IRS Announces Annual PCOR Fee Adjustment

The IRS has announced the annual increase in Patient-Centered Outcomes Research (PCOR) fees paid by health insurers and self-insured health plan sponsors. PCOR fees were established by the Affordable Care Act (ACA) and are used to support clinical effectiveness research. Because the ACA provision included an expiration date, PCOR fees originally were collected only for plan years ending before October 1, 2019. However, legislation enacted at the end of 2019 reinstated the PCOR provision, continuing the fee requirements through plan years ending before October 1, 2029 (see our Checkpoint article).

The PCOR fee applicable dollar amount of $2.00 is adjusted annually based on the percentage increase in projected per capita national health expenditures. The adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2020, and before October 1, 2021, is $2.66. This is a $.12 increase from the amount in effect for plan and policy years ending on or after October 1, 2019, and before October 1, 2020 (see our Checkpoint article). PCOR fees are calculated by multiplying the applicable dollar amount for the year by the plan’s or policy’s average number of covered lives.

EBIA Comment: PCOR fees are reported annually on the second quarter IRS Form 720 no later than July 31 of the calendar year immediately following the last day of the policy year or plan year to which the fee applies. In connection with the fee reinstatement, transition relief allowed insurers and plan sponsors to use any reasonable method for calculating the average number of covered lives for policy or plan years ending on or after October 1, 2019, and before October 1, 2020. No transition relief is provided in Notice 2020-84 for policy or plan years ending on or after October 1, 2020. For more information, see EBIA’s Health Care Reform manual at Section XXXVI.H (“Patient-Centered Outcomes Research (PCOR) Fees”). See also EBIA’s Self-Insured Health Plans manual at Section VI.H (“Additional Taxes Under Health Care Reform”).

Contributing Editors: EBIA Staff.