In late 2022, the IRS issued an update regarding Patient-Centered Outcomes Research Institute (PCORI) fees for 2023. Namely, that they are increasing.
For plans that end on or after October 1, 2022, and before October 1, 2023, the PCORI rate per covered individual is $3.00. As a reminder for employers, the rate for covered individuals with plans that end on or after October 1, 2021, and before October 1, 2022, is $2.79.
What are PCORI fees?
Annual PCORI fees help fund the Patient-Centered Outcomes Research Institute and were first introduced as part of the Affordable Care Act. The institute intends to advance medical research and inform policymakers and voters about recent discoveries in everything from treating mental illness to experimental medications for early-stage cancer.
Fees associated with PCORI were set to expire at the end of 2020 but were extended through September 30, 2029, as part of the Further Consolidated Appropriations Act of 2020.
How to calculate PCORI fees
Organizations that must make annual PCORI payments should keep in mind that the fee is calculated based on the average number of lives covered by the policy. This includes all plan participants, such as dependents, spouses, retirees, and COBRA recipients.
The IRS offers several methods for calculating the average, including
- Actual Count Method – add the actual number of employees covered on every day of the plan and divide by the number of days in the plan year
- Snapshot Method – add the total number of employees covered on a date during a quarter and divide by the number of dates on which a count was made
- Member Months Method – based on the member months reported on the NAIC Supplemental Health Care Exhibit filed for that calendar year
- State Form Method – a form based on the member months method filed in the business’ home state
- Form 5500 Method – add the total participants covered at the start and end of the plan year and divide by two
Plan sponsors must use the Actual Count Method, Snapshot Method, or Form 5500 Method. Depending on if you’re an issuer of specified health coverage or a plan sponsor, the methods available vary. Contact Trusaic for more information on PCORI fees or visit the IRS PCORI page.
Who needs to pay PCORI fees?
PCORI fees are necessary from all issuers of specified health insurance policies and plan sponsors offering self-funded health plans, including Health Reimbursement Arrangements. Health insurance policies and self-insured plans that only provide expected benefits (vision and dental) may not be subject to PCORI fees.
Self-funded employers and health carriers must submit the annual PCORI fees by July 31 via Form 720 and the Electronic Federal Tax Payment Systems (EFTPS).
Need assistance making the yearly PCORI fee payments? We can handle this responsibility for you at no additional cost as part of our full-service ACA Complete solution.
For information on ACA penalty amounts, affordability percentages, essential filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA Essential Guide.
