The Affordable Care Act (ACA) requires health insurance issuers and self-insured plan sponsors to pay Patient-Centered Outcomes Research Institute fees (PCORI fees). The fees are reported and paid annually using IRS Form 720, the Quarterly Federal Excise Tax Return.
Form 720 and full payment of the PCORI fees are due by July 31 of each year, and generally covers plan years that end during the preceding calendar year. For plan years ending in 2023, the PCORI fees are due by July 31, 2024.
Overview of the PCORI Fees
The PCORI fees were scheduled to expire for plan years ending on or after Oct. 1, 2019. However, a federal spending bill enacted at the end of 2019 extended the PCORI fees for an additional 10 years. As a result, these fees will continue to apply for the 2020-2029 fiscal years.
Calculating the PCORI Fee Payment
In general, the PCORI fees are assessed, collected and enforced like taxes. 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 plan. Final rules outline a number of alternatives for issuers and plan sponsors to determine the average number of covered lives.
Using Part II, Number 133 of Form 720, issuers and plan sponsors report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year ($3.00 for plan years ending on or after Oct. 1, 2022, and before Oct. 1, 2023, or $3.22 for plan years ending on or after Oct. 1, 2023, and before Oct. 1, 2024). The fees for specified health insurance policies and applicable self-insured health plans are then combined to equal the total tax owed.
Action Steps
To assess their obligations, employers should:
- Determine which plans are subject to the PCORI fees;
- Assess plan funding status (insured versus self-insured) to determine whether the issuer or the employer is responsible for the fees; and
- For self-insured plans, select an approach for calculating average covered lives.
The IRS provides helpful resources, including a chart on how the fees apply to specific types of health coverage or arrangements.
For assistance feel free to contact us at Inspire Workforce.
