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.
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.