The Internal Revenue Service (IRS) has developed regulations that could help groups start nonprofit, member-owned health plans.
The IRS drafted the regulations to implement part of the Consumer Operated and Oriented Plan (CO-OP) program described in Section 1322 of the Patient Protection and Affordable Care Act of 2010 (PPACA).
A temporary regulation, which takes effect immediately, lets organizers of a “qualified nonprofit health insurance issuer”(QNHII) claim tax-exempt status even before the U.S. Department of Health and Human Services (HHS) gives the QNHII permission to participate in the CO-OP program.
The IRS also has announced that it wants to develop a permanent rule based on the text of the temporary regulation. Comments on the rulemaking notice are due April 9.
Members of Congress added the CO-OP section to PPACA in an effort to increase the level of competition in the health insurance market.
To participate in the program, a carrier, or QNHII, must be a member-owned organiation that makes “substantially all” of its sales to individuals and small groups. The QNHII will become a new type of tax-eempt entity — a 501(c)(29) organization.