PCORI Fee Extended 10 Years, New Rate Issued

Introduction

• The PCORI fee was enacted by the ACA to help fund the Patient Centered Outcomes Research Institute (PCORI).
• The fee was set to expire in 2019, but H.R. 1865 reinstituted the fee for an additional 10 years.
• The PCORI fee will now expire the plan year ending after September 30, 2029.
• Plan sponsors of self-insured group health plans, including HRAs, should plan on remitting the PCORI fee using Form 720 by the July 31, 2020 due date.
• The rate for plans ending on or after October 1, 2019, but before October 1, 2020 is $2.54 times the average number of covered lives under the plan or policy.  

Fee Extended Through 2029

The Affordable Care Act (ACA) established the Patient Centered Outcomes Research Institute (PCORI) to support research on clinical effectiveness. The Institute has been funded in part by fees paid by certain health insurers and sponsors of self-insured health plans. The PCORI fee is determined by multiplying the average number of covered lives for the plan year times the applicable dollar amount, and is paid annually to the IRS using Form 720.

Under the ACA, the PCORI fees were scheduled to apply to plan years ending before October 1, 2019. This meant that the final 2018 PCORI payment for calendar year plans was due July 31, 2019. On December 20, 2019, the President signed the “Further Consolidated Appropriations Act, 2020” (the “Act”), which reinstated the PCORI fee paid by health plans for an additional 10 years. Under the Act, the PCORI fee is now extended to plan years ending on or before September 30, 2029, and the last payment for calendar year plans will be July 31, 2029.

In Notice 2020-44, IRS increased PCORI fee for the health plan or policy years ending on or after October 1, 2019, but before October 1, 2020 from $2.45 to $2.54 times the average number of covered lives under the plan or policy. Health plans with calendar year plan or policy years ending during this timeframe will use the new $2.54 rate when calculating the PCORI fee due this July on Form 720.

Next Steps

Employers who sponsor self-insured medical plans, including health reimbursement arrangements (HRAs) should plan on submitting the applicable fee by July 31, 2020 using IRS Form 720.