PCORI fees are annual federal fees that help fund the Patient-Centered Outcomes Research Institute. They generally apply to issuers of certain health insurance policies and sponsors of certain self-insured health plans. The amount is usually calculated by multiplying the plan’s average number of covered lives by the rate for the applicable policy or plan year. An insurer generally reports and pays the fee for a fully insured policy, while the plan sponsor generally handles an applicable self-insured plan. The fee concerns health coverage rather than wages, payroll taxes or routine employee deductions. Whether a particular benefit arrangement is subject to the fee depends on its structure and any applicable exception. Employers and other plan sponsors should identify the responsible entity and keep records that support their coverage count and calculation.
Table of Contents
- Who Is Responsible for Paying Pcori Fees?
- Which Health Arrangements Are Covered or Exempt?
- How Are Covered Lives Counted?
- How Much Is the Fee and When Is It Due?
- How Are Pcori Fees Reported and How Do They Affect Contingent Workforce Programs?
Who Is Responsible for Paying Pcori Fees?
Responsibility generally follows the type of health coverage. For a fully insured policy, the insurer reports and pays the fee. For an applicable self-insured health plan, the plan sponsor generally pays it. Under federal law, the sponsor is typically the employer for a plan established or maintained by one employer. A plan’s use of stop-loss insurance does not by itself make the stop-loss insurer responsible for the fee.
An administrator may help collect enrollment data or prepare the calculation. That administrative support does not by itself change which entity the law makes responsible. Organizations using an Administrative Services Organization (ASO) should clarify who will prepare the figures and who will confirm that filing and payment are complete. Assigning these tasks in advance can help prevent missed deadlines or gaps in the supporting records.
Tax-exempt organizations and governmental entities may still owe the fee for applicable coverage. Certain government health programs are exceptions, so an organization’s tax or government status alone does not settle the question. The IRS PCORI fee questions and answers describe payer rules and exceptions. A plan sponsor should review the actual arrangement rather than relying only on the name of the organization that provides its administrative services.
Which Health Arrangements Are Covered or Exempt?
PCORI fees generally apply to specified health insurance policies and applicable self-insured health plans covering people in the United States. Arrangements that provide only excepted benefits are generally outside the fee. Stand-alone dental or vision coverage and most health flexible spending arrangements are examples. Limited employee assistance programs may also be exempt when they do not provide significant benefits in the nature of medical care or treatment. The same principle can apply to certain disease management or wellness programs.
Account-based benefits need separate attention. A Health Reimbursement Account (HRA) may be an applicable self-insured arrangement even when it reimburses premiums for individual policies. An Individual Coverage Health Reimbursement Account (ICHRA) is not automatically exempt because employees obtain individual insurance. When an HRA accompanies fully insured medical coverage, the insurer’s policy fee does not necessarily cover the HRA’s separate obligation. Certain self-insured medical plans and HRAs sponsored by the same entity may be treated together under applicable rules.
Before deciding that a benefit is exempt, identify what the arrangement actually pays for and how it is structured. The name used in plan materials does not always determine its treatment. Plan documents and enrollment details can help establish whether the arrangement is an insured policy, a self-insured plan or an excepted benefit. When arrangements are combined or offered alongside one another, review whether the rules allow them to be counted together or require separate treatment.
How Are Covered Lives Counted?
The fee is based on average covered lives during the relevant policy or plan year. Under the ordinary approach for a self-insured plan, each covered person counts rather than only each enrolled employee. An employee enrolled with a spouse and child would generally represent three covered lives. Retirees and people with continued coverage through COBRA also count while they are covered. A person’s status as an employee is therefore not the only relevant fact. Actual enrollment in the plan is central to the calculation.
Federal rules provide several calculation methods. Self-insured plans may use the actual count method, the snapshot method or the Form 5500 method when the requirements for that method are met. The actual count method uses daily enrollment information. Snapshot methods use enrollment on specified dates and are subject to regulatory conditions. The Form 5500 method has its own eligibility and calculation rules. Insurers have a different set of permitted methods, so a method available to a plan sponsor should not automatically be assumed to apply to an insurer.
The records needed depend on the method selected. Enrollment files can help substantiate who was covered and when coverage applied. A sponsor should retain the calculation and its source records so that the reported average can be explained later. Review the current IRS Form 720 instructions and applicable rules before selecting a method. Consistent recordkeeping is especially important when coverage changes during the year or when more than one benefit arrangement may be involved.
How Much Is the Fee and When Is It Due?
The amount is generally the average number of covered lives multiplied by the rate for the applicable plan or policy year ending date. The rate is not selected solely by looking at the calendar year in which payment is made. For policy and plan years ending on or after October 1, 2025 and before October 1, 2026, the rate is $3.84 per covered life. For years ending on or after October 1, 2024 and before October 1, 2025, the rate is $3.47. Check current IRS instructions for years ending outside those periods rather than assuming a rate carries forward.
For example, a self-insured plan with a calendar plan year ending December 31, 2025 and an average of 300 covered lives would calculate a fee of $1,152 at the $3.84 rate. The fee generally applies to short plan years too. The average is based on coverage during that plan year, rather than reducing the per-life rate automatically. Fees currently apply to covered plan and policy years ending before October 1, 2029. The IRS overview of Affordable Care Act tax provisions provides related reporting information.
Confirm the relevant year-end date before applying a rate. A plan year may not match the calendar year, and a policy year may have a different ending date from the year in which the fee is paid. The applicable rate and the covered-life average together determine the amount. Retaining the rate source and calculation with the enrollment records makes it easier to support the reported figure.
How Are Pcori Fees Reported and How Do They Affect Contingent Workforce Programs?
The responsible insurer or plan sponsor generally reports and pays the fee annually on the second-quarter Form 720. The deadline is July 31 of the calendar year after the policy or plan year ends. A filer that reports only the PCORI fee generally does not need to file Form 720 in other quarters solely for that fee. PCORI reporting is separate from payroll tax reporting. Keep the plan-year dates, enrollment records, calculation method and payment confirmation with the filing records.
For contingent workforce programs, responsibility depends on which entity sponsors or issues the health coverage. It does not depend simply on where a worker performs an assignment. A staffing employer that sponsors a self-insured plan may have the filing obligation, while the insurer generally pays the fee for fully insured coverage. A client’s assignment roster cannot by itself establish the number of covered lives because coverage may start or continue on dates that differ from assignment dates.
The program should identify the responsible entity and establish how enrollment information reaches the person handling the calculation. This is relevant when a staffing employer provides health coverage to eligible workers and must account for their enrollment in a sponsored plan. If an employer-funded reimbursement arrangement accompanies insured coverage, check whether it creates a separate sponsor obligation. Coordinating benefits administration with the filing process can help ensure that the covered-life count reflects enrollment rather than assumptions based on assignment records.
