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The Affordable Care Act imposes a fee on health insurance issuers and self-insured plan sponsors to fund comparative effectiveness research. These fees are called PCORI fees and are paid annually using IRS Form 720. PCORI fees are due by July 31st of each year. For plan years ending in 2023, fees are due by July 31, 2024.
PCORI Fee Overview
The PCORI fees, originally set to expire in 2019, were extended for an additional 10 years by a federal spending bill in 2019. This extension means the fees will apply for fiscal years 2020-2029.
Calculating the PCORI Fee Payment
PCORI fees are collected like taxes, based on the average number of covered lives. Issuers and plan sponsors report this number separately for specified health insurance policies and self-insured health plans. The total tax owed is calculated by multiplying the number of covered lives by the applicable rate for that tax year ($3.00 for plan years ending on or after October 1, 2022, and before October 1, 2023, or $3.22 for plan years ending on or after October 1, 2023, and before October 1, 2024). The fees for health insurance policies and self-insured health plans are combined to determine the total tax owed.
Action Steps
To assess their obligations, employers should:
- Determine which plans are subject to PCORI fees;
- Assess funding status (insured vs. self-insured) to determine fee responsibility; and
- For self-insured plans, select an approach for calculating average covered lives.
The IRS offers helpful resources, including a chart on fee application to specific health coverage types. Download the bulletin for more details.
National Insurance Services is not a law firm and no opinion, suggestion, or recommendation of the firm or its employees shall constitute legal advice. Readers are advised to consult with their own attorney for a determination of their legal rights, responsibilities and liabilities, including the interpretation of any statute or regulation, or its application to the readers’ business activities.
