Health plans

IRS increases PCORI fees for health plans payable in 2022

The IRS is increasing the fees that insurers or promoters of self-insured health plans pay each year to fund the Federal Patient-Centered Outcomes Research Institute (PCORI) trust fund. For 2022, the fee is due August 1, as July 31 falls on a Sunday this year.

Charges apply to previous calendar year health insurance plans. According to Notice 2021-04, which the IRS issued on December 21, the current annual fee adjustments are as follows:

  • For plan years ended on or after October 1, 2021 and before October 1, 2022 (including calendar year plans), the fees are
    $ 2.79 per person covered by the plan, up from $ 2.66 a year earlier.
  • For plan years ending on or after October 1, 2020 and before October 1, 2021, the fees are
    $ 2.66 per person, up from $ 2.54 the previous year.

Self-insured employers pay the annual PCORI fees directly to the IRS. For fully insured employers, the costs are paid by the insurance provider, although the cost may be factored into premium increases.

Fees are reported and paid annually with the submission of IRS Form 720 (Quarterly Federal Excise Tax Return) and are due by July 31 of the year following the end of the plan year, unless that this date does not fall on a weekend or a federal holiday.

Fees apply until 2029

The Affordable Care Act created a fee to fund a Washington, DC-based institute that conducts research on the comparative effectiveness of medical treatments. The fees were originally intended to apply only to plans whose term ended after September 30, 2012 and before October 1, 2019. However, under the bipartite budget law of 2019, the annual PCORI filing and fees have been extended for 10 years, until 2029.

“PCORI fees are calculated using the average number of lives covered by the policy or plan and the applicable dollar amount for that policy year or plan year,” said William Sweetnam, legislative and technical director of the Council. of employers on flexible pay in Washington. , DC “The applicable dollar amount was $ 2 when the fee was enacted under the Affordable Care Act, and this amount is increased each year based on the increase in the projected per capita national spending. health. “

Calculation of PCORI fees

The IRS offers self-insured employers options to determine the average number of plan members, which the IRS designates as covered lives — employees, spouses, and dependents covered by the Medicare plan. According to the IRS, plan sponsors can use any of the following methods to calculate the average number of lives covered by the plan:

  • The actual counting method. Plan sponsors add up the total covered lives for each day in the year, divided by the total number of days in the plan year.
  • The snapshot method. Sponsors add up the total lives covered on a date in each quarter of the plan year.
  • The instantaneous factor method. Similar to the snapshot method, the number of lives covered on a given day can be determined by counting the actual number of lives covered on that day or by treating people with individual coverage as one life and those with coverage. other than individual coverage. like 2.35 lives.
  • The method of Form 5500. Plan sponsors use a formula that includes the number of members shown on Form 5500 for the plan year.

The IRS released a chart showing the application of PCORI fees to common types of health coverage.

[Need help with legal questions? Check out the new

SHRM LegalNetwork.]