The Affordable Care Act (ACA) requires health insurance issuers and sponsors of self-insured health plans to pay “Patient-Centered Outcomes Research Institute” (PCORI) fees. The fees are reported and paid annually using IRS Form 720. For fully-insured plans, the insurers are responsible for the fee (most build in the fee into their current pricing model). For self-insured plans, the plan sponsor is responsible for the fee.
Overview of the PCORI Fee
The PCORI fee applies to plan years ending on or after Oct. 1, 2012, and end for plans ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years. Issuers and plan sponsors will be required to pay the fees annually by July 31 of each year.
Reporting the PCORI Fee on Form 720
The PCORI fee applies separately to “specified health insurance policies” and “applicable self-insured health plans,” and is based on the average number of lives covered under the plan or policy.
Using Part II, Number 133 of Form 720, issuers and plan sponsors will be required to 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, as follows:
- $1 for plan years ending before Oct. 1, 2013 (2012 for calendar year plans)
- $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014
- $2.08 for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015 (see Notice 2014-56)
- For plan years ending on or after Oct. 1, 2015, the rate will increase for inflation
SPECIAL RULES FOR HRAs and FSAs
If an employer sponsors a fully-insured medical plan and a self-funded plan such as a Health Reimbursement Account (HRA), a Medical Expense Reimbursement Account (MERP), or, in rare instances, a Health Flexible Spending Account (FSA), the employer may be required to pay separate PCORI fees for the self-insured aspect of the fully-insured plan. Note, however, that to calculate the PCORI fee for HRA accounts, only covered employees are counted, not dependents and spouses.
To read more about the PCORI fee, please click here.