Blog Details

The Patient-Centered Outcomes Research Institute (PCORI) fee is a provision under the Affordable Care Act (ACA). This fee incurs costs for health insurance providers and sponsors of certain self-insured plans to facilitate research that might improve health care outcomes. For insurers and administrators, PCORI-related IRS filing requirements and Form 720 instructions must be followed to avoid penalties and ensure proper reporting.

Not everyone falls under the purview of the PCORI fees; however, certain categories must comply. Health insurance providers and self-insured employers and sponsors of health reimbursement arrangements (HRAs) should report and remit payments. The IRS Form 720 (Quarterly Federal Excise Tax Return) is the one used for the annual filing of PCORI fees, although most excise taxes will typically be reported on a quarterly basis. Eligible businesses would keep compliance with federal tax requirements.

PCORI fees are due on July 31 of every year for a plan year ending in the previous calendar year. For insurance providers and plan sponsors, the computation of the fee is based on the average number of covered lives under the plan. By being well informed of the IRS filings for PCORI, tax due dates, and the methods of paying them, taxpayers can ensure a smooth submission process and avoid costly penalties in the process. Most providers are now adopting IRS e-file platforms to comply with the requirement more efficiently.

Health insurance providers must enter their information accurately into Part II, the PCORI section of the IRS Form 720. Businesses usually hire tax professionals, use accounting software, or rely on IRS e-file systems in the process to make things easier. Proper documentation and keeping good records are fundamental to supporting compliance when audited and for future cross-references.

To simplify compliance, health insurance providers need to put in place internal reporting systems and track the covered lives across the year and keep abreast of IRS PCORI updates. The burden of administrative duties may be reduced by working with a third-party administrator or tax consultant or using specialized compliance tools. By taking such a proactive approach, a provider meets the requirements in tax reporting and fulfills a greater goal of furthering research in patient-centered healthcare.