Section 9010 of the Patient Protection and Affordable Care Act (ACA) imposes a fee on each covered entity engaged in the business of providing health insurance for United States health risks. The first filings were due from covered entities by April 15, 2014 and the first fees were due September 30, 2014. There was a moratorium on the fee for 2017.
Moratorium on the Providers Fee was for 2017 and 2019, Not for 2018
The due date for Form 8963, Report of Health Insurance Provider Information, for Fee Year 2018 is April 17, 2018.
The Consolidated Appropriations Act of 2016, Title II, § 201, Moratorium on Annual Fee on Health Insurance Providers, suspended collection of the health insurance provider fee for the 2017 calendar year only. Thus, health insurance issuers were not required to pay the fee for 2017. This moratorium did not affect the filing requirement and payment of the fee for 2016 or 2018. Enacted on January 22, 2018, along with continuing resolution legislation, H.R. 195, Division D – Suspension of Certain Health-Related Taxes, § 4003, suspends collection of the fee for the 2019 calendar year only. Again, this does not affect the filing requirement and payment of the fee for 2018. For additional information on the 2017 and 2019 moratoriums, see our questions and answers. The “applicable amount” for fee year 2018 remains at $14.3 billion (see Treas. Reg. § 57.4(a)(3)).
A covered entity is generally any entity with net premiums written for health insurance for United States health risks during the fee year that is (1) a health insurance issuer within the meaning of section 9832(b)(2); (2) a health maintenance organization within the meaning of section 9832(b)(3); (3) an insurance company that is subject to tax under subchapter L, Part I or II, or that would be subject to tax under subchapter L, Part I or II, but for the entity being exempt from tax under section 501(a); (4) an insurer that provides health insurance under Medicare Advantage, Medicare Part D, or Medicaid; or (5) a non-fully insured multiple employer welfare arrangement (MEWA).
For more information on what is a covered entity, please see the final regulations and final regulations/removal of temporary regulations.
The term covered entity generally does not include
- A self-insured employer
- A governmental entity
- Certain nonprofit corporations
- Certain voluntary employees’ beneficiary associations (VEBAs)
For more information on what entities are excluded from the fee, please see the final regulations and final regulations/removal of temporary regulations.
United States Health Risk
A United States health risk is the health risk of any individual who is (1) a United States citizen, (2) a resident of the United States (within the meaning of section 7701(b)(1)(A)), or (3) located in the United States, with respect to the period such individual is so located.
On December 16, 2014, Congress enacted the Expatriate Health Coverage Clarification Act of 2014 (EHCCA). Section 3(a) of the EHCCA provides that the ACA generally does not apply to expatriate health plans. Section 3(c)(1) of the EHCCA specifically excludes expatriate health plans from the § 9010 fee by providing that, for calendar years after 2015, a qualified expatriate enrolled in an expatriate health plan is not considered a United States health risk. These rules are generally effective for expatriate health plans issued or renewed on or after July 1, 2015, unless otherwise specified. In the absence of final regulations under EHCCA, a fee payer may rely on the proposed regulations or use any other reasonable method to determine its expatriate plans. The IRS considers the approach taken in Notice 2016-14 for the 2016 fee year a reasonable method. That notice used the MLR final rule definition for expatriate policies in 45 CFR 158.120(d)(4) along with an accompanying certification attached to the Form 8963.
Health insurance generally has the same meaning as the term “health insurance coverage” in section 9832(b)(1)(A), defined to mean benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a covered entity. The term health insurance includes limited scope (also called stand-alone) dental and vision benefits under section 9832(c)(2)(A) and retiree-only health insurance.
For more information on what is health insurance, please see the final regulations.
Each covered entity, including each controlled group that is treated as a single covered entity, must report its net premiums written for health insurance of United States health risks during the previous year to the IRS by April 15th of the year in which the fee is due (the fee year) on Form 8963 (pdf , 64.65KB) “Report of Health Insurance Provider Information” in accordance with the instructions (pdf, 150.38KB) for the form.
Covered entities are encouraged to submit Form 8963 via e-file. E-file reduces the risk of transcription errors and reduces the report processing time. In addition, electronic filers receive immediate acknowledgement of receipt and are able to track submission status online.
Controlled groups must select a designated entity, which is responsible for filing the Form 8963 on behalf of the controlled group members and maintaining documentation of the members’ consents to the selection of the designated entity. If a controlled group does not select a designated entity, the IRS will select the designated entity (members are deemed to have consented to the IRS’s selection).
For more information on controlled groups, please see the final regulations and final regulations/removal of temporary regulations.
Calculating the Fee
The annual fee for each covered entity is equal to an amount that bears the same ratio to the applicable amount as the covered entity’s net premiums written for health insurance of United States health risks during the data year taken into account bears to the aggregate net premiums written for health insurance of United States health risks of all covered entities during the data year taken into account.
For more information on calculation of the fee, please see the final regulations.
Applicable amount means the aggregate fee amount each year for all covered entities under section 9010. The applicable amounts for fee years are—
|Fee Year||Applicable Amount|
|2019 and thereafter||The applicable amount in the preceding fee year increased by the rate of premium growth (within the meaning of section 36B(b)(3)(A)(ii).|
Net Premiums Written Taken Into Account
The amount of net premiums written taken into account for each covered entity per calendar year is:
|Covered entity’s net premiums written during the data year that are:||Percentage of net premiums that are taken into account is:|
|Not more than $25,000,000||0|
|More than $25,000,000 but not more than $50,000,000||50|
|More than $50,000,000||100|
Partial Exclusion for Certain Exempt Activities
After application of the net premiums written taken into account, if the covered entity (or any member of the controlled group treated as a single covered entity) is exempt from tax by section 501(a) and is described in section 501(c)(3) (generally a charity), 501(c)(4) (generally a social welfare organization), 501(c)(26) (generally a high-risk health insurance pool), or 501(c)(29) (a consumer operated and oriented plan (CO-OP) health insurance issuer), only 50 percent of the remaining net premiums written that are attributable to its exempt activities will be taken into account.
Notice of Preliminary Fee Calculation
For each fee year, the IRS will make a preliminary calculation of the fee for each covered entity. The IRS will notify each covered entity of its preliminary fee calculation for that fee year using Letter 5066C, and it will include the following:
- The covered entity’s allocated fee.
- The covered entity’s net premiums written for health insurance of United States health risks.
- The aggregate net premiums written for health insurance of United States health risks taken into account for all covered entities.
- Instructions for how to submit a corrected Form 8963 to correct any errors through the error correction process.
If a covered entity believes that the notice of preliminary fee calculation contains an error, a corrected report must be provided to the IRS by July 15th of the fee year. The covered entity will make an error correction report by completing in full a new Form 8963 and checking the “Corrected Report” box on the form. The corrected Form 8963 will replace the original Form 8963. Therefore, the corrected report must contain all of the information required by the form’s instructions. In the case of a controlled group, the corrected Form 8963 must include all of the information required by the instructions for the entire controlled group, including the information for members that do not have corrections.
For more information on the error correction process, please see the final regulations and Notice 2013-76.
Notice of Final Fee Calculation
The IRS will send each covered entity its final fee calculation for that year by August 31st using Letter 5067C.
For more information regarding the final fee calculation, please see the final regulations and Notice 2013-76.
Payment of the Fee
Each covered entity must pay its final fee by September 30th of the fee year.
Method of Paying the Fee
The fee is to be paid by electronic funds transfer (EFTPS). There are 3 Options for this payment. See EFTPS Payment Options (pdf, 18KB). If your financial institution has not added the tax type for the IPF payment to its software, you can still make an EFTPS same day wire payment. The financial institution can call the Federal Tax Collection Service (FTCS) at 1-800-382-0045 and a representative will be able to walk through the process. To assist your financial institution, you may download the attached Same Day Payment Worksheet (pdf, 60KB).
Joint and Several Liability
Each member of a controlled group is jointly and severally liable for the fee.
Tax Treatment of the Fee
The annual fee is treated as a nondeductible excise tax. For more information, please see the final regulations and Revenue Ruling 2013-27.
There is a penalty for failure to report the required information by April 15th of the fee year, unless such failure is due to reasonable cause. The penalty for failure to report is $10,000 plus the lesser of $1,000 multiplied by the number of days during which the failure continues, or the amount of the fee. There is an accuracy related penalty for any understatement of a covered entity’s net premiums written. The accuracy related penalty is equal to the excess of the amount of the fee for the fee year that should have been paid, over the amount of the fee determined based on the understatement.
The information submitted on both the original and corrected Forms 8963 is not confidential. All information on Form 8963 will be open for public inspection or available upon request. You may download a copy of available data here:
- 2018 Preliminary Information (xlsx, 151KB)
- 2016 Final Information (xlsx, 164KB)
- 2015 Final Information (xlsx, 171KB)
- 2014 Final Information (xlsx, 164KB)
IPF Contact Information: LB&I IPF