Accounting Issues: Accounting for Annual Health Insurance Fees

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Accounting Issues: Accounting for Annual Health Insurance Fees On March 23, 2010, President Barack Obama signed into law the Patient Protection and Affordable Care Act (PPACA) and on March 30, 2010 the Health Care and Education Reconciliation Act provided provisions to the PPACA. The laws focus on reform of the private health insurance market, provide better coverage for those with pre-existing conditions, improve prescription drug coverage in Medicare and extend the life of the Medicare Trust fund by at least 12 years (Washington). There are a number of provisions in the PPACA Act that will impact the accounting for many companies. Among those provisions are the following (US): * A new annual fee on pharmaceutical manufacturers…show more content…
For example, once a health insurer participates in the government program in 2011 that causes the health insurer to be subject to the fee in 2011. The profits in 2010 are solely used to calculate the fee; they do not obligate the health insurer to pay the fee.
It came to the Emerging Issues Task Force (EITF) attention that treatment for the annual fees should be treated like the fee for pharmaceutical manufacturers, which was also enacted in the Acts. People believe that the fee to be paid by health insurers is similar in substance to the fee to be paid by pharmaceutical manufacturers. Therefore, it has been requested that the final update include amendments to clarify that the accounting for both fees be the same. The table below compares the fees to be paid by pharmaceutical manufacturers and health insurers according to the Act (Fees).

| Pharmaceutical Manufacturer | Health Insurer | Purpose of the fee | To fund other provisions of the Act | To fund other provisions of the Act | Scope | Entities that sell branded prescription drugs to any government program specified in the Act | Entities that provide health insurance or administrative services for any U. S. health risk | Exclusions | Certain entities are excluded if their sales fall below a minimum threshold | Certain entities are excluded

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