What is the PCORI fee and who must pay it?

The PCORI fee (Patient-Centered Outcomes Research Institute fee) funds comparative effectiveness research. Self-funded health plan sponsors must pay the PCORI fee annually. The fee is $3.22 per covered life for plan years ending in 2025 (indexed annually by CMS). Fully insured plan sponsors do not pay the PCORI fee directly — the insurance carrier pays it. The fee is reported and paid on IRS Form 720 by July 31 of the calendar year following the plan year end.

How do I calculate the PCORI fee for my self-funded plan?

Multiply the average number of covered lives (employees + dependents) by the applicable PCORI rate ($3.22 for plan years ending in 2025). Three methods are available to calculate average covered lives: the actual count method (average of covered lives on the first day of each month), the snapshot method (average of covered lives on a single day in each quarter), and the Form 5500 method (use the participant count from Form 5500). The snapshot method is most commonly used for simplicity.

When is the PCORI fee due and how is it paid?

The PCORI fee is reported on IRS Form 720 (Quarterly Federal Excise Tax Return) and paid by July 31 of the calendar year following the last day of the plan year. For a calendar-year plan (January 1 – December 31, 2025), the PCORI fee is due July 31, 2026. Payment is made with Form 720 — there is no separate PCORI-specific form. The fee is deductible as an ordinary business expense.

Does the PCORI fee apply to HRAs and HSA-compatible plans?

Health Reimbursement Arrangements (HRAs) that are not integrated with another self-funded plan are subject to the PCORI fee as separate plans. Integrated HRAs (HRAs offered in conjunction with a self-funded major medical plan) are generally not subject to a separate PCORI fee if the HRA and major medical plan have the same plan year and the same plan sponsor. HSAs are not subject to the PCORI fee because they are not employer-sponsored health plans.

What are the penalties for failing to pay the PCORI fee?

Failure to pay the PCORI fee is treated as a failure to pay federal excise tax, subject to standard IRS late payment penalties and interest. The penalty for failure to file Form 720 is 5% of the unpaid tax per month (up to 25%). The penalty for failure to pay is 0.5% per month (up to 25%). Given the relatively small dollar amount of the PCORI fee for most employers, the administrative cost of non-compliance far exceeds the fee itself.

ACA — PCORI Fee

PCORI Fee for Employer Health Plans

The Patient-Centered Outcomes Research Institute (PCORI) fee is an excise tax on employer-sponsored health plans established by the Affordable Care Act. Self-funded plan sponsors pay the fee directly to the IRS. Fully-insured plan sponsors pay it indirectly through their insurance carrier. The fee funds comparative effectiveness research.

Key facts at a glance

Who pays (self-funded)

Plan sponsor files and pays directly

Who pays (fully-insured)

Insurance carrier pays; cost passed to employer

Filing form

IRS Form 720 (Quarterly Federal Excise Tax Return)

Annual deadline

July 31 each year for the prior plan year

Fee basis

Per covered life (average annual covered lives)

Current rate

Adjusted annually by IRS — check IRS Notice for current year

How to calculate the PCORI fee

The fee is calculated by multiplying the applicable dollar amount (set by the IRS each year) by the average number of covered lives under the plan for the plan year. There are three IRS-approved methods for counting covered lives:

Actual count method: Add the total number of covered lives for each day of the plan year and divide by the number of days in the plan year.

Snapshot method: Count covered lives on one date in each quarter (or the first date of each quarter) and average the four counts.

Form 5500 method: Use the participant count reported on Form 5500. Add the beginning and ending participant counts and divide by 2. Only available for plans that file Form 5500.

Plans subject to the PCORI fee

Self-funded major medical plans (including level-funded plans)

Health reimbursement arrangements (HRAs) — unless integrated with a self-funded plan subject to the fee

Fully-insured plans (carrier pays; employer pays indirectly)

Retiree-only plans

Expatriate plans (subject to special rules)

Exempt plans: Excepted benefit plans (dental, vision, EAP), FSAs that qualify as excepted benefits, and HRAs integrated with a self-funded plan that is already subject to the fee (to avoid double-counting).

Common PCORI fee mistakes

Missing the July 31 deadline — Form 720 is due annually, not quarterly for PCORI

Failing to file for HRAs separately when the HRA is not integrated with a self-funded plan

Using the wrong covered-life count method or miscounting dependents

Not checking the IRS Notice each year for the updated per-covered-life rate

Assuming the TPA handles PCORI filing — self-funded plan sponsors must file Form 720 themselves

Use our PCORI fee calculator

Estimate your plan's annual PCORI fee obligation using our free calculator tool.

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