The Internal Revenue Service (IRS) has given nonprofit Blue Cross and Blue Shield plans that violate new medical loss ratio requirements a mechanism to stay in compliance with tax accounting rules.
The IRS describes the accounting flexibility mechanism in IRS Notice 2011-04.
Starting in 2011, the Affordable Care Act, the package that includes the Patient Protection and Affordable Care Act (PPACA), will require health carriers to spend at least 85% of large group premiums and 80% of individual and small group premiums on health care and quality improvement efforts.
Another section of PPACA, PPACA Section 9016, will take federal income tax benefits away from nonprofit health plans and nonprofit Blues plans if the plans fail to spend at least 85% of premium revenue on health care and quality improvement efforts.