If you are a health insurance provider, as of January 1, 2014, the Affordable Care Act and the Health Care and Education Reconciliation Act have mandated that your company must pay an annual fee on written health insurance premiums. However, there has been some confusion as to how to recognize and classify the fee portions of the premiums on your company’s income statements.

The Financial Accounting Standards Board (FASB), in conjunction with the National Association of Insurance Commissioners (NAIC), has issued an Accounting Standards Update (ASU), ASU-2011-06 to address these concerns.

According to the ASU, “A health insurer’s portion of the annual fee is payable no later than September 30 of the applicable calendar year and is not tax deductible. The annual fee for the health insurance industry will be allocated to individual health insurers based on the ratio of the amount of an entity’s net premiums written during the preceding calendar year to the amount of health insurance for any U.S. health risk that is written during the preceding calendar year.”

The amendments in ASU 2011-06, entitled, Fees Paid to Federal Government by Health Insurers, specify that “the liability for the fee should be estimated and recorded in full once the entity provides qualifying health insurance in the applicable calendar year in which the fee is payable.” The new guidelines specified in the ASU are effective for calendar years beginning after December 31, 2013, when the additional fees initially became applicable.

As this is the first “applicable calendar year” that the amendments become effective, and the September deadline is fast approaching, the time to make sure your financial statements are in compliance with ASU-2011-06, is now.

Taxation and compliance issues regarding the Healthcare industry, especially since the passage of the Affordable Care Act, (ACA) can be quite complex. If you would like to benefit from our expertise in these areas or if you have further questions on this Advisory, or the ACA, do not hesitate to contact our Healthcare Specialists, or call us at 1-800-239-1474.