The Internal Revenue has released temporary regulations and proposals for the health "9010" insurance fees required by the Affordable Care Act.
The IRS has released final and temporary regulations for the health insurance fee that under ACA section 9010 is levied on most health plans, with main exceptions for nonprofits deriving more than 80 percent of their premium revenue from Medicare, Medicaid and CHIP, as well as some others.
In the temporary regulations, the IRS is clarifying "certain terms in section 9010," particularly what it means to be a covered entity and when they do and don't have to pay.
"Following the publication of the final regulations in TD 9643, the Treasury Department and the IRS received questions about how to apply the exclusions under section 9010(c)(2) to the general definition of a covered entity," IRS regulators wrote.
That provision, 9010 (c)(2), excludes several kinds of organizations from the covered entity definition, and thus the tax: "Any employer to the extent that the employer self-insures its employees' health risks; any governmental entity; any entity that is incorporated as a nonprofit, corporation under a state law, no part of the net earnings of which inures to the benefit of any private shareholder or individual, no substantial part of the activities of which is carrying on propaganda, or otherwise attempting, to influence legislation."
The temporary and proposed regulations attempt to clarify who has to pay in the event of any kind of restructuring into or out of a covered entity.
"Specifically, the temporary regulations provide that, for the 2015 fee year and each subsequent fee year, an entity qualifies for an exclusion under section 9010(c)(2) if it qualifies for an exclusion either for the entire data year ending on the prior December 31st or for the entire fee year beginning on January 1st," IRS regulators wrote. "An entity that qualifies for an exclusion under this rule is not a covered entity for that fee year and must not report its net premiums written."
The temporary regulations also impose "a special rule for an entity that uses the fee year as its test year." The fee is due by September 30 th of the fee year, and "it may not be clear until the end of the fee year whether an entity will in fact qualify for an exclusion," regulators wrote.
"If an entity using the fee year as its test year does not report its net premiums written because it expects to qualify for an exclusion under section 9010(c)(2), but the entity ultimately does not qualify for an exclusion, the temporary regulations require the entity to use the data year as its test year in all subsequent fee years. In this circumstance, the entity will necessarily be a covered entity that is required to report its net premiums written immediately following fee year. In addition, an entity that does not timely file a report in a fee year, and that is a covered entity for that fee year because it does not qualify for an exclusion, may be subject to penalties, including the failure to report penalty under section 9010(g)(2)."
Comments on the proposals will be open through May 27.
The IRS and its parent agency, the Department of the Treasury also released a notice on approaches for implementing the excise tax, the Cadillac tax, on high-cost employer-sponsored health plans starting in 2017. Comments on these approaches are open through May 15.