CPA & Business Advisory Blog

Health Care Reform & Market Sector Fees

The Patient Protection Act, as amended by the House Reconciliation Act, imposes annual nondeductible fees on various health-related industries, such as medical device manufacturers and importers, health insurance providers and others. The annual fees would be allocated across industry sectors according to market share. The patient Protection Act, as amended, delays the effective dates of the taxes on brand name pharmaceuticals sales by one year until 2011 and on health insurance providers for three years until 2014. The Patient Protection Act, as amended, also exempts qualified nonprofi t insurance providers serving lower-income and other targeted groups and some voluntary employee benefit associations.

Comment

The Patient Protection Act, as amended by the House Reconciliation Act, removes an annual fee that would have been imposed on medical device manufacturers. However, as a trade-off, the Patient Protection Act, as amended, adds an excise tax on medical device sales. However, certain medical devices routinely purchased by consumers, such as eyeglasses and hearing aids, would be exempt from the excise tax.

The Patient Protection Act, as amended by the House Reconciliation Act, would also require Code Sec. 501(c)(3) hospitals to conduct periodic community health needs assessments and adopt written financial assistance policies. Individuals who qualify for fi nancial assistance would be billed at the same rates as insured individuals. The bill would also add some consumer protection provisions to debt collection activities by nonprofi t hospitals.

Comment

The IRS would be required to review a nonprofi t hospital’s community benefi t activities at least once every three years.

Comment

The Patient Protection Act, as amended by the House Reconciliation Act, authorizes the IRS to share return information with the U.S. Department of Health and Human Services to curb Medicare fraud.

Heath Insurance Executive Pay. The Patient Protection Act modifies Code Sec. 162(m) as it applies to remuneration paid by health insurance providers to high-level executives. If at least 25 percent of the premium income to the insurer does not meet minimum essential coverage requirements under the Act, no Code Sec. 162(m) deduction would be allowed to the extent the remuneration exceeds $500,000, with a special provision for deferred compensation. No further changes were made in the House Reconciliation Act to this provision.

Indoor Tanning Tax. The Patient Protection Act, as amended by the House Reconciliation Act, imposes a tax of 10 percent on qualified indoor tanning services effective for services provided on or after July 1, 2010.

New Therapies Tax Credit. On the positive side of the ledger for the health industry, the Patient Protection Act creates a new two-year temporary tax credit to encourage investments in new health care therapies for tax years beginning in 2009 and 2010.

SourceCCH, a Wolters Kluwer business

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