The Internal Revenue Service (IRS) is pushing back the compliance deadlines for Patient Protection and Affordable Care Act (PPACA) nonprofit health plan and nonprofit hospital social responsibility requirements.

The IRS gave nonprofit Blue Cross and Blue Shield health plans and other nonprofit health plans that qualify for special federal income tax status another year to comply with a new 85% medical loss ratio (MLR) requirement in IRS Notice 2011-51.

The IRS gave nonprofit hospitals an extra year before they must start filling out Part V, Section B of Schedule H, Hospitals in IRS Announcement 2011-37.

Notice 2011-51

One PPACA MLR provision already requires Blues plans and other health insurers to spend at least 85% of large group premiums and 80% of individual and small group premiums on health care and quality improvement efforts. Insurers that fall short of meeting that MLR requirement must send rebates to customers.

A separate PPACA MLR section, PPACA Section 9016, has created Internal Revenue Code (IRC) Section 833(c)(5). IRC Section 833(c)(5) is supposed to take federal income tax benefits away from a nonprofit health plan if the plan fails to spend at least 85% of premium revenue on health care.

Today, a nonprofit plan eligible for special tax status can deduct 25% of claims and expenses and 100% of unearned premium reserves from taxable income.

In 2010, the IRS eased the effect of IRC Section 833(c)(5) by applying the provision only to the first taxable year beginning after Dec. 31, 2009.

In the new notice, the IRS says it will not apply the provision into the first taxable year beginning after Dec. 31, 2010.

Announcement 2011-37

PPACA Section 9007 is supposed to subject nonprofit hospitals to new standards.

To earn their nonprofit status, hospitals must:

  • Conduct a community health needs assessment at least once every 3 years.
  • Develop written emergency care standards, to ensure all patients get emergency care on an equal basis.
  • Limit the amount of charges imposed on patients who need financial assistance.
  • Determine whether a patient is eligible for financial help before using lawsuits, arrests or liens to try to collect on unpaid bills.

The hospitals are supposed to report on those activities on Schedule H, which is part of Form 990, the IRS return for organizations that are exempt from paying federal income tax.

The IRS is giving nonprofit hospitals relief from the PPACA social responsibility requirements by making filling out “Part V.B.” optional for the 2010 tax year.

The IRS “has decided to make the entire Part V.B optional for the 2010 tax year to give the hospital community more time to familiarize itself with the types of information the IRS will be collecting…and to address any ambiguities arising from the extensive revisions of the form and instructions,” officials say.

“The IRS continues to invite comments on how to improve the clarity and reduce the burden of reporting the information related to these additional requirements on the Form 990 and Schedule H,” officials say.

Other PPACA tax regulation coverage from National Underwriter Life & Health: