If you are a business owner or a plan sponsor managing a self-funded health plan or a Health Reimbursement Arrangement (HRA), the end of July likely brings a specific type of administrative "scary" to your desk. We are talking about the Patient-Centered Outcomes Research Institute (PCORI) fee.
While the name is a mouthful, the requirement is straightforward: the IRS wants its share to fund research into the effectiveness of medical treatments. If you feel a bit overwhelmed by the technicalities of Form 720 and the various "counting methods" required to stay compliant, you aren't alone. At Total Benefit Solutions Inc, we spend our days navigating these exact regulations so our clients don't have to face the IRS bureaucracy solo.
In this guide, we will break down exactly what you need to pay, how to calculate your numbers, and how to file Form 720 for the 2026 deadline.
What Exactly is the PCORI Fee?
The PCORI fee was established as part of the Affordable Care Act (ACA). It is a per-participant fee that helps fund the Patient-Centered Outcomes Research Institute. This institute conducts research to help patients, clinicians, and policymakers make informed health decisions.
While the goal is noble, the administration is an annual chore for employers. The most important thing to understand is who is responsible for paying it. If your medical plan is fully insured (meaning you pay premiums to a carrier like Anthem or UnitedHealthcare), the insurance carrier handles the fee. They build it into your premiums and pay the IRS directly. You can breathe a sigh of relief.
However, if you have a self-insured plan, including a stand-alone HRA or an Individual Coverage HRA (ICHRA), the burden of filing and paying falls squarely on you, the employer. This is where Form 720 comes into play.
The 2025 and 2026 Rates: Know Your Numbers
The PCORI fee isn't a flat tax; it’s a "per-life" fee that adjusts annually based on national health expenditures. Because the filing deadline is always July 31 of the year following the end of the plan year, you are often looking backward at your participation numbers.
For the upcoming filings, here are the specific rates you need to keep in your records:
| Plan Year End Date | Applicable Rate | Filing/Payment Due Date |
|---|---|---|
| Ending between Oct 1, 2024 and Sept 30, 2025 | $3.47 per employee/covered life | July 31, 2026 |
| Ending between Oct 1, 2025 and Sept 30, 2026 | $3.84 per employee/covered life | July 31, 2027 |
If your medical plan year ended in 2025 (for example, a standard calendar year plan ending December 31, 2025), your Form 720 and the corresponding fees are due by July 31, 2026.
How to Count Your Participants (The Technical Part)
The biggest hurdle for most plan sponsors is determining the "average number of covered lives." The IRS provides a few different ways to do this, and the method you choose can slightly impact the amount you owe.
1. The Actual Count Method
You count the total number of lives covered (employees plus dependents) for every single day of the plan year and divide by the number of days in the year. This is the most accurate but also the most labor-intensive if you don't have automated reporting.
2. The Snapshot Method
You pick a date in each quarter (or more frequently) and count the lives on those specific "snapshots." You then average those snapshots to get your final number. For example, you might look at the first day of each month.
3. The Form 5500 Method
You use the participant counts reported on your Form 5500 for the plan year. This is often the simplest "shortcut" if you've already filed your 5500.
Special Rules for HRAs and ICHRAs
If you offer an HRA alongside a fully insured medical plan, the rules are slightly different. Because the carrier is already paying for the lives on the medical plan, the IRS allows you to count only the employees enrolled in the HRA, disregarding spouses and dependents. This significantly lowers your PCORI liability.
If you have an ICHRA (Individual Coverage HRA), the employer is also responsible for the fee. Like a standard HRA, you only need to count the employees as covered lives and can disregard dependents.
Filing Form 720: A Step-by-Step Walkthrough
Form 720 is technically a "Quarterly Federal Excise Tax Return." However, for the PCORI fee, you only file it once a year for the second quarter (the quarter ending June 30).
- Identify the Quarter: Even though your plan might end in December, you report the fee on the Form 720 for the second quarter of the following year. For a 2025 plan year, you'll use the Q2 2026 form.
- Find Part II: Look for the section labeled "Patient-Centered Outcomes Research Fee" (IRS No. 133).
- Enter the Lives: In column (a), enter the average number of lives you calculated using one of the methods above.
- Apply the Rate: Multiply that number by the applicable rate ($3.47 or $3.84, depending on your plan end date).
- Finalize and Pay: Total your tax in Part III, sign the form, and send it in with your payment voucher (Form 720-V).
If you find this process confusing, don't worry: most people do. That's why having an independent broker and advocate like Total Benefit Solutions Inc is vital. We don't just sell plans; we help you navigate the regulatory minefield that comes after the sale.
Why "Good Enough" Compliance Isn't Good Enough
You might be tempted to guess your numbers or skip the filing if the amount is small. We strongly advise against this. The IRS takes excise tax filings seriously, and penalties for late filing or underpayment can quickly exceed the actual fee itself.
At Total Benefit Solutions Inc, we act as the intermediary between you and the complex world of insurance regulations. We take a "never accept no" approach when fighting for our clients, whether that's battling a denied claim or ensuring your business is shielded from avoidable tax penalties. Our goal is to make sure you are fully protected and that you never have to deal with insurance bureaucracy alone.
Dealing with Multiple Plans
What if you have multiple self-insured plans? If you have an HRA and another self-insured medical plan (like a self-funded PPO), they are treated as a single plan for PCORI purposes. In this scenario, each participant (including dependents) is only counted once.
However, if you have an HRA paired with an insured plan, the carrier pays for the insurance, and you pay for the HRA. It feels like double-dipping by the IRS, but that is the current regulation. The silver lining is the "employee-only" counting rule mentioned earlier, which keeps the HRA portion of the fee relatively low.
Let Us Be Your Advocate
Navigating the Affordable Care Act's various fees, from PCORI to transitional reinsurance fees (if applicable), can feel like a full-time job. But you already have a full-time job: running your business or managing your family’s health.
We specialize in health insurance advocacy and consulting. Whether you are a small business owner trying to figure out which HRA makes sense for your team, or an individual overwhelmed by the rules of an ACA plan, we are here to help. We shop the market, compare your options, and provide authoritative guidance that you can actually understand.
If you have questions about your PCORI fee, Form 720, or your overall employee benefits strategy, don't hesitate to reach out. We take pride in being the experts who stand in your corner and fight for the benefits you deserve.
Contact Total Benefit Solutions Inc Today
Don't let the July 31 deadline sneak up on you. If you need assistance calculating your PCORI fee or reviewing your self-funded plan's compliance, contact our team of experts today.
Website: www.totalbenefits.net
Phone: (215) 355-2121
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