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Northwest OH Legal Blog

Thursday, December 12, 2013

IRS issues final rule implementing ACA fee on health insurers.

The Internal Revenue Service has released a final rule implementing a provision in the Affordable Care Act imposing billions of dollars in fees on health insurers. Health insurers are generally liable for annual fees based on premiums. The aggregate fee amount for all covered entities is $8 billion for 2014; $11.3 billion for 2015; $11.3 billion for 2016; $13.9 billion for 2017; and $14.3 billion for 2018, the rule said. The fee for subsequent years will be increased by the rate of premium growth.

The fee is to be levied on all fully insured health plans. Self-funded plans, including self-funded multi-employer plans are exempt. Most large employers fund the plans they offer their employees.

The final rule (T.D. 9643) was released Nov. 26, 2013 and published in the Nov. 29, 2013 in the Federal Register (78 Fed. Reg. 71,476, 11/29/13).The Joint Committee on Taxation has estimated that the fee would exceed $100 billion over the next 10 years. The proposed rule was issued in March and published in the March 4 Federal Register (42 PBD, 3/4/13; 40 BPR 523, 3/5/13).

The health insurance industry has strongly opposed the ACA provision. “Imposing a new sales tax on health insurance will add a financial burden on families and employers at a time when they can least afford it,” Karen Ignagni, president and chief executive officer of America's Health Insurance Plans (AHIP), said in a statement after the proposed rule was released.

AHIP said the estimated $100 billion in collections over the next decade from insurers will be larger than the ACA's taxes on drugs and medical devices combined.

AHIP says it supports proposed legislation that would repeal the fees, which was introduced in the House of Representatives.  In addition, the industry group said that it supports legislation introduced in the House of Representatives to delay the implementation of the health insurance tax for two years.

In a notice (Notice 2013-76) explaining the rule, the IRS said that, for each fee year, the IRS will make a preliminary fee calculation for each covered entity and will notify each covered entity of this calculation.


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