Proposed Regs Would Require Electronic Filing Of Form For Annual Health Insurer Fee

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Preamble to Prop Reg12/08/2016, Prop Reg § 57.3, Prop Reg § 57.10

IRS has issued proposed regs that would require covered entities engaged in the business of providing health insurance for U.S. health risks and reporting more than $25 million in net premiums written to electronically file Form 8963, “Report of Health Insurance Provider Information” for purposes of the annual health insurer fee.

Effective for calendar years beginning after Dec. 31, 2013, an annual fee is imposed on a covered entity– with some exceptions, any entity engaged in the business of providing health insurance with respect to U.S. health risks. The fee is a fixed amount allocated among all covered entities in proportion to their relative market share as determined by each entity’s net premiums written for the data year, which is the year immediately preceding the year in which the fee is paid. 1406 of the Health Care and Education Reconciliation Act of 2010 (HCERA, P.L. 111-152)– collectively, the Affordable Care Act).

The 2016 Consolidated Appropriations Act (P.L. 114-113, 12/18/2015) provided a one-year suspension of the annual fee on health insurance providers for 2017; the effective date of the annual fee was amended so that it applies to calendar years: (1) beginning after Dec. 31, 2013 and ending before Jan. 1, 2017; and (2) beginning after Dec. 31, 2017.

9010( b)( 3) requires IRS to calculate the amount of each covered entity’s fee on a calendar year basis. 9010( g)( 1) requires that each covered entity must report to IRS the covered entity’s net premiums written for health insurance for any U.S. health risk for the preceding calendar year by the prescribed date. The reporting requirement applies regardless of whether a covered entity will be liable for a fee.

The information is reported to IRS on Form 8963, which must be filed by April 15 of the year following the calendar year for which data is being reported. Neither the statute nor the regs currently specify whether Form 8963 must be submitted electronically or on paper. Covered entities currently have the option of filing the form in either manner.

9010( g)( 2) imposes a penalty on a covered entity for any failure to report the required information by the date prescribed by IRS (determined with regard to any extension of time for filing), unless such failure is due to reasonable cause. 9010( g)( 3) imposes an accuracy-related penalty for understating the covered entity’s net premiums written for health insurance for any U.S. health risk for any calendar year.

Reg. § 57.5 requires IRS to send each covered entity notice of a preliminary fee calculation for that fee year (the calendar year in which the fee must be paid, beginning with 2014). Notice 2013-76, 2013-51 IRB 769, provides that IRS will mail each covered entity its notice of preliminary fee calculation by June 15 of each fee year.

§ 57.6 requires that a covered entity correct any errors identified after receiving the preliminary fee calculation by filing a corrected Form 8963. The covered entity remains liable for any failure to report penalty if it failed to timely submit the original Form 8963. § 57.7( b), IRS must send each covered entity its final fee calculation no later than August 31.

The covered entity must pay the fee by September 30 of the fee year, as provided by Sec. The fee must be paid by electronic funds transfer. § 57.7( d), Reg.

Proposed regs. Prop Reg § 57.3( a)( 2) would provide that 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 electronically file these forms after Dec. 31, 2017.

This is because a covered entity (including a controlled group) reporting no more than $25 million in net premiums written isn’t liable for a fee and so the time constraints applicable to computation of the fee aren’t applicable with respect to these entities. (Reg.

The proposed regs would also provide that if a Form 8963 or corrected Form 8963 was required to be filed electronically, any subsequently filed Form 8963 filed for the same fee year would also have to be filed electronically, even if the subsequently filed Form 8963 reports $25 million or less in net premiums written.

In addition, the proposed regs provide that failure to electronically file will be treated as a failure to file for purposes of Reg. § 57.3( b). (Prop Reg § 57.3( a)( 2)( ii)).

IRS has determined that electronic reporting is appropriate because there is a short window of time for (1) IRS to compile and analyze the reported information and send out preliminary letters, (2) covered entities to respond with any corrections, (3) IRS to compile and analyze the amended reporting and issue final fee letters, and (4) covered entities to pay the fee.

Proposed effective/applicability date. The proposed regs are proposed to apply to any covered entity reporting more than $25 million in net premiums written on any Form 8963 filed after Dec. 31, 2017. (Prop Reg § 57.10( c)).

References: For the annual fee on health insurance providers, see FTC 2d/FIN ¶ 5641 et seq.