|THE ACA (AFFORDABLE CARE ACT) REQUIRES YOU TO HAVE MINIMUM
HEALTH INSURANCE COVERAGE AS DETERMINED BY THE FEDERAL
FAILURE TO PURCHASE AND MAINTAIN AN INSURANCE POLICY WILL RESULT IN
THE IMPOSITION OF A PENALTY for 2014, the minimum penalty will be $95 per
uninsured adult and $47.50 per child, up to $285 for a family OR take your
household income, then subtract $20,000 if you have a family and $10,000 if you
don't. Multiply that number by 1%. You'll owe the greater.
Over FIVE MILLION INSURANCE POLICIES were cancelled because they did not
meet the minimum requirements established under the ACA,
The EMPLOYER MANDATE that employers provide insurance for their employees
was delayed until 2015.
Qualifying individuals will receive a tax credit when purchasing insurance from
the exchanges. However, employer provided and insurance purchased outside
the exchanges will not qualify for a tax credits or states opting to expand
medicare under federal plans!
Medical insurance purchase outside the "Market" will not qualify for subsidies;
therefore, many employers may "opt out" and pay the penalty for not providing
insurance in order to allow employees access to subsidized plans which will be
cheaper for the employers. Many may see their plans dropped and a stipend
provided to help offset the costs of insurance under the ACA.
THESE "STIPENDS" FOR MEDICAL INSURANCE WILL BE TAXED
UNLIKE EMPLOYER SPONSORED TAX FREE HEALTH INSURANCE.
THERE IS A STIFF PENALTY FOR EMPLOYERS WHO DO NOT REPORT
THIS STIPEND AS INCOME ON YOUR W-2!
Individuals will qualify for Medicaid if they are under 133% of the Federal Poverty Level
Qualifying large employers will pay a $2,000 penalty per full time employee if they
do not offer minimum qualifying insurance packages(delayed until 2015)
Penalties of the Act will be connected to tax returns
Individuals claiming dependents will pay penalties if those dependents do not
carry minimum insurance coverage
Americans can count on additional documents that will be required filing with
our individual and corporate tax returns
If the lowest-cost insurance plan is more than 8% of your income, you won't be
stuck with a fine
If you don't purchase a plan by the end of February, you'll owe a penalty
You can join a federally recognized health care sharing ministry
Penalties increase annually through 2016
In 2015, the penalty increases to the greater of $325 or 2.0% of an individual’s
annual income. In 2016 the penalty jumps to $695 per person or 2.5% of income.
Beyond 2016, the fines will be indexed to the cost of living.
You cannot be turned down for insurance because of preexisting conditions
Children stay on their parents insurance until age 26
FIND YOUR HEALTH CARE ANSWERS HERE (UNDER 65)
FIND YOUR HEALTH CARE ANSWERS HERE (65 or OLDER)
CONTACT US FOR MORE INFORMATION
CALCULATE YOUR PREMIUMS - ANSWER YOUR QUESTIONS
We will help you explore your options under the ACA
IRS INFO FOR FAMILIES
QUESTIONS AND ANSWERS FROM THE IRS
IRS ANSWERS FOR TAX PROFESSIONALS PUB 5187
HEALTH CARE INFORMATION
MAKING A SHARED RESPONSIBILITY PAYMENT
Check out the new Affordable Care Act Tax Provisions Home Page
Información en Español: Disposiciones de La Ley del Cuidado de Salud de Bajo Precio
The open enrollment period to purchase health insurance coverage for 2014 through the
Health Insurance Marketplace runs from Oct. 1, 2013, through March 31, 2014. If you are
seeking information about how to obtain health care coverage or financial assistance to
purchase health care coverage for you and your family, visit the Health and Human
Services website, HealthCare.gov.
Effect of Sequestration on Small Business Health Care Tax Credit
Pursuant to the requirements of the Balanced Budget and Emergency Deficit Control Act
of 1985, as amended, refund payments issued to certain small tax-exempt employers
claiming the refundable portion of the Small Business Health Care Tax Credit under
Internal Revenue Code Section 45R, are subject to sequestration. This means that refund
payments processed on or after Oct.1, 2013, and on or before Sept. 30, 2014, to a Section
45R applicant will be reduced by the fiscal year 2014 sequestration rate of 7.2 percent,
irrespective of when the original or amended tax return was received by the IRS. The
sequestration reduction rate will be applied unless and until a law is enacted that cancels
or otherwise impacts the sequester, at which time the sequestration reduction rate is
subject to change.
Affected taxpayers will be notified through correspondence that a portion of their
requested payment was subject to the sequester reduction and the amount.
IRC §7216, Disclosure or Use of Information by Tax Return Preparers
Final Treasury Regulations on rules and consent requirements relating to the disclosure
or use of tax return information by tax return preparers became effective Dec. 28, 2012. For
additional information about how these apply to services and education related to the
Affordable Care Act, please see our questions and answers.
Medical Loss Ratio (MLR)
Beginning in 2011, insurance companies are required to spend a specified percentage of
premium dollars on medical care and quality improvement activities, meeting a medical
loss ratio (MLR) standard. Insurance companies that are not meeting the MLR standard will
be required to provide rebates to their consumers beginning in 2012. For information on
the federal tax consequences to an insurance company that pays a MLR rebate and an
individual policyholder who receives a MLR rebate, as well as information on the federal
tax consequences to employees if a MLR rebate stems from a group health insurance
policy, see our frequently asked questions.
Reporting Employer Provided Health Coverage in Form W-2
The Affordable Care Act requires employers to report the cost of coverage under an
employer-sponsored group health plan on an employee’s Form W-2, Wage and Tax
Statement, in Box 12, using Code DD. Many employers are eligible for transition relief for
tax-year 2012 and beyond, until the IRS issues final guidance for this reporting
The amount reported does not affect tax liability, as the value of the employer excludible
contribution to health coverage continues to be excludible from an employee's income,
and it is not taxable. This reporting is for informational purposes only, to show employees
the value of their health care benefits.
More information about the reporting can be found on Form W-2 Reporting of Employer-
Sponsored Health Coverage.
Net Investment Income Tax
A new Net Investment Income Tax went into effect on Jan. 1, 2013. The 3.8 percent Net
Investment Income Tax applies to individuals, estates and trusts that have certain
investment income above certain threshold amounts. On Nov. 26, 2013, the IRS and the
Treasury Department issued final regulations which provide guidance on the general
application of the Net Investment Income Tax and the computation of Net Investment
Income. In addition, on Nov. 26, 2013, the IRS and the Treasury Department issued
proposed regulations on the computation of net investment income as it relates to certain
specific types of property. Comments may be submitted electronically, by mail or hand
delivered to the IRS. For additional information on the Net Investment Income Tax, see our
questions and answers.
Additional Medicare Tax
A new Additional Medicare Tax went into effect on Jan. 1, 2013. The 0.9 percent Additional
Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation
and self-employment income that exceeds a threshold amount based on the individual’s
filing status. The threshold amounts are $250,000 for married taxpayers who file jointly,
$125,000 for married taxpayers who file separately and $200,000 for all other taxpayers. An
employer is responsible for withholding the Additional Medicare Tax from wages or
compensation it pays to an employee in excess of $200,000 in a calendar year. On Nov. 26,
2013, the IRS and the Department of the Treasury issued final regulations which provide
guidance for employers and individuals relating to the implementation of Additional
Medicare Tax, including the requirement to withhold Additional Medicare Tax on certain
wages and compensation, the requirement to report Additional Medicare Tax, and the
employer process for adjusting underpayments and overpayments of Additional Medicare
Tax. In addition, the regulations provide guidance on the employer and individual
processes for filing a claim for refund for an overpayment of Additional Medicare Tax. For
additional information on the Additional Medicare Tax, see our questions and answers.
On April 26, 2012, the Department of the Treasury and IRS issued Notice 2012-31, which
provides information and requested public comment on an approach to determining
whether an eligible employer-sponsored health plan provides minimum value. Additionally,
on April 30, 2013, the Treasury Department and the IRS issued proposed regulations
relating to minimum value of eligible employer-sponsored plans and other rules regarding
the premium tax credit. The proposed regulations solicit public comments. Starting in
2014, whether such a plan provides minimum value will be relevant to eligibility for the
premium tax credit and application of the employer shared responsibility payment.
Information Reporting on Health Coverage by Employers
On Sept. 5, 2013, the Department of the Treasury and IRS issued proposed regulations
(REG-136630-12) on employer health insurance coverage information reporting. The
information reporting relates to health insurance coverage that is offered by certain
employers, referred to as applicable large employers, and reporting is to be provided by
each applicable large employer member. Comments on the proposed regulations may be
submitted electronically, by mail or by hand delivery. Additionally, on July 9, 2013, the
Department of the Treasury and the IRS announced transition relief for 2014 from this
annual information reporting. Notwithstanding this transition relief, once the information
reporting rules have been issued, employers and other reporting entities are encouraged
to voluntarily comply with the information reporting provisions for 2014. For more
information, please see Notice 2013-45.
Information Reporting on Health Coverage by Insurers
On Sept. 5, 2013, the Department of the Treasury and IRS issued proposed regulations
(REG-132455-11) on minimum essential coverage information reporting. The information
reporting is to be provided by health insurance issuers, certain sponsors of self-insured
plans, government agencies and certain other parties that provide health coverage.
Comments on the proposed regulations may be submitted electronically, by mail or by
hand delivery. Additionally, on July 9, 2013, the Department of the Treasury and the IRS
announced transition relief for 2014 from this annual information reporting.
Notwithstanding this transition relief, once the information reporting rules have been
issued, insurers and other reporting entities are encouraged to voluntarily comply with the
information reporting provisions for 2014. For more information, please see Notice 2013-45.
Disclosure of Return Information
On Aug. 13, 2013, the Department of the Treasury and the IRS issued final regulations with
rules for disclosure of return information to the Department of Health and Human Services
that will be used to carry out eligibility determinations for advance payments of the
premium tax credit, Medicaid and other health insurance affordability programs. For
additional information on the final regulations, see our questions and answers.
Small Business Health Care Tax Credit
This credit helps small businesses and small tax-exempt organizations afford the cost of
covering their employees and is specifically targeted for those with low- and moderate-
income workers. The credit is designed to encourage small employers to offer health
insurance coverage for the first time or maintain coverage they already have. In general,
the credit is available to small employers that pay at least half the cost of single coverage
for their employees. On Aug. 23, 2013, the Department of Treasury and the IRS issued
proposed regulations which include information on the transition of eligibility for the credit
and requiring the purchase of insurance coverage through an Exchange. Additionally, IRS
Notice 2014-06 provides transition relief for employers in certain counties in Washington
and Wisconsin with no SHOP coverage available. Learn more by browsing our page on
the Small Business Health Care Tax Credit for Small Employers.
Application of the Affordable Care Act to Health Reimbursement Arrangements, Health
Flexible Spending Arrangements and Certain Other Employer Healthcare Arrangements
The Affordable Care Act’s market reforms apply to group health plans. On Sept. 13, 2013,
the IRS issued Notice 2013-54, which explains how the Affordable Care Act’s market
reforms apply to certain types of group health plans, including health reimbursement
arrangements (HRAs), health flexible spending arrangements (health FSAs) and certain
other employer healthcare arrangements, including arrangements under which an
employer reimburses an employee for some or all of the premium expenses incurred for an
individual health insurance policy. The notice also provides guidance on employee
assistance programs or EAPs and on section 125(f)(3), which prohibits the use of pre-tax
employee contributions to cafeteria plans to purchase coverage on an Affordable
Insurance Exchange (also called a Marketplace). The notice applies for plan years
beginning on and after Jan. 1, 2014, but taxpayers may apply the guidance provided in the
notice for all prior periods.
DOL has issued a notice in substantially identical form to Notice 2013-54, DOL Technical
Release 2013-03, and HHS will shortly issue guidance to reflect that it concurs with Notice
2013-54. On Jan. 24, 2013, DOL and HHS issued FAQs that addressed the application of
the Affordable Care Act to HRAs.
On Jan. 9, 2014, DOL and HHS issued FAQs that addressed, among other things, future
rules relating to excepted benefits.
Health Flexible Spending Arrangements
Effective Jan. 1, 2011, the cost of an over-the-counter medicine or drug cannot be
reimbursed from Flexible Spending Arrangements (FSAs) or health reimbursement
arrangements unless a prescription is obtained. The change does not affect insulin, even if
purchased without a prescription, or other health care expenses such as medical devices,
eye glasses, contact lenses, co-pays and deductibles. This standard applies only to
purchases made on or after Jan. 1, 2011. A similar rule went into effect on Jan. 1, 2011, for
Health Savings Accounts (HSAs), and Archer Medical Savings Accounts (Archer MSAs).
Employers and employees should take these changes into account as they make health
benefit decisions. For more information, see news release IR-2010-95, Notice 2010-59,
Revenue Ruling 2010-23 and our questions and answers. FSA and HRA participants can
continue using debit cards to buy prescribed over-the-counter medicines, if requirements
are met. For more information, see news release IR-2010-128 and Notice 2011-5.
Additionally, Notice 2013-57 provides information about the definition of preventive care
for purposes of high deductible health plans associated with HSAs.
In addition, starting in 2013, there are new rules about the amount that can be contributed
to an FSA. Notice 2012-40 provides information about these rules and flexibility for
employers applying the new rules. On Oct. 31, 2013, the Department of the Treasury and
IRS issued Notice 2013-71, which provides information on a new $500 carryover option for
employer-sponsored healthcare flexible spending arrangements. Learn more by reading
the news release issued by the U.S. Department of the Treasury.
Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care
Act’s market reforms to certain health FSAs.
Medical Device Excise Tax
On Dec. 5, 2012, the IRS and the Department of the Treasury issued final regulations on the
new 2.3-percent medical device excise tax (IRC §4191) that manufacturers and importers
will pay on their sales of certain medical devices starting in 2013. On Dec. 5, 2012, the IRS
and the Department of the Treasury also issued Notice 2012-77, which provides interim
guidance on certain issues related to the medical device excise tax. Additional information
is available on the Medical Device Excise Tax page and Medical Device Excise Tax FAQs
Changes to Itemized Deduction for Medical Expenses
Beginning Jan. 1, 2013, you can claim deductions for medical expenses not covered by
your health insurance when they reach 10 percent of your adjusted gross income. This
change affects your 2013 tax return that you will file in 2014. There is a temporary
exemption from Jan. 1, 2013, to Dec. 31, 2016, for individuals age 65 and older and their
spouses. For additional information, see our questions and answers.
Health Insurance Premium Tax Credit
Starting in 2014, individuals and families can take a new premium tax credit to help them
afford health insurance coverage purchased through an Affordable Insurance Exchange.
The premium tax credit is refundable so taxpayers who have little or no income tax liability
can still benefit. The credit also can be paid in advance to a taxpayer’s insurance company
to help cover the cost of premiums. On May 18, 2012, the Department of the Treasury and
the IRS issued final regulations which provide guidance for individuals who enroll in
qualified health plans through Exchanges and claim the premium tax credit, and for
Exchanges that make qualified health plans available to individuals and employers. On
Jan. 30, 2013, the Department of the Treasury and IRS released final regulations on the
premium tax credit affordability test for related individuals. On April 30, 2013, the
Department of the Treasury and the IRS issued proposed regulations relating to minimum
value of eligible employer-sponsored plans and other rules regarding the premium tax
credit. The proposed regulations solicit public comments. Additionally, Notice 2013-41,
issued on June 26, 2013, provides information for determining whether or when
individuals are considered eligible for coverage under certain Medicaid, Medicare, CHIP,
TRICARE, student health or state high risk pool programs. This determination will affect
whether the individual is eligible for the premium tax credit. Comments may be submitted
electronically, mailed or hand delivered to the IRS. On June 28, 2013, the Department of the
Treasury and IRS issued proposed regulations on the new reporting requirements for
Exchanges. Comments may be submitted electronically, mailed or hand delivered to the
IRS. For more information on the credit, see our questions and answers.
Individual Shared Responsibility Provision
Starting in 2014, the Individual Shared Responsibility provision calls for each individual to
either have minimum essential coverage for each month, qualify for an exemption, or make
a payment when filing his or her federal income tax return. On Aug. 27, 2013, the
Department of the Treasury and the IRS issued final regulations on the Individual Shared
Responsibility provision. Additionally, Notice 2013-42, issued on June 26, 2013, provides
transition relief from the shared responsibility provision for employees and their families
who are eligible to enroll in certain employer-sponsored health plans with a plan year other
than a calendar year if the plan year begins in 2013 and ends in 2014. For additional
information on the Individual Shared Responsibility provision, the final regulations and
Notice 2013-42, see our questions and answers. Additional information on exemptions and
minimum essential coverage is available in final regulations issued by the U.S. Department
of Health & Human Services. The open enrollment period to purchase health insurance
coverage for 2014 through the Health Insurance Marketplace runs from Oct. 1, 2013,
through March 31, 2014.
Health Coverage for Older Children
Health coverage for an employee's children under 27 years of age is now generally tax-free
to the employee. This expanded health care tax benefit applies to various work place and
retiree health plans. These changes immediately allow employers with cafeteria plans ––
plans that allow employees to choose from a menu of tax-free benefit options and cash or
taxable benefits –– to permit employees to begin making pre-tax contributions to pay for
this expanded benefit. This also applies to self-employed individuals who qualify for the
self-employed health insurance deduction on their federal income tax return. Learn more
by reading our news release or this notice.
Excise Tax on Indoor Tanning Services
A 10-percent excise tax on indoor UV tanning services went into effect on July 1, 2010.
Payments are made along with Form 720, Quarterly Federal Excise Tax Return. The tax
doesn't apply to phototherapy services performed by a licensed medical professional on
his or her premises. There's also an exception for certain physical fitness facilities that
offer tanning as an incidental service to members without a separately identifiable fee. For
more information on the tax and how it is administered, see the Indoor Tanning Services
For tax years 2010 and 2011, the Affordable Care Act raised the maximum adoption credit
per child and the credit was refundable. For more information related to the adoption credit
for tax years 2010 and 2011, see our news release, tax tip, questions and answers, flyer,
Notice 2010-66, Revenue Procedure 2010-31, Revenue Procedure 2010-35 and Revenue
For tax year 2012, the credit has reverted to being nonrefundable, with a maximum amount
(dollar limitation) of $12,650 per child. If you adopted a child in 2012, see Tax Topic 607 for
Transitional Reinsurance Program
The ACA requires all health insurance issuers and self-insured group health plans to make
contributions under the transitional Reinsurance Program to support payments to
individual market issuers that cover high-cost individuals. For information on the tax
treatment of contributions made under the Reinsurance Program, see our frequently
Medicare Shared Savings Program
The Affordable Care Act establishes a Medicare shared savings program (MSSP) which
encourages Accountable Care Organizations (ACOs) to facilitate cooperation among
providers to improve the quality of care provided to Medicare beneficiaries and reduce
unnecessary costs. More information can be found in Notice 2011-20, which solicited
written comments regarding what additional guidance, if any, is needed for tax-exempt
organizations participating in the MSSP through an ACO. This guidance also addresses
the participation of tax-exempt organizations in non-MSSP activities through ACOs.
Additional information on the MSSP is available on the Department of Health and Human
The Centers for Medicare and Medicaid Services has released final regulations describing
the rules for the Shared Savings Program and accountable care organizations. Fact Sheet
2011-11 confirms that Notice 2011-20 continues to reflect IRS expectations regarding the
Shared Savings Program and ACOs, and provides additional information for charitable
organizations that may wish to participate.
Qualified Therapeutic Discovery Project Program
This program was designed to provide tax credits and grants to small firms that show
significant potential to produce new and cost-saving therapies, support U.S. jobs and
increase U.S. competitiveness. Applicants were required to have their research projects
certified as eligible for the credit or grant. IRS guidance describes the application process.
Submission of certification applications began June 21, 2010, and applications had to be
postmarked no later than July 21, 2010, to be considered for the program. Applications that
were postmarked by July 21, 2010, were reviewed by both the Department of Health and
Human Services (HHS) and the IRS. All applicants were notified by letter dated October 29,
2010, advising whether or not the application for certification was approved. For those
applications that were approved, the letter also provided the amount of the grant to be
awarded or the tax credit the applicant was eligible to take.
The IRS published the names of the applicants whose projects were approved as required
by law. Listings of results are available by state.
Learn more by reading the IRS news release, the news release issued by the U.S.
Department of the Treasury, the page on the HHS website and our questions and answers.
Group Health Plan Requirements
The Affordable Care Act establishes a number of new requirements for group health plans.
Interim guidance on changes to the nondiscrimination requirements for group health
plans can be found in Notice 2011-1, which provides that employers will not be subject to
penalties until after additional guidance is issued. Additionally, TD 9575 and REG-140038-
10, issued by DOL, HHS and IRS, provide information on the summary of benefits and
coverage and the uniform glossary. Notice 2012-59 provides guidance to group health
plans on the waiting periods they may apply before coverage starts. On March 19, 2013,
HHS, DOL and IRS issued proposed regulations on the ninety-day waiting period
limitation. The proposed regulations solicit public comments to be submitted to DOL.
More information on group health plan requirements is available on the websites of the
Departments of Health and Human Services and Labor and in additional guidance.
Further, Notice 2013-54 provides guidance regarding the application of the Affordable Care
Act’s market reforms to certain types of group health plans, including health
reimbursement arrangements (HRAs), health flexible spending arrangements (health
FSAs) and certain other employer healthcare arrangements, including arrangements under
which an employer reimburses an employee for some or all of the premium expenses
incurred for an individual health insurance policy.
Annual Fee on Health Insurance Providers
The Affordable Care Act created an annual fee on certain health insurance providers
beginning in 2014. On Nov. 26, 2013, the Treasury Department and IRS issued final
regulations on this annual fee imposed on covered entities engaged in the business of
providing health insurance for United States health risks.
Tax-Exempt 501(c)(29) Qualified Nonprofit Health Insurance Issuers
The Affordable Care Act requires the Department of Health and Human Services (HHS) to
establish the Consumer Operated and Oriented Plan program (CO-OP program). It also
provides for tax exemption for recipients of CO-OP program grants and loans that meet
additional requirements under section 501(c)(29). IRS Notice 2011-23 outlined the
requirements for tax exemption under section 501(c)(29) and solicited written comments
regarding these requirements as well as the application process. Revenue Procedure 2012-
11, issued in conjunction with temporary regulations and a notice of proposed rulemaking,
sets out the procedures for issuing determination letters and rulings on the exempt status
of organizations applying for recognition of exemption under 501(c)(29).
An overview of the CO-OP program is available on the HHS website.
Medicare Part D Coverage Gap “donut hole” Rebate
The Affordable Care Act provides a one-time $250 rebate in 2010 to assist Medicare Part D
recipients who have reached their Medicare drug plan’s coverage gap. This payment is not
taxable. This payment is not made by the IRS. More information can be found at www.
Additional Requirements for Tax-Exempt Hospitals
The Affordable Care Act added new requirements for charitable hospitals (see Notice 2010-
39 and Notice 2011-52). On June 26, 2012, the IRS published proposed regulations that
provide information on the requirements for charitable hospitals relating to financial
assistance and emergency medical care policies, charges for emergency or medically
necessary care provided to individuals eligible for financial assistance, and billing and
collections. On April 5, 2013, the IRS published proposed regulations on the requirement
that charitable hospitals conduct community health needs assessments (CHNAs) and
adopt implementation strategies at least once every three years. These proposed
regulations also discuss the related excise tax and reporting requirements for charitable
hospitals and the consequences for failure to satisfy the section 501(r) requirements. On
August 15, 2013, the IRS published temporary regulations and proposed regulations
providing information on which form to use when making an excise tax payment for failure
to meet the CHNA requirements and the due date for filing the form. Notice 2014-2 confirms
that hospital organizations can rely on proposed regulations under section 501(r) of the
Internal Revenue Code published on June 26, 2012 and April 5, 2013, pending the
publication of final regulations or other applicable guidance. Notice 2014-3 contains a
proposed revenue procedure that provides correction and disclosure procedures under
which certain failures to meet the requirements of section 501(r) will be excused.
Annual Fee on Branded Prescription Pharmaceutical Manufacturers and Importers
The Affordable Care Act created an annual fee payable beginning in 2011 by certain
manufacturers and importers of brand name pharmaceuticals. On Aug. 15, 2011, the IRS
issued temporary regulations and a notice of proposed rulemaking on the branded
prescription drug fee. The temporary regulations describe the rules related to the fee,
including how it is computed and how it is paid. On Aug. 5, 2013, the IRS issued Notice
2013-51, which provides additional guidance on the branded prescription drug fee for the
2014 fee year. For information on the fee for the 2012 fee year and for the 2013 fee year, see
Notice 2011-92 and Notice 2012-74.
Modification of Section 833 Treatment of Certain Health Organizations
The Affordable Care Act amended section 833 of the Code, which provides special rules
for the taxation of Blue Cross and Blue Shield organizations and certain other
organizations that provide health insurance. IRS Notice 2010-79 provides transitional relief
and interim guidance on the computation of an organization’s taxpayer’s Medical Loss
Ratio (MLR) for purposes of section 833, the consequences of nonapplication and
changes in accounting method. Notice 2011-04 provides additional information and the
procedures for qualifying organizations to obtain automatic consent to change its method
of accounting for unearned premiums. Notice 2012-37 extends the transitional relief and
interim guidance provided in Notice 2010-79 for another year to any taxable year beginning
in 2012 and the first taxable year beginning after Dec. 31, 2012.
On January 6, 2014, the IRS issued final regulations that describe how the MLR for
purposes of section 833 is computed.
Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers
(amended section 162(m))
The Affordable Care Act amended section 162(m) of the Code to limit the compensation
deduction available to certain health insurance providers. The amendment goes into effect
for taxable years beginning after Dec. 31, 2012, but may affect deferred compensation
attributable to services performed in a taxable year beginning after Dec. 31, 2009. On April
1, 2013, the Treasury Department and IRS issued proposed regulations on this provision.
Comments may be submitted electronically, by mail, or hand delivered to the IRS.
Employer Shared Responsibility Payment
The Affordable Care Act establishes that certain employers must offer health coverage to
their full-time employees or a shared responsibility payment may apply. On Dec. 28, 2012,
the Department of the Treasury and the IRS issued proposed regulations on the Employer
Shared Responsibility provisions. Comments may be submitted by mail or hand-delivered
to the IRS. For additional information on the Employer Shared Responsibility provisions
and the proposed regulations, see our questions and answers. Other information, much of
which has been incorporated into the proposed regulations, may be found in news
releases IR-2011-92 and IR-2011-50 and Notices 2011-73, 2011-36, 2012-17 and 2012-58. On
July 9, 2013, the Department of the Treasury and the IRS announced transition relief from
the Employer Shared Responsibility provisions for 2014. For more information, please see
Patient-Centered Outcomes Research Institute Fee
The Affordable Care Act imposes the Patient-Centered Outcomes Research Institute
(PCORI). Funded by the Patient-Centered Outcomes Research Trust Fund, the institute will
assist patients, clinicians, purchasers and policy-makers in making informed health
decisions by advancing clinical effectiveness research. The trust fund will be funded in
part by fees paid by issuers of certain health insurance policies and sponsors of certain
self-insured health plans.
The IRS and the Department of the Treasury have issued final regulations on this fee.
Additional information on the fee is available on the PCORI page and in our questions and
answers and chart summary. Form 720, Quarterly Federal Excise Tax Return, was revised
to provide for the reporting and payment of the PCORI fee.
Retiree Drug Subsidies
Under § 139A of the Internal Revenue Code, certain special subsidy payments for retiree
drug coverage made under the Social Security Act are not included in the gross income of
plan sponsors. Plan sponsors receive these retiree drug subsidy payments based on the
allowable retiree costs for certain qualified retiree prescription drug plans. For taxable
years beginning on or after Jan. 1, 2013, new statutory rules affect the ability of plan
sponsors to deduct costs that are reimbursed through these subsidies. See our questions
and answers for more information.
For More Information
For tips, fact sheets, questions and answers, videos and more, see our Affordable Care
Act of 2010: News Releases, Multimedia and Legal Guidance page.
The Affordable Care Act, or health care law, contains new health
insurance coverage and financial assistance options for individuals and
families. The IRS will administer the tax provisions included in the law.
Visit HealthCare.gov for more information on coverage options and
Do I need to do anything right now to get ready for the changes coming
•The premium tax credit can help make the cost of purchasing health
insurance coverage through the Marketplace more affordable for
individuals and families with low to moderate incomes. Learn more.
•You may have received a letter from your employer providing
information about the new Marketplace, and any health insurance
coverage your employer may offer. For more information about coverage
options through the Marketplace, visit HealthCare.gov. If you have
questions about the coverage offered by your employer, please contact
Considerations for 2013
•Open Enrollment for the Health Insurance Marketplace: The open
enrollment period to purchase health care coverage through the new
Health Insurance Marketplace began Oct. 1, 2013. When you get health
insurance through the marketplace, you may be able to get advance
payments of the premium tax credit that will immediately help lower your
monthly premium. Learn more at HealthCare.gov.
•Filing Requirement: If you do not have a tax filing requirement, you do
not need to file a 2013 federal tax return to establish future eligibility or
qualify for future financial assistance, including advance payments of the
premium tax credit to purchase health insurance coverage through a
Health Insurance Marketplace. Learn more at HealthCare.gov.
•W-2 Reporting of Employer Coverage: Certain employers are required to
report the value of the health insurance coverage they provide. The value
of health care coverage as reported by your employer in box 12 and
identified by Code DD on your Form W-2 is not taxable.
•Itemized Medical Expenses: You can deduct your unreimbursed medical
and dental expenses that exceed 10 percent of your adjusted gross
income on your 2013 tax return. The 7.5 percent threshold will remain for
those 65 and older for tax years 2013 through 2016.
•Other ACA Tax Provisions: Additional Medicare Tax, Premium Rebate for
Saving Accounts, and Net Investment Income Tax.
Looking ahead to 2014
•Premium Tax Credit: To claim the premium tax credit, you must get
insurance through the Marketplace. You can elect to have advance
payments of the tax credit sent directly to your insurer during 2014, or
wait to claim the credit when you file your tax return in 2015. If you
choose to have advance payments sent to your insurer, you will have to
reconcile the payments on your 2014 tax return filed in 2015. Learn More.
•Individual Shared Responsibility Payment: Starting January 2014, you
and your family must either have health care coverage, have an
exemption from coverage, or make a payment when you file your 2014
tax return in 2015. Most people already have qualifying health care
coverage and will not need to do anything more than maintain that
coverage throughout 2014. Learn More.
•Change in Circumstances: If you are receiving advance payments of the
premium tax credit to help pay for your insurance coverage, you should
report changes such as income or family size to your marketplace.
Reporting changes will help to make sure you are getting the proper
amount of assistance.