The annual PCORI fee, which is imposed on health insurance issuers and self-insured health plan sponsors to fund the work of the Patient-Centered Outcomes Research Institute, is due to the IRS by August 1, 2022 (since July 31 falls on a Sunday)for plan years ending in between October 1, 2021 and September 30, 2022, including calendar year plans. The fee will increase from $2.66 per plan enrollee in 2021 to $2.79 per plan enrollee for 2022.

Background

The Affordable Care Act (ACA) established the PCORI fee to support the Washington, D.C.-based institute of the same name, funding research on the comparative effectiveness of medical treatments. The annual fee generally applies to major medical plans and health reimbursement arrangements (HRAs) that cover employees who work and reside in the United States.

• The PCORI fee was originally set to expire in 2020, with the last payment to be due on July 31, 2019. However, new legislation passed on December 20, 2019 extended the fee for an additional ten years.
• The IRS, which treats the fee as an excise tax, has published a table that summarizes the application of the fee to various types of health coverage. The PCORI fee generally applies to
  • major medical insurance coverage
  • accident and health coverage
  • retiree-only health or major medical coverage
  • COBRA coverage
  • HRAs, unless excepted (i.e., separately offered, limited-scope dental or vision only benefits)
  • state and local government employee or retiree health or major medical plans

FSA Rules

A special rule for healthcare FSAs defines these accounts as self-insured plans, and therefore subject to the PCORI fee, unless they are deemed “excepted benefits” per the following conditions:

• The employer offers group health plan coverage to employees who participate in the health FSA, and
  • The employer makes no contributions to employees’ health FSAs, or employer contributions are less than
    • two times the employees’ election, or
    • $500 more than employees’ election, whichever is greater.

HRA Rules

• Special rules apply for self-insured plans with an HRA: 
  • Two or more self-insured health plans can be treated as one plan for the purpose of calculating the PCORI fee (so that each life covered under both plans would only be counted once when calculating the fee) if both have the same plan year and plan sponsor.
  • Employers with fully insured plans, who also sponsor a separate medical HRA, are responsible for paying the PCORI fee for the HRA. The insurer is responsible for playing the fee for the fully insured plan. The two plans are treated separately with respect to calculating the fee.

Calculation Methods

• The PCORI fee is calculated based on the average number of covered lives under the health plan and the plan year end date.
• While insurance carriers pay the PCORI fee on behalf of fully insured plans, the fee for self-insured plans must be paid by the employer that sponsors the plan.
• For plan years ending October 1, 2021 through September 30, 2022, the fee is $2.79 per covered life.
• Plan sponsors may use one of three methods to determine the average number of lives covered by their plans:
  • Actual count method: the sum of lives covered for each day in the plan year divided by the number of days in the plan year. If data is provided on a monthly basis, employers may divide the sum of the average lives per month by the number of months in the plan year.
  • Snapshot method: the sum of the lives covered on one date in each quarter (or an equal number of dates in each quarter) divided by the number of days on which a count was made.
  • Form 5500 method: for sponsors of plans with self-only coverage, the mean of the number of covered employees at the beginning of the plan year, as reported on Form 5500, and the number of covered employees at the end of the plan year. For plans that offer more than self-only coverage, the sum of the number of employees covered at the beginning of the plan year and the number of employees covered at the end of the plan year, as reported on Form 5500.
• The PCORI fee should be filed and paid through theElectronic Federal Tax Payment System using IRS Form 720. Instructions for completing Form 720 can be found here.