IRS Announces Annual PCOR Fee Adjustment and Transition Relief

The IRS has announced the annual increase in Patient-Centered Outcomes Research (PCOR) fees paid by health insurers and self-insured health plan sponsors, as well as transition relief for counting the average number of covered lives. PCOR fees were established by the Affordable Care Act (ACA) and are used to support clinical effectiveness research. Under the ACA provision, PCOR fees were collected for plan years ending before October 1, 2019. However, legislation enacted at the end of 2019 reinstated the PCOR provision and continued the fee requirements through plan years ending before October 1, 2029 (see our Checkpoint article).

The adjusted applicable dollar amount for PCOR fees for plan and policy years ending on or after October 1, 2019, and before October 1, 2020, is $2.54. This is a $.09 increase from the amount in effect for plan and policy years ending on or after October 1, 2018, and before October 1, 2019 (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. Because insurers and self-insured health plan sponsors may not have identified the number of covered lives for policy or plan years ending on or after October 1, 2019, and before October 1, 2020, due to the anticipated termination of the fee, transition relief provides that in addition to existing methods to calculate the average number of covered lives, insurers and plan sponsors may use any reasonable method (applied consistently for the full year) for calculating the average number of covered lives for this period.

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 (see our Checkpoint article). The IRS has posted a draft Form 720 and Instructions that reflect the extension of the fees and the transition relief. 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.