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Comments on IRS Definition of Governmental Entity



This week in Washington—NAPH submits comments on the governmental entity definition. You are tuning in to the National Association of Public Hospitals and Health Systems health policy update for the week of June 3, 2013.

On June 3, NAPH submitted comments to the Internal Revenue Service (IRS) on the definition of “governmental entity,” which appeared in a recently proposed regulation that implements the Affordable Care Act’s (ACA’s) annual fee on certain health insurance providers. The ACA excludes “governmental entities” from the annual fee imposed on health insurance providers. The proposed regulation excludes instrumentalities, those entities closely affiliated with state and local governments, in its definition of “governmental entity.” Additionally, the proposed regulation limits the fee exclusion only to those public agencies that contract with the state to administer state Medicaid benefits.

In its comments, NAPH shares its concern that the IRS’ definition of governmental entity is too narrow in the proposed regulation. The narrow definition outlined in the proposed regulation could potentially subject a number of government-controlled health systems to the annual fee. NAPH noted in its comments that all government-controlled health plans, whether organized as a governmental subdivision, instrumentality, or integral part, should qualify as governmental entities and thus be exempted from the annual fee imposed on health insurance providers.

NAPH also noted that government-controlled health systems administer a number of different medical benefits, which may not be limited to state Medicaid benefits, and urged IRS to clarify that the exclusion is not limited to the public agencies that contract with the state to administer state Medicaid benefits. Although the ACA did not explicitly define a governmental entity in regard to this fee, NAPH urged the IRS to follow Congressional intent and interpret the ACA language broadly for purposes of excluding governmental entities from the annual fee.

NAPH members can contact Xiaoyi Huang, NAPH’s assistant vice president for policy, at for additional questions about this issue.

Thanks for listening to another edition of This Week in Washington. I’m Zina Gontscharow; join us next week for another update.



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