What are PCORI fees?

PCORI fees fund the Patient-Centered Outcomes Research Institute (PCORI) Trust Fund. Fees are paid to the Internal Revenue Service (IRS) by health insurance companies or employers, depending on the type of plan. In turn, PCORI funds  evidence-based research that aims to improve patient outcomes and better inform caregivers, policymakers, and others involved in healthcare. It   was created as part of the  Affordable Care Act (ACA) .

Although it was set to expire in 2019, this fee was renewed for another 10 years on December 20, 2019. This means that the fee will remain in effect until 2029. This fee must be filed by July 31  using Form 720.  While Form 720 is a quarterly form, it only needs to be filed once a year to report and pay the PCORI fee, unless you have other liabilities that you need to report on the form. In that case, the form should be filed on a quarterly basis, and the PCORI fee should be reported and paid in another quarter.

What types of insurance coverage do PCORI fees apply to?

PCORI fees apply to certain health insurance policies, such as fully funded plans offered by health insurers and self-funded insurance plans offered by employers. These include:

• Major Medical Coverage Plans
• COBRA Coverage
• Accident and major medical coverage plans
• Health Reimbursement Arrangement (HRA)
• Major medical coverage for retirees
• Short Year Plans

The plans that are exempted include:

• Single plan for vision or dental
• Insurance coverage for employees working outside the US
• Medicaid, Medicare, and CHIP
• Military Health Plans
• HSA

For a detailed list of plans that are subject to the PCORI fee and those that are exempt,  see the IRS webpage on the subject  .

How much is the PCORI fee and how is it calculated?

According to the IRS,  the total PCORI fee  is ""equal to the average number of lives covered during the policy year or plan year, multiplied by the applicable dollar amount for the year."" The dollar amount is adjusted for inflation each year, so make sure you check with the IRS for the current year's amount when calculating your PCORI fee. As of 2020, the dollar amount is $2.45 for plans that expire any time between January and September 2019. For updates on the annual dollar amount and filing deadlines,   consult the IRS Applicable Rates Chart .

The IRS lists various methods for calculating the average number of lives covered during a plan year. There   are three methods for self-insured health plans and four methods for other specified health insurance policies. Each of these arrives at the average number of people covered during a plan year, which you then multiply by the applicable dollar amount.

What counts as personal life for PCORI fees?

You must count anyone covered during the plan year, which means employees and their dependents must be counted as well. For HRAs and  flexible spending arrangements (FSAs)  , you can count one life cover for each employee. For more information,   see the IRS website .