The Internal Revenue Service (IRS) had a hard time getting health insurers to submit their 2014 health insurance provider fee forms on time.
Section 9010 of the Patient Protection and Affordable Care Act of 2010 (PPACA) requires health insurance companies, health maintenance organizations (HMO) and other “covered entities” to pay a total of $8 billion in health insurer fees for 2014 to help compensate for the cost of PPACA programs. The total Section 9010 insurer fee amount is supposed to rise to $11.3 billion for 2015, hold at $11.3 billion for 2016, and then rise to $13.9 billion for 2017.
For the 2014 insurer fee year, the affected insurers were supposed to send Form 8963 insurer fee returns to the IRS by April 15, 2014.
PPACA Section 9010 calls for the IRS to impose penalties on insurers that filed their 2014 8963 forms after May 15, 2014.
PPACA regulations tie health insurers’ fee payments to premium revenue from health insurance premiums, stand-alone dental premiums and stand-alone vision premiums. Regulators were supposed to use premium revenue information from the 8963 forms to calculate how much of the $8 billion fee total each insurer owed. The IRS gave each insurer a Section 9010 fee bill estimate by June 13, 2014, and a final bill by Aug. 28, 2014.
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Auditors in the office of the Treasury Inspector General for Tax Administration (TIGTA) found that 168 of the 477 covered entities missed the original April 15, 2014 due date, and 143 — 30 percent of the total — missed the May 15, 2014 grace period deadline, according to a newly released TIGTA report.
Thirty-four insurers filed their 8963 forms 91 to 120 days after the original due date, and 16 filed the forms more than 120 days after the due date.
Because of the way the Section 9010 fee program is structured, the late filings affected the other health insurers’ Section 9010 fee payment amounts, not the amount of cash the IRS received from health insurers. As of Nov. 28, 2014, the IRS had collected $7.99 billion of the $8 billion in 2014 insurer fees, according to TIGTA data.
Insurers that filed their 8963 forms late had to explain the delays.
Seven insurers filed their forms so late that TIGTA officials excluded those insurers’ delay explanations from the analysis. Eighty-two, or 17 percent, said they had problems with understanding or meeting the PPACA Section 9010 filing requirements.
The IRS worked hard to tell health insurers about a new health insurance provider fee, and America’s Health Insurance Plans (AHIP) fought hard to kill the fee.
But 61 of the late filers, or 13 percent, told the IRS they were unaware of the Form 8963 filing requirement.
TIGTA officials said imposing PPACA Section 9010 late-filing fees on all of the insurers that sent in their 8963 forms more than 30 days late could bring in $4.9 million in penalty revenue.
Heather Maloy, commissioner for the large business and international division at the IRS, writes in a response to the TIGTA report that, according to the TIGTA data, adding the late filers into the Section 9010 fee calculations would have had only a small effect on the other insurers’ fee payment amounts.
Officials at the IRS and the parent of the IRS, the U.S. Treasury Department, considered adding the late filers to the calculations through a reconciliation process, but officials “rejected such a process because it would lead to a lack of certainty and finality with regard to the fees for each year,” Maloy writes. “IRS believes that, overall, fee-payers highly value the certainty and finality of the current process.”
In response to the suggestion that the IRS could impose late-filing penalties on the late filers, Maloy says the IRS “will continue to consider and assess penalties as appropriate, on a case-by-case basis, based on all the facts and circumstances, to promote and encourage future compliance with the filing requirements of Section 9010.”