What is the PCORI fee and who pays it?

The PCORI fee funds the Patient-Centered Outcomes Research Institute. It is paid by the issuer of insured group health plans and by the plan sponsor (employer) of applicable self-insured plans, and is reported once a year on IRS Form 720.

What the PCORI fee is for

Health Care Reform created a new nonprofit corporation, the Patient-Centered Outcomes Research Institute, to support clinical effectiveness research. This entity is funded in part by fees — sometimes referred to as PCORI fees or CER (Comparative Effectiveness Research) fees — paid by certain health insurers and applicable sponsors of self-insured health plans.

The institute assists patients, clinicians, purchasers and policymakers in making informed health decisions by advancing the quality and relevance of evidence-based medicine through the synthesis and dissemination of comparative clinical effectiveness research findings.

Which plans are subject to the fee

These fees are paid by the issuer of insured group health plans and by sponsors of applicable self-insured group health plans. Self-insured plans include HRAs and FSAs which are considered Non-Excepted Benefits.

• HRA: as a general rule, an HRA is considered a Non-Excepted Benefit if the maximum benefit is greater than $500.
• Health FSA: a health FSA is considered a Non-Excepted Benefit if the maximum benefit exceeds either (1) two times the participant's salary reduction election, or (2) the participant's salary reduction election plus $500, if greater.
• HRAs and FSAs can also be considered Excepted Benefits if they only reimburse limited-scope benefits, such as dental or vision expenses.

Excluded: a self-insured health plan that is an EAP, disease management program, or wellness program that does not provide significant benefits for medical care or treatment is excluded from the fees.

Who is responsible for paying the fee

The plan sponsor (employer) is responsible for paying the PCORI fees for self-insured plans.

• If the plan is maintained by two or more employers, the plan sponsor is the employer identified as the plan sponsor in the plan documents.
• If the employer maintains a self-insured component (for example an HRA or health FSA) integrated with a fully-insured health plan, both plans are subject to the fees; however, the health insurer is responsible for the PCORI fees relating to the fully-insured plan.
• If the self-insured component is integrated with a self-insured health plan, the employer must count all individuals covered under the plan (including spouses and dependents), but the two plans can be aggregated and the employer need not double count persons covered under both plans.

When the PCORI fee is due

The employer (or plan sponsor) reports and pays the fees once a year on IRS Form 720, Quarterly Federal Excise Tax Return. The report and payment are due by July 31 of the year following the last day of the policy or plan year. Payment must be made with the filing.

Plans with certain plan years must file for the plan ending in 2024 by August 1, 2025.

Plans with the following plan years must file for a plan ending in 2024 by August 1, 2025:

Note on the Form 5500 method: when applied to a plan that has both self-only and other coverage, the average is simply the sum of the total participants identified on Form 5500 at the beginning of the plan year and the total participants identified at the end of the plan year. Simply adding the totals is akin to using a factor of 2.00, which is lower than the factor used under the snapshot factor method, but in this situation the factor is applied to all coverage types, not just coverage other than self-only.

Special counting rules for HRAs and health FSAs

Stand-alone HRA or FSA

If the same sponsor has no other applicable self-insured health plans, the sponsor must pay the fee based on the average number of lives covered by the specific plan, but counting only one life per participant — excluding spouses and dependents.

HRA/FSA integrated with insured major medical coverage

If a plan sponsor has an HRA and/or health FSA along with major medical coverage that is fully insured, the plan sponsor must pay the fee for the average number of lives covered by the self-insured plan. The insurance company is responsible for the fees on the fully insured health insurance policy. To calculate the average number of lives covered by the self-insured plan, the plan sponsor uses the one life per participant rule — count each employee participant enrolled in coverage, but not their spouse or dependents. If an employer offers both an HRA and an FSA that have the same plan year, each participant enrolled in both benefits should only be counted once.

HRA/FSA integrated with self-funded major medical coverage

If the same plan sponsor has another self-insured health plan with the same plan year, then each person covered by both plans is only counted once. All individuals (including spouses and dependents) covered by both plans are counted. If the plan covers anyone who is not also covered under the other self-insured major medical health plan, the sponsor must pay the fee for those individuals using the one life per participant rule — dependents and spouse not counted.

Frequently asked questions

What is the PCORI fee?

The PCORI fee — sometimes referred to as a CER (Comparative Effectiveness Research) fee — is paid by certain health insurers and applicable sponsors of self-insured health plans to help fund the Patient-Centered Outcomes Research Institute, a nonprofit corporation created by Health Care Reform to support clinical effectiveness research.

Who is responsible for paying the PCORI fee?

The plan sponsor (employer) is responsible for paying the PCORI fees for self-insured plans, while the issuer is responsible for insured group health plans. If the plan is maintained by two or more employers, the plan sponsor is the employer identified as the plan sponsor in the plan documents.

When is the PCORI fee due?

The employer or plan sponsor reports and pays the fee once a year on IRS Form 720, Quarterly Federal Excise Tax Return. The report and payment are due by July 31 of the year following the last day of the policy or plan year, and payment must be made with the filing.

Do HRAs and health FSAs owe the PCORI fee?

HRAs and FSAs are subject to the fee when they are considered Non-Excepted Benefits. As a general rule an HRA is a Non-Excepted Benefit if the maximum benefit is greater than $500, and a health FSA is a Non-Excepted Benefit if the maximum benefit exceeds either two times the participant's salary reduction election or that election plus $500, if greater. HRAs and FSAs that only reimburse limited-scope benefits, such as dental or vision expenses, can be Excepted Benefits.

When does the PCORI fee expire?

Through the passage of the Further Consolidated Appropriations Act, 2020 in December of 2019, the PCORI fee was extended for an additional 10 years, ending on or after October 1, 2029. Plans ending before that date will need to pay fees.