What Is Form 8963 and Who Is Required to File It?
Understand the purpose of IRS Form 8963 and the process for reporting the annual health insurance provider fee as required by the Affordable Care Act.
Form 8963, Report of Health Insurance Provider Information, was a document used by the Internal Revenue Service (IRS) to gather data from entities in the health coverage industry. This information was used to calculate a fee on health insurance providers established under the Affordable Care Act (ACA). The form collected financial data from a “data year” to determine the fee due in the following “fee year.”
The fee was repealed for calendar years after 2020, making the fee assessed in 2020 the final one. Consequently, the form is no longer filed.
Who Was Required to File Form 8963
The requirement to file Form 8963 applied to “covered entities” engaged in the business of providing health insurance for United States health risks. This included specified health insurance providers, such as insurance companies and health maintenance organizations (HMOs). The filing obligation was triggered by their activity of writing health insurance premiums for individuals and groups within the U.S.
If an entity was part of a controlled group—a group of corporations connected through common ownership—the group was treated as a single entity for filing purposes. In such cases, one member of the group was designated to file Form 8963 on behalf of all members, consolidating the required financial information.
Information Required for Form 8963
Filers gathered specific financial data, centered on the calculation of “net premiums written” for the applicable data year. This figure represented the direct premiums an insurer earned from providing health coverage for U.S. health risks. The calculation began with the direct premiums written and then incorporated several specific adjustments.
The total had to be reduced by reinsurance premiums ceded to other insurers, which is the practice of transferring a portion of the risk to another insurance company. The calculation did not include premiums written for indemnity reinsurance.
Filers also had to identify any premiums that qualified for partial exclusions. For instance, premiums attributable to the exempt activities of certain nonprofit organizations, such as those organized under Internal Revenue Code Section 501(c), were subject to a 50% reduction.
Completing and Submitting the Form
The central task was reporting the calculated net premiums written in the appropriate sections. The form was structured to guide the filer through reporting the total net premiums and then separately identifying any amounts that qualified for specific exclusions. The IRS used this reported information to compute each provider’s share of the total fee for the year.
Submission procedures depended on the filer’s total reported net premiums. Entities reporting net premiums written of $25 million or more were required to file Form 8963 electronically. A failure to file electronically when required was treated as a failure to file the form altogether.
The payment of the calculated fee was a separate action from filing the form. The fee had to be paid electronically through the Electronic Federal Tax Payment System (EFTPS). The due date for the payment was no later than September 30th of the fee year.