IRS makes sudden PPACA insurer tax change

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.