If you’re a small business owner with a self-insured health plan, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization?
Under the Affordable Care Act (ACA), insurers and sponsors of certain health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI).
PCORI is an independent organization that the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness.
Your insurance company normally covers this fee. However, employers offering a self-insured health plan, including a health reimbursement arrangement (HRA), must pay this fee via Form 720 1 by July 31 each year. This fee was initially set to expire in 2019, but Congress extended it through September 30, 2029 2, due to the Further Consolidated Appropriations Act of 2020 3.
In this blog post, you’ll learn:
- Which organizations must pay a PCORI fee annually via Form 720.
- What the PCORI fee is for 2025.
- The three methods for calculating the number of lives for PCORI fees on Form 720, including the actual count method, snapshot method, and Form 5500 Method.
Who owes the PCORI fee?
Specified health insurance policies subject to PCORI fees include fully-insured and self-insured group health plans, prepaid health coverage arrangements with fixed premiums for accident or health coverage, and HRAs. Group health insurance carriers typically cover this fee.
However, if your company offers a self-insured health plan, such as an HRA, you must pay the PCORI fee yourself and file it with the IRS. This includes the qualified small employer HRA (QSEHRA), individual coverage HRA (ICHRA), and group coverage HRA (GCHRA).
However, an integrated HRA isn’t subject to PCORI4 if an employer offers it alongside a self-insured plan from the same plan sponsor. In this case, the HRA and medical plan are considered a single plan for the PCORI fee. If an employer offers a GCHRA alongside a fully-insured plan, they must pay a PCORI fee for the HRA.
An HRA that only covers dental and vision expenses is also exempt from the PCORI fee.
PCORI fees apply to organizations that offer different benefits, including:
- Specific fully insured plans
- Self-funded plans, including accident and major medical coverage
- HRAs
- Health flexible spending accounts (FSAs) if employer contributions exceed the greater of either the employee’s contribution or $500
Which plans are exempt from the PCORI fee?
Some benefits, such as health savings accounts (HSAs) and other excepted benefits, aren’t subject to the fees.
Health plans exempt from the PCORI fee include the following:
- Government programs, including Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP)
- Insurance policies that only provide excepted benefits, such as vision or dental
- Wellness programs (as long as the program doesn’t provide significant medical care or treatment benefits)
- Policies that solely cover international employees
- Archer medical savings accounts (MSAs)
- Stop-loss or hospital indemnity
- Accident-only coverage
- Workers’ compensation
How much is the PCORI fee?
Sponsors of applicable insurance plans will pay a PCORI fee each July. This fee applies to the previous plan year. For example, if you have a calendar year HRA plan that ended on December 31, 2024, you’ll pay a PCORI fee for that 2024 plan year in July 2025.
For plans ending on or after October 1, 2024, and before October 1, 2025, the PCORI fee5 is $3.47 per covered life. That’s up from $3.22 per covered life for plan years from a year earlier.
The Secretary of Health and Human Services adjusts the amount annually for inflation.
|
Plan year |
PCORI fee |
|
Plan years ending after October 1, 2024, and before October 1, 2025. |
$3.47 |
|
Plan years ending after October 1, 2023, and before October 1, 2024. |
$3.22 |
|
Plan years ending after October 1, 2022, and before October 1, 2023. |
$3.00 |
|
Plan years ending after October 1, 2021, and before October 1, 2022. |
$2.79 |
Here’s how this breaks down for plans that ended in 2024.
|
Plan year ended |
PCORI fee amount per covered life |
|
January 2024 |
$3.22 |
|
February 2024 |
$3.22 |
|
March 2024 |
$3.22 |
|
April 2024 |
$3.22 |
|
May 2024 |
$3.22 |
|
June 2024 |
$3.22 |
|
July 2024 |
$3.22 |
|
August 2024 |
$3.22 |
|
September 2024 |
$3.22 |
|
October 2024 |
$3.47 |
|
November 2024 |
$3.47 |
|
December 2024 |
$3.47 |
What is IRS Form 720?
Organizations use Form 720, known as the Quarterly Federal Excise Tax Return6, to report any federal excise taxes collected.
This includes a variety of tax categories and fees, such as:
- Environmental taxes. This includes petroleum oil spill liability, products, and chemicals that cause ozone layer depletion. With these environmental taxes, you’ll also have to complete IRS Form 66279.
- Communications and air transportation taxes. This includes phone service and air travel.
- Fuel taxes. This category includes fuel types such as diesel, kerosene, gasoline, and natural gas.
- Retail taxes. This is for trucks, trailers, and tractors.
- Ship passenger taxes.
- Foreign insurance taxes. This is for insurance that’s issued by foreign insurers.
- Manufacturers taxes. This includes a long list of products and services, such as coal, tires, indoor tanning services, and vaccines.
- Other excise taxes.
- PCORI fees. These are for specified health insurance policies and applicable self-insured health plans.
Does your business need to submit IRS Form 720?
If you owe a PCORI fee, you must pay it using IRS Form 720 by July 31, following the last day of the plan year. If that date falls on a weekend or federal holiday, the PCORI fee is due on August 1. For self-insured health plans, see Part II, IRS No. 133 (b) of the form. If your business doesn’t owe a PCORI fee, you don’t need to complete IRS Form 720.
If you currently file Form 720, you will pay the fee with your second-quarter return. If you don’t regularly file Form 720, you only need to file the form once, during the second quarter, with your return. You don’t need to file Form 720 on a quarterly basis.
What happens if you don’t pay the PCORI fee?
David Blain is the CEO of BlueSky Wealth Advisors. Part of his role involves ensuring compliance with myriad financial and tax regulations that impact both his firm and its clients. Based on his experience helping clients with tax submissions, the importance of carefully managing the PCORI fee can’t be understated.
“Forgetting or choosing not to pay this fee can lead to penalties and interest charges, which can be significant and add unnecessary costs,” Blain said. “We’ve seen scenarios where entities miscalculated their covered lives or missed the fee payment deadline, and both situations led to complications during their annual audits and an increase in administrative burden to rectify the oversight.”
If you don’t report or pay8 the PCORI fee, you may face penalties similar to those for not filing a tax return. According to Internal Revenue Code §6651, the penalty is 5% of the excise tax due for each month or part of a month the return is late, with a cap of 25% of the unpaid tax.
“For employers and plan sponsors, I strongly recommend setting reminders for the reporting deadline, conducting a regular review of the number of insured members under applicable plans, and always maintaining open lines of communication with tax professionals,” Blain said. “In instances where clients have forgotten to make their payments, acting swiftly to correct the oversight and promptly communicating with the IRS has helped in minimizing the penalties.”
How to calculate the PCORI “number of lives”
According to Form 720 instructions, there are three ways to count the number of lives for plan years.
Here’s what the instructions state for calculating the number of lives:
- The actual count method: Add the total of lives covered for each day of the plan year and divide that total by the total number of days in the plan year.
- The snapshot method: Take the total number of lives covered on one date (or more dates if an equal number of dates is used in each quarter) during the first, second, or third month of each quarter and divide that total by the number of dates on which you made a count.
- Form 5500 Method: Take the number of participants reported on Form 5500, Annual Return/Report of Employee Benefit Plan, or Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan. You’ll add the total number of lives covered at the beginning and end of the plan year, then divide this amount by two.
Additionally, there are special rules for calculating covered lives if you offer multiple self-funded plans or an integrated HRA from a medical insurance provider.
With an employer-sponsored HRA that’s integrated with a fully-insured medical policy, it’s only a requirement to pay the fee with respect to each HRA participant.
For multiple self-funded medical plans, you can treat them as a single plan for purposes of the fee. Each covered life is only counted once for the fee calculation.
You can view detailed information about “lives covered” in the final regulations9 document.
Does COBRA coverage to retirees or former employees count as “lives” covered?
Yes. You must count COBRA-covered individuals and dependents in the total number of lives for your benefit.
How to complete Form 720
New to filling out Form 720? We’ve compiled some examples. Below, the company plan covered an average of three participants and had a plan year that ended on December 31, 2024.
This section is included for informational purposes only. You should seek professional advice from a tax adviser or legal counsel to ensure proper compliance with the law.
Step 1: Complete company information header
The first part of this tax form asks for the basics, such as your name, address, and employer identification number, or EIN.
In the header, the quarter ending date will be June 30, 2025, as you’re filing the form for the second quarter of 2025. Don’t check “Final return” unless your organization is going out of business or you aren’t required to file Form 720 in future quarters.
Step 2: Complete Part II, line 133(c) or (d)
Complete line 133(c) if your organization’s plan year ended before October 1 of the previous year. In this example, the plan year ended in December, so we’d move on to the next section, 133(d). Complete line 133(d) if the plan year ended on or after October 1 (this is the case with most plans). In this example, the plan did.
Step 3: Complete Part III lines 3 and 10, sign and date
Now, you’ll complete Part III, lines 3 and 10, which is your total tax and the balance due to the IRS. You’ll then sign the form and date it.
Step 4: Complete the payment voucher
At the end of Form 720, you’ll find Form 720-V, titled “Payment Voucher.” You’ll complete this information and the amount you’re paying to the United States Treasury.
Step 5: Send the completed form, payment voucher, and check to the IRS
You’ll send Form 720 to the IRS in Ogden, Utah.
Send to:
Department of the Treasury
Internal Revenue Service
Ogden, UT 84201-0009
How does PeopleKeep help with PCORI fee reporting?
PeopleKeep customers with an HRA can download a report from their admin dashboard prior to the Form 720 due date in late July. They’ll simply navigate to “Reports” and download the file. This report includes the current fee amount and the calculated number of lives on the platform so that you can easily complete Form 720.
Conclusion
For applicable employers, the deadline for filing IRS Form 720 and paying PCORI fees is July 31. You should always reach out to a tax professional with your legal questions to ensure you’re filling out your form and paying the fees correctly.
If you want a compliant, tax-advantaged health benefit for your employees, PeopleKeep by Remodel Health can help! Our HRA administration software makes it easy to set up and manage your health benefit in minutes.
This blog article was originally published on August 4, 2020. It was last updated on June 25, 2025.
1. https://www.irs.gov/forms-pubs/about-form-720
2. https://www.irs.gov/newsroom/patient-centered-outcomes-research-institute-fee
3. https://www.congress.gov/bill/116th-congress/house-bill/1865
5. https://www.irs.gov/pub/irs-drop/n-23-70.pdf
7. https://www.irs.gov/pub/irs-drop/n-22-59.pdf
8. https://www.irs.gov/pub/irs-pdf/i720.pdf
9. https://www.irs.gov/pub/irs-pdf/f6627.pdf
11. https://www.govinfo.gov/content/pkg/FR-2012-12-06/pdf/2012-29325.pdf
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