Are your clients aware of their PCORI fee obligations?

Issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans are responsible every year for a fee that helps fund the Patient-Centered Outcomes Research Institute (PCORI). The institute advances evidence-based medicine through gathering and disseminating clinical research findings. It aims to help patients, clinicians, purchasers and policymakers make better-informed healthcare choices through clinical effectiveness research.

These PCORI fees are due each year by July 31 of the year following the last day of the plan year using IRS Form 720 (Quarterly Federal Excise Tax Return).

Issuers and plan sponsors who are required to pay the PCORI fee but are not required to report any other liabilities on a Form 720 will be required to file a Form 720 only once a year. They will not be required to file a Form 720 for the other quarters of the year.

Issuers and plan sponsors who are required to pay the PCORI fee as well as other liabilities on a Form 720 will use their Form 720 for the second quarter to report and pay the PCORI fee that is due July 31. Only one Form 720 should be filed for each quarter.

In self-funded plans, the employer collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. Health insurance policies and self-insured plans that only provide stand-alone benefits, such as vision and dental, may not be subject to PCORI fees. 

How much is the fee?

The 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. This number includes all plan participants, including dependents, spouses, retirees and COBRA recipients.

• $3.00 for policy and plan years ending after October 1, 2022, and before October 1, 2023.
• $2.79 for policy and plan years ending after Oct. 1, 2021, and before Oct. 1, 2022.

The PCORI fees were introduced as part of the Affordable Care Act. They are intended to inform policymakers and voters about newer discoveries in a wide range of areas, from treating mental illness to experimental cancer treatments.

The fees were set to expire at the end of 2020, but were extended through September 30, 2029, as part of the Further Consolidated Appropriations Act of 2020. 

How Wipfli can help

The complex and ever-changing tax landscape can be tough for businesses to keep up with. Wipfli tax specialists can provide you with peace of mind and confidence that you are meeting your obligations, while providing strategies to meet your needs for the short and long term. Find out more about our comprehensive services for compliance and taxation.

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This article was authored by Senior Accountant Andrea Hey.