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Got A Self-Insured Plan? Get Ready! The First Phase Of PCORI Fees Are Due By July 31, 2013

As part of Health Care Reform, the Affordable Care Act (ACA) created the Patient-Centered Outcomes Research Institute (PCORI) to evaluate the clinical effectiveness of various medical treatments and procedures.

PCORI will collect and disseminate their research findings which are intended to help patients, providers, and others make better-informed healthcare decisions. To fund PCORI, ACA imposes an annual fee to be paid by health insurance issuers and employers who sponsor self-insured group health plans. The PCORI fee applies for each plan year ending on or after October 1, 2012 and before October 1, 2019. PCORI fees must be paid annually to the IRS by July 31 of the year following the last day of the plan year. This means many employers with applicable self-insured plans will need to pay the PCORI fee by July 31st, 2013.

How Much is the PCORI Fee and How is it Calculated?

PCORI fees are calculated based on the average number of lives covered under the policy or plan. For plan years ending before October 1, 2013, the fee is set at $1 multiplied by the average number of covered lives under the plan and $2 for the next plan year. The fee is subject to adjustment through 2019 based on health care inflation.

For the first year the fee is in effect, any reasonable method may be used to determine the average number of covered lives. Thereafter, the plan sponsor must use one of three methods: (i) the actual count method, (ii) the snapshot method or (iii) the Form 5500 method. COBRA coverage also must be taken into account in determining the fee.

Who Pays the PCORI Fee?

The insurance carrier is responsible for paying the fee for fully-insured group health plans. The plan sponsor is responsible for paying the fees for self-insured plans. The plan sponsor for self-insured plans is the employer. Self-insured plans include Health Reimbursement Arrangements (HRAs) and certain Flexible Spending Accounts (FSAs) that are not excepted benefits.

What Plans are Subject to the PCORI Fee?

Plans subject to the fee include:

  • Medical plans.
  • Prescription drug plans.
  • Self-insured dental or vision plans, if provided without a separate election or premium charge.
  • Health reimbursement arrangements (HRAs).
  • Retiree-only health plans

Plans exempt from the fee include:


  • Separately insured dental or vision plans.
  • Self-insured dental or vision plans, if subject to separate coverage elections and employee contributions.
  • Expatriate coverage provided primarily for employees who work and reside outside of the U.S.
  • Health savings accounts (HSAs).
  • Most flexible spending accounts (FSAs).
  • Employee assistance programs (EAPs), wellness programs and disease management programs that do not provide "significant benefits in the nature of medical care or treatment."

Special Rules for HRAs:

  • If you have a fully-insured health plan and an HRA, the HRA is considered a self-funded plan. The health plan insurer pays the fee on the fully-insured group health plan and the employer, the plan sponsor, pays the fee on the HRA, even if you use a third-party HRA administrator.
  • If you sponsor both a self-funded group health plan and a separate self-funded HRA, the employer pays the fee only on the combined group health plan (self-funded medical plan + self-funded HRA = one self-funded group health plan).
  • If you sponsor only an HRA with no group health plan, the employer pays the fee on the HRA.

Reporting and Fee Payment Due Dates for Self-Insured Employer Plans:

Employers who sponsor self-insured health plans are required to report and pay the PCORI fee for a plan using IRS Form 720. PCORI fees are due by July 31 of the year following the last day of the plan year. The IRS has just released a revised version of Form 720 that includes two new lines for the PCORI fee (one line for plan sponsors of self-insured plans and one line for health insurance issuers). The PCORI fee is "IRS No. 133"; it is covered on pages 1 and 8-9 of the instructions. Although Form 720 is for quarterly federal excise tax returns, employers need to report and pay PCORI fees only annually. Additionally, the IRS has recently concluded that PCORI fess are ordinary and necessary business expenses and thus are deductible business expenses even though the tax is classified and payable as an excise tax.

The PCORI plan year periods, applicable fees and due dates are summarized as follows:


Plan Year End Fee Due Date
From October 1, 2012 through December 31, 2012 $1 times the average number of covered lives July 31, 2013
From January 1, 2013 through September 30, 2013 $1 times the average number of covered lives July 31, 2014
From October 1, 2013 through December 31, 2013 $2 times the average number of covered lives July 31, 2014
From January 1, 2014 through September 30, 2014 $2 times the average number of covered lives July 31, 2015
On or after October 1, 2014 going forward To Be Determined July 31 of following calendar year

The IRS has issued Questions and Answers as well as a Chart summarizing the plans or arrangements that are subject to the PCORI fee and the party responsible for paying and reporting the fee. Links to these IRS resources are here:

Employer Action: If you sponsor a self-insured plan (including an HRA maintained in conjunction with an insured plan) with a plan year ending between October 1, 2012 and December 31, 2012, your first PCORI fee is due on July 31, 2013. You are responsible for calculating the average number of lives covered under the plan, and reporting and paying the PCORI fee with respect to the plan. We recommend you begin now reviewing your plans to determine your PCORI fee liability.

Should you have any questions about PCORI fees, Health Care Reform, or any other benefit plan matter, please contact an OneDigital consultant or account manager.

A note on this post: the content was compiled by OneDigital Account Manager Christine Gaiser. We are about to announce the launch of an OneDigital Compliance Team, of which she is an integral member. Stay tuned for more information!