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The Patient-Centered Outcomes Research Institute (PCORI) fee funds comparative effectiveness research. The IRS changes this fee from time to time, so employers and plan sponsors have to keep up with the increase of this fee for compliance and budgeting.

This fee is under the Affordable Care Act (ACA) and charges health insurers and self-insured health plans an amount every year to fund research that enables both patients and healthcare providers to make better decisions. IRS Form 720 is used for reporting and payment.

The IRS adjusts the PCORI fee from year to year based on the projected per capita national health expenditures. Now it has a very new fee for plan years that are ending in 2024:

For policy years or plan years ending on or after October 1, 2023, and before October 1, 2024, the fee per covered life is $3.22, an increase from the previous year's fee of $3.00.

This rise reflects trends in healthcare costs and inflation adjustments, and the calculation of the new fee should be done by employers based on the average number of lives covered under the plan.

The following types of entities are affected:

Employers with self-funded health plans

Health insurance companies

Multiple employer welfare arrangements'

Even small businesses managing their health benefits independently are subject to this.

Those being:

Identify what the end date of the plan year is.

Identify the acceptable IRS methods (whether actual count, snapshot or Form 5500) in calculating average lives covered.

File and pay the fee through IRS Form 720, before the July 31 deadline.

Employers must contact tax or HR specialists for relevancy and filing accuracy to avoid incurring penalties.

The increase might seem small, but repeated non-compliance may result to audits or penalties. In fact, catching up with changes healthcare compliance regulations, updates on ACA reporting, and those by IRS ensures your organization remains penalty-free and audit-ready.