- On October 31, 2023
The Internal Revenue Service (IRS) has released the amount of the 2023 plan year Patient-Centered Outcomes Research Institute (PCORI) fee, which must be paid by group health insurance plan sponsors and health insurance issuers by July 31, 2024.
The fee rate for plan years ending in 2023 are as follows:
- For plan years ending between January 1, 2023, and September 30, 2023, the fee is $3.00 per covered life.
- For plan years ending between October 1, 2023, and December 31, 2023, the fee is $3.22 per covered life.
The PCORI fee was established under the Affordable Care Act to fund comparative effectiveness medical research. The fee is based on the average number of lives covered under a health insurance policy or plan. Health insurance carriers pay the fee for fully insured health coverage, but if an employer offers self-funded or level-funded coverage, including a health reimbursement arrangement (HRA), it must calculate and pay the PCORI fee each year using the second quarter version of IRS Form 720, the quarterly excise tax filing form. Since this form is usually not published until the second quarter of each tax year, it’s difficult for group health plan sponsors to pay their PCORI until closer to when it is due. However, the total amount a group with self-funded, level-funded, and/or HRA coverage needs to pay in PCORI fees can be tabulated well before then.
There are four acceptable methods for calculating the PCORI fee amount, and a group plan sponsor can use whichever method produces the most favorable result for them. The methods are:
- Actual Count Method – Count the actual covered lives on each day of the plan year and divide by the number of days in the plan year.
- Snapshot Method – Choose one or more days during each calendar quarter, add the covered lives on those dates, and divide by the number of dates used. Sponsors must use the same number of dates in each quarter, and the dates must be within three days of the comparable date in the other quarters.
- Snapshot method – Choose one or more days during each calendar quarter, add the covered lives on those dates, and divide by the number of dates used. Sponsors must use the same number of dates in each quarter, and the dates must be within three days of the comparable date in the other quarters. Note that a plan sponsor may also use a snapshot factor that counts the actual number of participants with individual coverage plus 2.35 times the number of participants with other than individual coverage.
- Form 5500 Method – Count the number of participants reported at the beginning of the plan year plus the number reported at the end of the plan year and divide by two. Sponsors wanting to use this method should be sure the relevant Form 5500 will be filed by July 31 – extensions are not permitted.
ExpressLink will provide our broker partners with more information about helping group clients calculate and pay their PCORI fees for the 2023 plan year during the second quarter of 2024.