Filed Under:Markets, Employee Benefits

IRS makes sudden PPACA insurer tax change

The Notice 2014-47 fee break applies only to the 2014 fee year, officials say.
The Notice 2014-47 fee break applies only to the 2014 fee year, officials say.

The Internal Revenue Service has announced a sudden interpretation change that could help cut some quick-moving health insurers' Patient Protection and Affordable Care Act (PPACA) health insurance provider fee payments.

The IRS says a "controlled group" of insurers can reduce its PPACA health insurance provider fee tab by leaving any members that are not "covered entities" out of net premium calculations. The group can get the fee reduction only if it faxes a corrected Form 8963 health insurance provider information report to the IRS at (877)-797-0235 by Monday.

"The IRS cannot process a Form 8963 received after this date," officials warn in the IRS Notice 2014-47.

PPACA drafters created the PPACA Section 9010 fee to raise revenue, and to give the U.S. Treasury of what the drafters thought would be extra premium revenue flowing to health insurers as a result of PPACA provisions that impose penalties on some people who fail to have what PPACA defines as a minimum level of health coverage.

PPACA Section 9010 defines "covered entities" as "any entity that provides health insurance for any United States health risk during the calendar year in which the fee is due."

The Section 9010 covered entity definition excludes self-insured employers, governmental entities, nonprofit corporations and "non-employer established Section 501(c)(9) entities." A "Section 501(c)(9) entity is a voluntary employees' beneficiary association (VEBA). Bankruptcy negotiators often create VEBAs to handle retiree health benefits for employers that go through Chapter 11 bankruptcy reorganization.

PPACA requires insurers to pay $8 billion in insurer fees for 2014. The IRS is applying the fee requirement to insurers that have more than $25 million in net premiums from U.S. health insurance. If an insurer does pay the fee, the fee is supposed to be based on its share of total U.S. covered entity health risk premium revenue.

The IRS does not give examples of the kinds of companies that might be helped by Notice 2014-47, but the kinds of companies affected might include a group that controls both a commercial health insurance issuer and a VEBA, or a commercial health insurance issuer and a large self-insured plan.

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