On July 3, 2017, Governor Kate Brown signed into law House Bill (HB) 2391, a health care tax package designed in part to fund Medicaid services for the next two years.
The bill contains new taxes and reporting requirements for Oregon health care providers and insurers, including a 1.5% gross premiums tax on insurers and managed care organizations, an increased hospital assessment of 6%, and a new rural hospital assessment. All of the bill’s provisions go into effect on January 1, 2018.
Gross Premiums Tax
A 1.5% tax will be imposed on premiums—or their equivalent—received by insurers, managed care organizations, and the Public Employees’ Benefit Board beginning in the first calendar quarter of 2018. This tax is in addition to any current Oregon income tax obligations.
Insurers
For insurers, the 1.5% tax is imposed on the gross amount of premiums earned by the insurer that were derived from health benefit plans delivered or issued for delivery in Oregon.
Gross amount of premiums is defined as the “consideration paid by insureds to an insurer for policies of insurance, and includes all premiums, assessments, dues, and fees received or derived, or obligations taken therefor, by whatever term known,” in Oregon Revised Statutes Section 731.808.
Health benefit plans include the following:
- Hospital expense, medical expense, or hospital or medical expense policy or certificate
- Subscriber contract of a health care service contractor
Health benefit plans don’t include coverage of Medicare services pursuant to contracts with the federal government or Medicare supplement plans.
Managed Care Organizations
For managed care organizations, the 1.5% tax is imposed on amounts received from the Oregon Health Authority (OHA) for providing health services as part of the Oregon Health Plan, which is the state’s Medicaid program.
Managed care organizations include coordinated care organizations as well as prepaid managed-care health services organizations, which are managed physical health, dental care, mental health or chemical dependency organizations that contract with the OHA or a coordinated care organizations on a prepaid basis.
Deadlines
The Department of Consumer and Business Services will issue forms, with filings due 45 days after the end of each calendar quarter. In the case of insurers, reports must include all health benefit plans issued or renewed by the insurer during the calendar quarter and the gross amount of premiums by line of insurance.
Reports and tax payments are also due quarterly. The penalty for late filing is $500 each day of delinquency, capped at 5% of the assessment amount due.
Hospital Assessment
Oregon hospitals must pay a hospital assessment on net patient revenue. Under HB 2391, an additional 0.7% assessment is imposed, bringing the maximum hospital assessment to 6% of net patient revenue. Public hospitals other than health-district hospitals are exempt from this assessment.
Rural Hospital Assessment
HB 2391 also imposes a 4% rural hospital assessment on net patient revenue earned by Type A and Type B hospitals. Type A hospitals are defined as small and remote hospitals with fewer than 50 beds that are more than 30 miles from the nearest hospital while Type B hospitals are 30 miles or less from the nearest hospital. Public hospitals other than health-district hospitals are exempt from this assessment.
We’re Here to Help
If you have questions about how the gross premiums tax or hospital assessment changes may affect your organization—or are interested in estimating your exposure and learning how to prepare for these new reporting requirement—contact your Moss Adams professional or email statetax@mossadams.com.