Do you owe the PCORI Fee which is due by July 31, 2013?

Authored on

Posted by Michael E. Mast, CPA

As part of the Patient Protection Affordable Health Care Act (PPACA), the Patient Centered Outcome Research Institute (PCORI) was created and tasked with assessing a fee on the insurance company for fully insured welfare plans, and on the employer for self-insured welfare plans, including Health Reimbursement Arrangements (HRA) and Flexible Spending Accounts (FSA). If your company offers a self-insured health and welfare plan, a HRA, or a FSA, your company must pay a fee per covered person by July 31, 2013 on Form 720.

While the actual fee can be easily calculated (rate x average number of covered lives), determining what plans are subject to the fee and the average number of covered lives can be quite complicated. In some cases, a single individual may count as more than one covered life. For example, if a fully insured medical plan is paired with an HRA, the insurance company would pay for that participant’s eligibility to the fully-insured part of the plan, and the employer would pay because he/she is eligible to the HRA.  However, if the plan sponsor offers a self-insured welfare plan and an HRA, then the participant would only be counted once.

The PCORI fee does not apply to Health Savings Arrangements (HSAs), stand-alone dental plans, vision plans, accident plans, stop-loss policies, or individuals residing outside of the United States. To verify whether your plan is subject to the PCORI fee, click here.

The fee is assessed as follows:

Plan Years Ending
during the year ending

Fee Assessed

September 30, 2013

$1 per average covered life

September 30, 2014

$2 per average covered life

September 30, 2015 – 2019

$2 per average covered life indexed
for increases in the projected
per capita amount of
National Health Expenditures

After you determine whether your company owes the PCORI fee, there are four optional methods (Actual Count, Snapshot, Snapshot Factor, Form 5500) that you can use to calculate the number of covered lives.

Methods available for sponsors of self-insured plans

  • Actual Count Method: The total count of all lives covered by the plan each day of the plan year divided by the number of days in the plan year.
  • Snapshot Method: The sponsor may select a day (or days) from each quarter to calculate the average number of covered lives. The days selected each quarter must be within 3 days of each other. For example, if a calendar year policy uses January 3rd for the first quarter, April 3rd, July 3rd and October 3rd are used for the second, third and fourth quarters, respectively. The total number of lives covered on these days is then divided by 4 to calculate the average covered lives. If more than one day per quarter is selected, the principle is applied consistently. For purposes of this method the 30th and 31st are treated as the last day of the month.
  • Snapshot Factor Method: This method is the same as above, but self-insured plans have the option of counting participants with self-only coverage as one life and participants with other than self-only coverage as 2.35 lives. For example, if on January 1st a plan has 500 participants with self only coverage and 300 participants with other than self-only coverage the number of covered lives is 1,205 (=500 + 300 X 2.35).
  • Form 5500 Method: A self-insured plan may take the average of the total number of participants covered at the beginning and end of the plan year, if the Form 5500 is filed timely to facilitate the filing of Form 720 by July 31st, and the plan only offers self-only coverage. IF the plan offers other than self only coverage, the average number of covered lives is computed using the total of the number of participants at the beginning and end of the plan year.

With the additional funding provided by this fee, the PCORI hopes to fulfill its mission of helping people make informed health care decisions and improve health care delivery and outcomes by producing and promoting high integrity and evidence-based information that comes from research guided by patients, caregivers and the broader health care community.

Disclaimer: This blog post is valid as of the date published.

About the Author

Manager Accounting & Auditing

More Insights from Michael

© 2022 Belfint Lyons & Shuman | All Rights Reserved  | Privacy Policy |

Belfint Lyons Shuman is a Certified Public Accounting (CPA) firm that audits Defined contribution plans (profit-sharing, 401(k), 403(b) , 401(a), 457(b))), and Defined benefit plans (pension and cash balance), and Health and welfare plans. We serve a variety of plan sponsors including for-profit, nonprofit, governmental, and Taft-Hartley collectively-bargained plans located in Delaware, Pennsylvania, New Jersey, Maryland, Washington, D.C., Virginia, Massachusetts, and nationally. For additional information contact us at