Glossary of Human Resources Management and Employee Benefit Terms
PCORI fees fund the Patient-Centered Outcomes Research Institute (PCORI) trust fund. The fees are paid to the Internal Revenue Service (IRS) by health insurance companies or employers, depending on the type of plan. In turn, the PCORI funds evidence-based research that aims to improve patient outcomes and better inform caregivers, policymakers, and others involved in healthcare. It was created as part of the Affordable Care Act (ACA).
Though set to expire in 2019, this fee was renewed for another 10 years on December 20, 2019. This means that the fee will be applicable through 2029. This fee needs to be filed by July 31 using Form 720. While Form 720 is a quarterly form, it should only be filed once a year to report and pay PCORI fees unless you also have other liabilities you need to report on the form. In that case, the form should be filed quarterly, and the PCORI fees should be reported and paid in the second quarter.
The PCORI fee applies to certain health insurance policies, namely fully funded plans provided by health insurers and self-funded insurance plans provided by employers. This includes:
Major medical coverage plans
Accident and major medical coverage plans
Health Reimbursement Arrangement (HRA)
Major medical coverage for retirees
Short year plans
Plans that are exempt include:
Stand-alone plans for vision or dental
Insurance coverage for employees working outside the U.S.
Medicaid, Medicare, and CHIP
Military health plans
For a comprehensive list of plans for which the PCORI fee applies and those that are exempt, consult this IRS webpage on the subject.
According to the IRS, the total 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.” The dollar amount is adjusted every year for inflation, so make sure you check with the IRS for the current year’s amount when calculating your PCORI fee. As of 2020, the dollar amount for plans ending anytime between January and September 2019 is $2.45. For updates on the yearly dollar amount and filing deadlines, consult the IRS applicable rates chart.
The IRS lists different methods for calculating the average number of lives covered during the plan year. There are three methods for self-insured health plans and four methods for other specified health insurance policies. Each of these arrives at an average count of people who were covered during a plan year, which you then multiply by the applicable dollar amount.
You need to count anyone who is covered during the plan year, meaning employees and their dependents should be counted. For HRAs and flexible spending arrangements (FSAs), you can count one life covered for each employee. For more information, consult the IRS website.