The Affordable Care Act requires that self-funded health plans pay an annual fee to the Patient-Centered Outcomes Research Institute (PCORI) on a “per member” basis. Since the fee is indexed against medical inflation, it rises slightly each year. As a reminder, the fee corresponding with the member count of the 2021 plan year is due on the upcoming August 1, 2022 deadline.
What Fee Does Your Self-Funded Plan Pay?
- If your plan year ended between January 1 – September 30, 2021, the fee is $2.66 per member.
- If it ended between October 1 – December 31, 2021 (or if your health plan is a calendar year plan), the fee is $2.79 per member.
* Confusion can arise if a plan is shorter in duration than a full year. For instance, if a self-funded health plan shifts from a non-calendar year plan to a calendar year plan, plan sponsors often wonder if they are required to pay the full amount or merely a pro-rated amount of the PCORI fee. Even in the case of a short plan year, self-funded plans are still required to pay the full PCORI fee amount (See Q12 in the IRS PCORI Q&A).
Plan sponsors may use any one of three methods to determine the average number of members on the health plan when calculating the total amount of PCORI fee owed to the IRS.
- Actual Count Method – Calculated by adding the total number of lives covered for each day under the plan year and dividing that total by the number of days in the plan year.
- Snapshot Method – Calculated by determining the average number of members covered on a consistent date during the first, second, or third month of each quarter and dividing that total by the number of dates chosen. Most of the time, the “number of dates” will be 4 – except in the case of a short plan year, a new self-funded plan beginning, etc. where the number of quarters may be fewer than 4.
- Form 5500 Method – Calculated based on the average number of members reported on the Form 5500 that’s filed for the 2021 plan year.
How to Pay PCORI Fees
Self-funded health plan sponsors pay the PCORI fees as they would a tax via the IRS’s Form 720, which is the “Quarterly Federal Excise Tax Return” form. Guidance on how to properly submit this form can be found on the IRS website.
This compliance overview is just that – an overview. It does not claim to be exhaustive nor should it be misconstrued as legal advice. Great effort has been put forth in ensuring the accuracy of all content, but this is no guarantee of infallibility. For official clarification or final authority, readers should solicit legal counsel.