Key Takeaways
- PCORI fees fund the Patient-Centered Outcomes Research Institute and are required of all self-funded health plan sponsors.
- The fee is calculated per covered life and is due annually by July 31 on IRS Form 720.
- Self-funded plan sponsors pay the fee directly — unlike fully-insured plans where the insurer pays.
- The fee amount is adjusted annually by the IRS; the rate for plan years ending in 2024 is $3.22 per covered life.
- Accurate covered-life counting is the most common compliance challenge — three IRS-approved counting methods are available.
What Is the PCORI Fee?
The Patient-Centered Outcomes Research Institute (PCORI) fee is an excise tax imposed by the ACA to fund comparative effectiveness research. It applies to health insurance issuers and self-funded health plan sponsors. For self-funded plans, the plan sponsor — the employer — is responsible for calculating and paying the fee directly to the IRS.
The fee was originally scheduled to expire after plan years ending before October 1, 2019. Congress extended it through plan years ending before October 1, 2029, as part of the Further Consolidated Appropriations Act of 2020. Employers with self-funded plans must continue paying PCORI fees through at least 2029.
PCORI fees are often overlooked by self-funded employers because they are relatively small in absolute terms — a 200-life plan pays roughly $644 per year. But the failure to file Form 720 and pay the fee is a compliance violation that can trigger IRS penalties. The fee is not optional and does not go away when you switch from fully-insured to self-funded.
Who Pays and When
The PCORI fee obligation depends on the plan type:
| Plan Type | Who Pays | Due Date |
|---|---|---|
| Fully-insured group health plan | Insurance carrier | July 31 (carrier files Form 720) |
| Self-funded group health plan | Plan sponsor (employer) | July 31 (employer files Form 720) |
| HRA integrated with self-funded plan | Plan sponsor (employer) | July 31 (one fee for the integrated plan) |
| HRA integrated with fully-insured plan | Plan sponsor (employer) | July 31 (separate fee for the HRA) |
| Excepted benefit HRA (EBHRA) | Not subject to PCORI fee | N/A |
HRAs are a common source of confusion. An HRA integrated with a fully-insured plan is still subject to PCORI fees — the employer pays for the HRA separately, even though the carrier pays for the underlying insured plan. An HRA integrated with a self-funded plan is treated as a single plan — one PCORI fee covers both.
Calculating the Fee: Three Counting Methods
The PCORI fee is calculated as the fee rate multiplied by the average number of covered lives during the plan year. The IRS allows three methods for counting covered lives. Employers may use any method consistently within a plan year.
- 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. Most accurate but most administratively burdensome.
- Snapshot Method: Count covered lives on one date in each quarter (or the first date of each quarter) and average the four counts. A simplified snapshot method counts only employees (not dependents) and multiplies by 2.35 to estimate total covered lives.
- Form 5500 Method: Use the number of participants reported on the plan's Form 5500. For plans that report both beginning and end-of-year participants, average the two numbers. Only available to plans that file Form 5500.
The Snapshot Method is the most commonly used by self-funded employers because it balances accuracy with administrative simplicity. Pick a consistent date in each quarter — the first day of the first month of each quarter works well — count covered lives on that date, and average the four counts.
Current Fee Rates
The PCORI fee rate is adjusted annually by the IRS based on the percentage increase in the projected per capita amount of National Health Expenditures. The rate applies to plan years ending in the specified calendar year.
| Plan Year Ending In | Fee Per Covered Life | Due Date |
|---|---|---|
| October 2022 – September 2023 | $3.00 | July 31, 2023 |
| October 2023 – September 2024 | $3.22 | July 31, 2024 |
| October 2024 – September 2025 | $3.47 | July 31, 2025 |
The IRS announces the updated fee rate each spring in a Notice. Check IRS.gov annually for the current rate applicable to your plan year.
Filing Form 720
The PCORI fee is reported and paid on IRS Form 720 (Quarterly Federal Excise Tax Return), Part II, Line 133. Despite the "quarterly" name, the PCORI fee is filed annually — due July 31 of the calendar year following the last day of the plan year.
- 1Determine your plan year end date — calendar year plans end December 31; fiscal year plans end on a different date.
- 2Count covered lives using one of the three IRS-approved methods.
- 3Multiply covered lives by the applicable fee rate for your plan year.
- 4Complete Form 720, Part II, Line 133 with the covered life count and fee amount.
- 5Submit Form 720 and payment by July 31.
- 6Retain documentation of your covered-life calculation and the counting method used.
Many TPAs will provide covered-life counts to self-funded plan sponsors upon request. Ask your TPA for a covered-life report for the plan year before preparing Form 720 — it saves time and reduces the risk of counting errors.
Your Action Steps
- 1Confirm whether your plan is self-funded — if so, you are responsible for filing Form 720 and paying the PCORI fee by July 31.
- 2Identify all health plan components subject to PCORI fees — including any HRAs integrated with fully-insured plans.
- 3Select a covered-life counting method and document it — you must use the same method consistently within a plan year.
- 4Request a covered-life count from your TPA for the most recent plan year.
- 5Calculate the fee: covered lives × current IRS rate. Verify the current rate at IRS.gov.
- 6File Form 720 and remit payment by July 31. Retain the filing and your covered-life calculation documentation for at least 6 years.
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