Patient-Centered Outcome Research Institute Fees (PCORI) Due July 31, 2019

The Patient-Centered Outcomes Research Institute (PCORI) fee is due by July 31, 2019. The PCORI fee was created under the Affordable Care Act (ACA) to advance comparative effectiveness research to allow patients, clinicians and the public to make more informed health decisions. For 2019, the fee was increased to $2.45 times the average number of covered lives for the plan year.

There will not be any PCORI fee for plan years that end on October 1, 2019 or later, which means for calendar-year plans this is the last PCORI Fee. For non-calendar year plans that end between January 1, 2019 and September 30, 2019, there will be one last PCORI payment due by July 31, 2020.

What are the methods for calculating the PCORI fee?

For fully-insured health plans, the PCORI fee is generally included in the monthly medical plan premiums. Plan sponsors of self-insured plans will need to calculate the average number of covered lives and pay the applicable fee. There are three options to determine the average number of covered lives:

1. Actual Count Method – Calculating the number of lives covered for each day of the plan year and dividing the sum by the number of days in the plan year
2. Snapshot Method – Adding the total number of covered lives on a date in each quarter of the plan year
3. Form 5500 Method – Determining the average number of lives covered under all policies in effect for a year based upon an employer’s annual ERISA 5500 filing

The PCORI fee generally applies to insurance policies providing accident and health coverage and to self-insured group health plans. This can include plans offered by one or more employers as well as multiple employer welfare arrangements (MEWA). Governmental entities that are sponsors of self-insured health plans are also subject to the PCORI fee. The PCORI fee may apply to retiree plans that are not considered excepted benefits under HIPAA. Special rules apply to health reimbursement arrangements (HRA) and health flexible spending accounts (FSA). Lastly, employers who offer multiple self-insured plans (e.g. medical and prescription drug) are only subject to one PCORI fee.

How are the PCORI fees paid and reported?

The PCORI fee is applied to the plan sponsor; therefore, for self-insured plans, the fee cannot be paid using plan assets.

PCORI fees are treated like a tax by the IRS and must be reported and paid annually on IRS Form 720. The PCORI fee should be applied to the second quarter on Form 720. Additionally, the PCORI fee may be deductible as an ordinary and necessary business expense under Code Section 162.

What should employers do?

Employers should determine which plans are subject to the PCORI fees. For self-insured plans, employers should work with their consultant to obtain the necessary information in order to determine the average number of covered lives on their plan(s).

Please click here for additional information regarding the fees as well as instructions and Form 720.

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