If you’re a business owner, you’re used to the usual suspects when it comes to costs: payroll, rent, and the rising price of health insurance. But there’s a sneaky little fee hiding in your Health Reimbursement Arrangement (HRA) that many employers completely miss until it’s almost too late.
It’s called the PCORI fee (Patient-Centered Outcomes Research Institute fee). While the name sounds like something out of a medical textbook, the reality is much simpler: it’s a federal fee that helps fund research for the government, and if you offer an HRA, you’re likely on the hook for it.
Currently, that fee is ticking up. Depending on when your plan year ends, you could be looking at $3.84 per employee. It might sound like pocket change, but when you multiply that by your entire staff and add in the potential penalties for missing the filing, it becomes a deal you need to pay attention to right now.
What Exactly is the PCORI Fee?
The PCORI fee was created as part of the Affordable Care Act (ACA). Its purpose is to fund a non-profit institute that researches which medical treatments work best.
While insurance companies usually handle this fee for "fully insured" plans (the traditional plans where you pay a monthly premium to a carrier), the rules change when you have a "self-funded" plan. Because an HRA is technically considered a self-funded health plan, the IRS looks directly at you, the employer, to make sure the fee gets paid.
At Total Benefit Solutions Inc, we see many small to medium-sized businesses get caught off guard by this because they assume their HRA provider or their insurance carrier is taking care of it. Most of the time, they aren't.
The Magic Numbers: $3.47 and $3.84
The IRS adjusts the PCORI fee every year based on national health spending. For the upcoming filings, here are the specific rates you need to know:
- For plan years ending between October 1, 2024, and September 30, 2025: The rate is $3.47 per covered life.
- For plan years ending between October 1, 2025, and September 30, 2026: The rate jumps to $3.84 per covered life.
(A "covered life" generally refers to anyone enrolled in the plan, but as we’ll see in a moment, HRAs have a special shortcut that makes this a bit easier for you.)
Why Your HRA Counting Rules are Different
This is where the "eye-opening" part comes in. If you were paying this fee for a standard self-funded medical plan, you would have to count every single person on the plan, employees, spouses, and children. That can get expensive and complicated very quickly.
However, the IRS gives HRA sponsors a break. If you are paying the PCORI fee specifically for an HRA, you only have to count one life per participating employee.
You don't need to worry about how many kids they have or if their spouse is covered by the HRA. If you have 50 employees enrolled in the HRA, you pay the fee for 50 lives. This "one-life-per-participant" rule is a significant administrative win for business owners who already have enough paperwork on their desks.
The Deadline You Can't Miss: July 31, 2026
Mark your calendars, because the IRS isn't known for being flexible with deadlines. The PCORI fee is reported once a year on IRS Form 720 (the Quarterly Federal Excise Tax Return).
Even though Form 720 is technically a "quarterly" form, the PCORI fee is only filed during the second quarter. For plan years that ended anytime in 2025, your filing and payment are due by July 31, 2026.
If you miss this date, you aren't just looking at the fee itself; you're looking at potential interest and penalties. We always tell our clients at Total Benefit Solutions Inc that it's much easier to pay $3.84 per person now than to deal with an IRS notice later.
How Do You Actually Count the "Average" Number of Lives?
You might be thinking, "My headcount changed five times last year. Which number do I use?" The IRS allows a few different ways to calculate your average:
- The Actual Count Method: You count the covered lives on every single day of the plan year and divide by the number of days. (Warning: This is a lot of math).
- The Snapshot Method: You pick a date in each quarter (like the first Friday of the second month) and average those four snapshots.
- The Form 5500 Method: If you already file a Form 5500 (the annual report for employee benefit plans), you can use the numbers reported there.
For most small businesses, the Snapshot Method is the sweet spot. It’s accurate enough for the IRS but won't require you to hire a full-time mathematician.
A Quick Note on Integrated Plans
Does your HRA work alongside a standard health insurance plan? Most do.
If your main medical plan is fully insured (you pay a premium to a company like Anthem or Blue Cross), your insurance carrier pays the PCORI fee for the medical plan, but you still have to pay the separate HRA PCORI fee for your employees.
If your main medical plan is self-funded and has the same plan year as your HRA, you might be able to treat them as a single plan and only pay the fee once. Navigating these "integrated" rules can be tricky, which is why having an advocate in your corner is so important.
Why You Need an Advocate
Rules like the PCORI fee are exactly why we do what we do. At Total Benefit Solutions Inc, we specialize in health insurance advocacy and consulting. We don't just sell you a policy and disappear; we help you navigate the complex web of state and federal regulations (the red tape that keeps you up at night).
We are independent brokers who shop around to find the best options for your business, and we never accept "no" as an answer when fighting for your benefits. Whether it's a small fee like PCORI or a massive claim dispute, we act as the intermediary between you and the giant insurance bureaucracy.
Don't let a $3.84 fee turn into a $3,840 headache. If you’re feeling overwhelmed by Form 720 or you’re not sure if your HRA is compliant, reach out to us. We’re here to make sure you’re protected, compliant, and focused on what you do best: running your business.
Ready to simplify your benefits? Let's talk.
Visit us at www.totalbenefits.net or give us a call at (215) 355-2121. We are your advocates in a complex healthcare world.
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