Jul 03 ,2025
Who pays the PCORI fee?
Who pays the PCORI fee?
Who Pays the PCORI Fee? A Guide for Employers and Plan Sponsors
The Patient-Centered Outcomes Research Institute (PCORI) fee is a tax imposed under the Affordable Care Act to fund research to study the effectiveness of medical treatments. It’s important for employers and plan sponsors to understand who is responsible for paying the PCORI fee and how it impacts their health coverage compliance.
What Is the PCORI Fee?
The PCORI fee is an excise tax used to fund comparative clinical effectiveness research. The fee is reported and paid annually by the use of IRS Form 720. The amount due has to be calculated on the average number of covered lives on a given health plan or policy.
Who Is Required to Pay the PCORI Fee?
Who pays the PCORI fee will also depend on the nature of the health plan:
1. Fully Insured Health Plans
In the case of your organization providing health benefits through a fully insured plan, then the insurance carrier is the one liable to pay for the PCORI—not the employer. This is true because tax-wise the insurer is seen as the plan sponsor.
2. Self-Insured Health Plans
Employers or plan sponsors of self-funded (self-insured) health plans should pay the PCORI fee themselves. This includes:
- Private companies with self-funded plans
- Governmental entities and nonprofits with self-funded coverage
- Multiemployer health plans
Even Health Reimbursement Arrangements (HRAs) or Flexible Spending Accounts (FSAs) integrated with a major medical plan may require the employer to file and pay the fee if these arrangements are self-insured.
When and How to File PCORI Fees
Employers and insurers must file IRS Form 720 annually, typically by July 31, to report and pay the PCORI fee. The average number of covered lives can be calculated using various methods allowed by the IRS, such as:
Actual count method
Snapshot method
Form 5500 method
Late payments may incur IRS penalties, so timely compliance is crucial.
Are There Any Exceptions?
Some arrangements are exempt from the PCORI fee, including:
Standalone dental or vision plans
Employee Assistance Programs (EAPs) not considered minimum essential coverage
Stop-loss or indemnity insurance
Always review your plan structure with a qualified tax professional or benefits consultant to confirm obligations.
Key Takeaways: Stay Compliant and Avoid Penalties
PCORI fees apply to most health plans under the ACA.
Insurance companies pay the fee for fully insured plans.
Employers/plan sponsors pay the fee for self-funded plans.
Use Form 720 for annual reporting and payment.
Filing is due by July 31st of the year following the end of the plan year.
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