On January 20, 2017, hours after being sworn in as the 45th president of the United States, President Donald Trump issued Executive Order 13765 that aims to “minimize the unwarranted economic and regulatory burdens” of the Affordable Care Act (ACA) while its repeal is “pending.” 

The one-page Executive Order declares that it is the policy

On April 8, 2016, the IRS released a private letter ruling denying tax-exempt status under Code section 501(c)(3) to an accountable care organization (“ACO”) that was not participating in the Medicare Shared Savings Program (“MSSP”).  PLR 201615022 (the “2016 PLR”) is the IRS’s first public written guidance on the tax-exempt status of ACO activities since 2011.

Since the MSSP became operational in 2012, it has been supported by a multi-agency effort to provide participants’ assurance that the application of existing laws and regulations governing tax-exempt status and permissible practices under the fraud and abuse laws would not be used against them. Recently, there has been increasing debate about whether the protected status that federal agencies have provided MSSP participants should also apply to ACOs in the private sector.  In fact, the Centers for Medicare & Medicaid Services and the Department of Health & Human Services’ Office of the Inspector General addressed this issue in their joint issuance of the final rule discussing the waivers of fraud and abuse laws for MSSP ACO arrangements in October 2015.  Now, with the 2016 PLR, the IRS has added its own views on the outer limits of protections for tax-exempt entities that create ACOs outside the MSSP.


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Featured Industry: Health Care
Spotlight on Best Practices, Litigation, Antitrust, and Tax for Health Care Companies

Crowell & Moring LLP is pleased to release its “2016 Litigation & Regulatory Forecasts: What Corporate Counsel Need to Know for the Coming Year.” The reports examine the trends and developments that will impact health care companies and other corporations in the coming year—from the last year of the Obama administration to how corporate litigation strategy is transforming from the inside out. This year will bring remarkable change for companies, as market disruptions and the speed of innovation transform industries like never before, and the litigation and regulatory environments in which they operate are keeping pace.


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Today the Department of Treasury and the Internal Revenue Service (IRS) published final regulations specifying how Consumer Operated and Oriented Plans (CO-OPs) may obtain tax exempt status under Internal Revenue Code Section 501(c)(29) as “Qualified Nonprofit Health Insurance Issuers” (QNHIIs). The IRS had previously issued guidance in Rev. Proc. 2012-11, which the IRS intends to reissue with a 2015 designation.

Created by ACA Section 1322, the CO-OP program is intended to facilitate the creation of member-governed nonprofit health insurance issuers to serve the individual and small group markets. Under the program, the Centers for Medicare & Medicaid Services (CMS) provide loans and repayable grants (collectively a “loan” or “loans”) to organizations that apply to become QNHIIs. The loans are designed to cover start-up costs and seed capital to satisfy state solvency requirements for health insurance issuers. Congress cut most of the funding set aside for the CO-OP program under the fiscal cliff deal (also known as the “American Taxpayer Relief Act of 2012”) in 2013.


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On January 27, 2014, the Internal Revenue Service (IRS) issued proposed regulations (“Proposed Regulations”, available here) clarifying the penalties imposed on nonexempt persons who fail to maintain minimum essential coverage as required by Internal Revenue Code (Code) Section 5000A. Very generally, Code Section 5000A requires nonexempt persons to either (1) maintain minimum essential coverage, or (2) make a shared responsibility payment. The Proposed Regulations:

  1. explain which government-sponsored programs do not qualify as “government-sponsored minimum essential coverage”;
  2. clarify that “minimum essential coverage” excludes health plans and programs that consist solely of “excepted benefits”;
  3. clarify—for purposes of the “lack of affordable coverage” exemption—the required contribution for individuals eligible to enroll in an eligible employer-sponsored plan that provides employer contributions to health reimbursement arrangements (HRAs) or wellness program incentives;
  4. expand the definition of hardship exemptions that may be claimed on a federal income tax return and provide additional guidance; and
  5. clarify the computation of the monthly “shared responsibility payment” penalty amount.

Comments with respect to the Proposed Regulations are due by April 28, 2014, and a public hearing is scheduled for May 21, 2014.


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The Treasury Department and the Internal Revenue Service released a final regulation providing guidance to Blue Cross and Blue Shield (and other qualifying healthcare organizations) on computing and applying the medical loss ratio (MLR) under Code Section 833(c)(5), which is effective as of January 7, 2013 and applies to tax years beginning after December 31, 2013. Under Code Section 833(c)(5), qualifying organizations (including Blue Cross and Blue Shield organizations) are provided with favorable income tax treatment, including: (1) treatment as stock insurance companies, (2) a special deduction under Code Section 833(b), and (3) the computation of unearned premium reserves based on 100 percent of unearned premiums under Code Section 832(b)(4). However, the Patient Protection and Affordable Care Act (ACA) added a provision to the Code, requiring that a qualifying organization must  have a medical loss ratio (MLR) of at least 85 percent to get favorable income tax treatment under Code Section 833(c)(5). For purposes of Code Section 833, an organization’s MLR is its percentage of total premium revenue expended on reimbursement for clinical services provided to enrollees under its policies during such taxable year (as reported under Section 2718 of the Public Health Service Act (PHSA)).
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On July 2, 2013, Treasury published a blog post announcing that the Affordable Care Act employer shared responsibility payments imposed by Internal Revenue Code (Code) section 4980H (also known as “pay or play”) will not apply until 2015. It is also delaying until 2015 the mandatory reporting requirements for issuers and employers, as described in