Health plans

Self-insured health plans: August 1 PCORI fee due date fast approaching

The Patient-Centered Outcomes Research Institute (“PCORI”) is an independent, not-for-profit research organization that funds, among other things, comparative clinical research. The PCORI is funded by annual dues – provided for in the Affordable Care Act – paid by insurers of fully insured health plans and sponsors of self-insured health plans, including health reimbursement agreements (“ HRA”) that are not excluded benefits (that’s to say, which do not reimburse certain coverage premiums and limit contributions to a maximum of $1,800 per year, as indexed, among other requirements). The PCORI fee originally applied only to health plans whose plan years ended after September 30, 2012 and before October 1, 2019. However, the 2019 Bipartisan Budget Act extended the PCORI fee to ‘in 2029.

Dental plans and vision plans that are excluded benefits (that’s to say, are offered through a stand-alone insurance policy, or are not integrated with a health plan), are not subject to PCORI fees. Similarly, health flex spending accounts that are excluded from benefits (that’s to saythe maximum benefit payable does not exceed twice the participant’s salary reduction election or $500 plus the participant’s salary reduction election and other eligible health plan coverage is made available to participants) benefits not subject to PCORI fees are also excluded.

PCORI fees are generally due on July 31. However, for plan years ending in 2021, the PCORI fee due date is August 1, 2022 because July 31, 2022 falls on a Sunday.

IRS Notice 2022-4 recently provided adjusted PCORI fees. For plans with plan years ending on or after January 1, 2021, through September 31, 2021, the fee is $2.66 per covered life. For plans with plan years ending on or after October 1, 2021 through December 31, 2021, the fee is $2.79 per covered life. The persons covered are employees, spouses and dependents covered by the health insurance plan. Employers who maintain self-insured health plans and HRAs (both with the same plan year) do not have to pay a separate PCORI fee for lives covered by the HRA. However, employers who provide coverage through a fully insured plan (whose PCORI fee will be paid by the insurer) and an HRA must pay a PCORI fee based on the HRA, but the lives covered are limited to employees.

The IRS provided useful information FAQs on PCORI fees, including information on permitted methods of counting covered lives. See PCORI Fee FAQs. Authorized methods include:

  • Actual count method. Add the total number of lives covered by the plan for each day in the plan year and divide by the total number of days in the plan year.
  • Snapshot method. Add the total number of insureds covered for one or more days during each quarter of the plan year and divide by the number of days used.
  • Instantaneous factor method. The number of lives covered on a date is equal to: (a) the number of employees with self-only coverage and (b) the number of employees with non-self-only coverage multiplied by 2.35.
  • Form 5500 method. The method used to calculate participants for the Form 5500 statement.

PCORI fees are reported using IRS Form 720, Quarterly Federal Excise Tax Return. PCORI fees can be submitted to the IRS electronically or by mail.