PCORI fees are annual per-person charges that fund the Patient-Centered Outcomes Research Institute, a nonprofit created by the Affordable Care Act to study which medical treatments work best for patients. Health insurance issuers and employers that sponsor self-insured health plans pay these fees to the IRS each year based on the number of people covered under their plans.
Who Pays the PCORI Fee
Which entity is responsible depends on how the health plan is funded. For fully insured plans, where an employer purchases coverage from an insurance carrier, the insurance company pays the fee. For self-insured plans, where the employer funds claims directly, the employer (as plan sponsor) is responsible for calculating, reporting, and paying the fee.
This distinction matters if you’re an employer evaluating your obligations. If you buy a group policy from a carrier, the PCORI fee is baked into the insurer’s costs and you don’t file anything separately. If you self-fund your plan, the responsibility falls squarely on you.
Which Plans Are Subject to the Fee
The fee applies broadly to “specified health insurance policies” and “applicable self-insured health plans.” In practical terms, that includes most medical plans: major medical coverage, Health Reimbursement Arrangements (HRAs), and certain retiree-only plans all trigger the fee. If your company offers a standalone HRA, it counts as a self-insured health plan for PCORI purposes, meaning you owe the fee on covered lives under that arrangement.
Health Savings Accounts (HSAs) are not subject to the fee because they are individual trust accounts, not health insurance plans. Flexible Spending Accounts (FSAs) that qualify as “excepted benefits” are also generally exempt. An FSA qualifies as an excepted benefit when the employer also makes traditional group health coverage available and the FSA’s maximum benefit doesn’t exceed certain limits. If an FSA doesn’t meet those conditions, it could be treated as a self-insured health plan subject to the fee.
Plans that only cover vision, dental, or other limited-scope benefits are exempt as well, since they don’t constitute major medical coverage.
How the Fee Is Calculated
The PCORI fee equals the average number of covered lives during the plan year multiplied by a per-person rate set annually by the IRS. “Covered lives” includes employees, spouses, and dependents enrolled in the plan, not just the primary policyholder.
The IRS publishes an updated fee rate each year, adjusted for increases in national health expenditures. The rate has gradually risen since the fee’s inception. For the most recent plan years, it has been in the range of roughly $3.00 to $3.50 per covered life. Check the IRS PCORI fee page for the exact rate that applies to your plan year, since the amount depends on when your plan year ends.
The IRS allows several methods for determining the average number of covered lives, giving plan sponsors flexibility:
- Actual count method: Add up covered lives for each day of the plan year and divide by the number of days.
- Snapshot method: Count covered lives on a single date in each quarter (or more than one date per quarter), then average those counts. You can count actual lives or simply count each participant who has self-only coverage as one life and each participant with family coverage as 2.35 lives.
- Form 5500 method: For self-insured plans that file Form 5500 (the annual benefits filing), you can use the participant count reported there. Plans offering self-only coverage use the Form 5500 count directly; plans with family coverage multiply that count by a factor to approximate total covered lives.
You can choose whichever method works best for your plan, and you don’t have to use the same method every year. Insurance carriers use similar counting approaches for fully insured policies.
Filing and Payment Deadlines
The PCORI fee is reported and paid using IRS Form 720, the Quarterly Federal Excise Tax Return. Despite the form’s name, you only file it once a year for PCORI purposes, specifically for the second quarter. The deadline is July 31 of the year following the plan year’s end. For example, a plan with a calendar-year plan year ending December 31, 2024 would owe its fee by July 31, 2025.
Payment is due at the same time the form is filed. There’s no option to pay in installments. If your organization sponsors multiple self-insured plans, you report all of them on a single Form 720 but calculate the fee separately for each plan.
Even if you don’t owe any other excise taxes, you still use Form 720 for this fee. Many employers encounter this form only because of the PCORI obligation.
How Long the Fee Lasts
The PCORI fee was originally set to expire after plan years ending before October 1, 2019. Congress extended it through plan years ending before October 1, 2029, as part of legislation passed in late 2019. That means the fee will continue to apply for several more years, and employers and insurers should plan on it being part of their annual compliance calendar through at least 2029, with the final payments due by July 31, 2030.
Practical Impact for Employers
For a self-insured employer with 500 covered lives (employees plus dependents), the annual PCORI fee typically runs in the range of $1,500 to $1,750 at current rates. It’s a relatively small expense compared to total health plan costs, but missing the deadline can result in IRS penalties and interest.
Many employers outsource the calculation and filing to their third-party administrator (TPA) or benefits consultant, which can simplify the process since the TPA already tracks enrollment data. Even so, the legal obligation to file and pay remains with the plan sponsor, so confirming it’s been handled each year is important. Set a reminder well before July 31 to verify that Form 720 has been completed and the payment submitted.