PCORI Fees: Who, What, When and How?
The Patient-Centered Outcomes Research Institute (PCORI) fee is an essential component of the Affordable Care Act (ACA) compliance structure. Understanding what PCORI fees are, who needs to file, when it needs to be filed, the rate at which it needs to be paid, and the form on which it is filed is integral to maintaining compliance and avoiding potential penalties.
What are PCORI Fees?
The PCORI fee is a fee that certain health insurance issuers and self-insured health plan sponsors are required to pay. It is important to note the currently popular “level funded” plans many employers are using are self-insured plans and are required to file PCORI fees.
The purpose of this fee is to help fund the operations of the PCORI. The organization was established under the ACA to conduct research aimed at improving patient health outcomes. The PCORI conducts comparative effectiveness research, which helps to determine the effectiveness of different treatments and helps patients and doctors make informed healthcare decisions.
Who is Required to Pay PCORI Fees?
PCORI fees are generally due from insurers offering fully insured health plans and sponsors of self-insured health plans, including health reimbursement arrangements (HRAs) and certain flexible spending arrangements (FSAs). For fully insured plans, the insurer is responsible for the PCORI fees, while for self-insured health plans, the plan sponsor is responsible.
Exempted from PCORI fees are certain types of plans, including those that provide only excepted benefits (such as dental or vision plans), Employee Assistance Programs (EAPs) that do not provide significant benefits in the nature of medical care, and plans designed specifically to cover employees who are working and residing outside the United States.
When are PCORI Fees Due?
PCORI fees are due annually on July 31 of the year following the last day of the plan year. This means that if your plan year ended in 2022, the corresponding PCORI fee would be due by July 31, 2023.
What is the PCORI Fee Rate?
The PCORI fee rate is subject to change each fiscal year and is calculated based on the average number of lives covered under the plan or policy. Originally, the fee was set at $2.00 per life for the fiscal year ending after September 30, 2013, but has been adjusted for inflation annually since then.
The fee rate, which is determined by the Internal Revenue Service (IRS), is published each year in their guidance documents. For plan years ending before October 1, 2022, the rate for the average covered life is $2.79. For plan years ending on or after October 1, 2022 and before October 1, 2023 the rate for the average covered life is $3.00.
How are PCORI Fees Filed
To report and pay PCORI fees, entities must use IRS Form 720, titled “Quarterly Federal Excise Tax Return.” Even though the form’s title indicates a quarterly return, it is used on an annual basis for PCORI fee payment. Accompanying the Form 720 should be the payment voucher, Form 720-V. These should be filed with the IRS by the due date, which is July 31 following the last day of the plan year.
Staying in compliance with the ACA involves navigating a variety of regulatory obligations, among which is the PCORI fee. Whether you’re an insurer of a fully insured health plan or a sponsor of a self-insured plan, understanding these obligations helps maintain compliance and supports the overall aim of improving patient health outcomes.
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