The Patient Protection and Affordable Care Act imposed a new fee on all health care providers in July 2013. July 2014 is the second year for this potential tax. The fee is due July 31 of the calendar year following the last day of the policy year (plan year). Therefore, plan years which ended October 31, November 30, or December 31, 2012 were due by July 31, 2013. The fee for plans that ended after December 31, 2012 will now be due on July 31, 2014.
Providers include not only insurance companies but also sponsors of self-insured accident and health insurance plans, and some companies that offer health reimbursement arrangements (HRA) and/or flexible spending accounts (FSA). The initial fee for the first covered plan year is $1 times the average number of lives covered under the plan. The fee increases to $2 per person for the second plan year.
Most HRA sponsors are required to pay the tax, except for arrangements that only cover dental and vision benefits. FSAs are only covered by the law if the employer’s contribution exceeds the employee’s contribution and the employer offers health insurance coverage, whether through an insurance company or self-insured plan.
This fee is paid with the second quarter Form 720 excise tax return, which is due July 31st. If you are required to file Form 720 for other reasons, just include the fee on page two of the return for the quarter. If this is the only reason you are filing the return, you will not need to file the form for the 1st, 3rd, or 4th quarters.
IRS regulations offer a number of different ways to count the number of lives covered by your plan such as the actual method, the snapshot method, and the Form 5500 method. There is also a difference in the methods for self-insured plans and HRAs and FSAs. Unfortunately, there is no de minimis exception for small employers.
For more information on how to calculate the number of lives covered or for any other questions concerning this fee, please call us in Chesterfield at 636-532-9525 or in Washington at 636-239-4785.