The Internal Revenue Service (IRS) is asking for comments on a draft of the instructions for paying a new Patient Protection and Affordable Care Act (PPACA) tax.
The draft instructions, for IRS Form 8963, are supposed to help U.S. health insurance providers pay the annual fee on health insurance providers required by Section 9010 of PPACA. PPACA Section 9010 requires health insurance providers, or “covered entities,” to pay a total of $8 billion for the 2014 “data year” and $11.3 billion for the 2015 data year.
PPACA drafters created the fee to help pay for the cost of implementing PPACA, and because of drafters’ desire to keep the new individual health insurance ownership mandate from creating a windfall for private health insurers.
America’s Health Insurance Plans (AHIP) has been lobbying to persuade Congress to eliminate the tax. AHIP argues that the fee will backfire, by increasing insurers’ costs, leading to higher rates, and discouraging consumers from buying health coverage.
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A panel at the National Association of Insurance Commissioners developed the PPACA Section 9010 fee accounting guidelines.
In the new instructions, the IRS says a company that must file a Form 8963 generally will be a “covered entity that provided health insurance for any United States health risk” in 2014. For purposes of this fee, the IRS defines “covered entity” to include a health maintenance organization (HMO); an insurer that provides health insurance through Medicare Advantage, Medicare Part prescription drug or Medicaid programs; and a non-fully insured multiple employer welfare arrangement (MEWA).
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The total of net premiums subject to the fee includes “reinsurance premiums written, reduced by reinsurance ceded, and reduced by ceding commissions and [medical loss ratio (MLR)] rebates.” The affected net premium total also includes premiums written for assumption reinsurance — but not premiums written for indemnity reinsurance.