The IRS raises PCORI fees for health plans payable in 2023

The IRS raises fees paid annually by insurance issuers or sponsors of self-insured health plans to fund the Patient-Centered Outcomes Research Institute (PCORI) Federal Fund. Fees apply to health plans for the previous calendar year, and for plan years ending in 2022, PCORI fees are due by July 31, 2023.

Per Notice 2022-59released by the IRS on November 14, the current annual fee adjustments are as follows:

  • For plan years that ended on or after October 1, 2022 and before October 1, 2023, (including calendar year plans), fees
    $3 for one person covered by the plan, up from $2.79 a year earlier.
  • For plan years that ended on or after October 1, 2021, and before October 1, 2022, Fees
    $2.79 for one person, Up from $2.66 in the previous year.

The fee is calculated for each covered life, including dependents who are covered, retired, and participating in COBRA.
The IRS has published a chart View PCORI fee application to common types of health coverage.

Self-insured employers pay the annual PCORI fee directly to the IRS—third party officials cannot report and pay the fee. For fully insured employers, the fee is paid by the insurance company, although the cost may be factored into premium increases.

Fees are reported and paid annually with submission
IRS Form 720 (quarterly federal tax return) For the second quarter, due by July 31 of the year following the end of the plan year, unless that date falls on a weekend or a federal holiday. In 2023, the IRS will release an updated Form 720 for the second quarter with the PCORI fee adjustment for the next payment date of July 31.

Fees are valid until 2029

The Affordable Care Act created fees to fund an institute in Washington, D.C. that conducts research on the relative effectiveness of medical treatments. The fee was originally intended to only apply to plans with terms that expired after September 30, 2012, and before October 1, 2019. However, as part of the 2019 bipartisan balancing act, PCORI’s annual filing and surcharge has been extended 10 years to 2029.

“PCORI fees are calculated using the average number of lives covered by the policy or plan and the applicable dollar amount for the policy year or plan year,” explained William Sweetnam, legislative and technical director at the Employers Council on Flexible Compensation in Washington. D.C. “The applicable dollar amount was $2 when the fee was enacted as part of the Affordable Care Act, and this amount is increased annually based on increases in the projected per capita amount of national health expenditures.”

PCORI Fee Calculation

The IRS provides self-insured employers with options to determine the average number of enrollees in the plan, which the IRS refers to as covered lives—employees, spouses, and dependents covered by the health plan. According to the IRS,
Plan sponsors may use any of the following methods To calculate the average number of lives covered under the plan:

  • actual counting method. Plan sponsors add up the total number of lives covered for each day of the year, divided by the total number of days in the plan year.
  • snapshot method. Sponsors add up the total ages covered on one date in each plan quarter.
  • Snapshot operator method. Similar to the snapshot method, the number of lives covered on any one day can be determined by counting the actual number of lives covered on that day or by treating people with self-cover only as one life and those with non-self coverage only as lives 2.35.
  • Form 5500 method. Plan sponsors use a formula that includes the number of participants reported on Form 5500 for the plan year.

PCORI fees can be paid through
Electronic federal tax payment system.

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