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The Internal Revenue Service (IRS) recently released the adjusted Patient-Centered Outcomes Research Institute (PCORI) fee rate for policy and plan years ending on or after October 1, 2023, and before October 1, 2024.
Background
The Affordable Care Act (ACA) imposed a fee on issuers of fully insured plans and plan sponsors of self-insured plans. These assessed fees are contributed to the Patient-Centered Outcomes Research Trust Fund, which funds research, such as:
- Health outcomes and risks
- Clinical effectiveness
- Medical treatments and procedures
- Strategies to diagnose, treat, manage, and prevent injury or illness
The previously announced fee for policy or plan years ending on or after October 1, 2022, and before October 1, 2023, was $3.00 per covered life per year. The PCORI fee is currently scheduled to expire in 2029 or 2030, depending on the policy or plan year.
For more information on the PCORI fee, see the IRS questions and answers.
Updated PCORI Fee
For policy or plan years ending on or after October 1, 2023, and before October 1, 2024, the PCORI fee is now $3.22 per covered life. Issuers of fully insured health plans and employers who sponsor self-insured group health plans, including health reimbursement arrangements (HRAs) and level-funded health plans must pay this fee by July 31, 2024.
Plan sponsors of self-insured group health plans must pay this fee using IRS Form 720. According to Internal Revenue Code Section 162, the PCORI fee is tax deductible for the plan sponsor as an ordinary and necessary business expense.
For fully insured plans, the PCORI fee is paid by the health plan issuer, not the plan sponsor. Therefore, the plan sponsor does not need to take any action.
Calculating the PCORI Fee
The PCORI fee is determined by the average number of covered lives under each policy or plan, multiplied by the applicable dollar amount for the year. To calculate the average number of covered lives, the issuer or plan sponsor must use one of the following methods:
- Actual count method
- Snapshot method
- Form 5500 method (only for self-insured plans)
- Member months method (only for health insurance policy issuers)
- State form method (only for health insurance policy issuers)
For HRAs and health flexible spending accounts (FSA) that are not excepted benefits, plan sponsors or issuers must follow special counting rules based on other plans provided, or not provided, by the employer. These include:
- Stand-alone. If the HRA or health FSA is not integrated with a self-insured plan, then the employer must count each employee with an HRA or health FSA as a covered life.
- Integrated with fully insured coverage. If the HRA or health FSA is integrated with fully insured coverage, then the employer must count one covered life for each employee with an HRA or health FSA.
- Integrated with self-insured coverage. If the HRA or health FSA is integrated with self-insured coverage, then the employer must count each individual covered by both plans but should only be counted once.
What Employers Should Do Next
Employers should mark their calendar for July 31, 2024,as the due date for the PCORI fee submission. Work with your insurance carrier or broker to ascertain the number of applicable lives for the fee.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.
