plans that cover individuals residing in the United States. Thus, the PCORI fee does not apply to policies and plans that are designed specifically to cover employees who are working and residing outside the United States.


10. Are health insurance policies or self-insured health plans for tax-exempt organizations or governmental entities subject to the PCORI fee?

Yes. Unless the health insurance policy or self-insured health plan is an exempt governmental program described above, the policy or plan is a specified health insurance policy or applicable self-insured health plan subject to the PCORI fee and, accordingly, the health insurance issuer or plan sponsor is responsible for the PCORI fee.


11. Does the PCORI fee apply to an applicable self-insured health plan that has a short plan year?

Yes, the PCORI fee applies to a short plan year of an applicable self-insured health plan. A short plan year is a plan year that spans fewer than 12 months and may occur for a number of reasons. For example, a newly established applicable self-insured health plan that operates using a calendar year has a short plan year as its first year if it was established and began operating beginning on a day other than Jan. 1. Similarly, a plan that operates with a fiscal plan year experiences a short plan year when its plan year is changed to a calendar year plan year.


12. What is the PCORI fee for the short plan year?

The PCORI fee for the short plan year of an applicable self-insured health plan is equal to the average number of lives covered during that plan year multiplied by the applicable dollar amount for that plan year. Thus, for example, the PCORI fee for an applicable self-insured health plan that has a short plan year that starts on April 1, 2021, and ends on Dec. 31, 2021, is equal to the average number of lives covered for April through Dec. 31, 2021, multiplied by $2.79 (the applicable dollar amount for plan years ending on or after Oct. 1, 2021, but before Oct. 1, 2022).


13. What is the PCORI fee due date for the short plan year?

The due date for the PCORI fee is July 31 of the year following the last day of the plan year (including a short plan year).


14. Can a plan sponsor or policy issuer that overpaid the PCORI fee due July 31 reduce the PCORI fee due the following July 31 for the amount of the prior year’s overpayment?

No. Plan sponsors and policy issuers cannot reduce the PCORI fee due July 31 for any overpayment from a prior year. If a plan sponsor or policy issuer overpaid the PCORI fee reported on a previously filed Form 720, it should file Form 720X, Amended Quarterly Federal Excise Tax Return, for an overpayment of a previously filed PCORI liability. Form 720X is available on IRS.gov.


15. How should corrections to a previously filed Form 720 be made, for example one that determined a fee using an incorrect applicable dollar amount?

A plan sponsor or policy issuer should make corrections to a previously filed Form 720 by filing a Form 720X, Amended Quarterly Federal Excise Tax Return, including adjustments that result in an overpayment. Form 720X may be filed anytime within the applicable limitation period. Form 720X is available on IRS.gov.


Counting Methods for Applicable Self-Insured Health Plans

Generally, plan sponsors of applicable self-insured health plans must use one of the following three alternative methods to determine the average number of lives covered under a plan for the plan year:

  1. Actual Count Method: A plan sponsor may determine the average number of lives covered under a plan for a plan year by adding the totals of lives covered for each day of the plan year and dividing that total by the total number of days in the plan year.

  2. Snapshot Method: A plan sponsor may determine the average number of lives covered under an applicable self-insured health plan for a plan year based on the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second, or third month of each quarter, and dividing that total by the number of dates on which a count was made. Plan sponsors using this method also have the option of using the Snapshot Factor Method. In that case, instead of counting each covered participant, the employer may elect to count “primary” participants (e.g., employees) only. Then multiply the number of primary participants with self-only coverage by 1 and multiply the number of primary participants with dependent coverage by 2.35.

  3. Form 5500 Method: An eligible plan sponsor may determine the average number of lives covered under a plan for a plan year based on the number of participants reported on the Form 5500, Annual Return/Report of Employee Benefit Plan, or the Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. Add the number of plan participants reported on the Form 5500 or 5500-SF at the beginning and at the end of the plan year. If, however, the plan only provides self-only coverage (i.e., no dependent coverage), then divide the total by 2. To use this counting method, the Form 5500 or 5500-SF must be filed for the plan year by July 31 of the following year, which is the PCORI fee due date.

Official Guidance

In addition to the questions and answers above, the IRS provides regulatory guidance on this topic in the following materials:

IRS Notice 2022-59, Adjusted Applicable Dollar Amount for Fee (11/14/2022)

IRS Notice 2022-04, Adjusted Applicable Dollar Amount for Fee (12/21/2021)

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