The Affordable Care Act established the Patient-Centered Outcomes Research Institute (PCORI) to improve the quality of health care and provide information to help consumers make informed health care decisions. Health plans must pay an annual fee based on covered lives to help fund the Patient-Centered Outcomes Research Trust Fund. To see if a plan is subject to the fee, review this information from the IRS.
The IRS released the adjusted applicable dollar amount that must be used to calculate the fee for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023. This amount is $3.00. The increase from the prior applicable dollar amount is calculated by multiplying $2.79 (which is the adjusted applicable dollar amount for policy years and plan years ending in the previous Federal fiscal year) by the percentage increase of the projected per capita amount of National Health Expenditures published by HHS on March 24, 2022.
The PCORI fee is reported and paid on the second quarter IRS Form 720 (Quarterly Federal Excise Tax Return) which is due July 31.
If a health plan is fully insured, the insurer is responsible for paying the PCORI fee. If a health plan is self-funded, the plan sponsor (employer) must pay the fee. Stand-alone dental or vision plans, EAPs, wellness programs, plans for employees outside of the U.S., HSAs, and almost all HRAs and FSAs are not required to pay the PCORI fee. The fee is a tax-deductible business expense for employers with self-insured plans.
A self-funded health plan determines the applicable fee by multiplying the fee amount by the average number of total lives covered by the plan. The rules allow employers with self-funded plans to select among three methods for determining the number of covered lives.
Any reasonable method for calculating the average number of covered lives may be used but that reasonable method must be applied consistently for the year and the same method must be used for all plans for which a liability is reported on Form 720 for that year.
The options for counting lives for a self-funded plan include the following.
Insurers may select among four methods for determining the number of covered lives.
Employers with self-funded health plans will have to calculate and pay the required PCORI fee with their 2nd quarter tax filing.