PCORI Fees Due Aug. 1

The Affordable Care Act requires health insurance issuers and sponsors of self-insured health plans, including Health Reimbursement Arrangements, to pay Patient-Centered Outcomes Research Institute (PCORI) fees. The fees are reported and paid annually using IRS Form 720, Quarterly Federal Excise Tax Return. Issuers (insurance carriers) and plan sponsors (employers) are generally required to pay the PCORI fees annually on IRS Form 720 by July 31 of each year. However, because July 31, 2016, is a Sunday, PCORI fees will be due by Aug. 1, 2016, for plan years ending in 2015. IRS instructions for filing Form 720 include information on reporting and paying the PCORI fees.

PCORI fees apply for plan years ending on or after Oct. 1, 2012, but do not apply for plan years ending on or after Oct. 1, 2019. For calendar year plans, the fees will be effective for the 2012 through 2018 plan years.

The entity that is responsible for paying PCORI fees depends on whether the plan is insured or self-insured.

  • For insured health plans, the issuer of the health insurance policy is required to pay the research fees.
  • For self-insured health plans, the research fees are to be paid by the plan sponsor.

Reporting and Paying PCORI Fees

The PCORI fee applies separately to “specified health insurance policies” and “applicable self-insured health plans,” and is based on the average number of lives covered under the plan or policy.

Using Part II, Number 133 of Form 720, issuers and plan sponsors will be required to report the average number of lives covered under the plan separately for specified health insurance policies and applicable self-insured health plans. That number is then multiplied by the applicable rate for that tax year, as follows:

  • $1 for plan years ending before Oct. 1, 2013 (that is, 2012 for calendar year plans).
  • $2 for plan years ending on or after Oct. 1, 2013, and before Oct. 1, 2014.
  • $2.08 for plan years ending on or after Oct. 1, 2014, and before Oct. 1, 2015.
  • $2.17 for plan years ending on or after Oct. 1, 2015, and before Oct. 1, 2016.
  • For plan years ending on or after Oct. 1, 2016, the rate will increase for inflation, based on the percentage increase in the projected per capita amount of the National Health Expenditures.

The fees for specified health insurance policies and applicable self-insured health plans are then combined to equal the total tax owed. Issuers or plan sponsors that file Form 720 only to report the PCORI fee will not need to file Form 720 for the first, third or fourth quarter of the year. Issuers or plan sponsors that file Form 720 to report quarterly excise tax liability for the first, third or fourth quarter of the year (for example, to report the foreign insurance tax) should not make an entry on the line for the PCORI tax on those filings.

This blog is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.  You are encouraged to contact your tax advisor for any additional tax advice.

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