PCORI Fee Increase
The Internal Revenue Service (IRS) has increased the amount of the annual Patient Centered Outcomes Research Institute (PCORI) fee you may be required to pay as part of your ACA (Patient Protection and Affordable Care Act) compliance. This fee is due Aug. 1, 2022. For plan years that ended on or after Oct. 1, 2021, and before Oct. 1, 2022 (including calendar year plans), the fee is $2.79 per person covered by the plan. For plan years that ended on or after Oct. 1, 2020, and before Oct. 1, 2021, the fee is $2.66 per person.
The fee generally applies to specified health insurance policies such as major medical plans, but it does not apply to Health Insurance Portability and Accountability Act (HIPAA) of 1996 excepted benefits. If you sponsor a self-funded health plan, you or your administrator are required to file Tax Form 720 (available at www.IRS.gov) and make any payment due directly to the IRS. If you offer fully insured plans, your insurer will complete the filing but may bill you the annual fee.
We have received many questions in the past about PCORI fees as they relate to Health Reimbursement Arrangements (HRA) and Flexible Spending Accounts (FSA). If the account qualifies as a HIPAA excepted benefit, then no PCORI fee is due for that account.
How do I know if a Healthcare FSA is HIPAA excepted?
The FSA must meet all the following to qualify as an excepted benefit:
- Employees offered the Healthcare FSA are also eligible to participate in major medical coverage
- Employer contributions to the employee’s Healthcare FSA may not exceed $500 or must be structured as a compliant dollar-for-dollar employer matching contribution.
When employers offer flex credits under a Section 125 plan, things become more complicated. As a rule of thumb, the Healthcare FSA will remain HIPAA excepted so long as 50% or more of the flex credit amount is available as a cash out option, or non-cashable flex credits are limited to $500 per plan year.
What about HRAs?
An HRA that may be used to pay deductibles and copays under the applicable self-insured health plan is not subject to a separate fee (and the fee will apply only to the applicable self-insured health plan) if both the HRA and the applicable self-insured health plan have the same plan sponsor and the same plan year.
If funds from the HRA can be used to pay other medical related fees and/or premiums not associated with the self-insured plan, then the HRA itself is generally subject to the PCORI fee.
This blog is up to date as of June 2022 and has not been updated for changes in the law, administration or current events.