IRS releases proposed regs on Health Insurance Provider Fee and risk adjustments

The IRS has issued proposed regulations regarding the Health Insurance Provider Fee under Section 9010 of the Patient Protection and Affordable Care Act (P.L. 111-148). One set would require electronic filing of Form 8963, Report of Health Insurance Provider Information. These amendments are proposed to apply to any covered entity reporting more than $25 million in net premiums written on any Form 8963 filed after December 31, 2017. The other set of proposed regulations would modify the current definition of “net premiums written,” and are proposed to apply with respect to any fee that is due on or after September 30, 2018.

Electronic Filing. ACA Sec. 9010(a) imposes an annual fee on each covered entity engaged in the business of providing health insurance. The total aggregate “applicable” amount of the fee for all covered entities is determined by statute. A covered entity (including a controlled group) with no more than $25 million in net premiums written does not have any premiums taken into account and is not liable for a fee.

The Secretary must calculate the fee every years, and, to facilitate these calculations, each covered entity must report to the Secretary the covered entity’s net premiums written for health insurance for any United States health risk for the preceding calendar year by the date and in the manner prescribed by the Secretary. Information is reported to the IRS on Form 8963, ‘‘Report of Health Insurance Provider Information,’’ which must be filed in accordance with the form instructions by April 15 of the year following the calendar year for which data is being reported.

Under the proposed rule, a covered entity (including a controlled group) reporting more than $25 million in net premiums written on a Form 8963 or corrected Form 8963 must file these forms electronically, not on paper, after December 31, 2017. Forms 8963 reporting $25 million or less in net premiums written are not required to be electronically filed. If a Form 8963 or corrected Form 8963 is required to be filed electronically, any subsequently filed Form 8963 filed for the same fee year must also be filed electronically, even if such subsequently filed Form 8963 reports $25 million or less in net premiums written. Failure to electronically file will be treated as a failure to file.

Net Premiums Written. The proposed regulations would modify the current definition of net premiums written to account for premium adjustments related to retrospectively rated contracts, computed on an accrual basis. These amounts are received from and paid to policyholders annually based on experience. Retrospectively rated contract receipts and payments do not include changes to funds or accounts that remain under the control of the covered entity, such as changes to premium stabilization reserves.

Risk adjustments. ACA Sec. 1343 provides a permanent risk adjustment program for certain plans in the individual and small group markets, that transfers risk adjustment funds from health insurance plans with relatively lower-risk enrollees to issuers that disproportionately attract high-risk populations, such as individuals with chronic conditions. Each state or the HHS acting on a state’s behalf, must assess a charge on health plans and health insurance issuers in these markets if the actuarial risk of the enrollees of such plans or coverage for a year is less than the average actuarial risk of all enrollees in all plans that are not self-insured group health plans.

Also, each state, or the HHS acting a state’s behalf, must make a payment to health plans and health insurance issuers in the individual or small group markets if the actuarial risk of the enrollees of such plans or coverage for a year is greater than the average actuarial risk of all enrollees in all plans that are not self- insured group health plans.

The proposed regulations clarify that net premiums written include risk adjustment payments received and are reduced for risk adjustment charges paid. If a covered entity did not include risk adjustment payments received as direct premiums written on its Supplemental Health Care Exhibit (SHCE) or did not file an SHCE, these amounts are still part of net premiums written and must be reported as such on Form 8963. For this purpose, risk adjustment payments received and charges paid are computed on an accrual basis.

Comments sought. The Treasury Department and the IRS request comments on all aspects of the proposed rules. A public hearing will be scheduled if requested in writing by any person that timely submits written comments. If a public hearing is scheduled, notice of the date, time and place for the public hearing will be published in the Federal Register. Submissions should be sent to: CC:PA:LPD:PR (REG-123829-16 or REG-134438-15), room 5205, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044. Submissions may be also hand delivered Monday through Friday between the hours of 8:00 a.m. and 4:00 p.m. to CC:PA:LPD:PR (REG-123829-16), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue, NW., Washington, D.C., or sent electronically via the Federal eRulemaking Portal at http://www.regulations.gov (indicate IRS REG-123829-16 or REG-134438-15), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, D.C. 20044.

SOURCE: 81 FR 89017 and 89020, December 9, 2016.

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