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Patient Centered Outcomes Research Fee (PCOR Fee): Filing & Payment

Filing & payment deadline is July 31, 2024.

Contents

Background

Fees imposed on certain health insurers and plan sponsors of certain self-insured health plans, known as the Patient Centered Outcomes Research Fee (PCOR Fee or PCORI Fee), are due on July 31, 2024. The fee is a requirement under the Affordable Care Act (“ACA”) to help finance the Patient-Centered Outcomes Research Institute (the “Institute”). The Institute is a private, nonprofit corporation established under ACA to fund research of the clinical effectiveness of medical treatments, procedures, drugs, and other strategies or items that treat, manage, diagnose, or prevent illness or injury.

  • Plan sponsors are required to report their applicable PCOR fees annually on the Form 720, Quarterly Federal Excise Tax Return3, for the second quarter of the calendar year.
    • Please note that the Form 720 is generally updated in June of each year to reflect the updated PCOR amounts.
  • The fee for plan years ending on or after October 1, 2022, but before October 1, 2023, is $3.00, multiplied by the average number of lives covered under the plan.
  • The fee for plan years ending on or after October 1, 2023, but before October 1, 2024, is $3.22, multiplied by the average number of lives covered under the plan.
  • The average number of covered lives or participants is based on the number of employees, spouses and dependents that are covered by the plan.

Applicable Self-Insured Health Plans are Subject to the PCOR Fee

  • Plan sponsors of “applicable self-insured health plans” are responsible for paying the PCOR fee. Third parties are not permitted to report and pay on behalf of the plan sponsor.
  • In general, an “applicable self-insured health plan” is a plan that provides health or accident coverage, any portion of which is provided other than through an insurance policy.
  • The definition includes retiree-only plans. It also includes former employees or other qualifying beneficiaries receiving continuation coverage under COBRA or another similar federal or state law.
  • Not all HRAs and FSAs are excluded from the definition.
  • An FSA is excluded if it meets the requirements of an excepted benefit under the Internal Revenue Code.
  • EAPs and wellness plans are excluded so long as they do not provide significant benefits relating to medical care.

Calculating the Average Number of Lives in a Self-Insured Health Plan

The number of covered lives or plan participants (belly buttons) will fluctuate throughout the plan year, therefore the IRS has provided several counting methods to help plan sponsors determine the average number of covered lives. Plan sponsors of applicable self-insured health plans may use any of the following methods to calculate the average number of lives covered under the plans:

  1. The Actual Count Method (calculate the sum of the lives covered for each day of the plan year and divide the sum by the number of days in the plan year).
  2. The Snapshot Methods (add the total number of lives covered on a date in each quarter of the plan year, or an equal number of dates for each quarter, then divide the total by the number of dates on which a count was made). There are two methods to determine the number of lives covered on a designated date:
    1. Snapshot Factor (under this method, the number of lives covered on a date is equal to the sum of (i) the number of participants with self-only coverage on that date plus (ii) the number of participants with coverage other than self-only coverage on that date multiplied by 2.35).
    2. Snapshot Count (under this method, the number of lives covered on a date equals the actual number of lives covered on the designed date).
  3. The 5500 Method (use a formula that includes the number of participants actually reported on the Form 5500 for the plan year). The 5500 method is only available when the 5500 is filed no later than the due date for the PCOR fee for that plan year.

Plan sponsors may only use one method in each year, but do not have to use the same method from year to year.

If a plan sponsor only maintains a health FSA or HRA then the plan sponsor may treat each participant’s health FSA or HRA as covering a single life (spouses, dependents or other beneficiaries are not counted).

If a health FSA or HRA, that is an applicable self-insured health plan, has the same plan sponsor and plan year as another applicable self-insured health plan other than a health FSA or HRA, the two arrangements may be treated as a single plan. However, the participants in a health FSA or HRA that participate in another applicable self-insured health plan will be subject to the actual, snapshot or 5500 counting rules. There is a special rule for lives covered solely by the fully insured options under an applicable self-insured plan. If a self-insured plan provides coverage through fully insured and self-funded options, the plan sponsor can disregard the lives covered solely under the fully insured option when determining the average number of lives covered under the plan.

The Fee Schedule

  • The fee for plan years ending on or after October 1, 2022, but before October 1, 2023, is $3.00, multiplied by the average number of lives covered under the plan.
  • The fee for plan years ending on or after October 1, 2023, but before October 1, 2024, is $3.22, multiplied by the average number of lives covered under the plan.
  • The fee was scheduled to expire for policy or plan years ending after Sept. 30, 2019, but was reinstated for another 10 years in December 2019. The fee will begin to phase out beginning with plans ending after September 30, 2029.
  • Plan assets cannot be used to pay the PCOR fee.

If you would like more information, the IRS had established a PCOR page, which can be found here: Patient-Centered Outcomes Research Institute fee.