According to final rules released Friday, November 29, organizations that provided health insurance in 2013 will get an IRS excise tax assessment notice in August 2014, requiring them to pay by September 30 their proportionate share of $8,000,000,000. Yes, that’s with a “B.” The payment will not be deductible.
The insurer’s share will be based on its net health insurance premiums received in 2013, as reported to the IRS by April 15, on Form 8963. Issuers with net 2013 receipts of less than $25,000,000 must report, but will owe no tax. Issuers that totally exit the market by the end of 2013 need not report or pay the tax. A covered entity that fails to report will owe a penalty equal to $10,000, plus the lesser of $1,000 per day of delay or the total tax owed.
Employers with fully–insured plans will pay only the tiny fraction of their insurer’s payment that is passed-through to them. Genuinely self-insuring, single employers are not considered to be covered by this tax, but the rules warn that the tax may be imposed on their stop-loss carriers in low-threshold situations where excess coverage is functionally group health coverage.
Trouble is, some employers are unaware that, under these final rules, they are subject to reporting duties and penalties, even if their plans are quite small. For example:
- Multiple, unrelated employers participating in a self-insured group are involved in a “MEWA” – i.e., a Multiple Employer Welfare Arrangement – that the IRS treats as an issuer of health insurance;
- A MEWA that also is a “VEBA” – i.e., a Voluntary Employee Beneficiary Association – will be treated like a MEWA, but a VEBA serving multiple employers under a union contract, administered by joint trustees, will be exempt;
- Non-governmental educational institutions that provide self-funded student health insurance will have reporting responsibilities.
In addition, the final regulations cover limited scope, stand-alone dental and vision benefits, even though they are considered “excepted benefits” for other ACA purposes. Issuers of these stand-alone benefits may be surprised by the reporting requirement.
If you are in doubt about your Form 8963 status, you have until April 15, 2014 to determine your status and file the required report. But if you need to change your status to avoid reporting or tax obligations, your deadline may be December 31, 2013.