PCORI Fees FAQs
Overview: The Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute (PCORI) to help patients, clinicians, payers and the public make informed health decisions by advancing comparative effectiveness research. The Institute’s research is funded, in part, by fees paid by health insurance issuers and sponsors of self-insured health plans. These issuers are responsible for reporting and paying the PCORI fee by July 31st of each year following the last day of the plan year.
The fee applies to specified health insurance policies with policy years ending after 9/30/12, and before 10/1/19, and applicable self-insured health plans with plan years ending after 9/30/12, and before 10/1/19.
Research findings regarding clinical effectiveness will be organized and distributed by the institute.
The PCORI fee was originally scheduled to expire in 2019 has been extended for 10 years. On December 20, 2019 President Trump signed the SECURE ACT which extended the fee.
Q: How is the PCORI Fee calculated?
A: It is based on the average number of lives covered under a policy or plan, multiplied by the applicable dollar amount for the year, and will be adjusted annually for inflation.
Applicable dollar amounts:
- Policy and plan years ending after 9/30/12, and before 10/1/13 – $1.00
- Policy and plan years ending after 9/30/13, and before 10/1/14 – $2.00
- Policy and plan years ending after 9/30/14, and before 10/1/15 – $2.08
- Policy and plan years ending after 9/30/15, and before 10/1/16 – $2.17
- Policy and plan years ending after 9/30/16, and before 10/1/17 – $2.26
- Policy and plan years ending after 10/1/17, and before 10/1/18 – $2.39
- Policy and plan years ending after 10/1/18, and before 10/1/19 – $2.45
Q: Which employees are “counted” when determining the covered lives, and what methods are used to determine the average?
A: All employees that are covered during the policy or plan year must be counted when averaging the number of covered lives for that year. Keep in mind, an employee and their dependent child are counted as two separate lives. Individuals and their beneficiaries covered under COBRA are also counted in this average. Health reimbursement arrangements (HRA) and flexible spending arrangements (FSA) are exempt from the count.
Issuers of specified health insurance policies can use one of the following four methods:
- Actual Count
- Member Months
- State Form
Plan sponsors of applicable health plans can use on the following three methods:
- Actual Count
- Form 5500
Q: Is there a specific form to be used for reporting and paying the fee?
A: The fees are reported utilizing the IRS Form 720, Quarterly Federal Excise Tax Return which was revised for this purpose. Payment is due at the same time as the Form 720 is filed. Although electronic filing is available, it is not a requirement.
Q: Are there exceptions to the PCORI fee:
A: Payment of the PCORI fee does not apply to:
- Exempt governmental programs such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), programs established for providing medical care through federal law for members of the Armed Forces, veterans and members of Indian Tribes (other than through insurance policies);
- Policies and plans that only provide benefits limited to dental, vision or most FSAs;
- Policies and plans that are limited to employee assistance programs, disease management programs, or wellness programs – if they do not provide medical care or treatment benefits
- Policies and plans designed specifically for employees who are employed and reside outside of the US.
Q: What are the PCORI fee specifics for self-insured health plans with a short plan year?
A: The fee is based on the average number of covered lives, multiplied by the applicable dollar amount for that plan year. For example, if an applicable self-insured health plan’s short year started on May 1, 2013 and ended on December 31, 2013 and the average number of lives covered during that time period was 156, multiplied by $2*, $312 will be the calculated fee. The due date of July 31st of the year following the last day of the plan year still applies for a short plan year.
*the dollar amount is based on the plan years ending on or after 10/1/13, but before 10/1/14
Click here to read more about PCORI, as well as Reporting and Paying Fees. Visit our Health Care Reform page at advisorsbb.com for information regarding the Affordable Care Act, including mandates, IRS notifications and yearly overviews.
For more information regarding an Employee Benefits program for your organization, contact Jason Della Penna, Executive Vice President at Brown & Brown Benefit Advisors, email@example.com.
“This content is strictly informational and should not be used as specific advice on insurance products, legal, accounting and/or tax related matters. Insureds should always contact the appropriate licensed professional for their insurance, legal, accounting or tax needs.”