The Internal Revenue Service (IRS) has released proposed regulations on the health insurer fee under section 9010 of the Patient Protection and Affordable Care Act (PPACA). The regulations, which were published in the Federal Register on March 4, provide much needed guidance on the types of health insurance that will subject an insurer to the fee, the reporting requirements, how the fee will be assessed, and how it is to be paid. However, the proposed regulations also say that certain details will be published later in the Internal Revenue Bulletin. 78 FR 14034, et seq ., Treas. Reg. §§ 5 7.0 – 57.6302 - 1.

Background

Under section 9010 of PPACA, health insurance issuers will be assessed an annual fee (HI Tax or fee) for a portion of the “applicable dollar amount” payable by the entire industry for each year. The fee is first due in 2014. The applicable dollar amount is $8 billion for calendar year 2014, $11.3 billion for calendar years 2015 and 2016, $13.9 billion for calendar year 2017, and $14.3 billion for calendar year 2018, with increases after 2018 indexed based on net premium growth . Each issuer’s annual payment will be assessed based on a ratio designed to reflect the issuer’s relative market share of the U.S. health insurance business.

Although PPACA did not amend the Internal Revenue Code of 1986, as amended (Code) to include provisions implementing this fee, PPACA section 9010 provides that the fee is treated as an excise tax and is not deductible. In addition, section 9010 specifies that the Secretary of Treasury is to administer collection of the fee and has the authority to issue regulations and any other guidance needed for administration of the HI Tax.