The PCORI Fee Applies to Health Insurance Issuers and Self-funded Health Plans

Under the Affordable Care Act, health insurance issuers and self-funded health plans are required to pay an annual Patient-Centered Outcomes Research Institute fee (PCORI), set to expire in 2019. Because health insurance issuers are subject to this fee, the sponsor of a fully-insured health plan does not need to take any action. However, sponsors of self-funded health plans are obligated to comply. Payment of the PCORI fee must be submitted to the IRS no later than Monday, August 1, 2016.

Calculation and Submission of the Fee

The PCORI fee applies to self-funded health plans, including some Health Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs), and is calculated based on the number of covered lives under the plan. The fee per covered life varies depending upon when the plan year ends. For plans that ended on or after January 1, 2015 through September 30, 2105, the fee is $2.08 per covered life. For plans that ended on or after October 1, 2015 through December 31, 2015, the fee is $2.17 per covered life. Plan sponsors must calculate the average number of covered lives during the plan year using one of three methods prescribed by the IRS.

To submit the calculation and payment of the PCORI fee, plan sponsors must use IRS Form 720, the Quarterly Federal Excise Tax Return. Form 720 includes a section designated for employers to report and pay the annual PCORI fee. The form and full payment of the fee are generally due by July 31 each year, but because July 31 falls on a Sunday this year, the deadline is extended to August 1, 2016.

For more information on how the PCORI fee applies to your health plan, or for guidance on accurately calculating the number of covered lives, reach out to a member of our Compliance Team.