PCORI Fee for Self-Insured Plans - The Clear Guide
In this blog, we will explore the Self-Insured PCORI Fee in detail, covering key topics such as:
Who Should Pay the PCORI Fee for Self-Insured Plans?
What is a Multiple Self-Insured Plan?
Special Rules for Multiple Plans and HRAs.
How to Calculate the PCORI Fee for Self-Insured Health Plans?
Are Tax-Exempt Organizations and Governmental Entities Subject to the PCORI Fee?
Does the PCORI Fee Apply to a Short Plan Year?
PCORI Fee Recap:
The Patient-Centered Outcomes Research Institute (PCORI) fee is a temporary fee that applies to both fully insured and self-insured health plans for policy years from 2012 through 2029. This fee must be paid annually using IRS Form 720 – Quarterly Federal Excise Tax Return. Although Form 720 is a quarterly return, it is filed annually when reporting the PCORI fee. For the 2024 plan year, the filing deadline is July 31, 2025 and the applicable rate is $3.47 per covered life.Who Should Pay the PCORI Fee for Self-Insured Plans?
Under the Affordable Care Act (ACA), sponsors of self-insured health plans are required to pay the Patient-Centered Outcomes Research Institute (PCORI) fee.
Employers with Self-Insured Plans: Employers who sponsor self-insured health plans are responsible for filing Form 720 and paying the PCORI fee. This includes employers offering self-funded medical reimbursement arrangements such as Health Reimbursement Arrangements (HRAs). The fee must be paid annually by July 31 for the applicable plan year.
- Employers with Fully Insured Plans + HRA: Sponsors of fully insured health plans are not responsible for the PCORI fee on those insured lives, as the insurance carrier handles it. However, if the employer also sponsors a Health Reimbursement Arrangement (HRA), it is considered a self-funded plan, and the PCORI fee must be paid for the HRA-covered individuals.
What is a Multiple Self-Insured Plan?
Under the Affordable Care Act, PCORI fees are imposed on the issuer of a fully insured plan (typically the insurance carrier) or the plan sponsor of a self-insured health plan (usually the employer).
For self-insured plans maintained by multiple employers—such as a Multiple Employer Welfare Arrangement (MEWA) or a Voluntary Employee Beneficiary Association (VEBA)—the entity identified as the plan sponsor in the plan documents is responsible for paying the PCORI fee. If no sponsor is named, each participating employer is considered a plan sponsor and must pay their share of the fee.Special Rules for Multiple Plans and HRAs
Multiple Self-Funded Medical Plans:
If an employer offers more than one self-funded health plan, they can treat all plans as a single plan for PCORI fee purposes. In this case, each covered individual is counted only once when calculating the fee.HRAs Integrated with Fully Insured Plans:
If an employer offers a Health Reimbursement Arrangement (HRA) integrated with a fully insured medical policy, the PCORI fee only applies to each HRA participant, not the insured plan members (since the insurer pays the fee for those).
Level-Funded Plans:
Plan sponsors with level-funded arrangements should consult their carrier to determine whether the employer or the insurer is responsible for paying the PCORI fee.
How to Calculate the PCORI Fee for Self-Insured Health Plans?
The PCORI fee is based on the average number of lives covered under an applicable self-insured health plan during the plan year. Plan sponsors must use one of the following three IRS-approved methods to calculate this average:
Actual Count Method
Snapshot Method
Form 5500 Method
What Counts as a “Covered Life”?
All individuals covered during the plan year must be counted—not just employees. This includes spouses, dependents, and others.
Example: An employee and their dependent count as two lives.
Exception: For HRAs and FSAs, count only the employee, not dependents.
Plan sponsors must select an approved method and report the accurate total of covered lives.
HRA - Health Reimbursement Arrangement, is an employer-funded account that provides employees with tax-free reimbursements for eligible medical expenses, including individual health insurance premiums.
FSA - Flexible Spending Account is a tax-advantaged account that allows employees to contribute pre-tax money for eligible health care expenses not covered by their main medical plan.Are Tax-Exempt Organizations and Governmental Entities Subject to the PCORI Fee?
Yes. Health insurance policies or self-insured health plans offered by tax-exempt organizations or governmental entities are generally subject to the PCORI fee. Unless the plan qualifies as an exempt governmental program, it is considered a specified health insurance policy or an applicable self-insured health plan.
Therefore, the insurance issuer (for fully insured plans) or the plan sponsor (for self-insured plans) is responsible for paying the PCORI fee.
Does the PCORI Fee Apply to a Short Plan Year?
Yes, the PCORI fee applies even if an applicable self-insured health plan has a short plan year (i.e., fewer than 12 months). This can happen for various reasons—for example:
A newly established plan that begins on a date other than January 1, resulting in a shortened first plan year.
A plan transitioning from a fiscal year to a calendar year, creating a temporary short plan year during the switch.
In all such cases, the fee must still be calculated and paid based on the average number of covered lives during that shortened period.
WRAP:
Understanding and complying with the PCORI fee is essential for sponsors of self-insured health plans. By identifying your responsibilities, calculating covered lives accurately, and using the correct IRS method, you can ensure timely and compliant filing. Staying informed helps avoid penalties and simplifies annual reporting.
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