The IRS released the 2025 update to the annual Patient Centered Outcomes Research Institute (PCORI) fee. As a reminder, the PCORI fee was initiated as part of the Affordable Care Act to fund patient-centered research relating to health care. Both fully insured and self-funded health plans are required to pay the PCORI fee.
Updated PCORI Fee
The new fee is $3.47 per person per year. This is an increase from $3.22 per year in the prior period.
The Calculation
The annual fee is calculated by multiplying the PCORI fee times the average number of lives covered on the health plan. There are multiple methods that can be used to calculate this average, including the Actual Count method, the Snapshot method, and the 5500 method.
Note that the calculation is based on average covered lives, not average employees. It is often referred to as the “belly button” tax since it is paid for every “belly button” (or person) covered by the plan, not just for employees.
Effective Date
The updated fees apply for policy years and plan years that end on or after October 1, 2024, and before October 1, 2025. For calendar year plans, this means January 1, 2025.
Which plans are covered?
The easy answer is all health plans. However, it can be a bit more complicated when an HRA or FSA is added to the mix. HRA and FSA plans are both self-funded health plans which means they are generally subject to PCORI fees, unless an exception applies.
HRA Integrated with Insured Coverage: Employers that maintain a fully insured major medical plan along with an HRA must pay PCORI fees on the HRA. The carrier will pay the PCORI fees on the fully insured health plan component. The HRA count is calculated as one life per participant.
HRA Integrated with Self-Funded Coverage: There is a special PCORI rule that allows employers with multiple self-funded health plans to treat those plans as one. Therefore, employers with a self-funded health plan and an integrated HRA may treat the two plans as a single plan for PCORI purposes (thus eliminating double fees for two plans). In this case, the employer would owe only one PCORI fee for participants covered under both self-funded plans. The participant count for fee calculation purposes would be based on the per participant numbers of the underlying self-funded health plan, not the per employee numbers of the integrated HRA.
EBHRA Plans: Excepted benefits are not subject to healthcare reform’s mandates which means that they are not subject to PCORI fees. Such plans must be offered alongside a traditional group health plan, have a benefit cap under the federal limit, and reimburse only expenses that are not essential health benefits (such as dental, vision, infertility, or state-mandated travel benefits).
FSA Plans: “Regular” FSA plans that are fully funded by participant salary reductions qualify as excepted benefits and thus are not subject to PCORI fees. FSA plans that do not qualify as excepted benefits are subject to PCORI fees. An example would be a health FSA plan with employer sponsorship of greater than $500 in the form of a match or seed funding.
QSHRA Plans: An employer offering a QSHRA can’t, by definition, offer a group health plan. Therefore, a QSHRA is considered a standalone HRA plan and is subject to PCORI fees. The count is calculated as one life per participant.
Stop Loss Coverage: Stop Loss policies are not subject to PCORI fees.
Employer Action
Fully Insured Plans: Employers with fully insured plans do not need to take any action for PCORI fee filing as the fee is baked into the fully insured premium and paid by the carrier.
Self-Funded Plans: Employers with self-funded health plans must calculate fees and submit payment on the second quarter Form 720. The deadline is July 31st each year.
HRA/FSA Plans: Employers with HRA/FSA plans must first determine whether the plan is subject to PCORI fees (or exempted by the single plan rule or the excepted benefit rule). If subject, employers must calculate fees and submit payment on the second quarter Form 720. The deadline is July 31st each year.
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