Jul 07 ,2025
Self-funded vs fully-insured PCORI
Self-funded vs fully-insured PCORI
Self-Funded vs Fully-Insured PCORI: What Employers Should Know
Understanding how the Patient-Centered Outcomes Research Institute (PCORI) fee applies to a health plan-one that is self-funded versus fully-insured-is key for ensuring compliance with regulations and making the right fee calculation. Employers or benefits administrators must be aware of these distinctions, so they are able to file IRS Form 720 properly, avoiding excessive penalties.
What Is The PCORI Fee?
The PCORI fee, which is levied under the Affordable Care Act (ACA), funds research aimed at improving health outcomes by aiding patients and their providers in making informed decisions. It is an annual fee charged to the private issuers of healthcare policies and the sponsors of self-insured healthcare plans.
Self-Funded Health Plans: Employer Responsibilities
In a self-funded (self-insured) plan, the employer becomes financially responsible for seeing to their employees' health care claims instead of buying insurance from a carrier.
Who pays the PCORI fee? The employer (plan sponsor) is responsible.
How is it reported? The fee must be filed annually using IRS Form 720.
Calculation: The employer must determine the average number of covered lives using any of the IRS-approved methods-actuarial method, snapshot method, or Form 5500.
For Fully Insured Health Plans, The Insurer Will Handle It
With a fully-insured plan, the employer pays a premium to the insurance carrier, which carries all of the risks for claims.
Who pays the PCORI fee? The insurance provider is liable.
How is it reported? The insurer files and pays on behalf of the group.
Employer Tip: No action is required by employers offering only fully-insured coverage.
What If You Offer Both?
For employers with both fully insured and self-insured components (for example, an HRA linked to a fully insured plan), the employer is responsible for reporting and paying the PCORI fee for the self-funded component.
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