IRS Update: 2012 Health Insurance Rebates for Individuals

If you have customers that paid for their own insurance in 2011, they may be affected by a provision in the Affordable Care Act that requires health insurance companies to issue rebates to their customers. The rebates are required to be issued if health insurance companies do not spend a minimum specified percentage of their premium dollars on medical care and quality improvement activities. This is known as the Medical Loss Ratio standard. Read more

The Medical Loss Ratio provisions require insurance companies to spend at least 80% or 85% of premium dollars on medical care. If they fail to meet these standards they are required to provide a rebate to their customers starting in 2012. Read more

A taxpayer who received a rebate on their individual health insurance during 2012 may have to show the rebate amount as income on their 2012 Federal income tax return. The rebate will need to be reported as income if the taxpayer received a tax benefit on their 2011 Federal return because they included those insurance payments:

• In their total medical expenses reported on Schedule A; or
• As a deduction on Form 1040, line 29 for self-employed health insurance premiums.

Click here to read the entire CrossLink Tax Update about 2012 health insurance rebates for individuals.