By Wolters Kluwer Editorial Staff
The IRS issued final regulations that provide rules for the definition of a covered entity for purposes of the fee imposed by Sec. 9010 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The final regulations supersede and adopt the text of temporary regulations that provide rules for the definition of a covered entity. They affect persons engaged in the business of providing health insurance for United States health risks, and are effective February 22, 2018 (Final rule, 83 FR 8173, February 26, 2018).
Background. The ACA imposes an annual fee on covered entities that provide health insurance for United States health risks. On November 27, 2013, the Treasury Department and the Internal Revenue Service (IRS) issued final regulations relating to the health insurance providers fee (T.D. 9643). In February 2015, the Treasury Department and the IRS issued temporary regulations relating to the health insurance providers fee (80 FR 10333). A notice of proposed rulemaking cross-referencing the temporary regulations was also issued. The temporary regulations provided further guidance on the definition of a covered entity for the 2015 fee year and subsequent fee years.
Note. The Treasury Department and the IRS received two written comments with respect to the notice of proposed rulemaking. Both commentators agreed with the approach described in the proposed and temporary regulations. No public hearing was requested or held. After considering the public written comments, the final regulations adopted the proposed regulations without change and the temporary regulations are removed.
Explanation of provisions. The temporary regulations provided that, for the 2015 fee year and each subsequent fee year, an entity qualified for an exclusion under section 9010(c)(2) if it qualified for an exclusion either for the entire data year ending on the prior December 31 or for the entire fee year beginning on January 1. The temporary regulations also generally imposed a consistency requirement that bound an entity to its original selection of either the data year or the fee year (its test year) to determine whether it qualified for an exclusion under section 9010(c)(2) for the 2015 fee year and each subsequent fee year.
The temporary regulations also imposed a special rule for any entity that uses the fee year as its test year. Finally, the temporary regulations provided that a controlled group must report net premiums written only for each person who is a controlled group member at the end of the day on December 31 of the data year and that would qualify as a covered entity in the fee year if it were a single-person covered entity (not a member of a controlled group).
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