Health Care Reform, PCORI Fee

IRS Releases PCORI Fee 2021 Annual Adjustment

irs health insurer fees

The Internal Revenue Service (IRS) released the 2021 annual adjustment for the Affordable Care Act (ACA) Patient Centered Outcomes Research Institute (PCORI) fee. The fee is imposed on an issuer of a specified health insurance policy and a plan sponsor of an applicable self-insured health plan. For more information on whether a type of insurance coverage or arrangement is subject to the fee, see this IRS chart.

PCORI Rate Table*
Year Fee Amount
2018-2019 $2.45
2019-2020 $2.54
2020-2021 $2.66

*Confirm fee based on month in which plan year ends on or before. See IRS table.

Background

The Patient Centered Outcomes Research Institute (PCORI) fee, imposed by the Affordable Care Act, mandates self-insured plans pay an indexed $2.00 fee per covered life enrolled in their self-funded plan (for details on the PCORI fee see the articles linked below). Originally set to expire in 2019 for plan ending before October 1, 2019, this fee was recently revived in the Congressional Sending Bill. (For details, see the Leavitt Group article). The PCORI fee is now set to continue through plan years ending before October 1, 2029 (see the Leavitt Group article).

Who must Report?

Self-funded and level-funded plans must report and remit the fee for their major medical plan(s). Including:

  • Retiree-only plans
  • COBRA participants
  • Health Reimbursement Arrangements NOT integrated with a self-funded health plan
  • Minimum Essential Coverage (MEC) plans providing more than excepted benefits

Calculating, Reporting & Remitting the Fee

The PCORI fee is calculated using the average number of lives covered under an applicable self-insured health plan. Generally, plan sponsors of applicable self-insured health plans must use one of the following three methods to determine the average number of lives covered under a plan for the plan year.

  1. Actual Count Method
  2. Snapshot Method
  3. Form 5500 Method

For additional assistance on understanding and calculating the PCORI rate, see the Leavitt Group article.

Calculation Relief During the Pandemic

Plan sponsors with plan years ending on or after October 1, 2019, and before October 1, 2020,  may use any reasonable method for calculating the average number of covered lives. That reasonable method must be applied consistently for the duration of the plan year.

How Do I Remit the Fee?

The fee, required to be reported only once a year on the second quarter Form 720, Quarterly Federal Excise Tax Return and paid by its due date, July 31, is based on the average number of lives covered under the policy or plan. Please see the instructions for Form 720 on how to fill out the form and calculate the fee.

Recommended Action

  • Confirm covered life fee amount based on plan year month of coverage. See IRS table.
  • Self-funded plan should adjust their plan costs in consideration of the increased rate.

Additional Details

  • PCORI Fee IRS & Treasury Department final regulation.
  • Notice 2020-44   provides the adjusted applicable dollar amount for calculating the PCORI fee and the transition relief available for calculating the average number of lives for policy years and plan years that end on or after October 1, 2019, and before October 1, 2020.
  • For information on the fee, see the questions and answers and chart summary.
  • Form 720, Quarterly Federal Excise Tax Return, was revised to provide for the reporting and payment of the Patient-Centered Outcomes Research Fee.
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