PCORI stands for the Patient-Centered Outcomes Research Institute. This institute came about as part of legislative healthcare reform: the Affordable Care Act (ACA). PCORI fees that were part of this legislation are intended to fund the institute for a set time frame. According to a Society for Human Resource Management (SHRM) article on the topic: “The Affordable Care Act established the PCORI to study the comparative effectiveness of medical treatments. The funding mechanism for PCORI was a fee on group health plans, including certain employer-contributed health care FSAs and HRAs.”[i]
Source: everythign possible / Shutterstock
This fee has been in place since 2012, and 2019 is the last year for it, with limited exceptions for noncalendar year plans, whose customers may have one final payment due in 2020. According to the IRS website about the fee: “The PCORI fee applies to specified health insurance policies with policy years ending after Sept. 30, 2012, and before Oct.1, 2019, and applicable self-insured health plans with plan years ending after Sept. 30, 2012, and before Oct. 1, 2019.”[ii]
The PCORI fee gets paid annually, due July 31, to the IRS. The fee has increased each year it has been in effect. Currently, it stands at $2.45 “multiplied by the average number of lives covered under the policy for that policy year.” There are three methods of calculating the fee for self-insured entities: the actual count method, the snapshot method, and the Form 5500 method. (See https://www.irs.gov/newsroom/patient-centered-outcomes-research-institute-fee for calculation and method details.)
This fee applies to any insurer, and the fee is paid directly to the IRS. Typically, the insurance carrier pays the fee (not the insured individual). This applies directly to any employers that are self-insured, meaning they provide payment for healthcare services for their employees directly, rather than going through a third-party insurer. It would also apply to any employer that provides a separate, employer-funded health flexible spending account (FSA) or health reimbursement arrangement (HRA), even when the standard health insurance is provided by a third party. It’s not applicable, however, when the FSA or HRA is integrated with the third-party plan. It also does not apply to employers that provide only self-insured dental and/or vision plans or to employee assistance programs (EAPs).
If this describes your company, and you’re not already familiar with PCORI and the payment that is due now, work with the rest of your organization to ensure it gets paid on time, and submit the required IRS Form 720. Unless something drastic changes with the ACA, or your organization has a noncalendar year self-insured plan, this will be the last payment due.
If your organization is self-insured, what has been your experience with PCORI fees over the last several years? Is this handled within the HR realm in your organization or is it a payroll function for you? If this payment applies to the organization and you’re not already well-versed in this, get input from others quickly to meet this year’s deadline of July 31.
[i] https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/pcori-fees-due-july-31.aspx
[ii] https://www.irs.gov/affordable-care-act/patient-centered-outcomes-research-trust-fund-fee-questions-and-answers
Bridget Miller is a business consultant with a specialized MBA in International Economics and Management, which provides a unique perspective on business challenges. She’s been working in the corporate world for over 15 years, with experience across multiple diverse departments including HR, sales, marketing, IT, commercial development, and training.