Patient-Centered Outcomes Research Institute (PCORI) Fees Rise for 2023
The Internal Revenue Service (IRS) announced on November 14, 2022, that Patient-Centered Outcomes Research Institute (PCORI) fees for health plans for plan years ending in 2022 will increase for the 2023 calendar year. The fees are collected annually and are due by July 31, 2023.
The PCORI fee is paid by insurance issuers or sponsors of self-insured health plans to fund research into comparative clinical effectiveness. According to the IRS's announcement, the rate is set to rise from $2.79 to $3 per covered life for plan years ending between October 1, 2022, and October 1, 2023.
The previous year's PCORI fee rate was $2.45, which increased to $2.69 in 2020 and then again to the current rate of $2.79 for 2021. This is the fourth consecutive year that the IRS has raised the fee.
The annual fees are used to finance research into comparative clinical effectiveness and must be reported on Form 720. The form must be filed no later than July 31 of the calendar year following the close of the plan year to which it applies.
Created under the Affordable Care Act in 2010, the PCORI fee funds independent research that helps providers, insurers, and employers make evidence-based decisions on the use of health care services, procedures, and treatments. The fee was set to expire on October 1, 2019, but was extended through 2029 in the Bipartisan Budget Act of 2018.
How to Calculate PCORI Fees
PCORI fees are calculated by multiplying the applicable rate, $3 for 2022 plan years, by the average number of covered lives. Covered lives include employees, and their spouses or dependents enrolled in a health plan sponsored by an employer. It also refers to non-employees, such as retirees, who are also enrolled in that plan.
The options to calculate the average number of covered lives include the following:
- Actual Count Method: A count of all individuals enrolled in the plan for each day of the year divided by the total number of days.
- Snapshot Method: The total number of individuals covered on a particular date for every quarter of the year.
- Snapshot Factor Method: The approach is similar to the snapshot method but allows counting individuals with self-only coverage as one life and the remainder as 2.35 lives.
- Form 5500 Method: This formula includes the number of lives reported on Form 5500 for the year.
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Patient-Centered Outcomes Research Institute (PCORI) Fees Rise for 2023
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