IRS moves to collect billions in fees from healthcare law

The Internal Revenue Service on Friday unveiled its proposal to raise tens of billions of dollars through annual fees on health insurers, prompting fierce criticism from industry groups who warn the costs will be passed along to consumers.

The proposed rule from President Obama's healthcare law will be published for public consideration in Monday’s Federal Register

The rule would assess annual fees on most insurers that would total $8 billion next year and rise thereafter, eclipsing $14 billion in 2018, according to the IRS. The fees would vary in size, depending on a firm’s net premiums, and would come due by Sept. 30 every year.

Insurers that don’t pay on time would face penalties of $10,000, plus $1,000 for every day they miss deadline.

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The IRS acknowledged concerns from outside groups who suggest “that covered entities may attempt to recover a large portion of the fee from policyholders.” The agency will accept comments for 90 days, beginning Monday.

America's Health Insurance Plans (AHIP), the leading trade group for the insurance industry, blasted the fees as a tax that would exceed $100 billion in the next decade and hit average families still struggling to rebound from the economic recession.

“This is a new $100 billion tax on health insurance,” AHIP spokesman Robert Zirkelbach said in an interview Friday. “Taxing health insurance is only going to make it more expensive.

The group estimates that an average family’s health insurance would rise by more than $300 next year, with that total surpassing $500 in subsequent years.

During consideration of the Affordable Care Act, congressional Republicans fought unsuccessfully to scrap the fees. Another attempt to do away with them is now under way in the House, where Reps. Charles Boustany Jr. (R-La.) and Jim Matheson (D-Utah) are pressing a bill to repeal the provision.

Later Friday, the Treasury Department defended the rule, noting that it is merely one part of a law that contains many provsions. On balance, a Treasury Department spokesperson said, the law will increase competition and drive down costs. The ACA would also bring the industry millions of new customers, allowing them to keep costs down, the agency argued.

The spokesoerson pointed to estimates from the Congressional Budget Office suggesting that the law could reduce premiums for insurance plans in the small group and individual markets, while having a negligible effect on plans in the large group market. 

This story was updated at 5:27 p.m.