IRS Increases PCORI Fee for Plan Years Ending on or After October 1, 2020

IRS Increases PCORI Fee for Plan Years Ending on or After October 1, 2020

According to the Internal Revenue Service, the Patient Centered Outcomes Research Institute (PCORI) fee will rise to $2.66 per covered life for policy years and plan years that end on or after October 1, 2020.  For group health plans with policy years and plan years that ended before October 1, the rate is $2.54 per covered life.

The Affordable Care Act (ACA) requires all health insurers and self-funded group health plans to annually pay the PCORI fee.  The fee funds a government-sponsored center to research the effectiveness of various medical care treatments.  Health insurance carriers are responsible for making payments on behalf of all fully-insured health plan participants. So, for clients with that kind of coverage, premium rates will include the fee increase.  However, all employers operating self-insured medical plans must pay the PCORI fee directly.  Plans that must pay their fee include:

  • Traditional self-funded major medical plans
  • Level-funded plans
  • Health Flexible Spending Accounts (FSAs) that do not qualify as an excepted benefit plans, level-funded plans
  • Health Reimbursement Arrangements (unless they only reimburse for excepted benefit coverage not integrated with the group health plan).  If an HRA integrates with a fully-insured major medical plan, the employer must still pay the HRA’s fee.

The total number of people covered by each group plan, not just the number of covered employees, determines the tax amount.  There are several methods an affected employer plan can use to make that count.  Applicable employer plan sponsors must document their calculation and pay their fee using IRS Form 720 by July 31, 2021.  For self-funded plans, paying the tax is the employer’s direct responsibility, rather than a task completed by a third-party administrator.  Form 720 is the IRS’s general quarterly excise tax filing form, so if an affected business doesn’t need to pay other excise taxes, it will file Form 720 in the second quarter for PCORI fee purposes only.  Employers with detailed questions about the PCORI fee will likely find the IRS’s PCORI fee frequently asked questions (FAQ) page very helpful.