The basis for granting relief was the representation that many carriers could not install a reporting system within the short lead time afforded by the revenue ruling. Moreover, in view of the then prevailing uncertainty as to Congressional action, it was felt that the carriers should not be burdened with the implementation of reporting requirements based upco the provisions of existing law, when it was possible that altogether differe reporting requirements would be prescribed within a matter of weeks or mort by new legislation. Finally, it was recognized that the revenue ruling left open a number of questions that needed to be clarified or resolved in order to permit an effective system of reporting to be designed and implemented. Accordingly, the issuance of TIR 1026 envisioned the formation of 8, IRS/Insurance Industry task force to study the systemic and procedural aspect of information reporting both under present law and under the Senate Firans Committee amendment. In the interest of promoting ease of communication ax meeting an early target date for completion of the study, composition of the task force was limited to six members consisting of two representatives fr the IRS and one representative each from the life and health insurance industry, the property and casualty insurance industry, the Blue Shield Pla and the Blue Cross Plans. 5 In accordance with this limitation, the task force was composed of Le following members: John M. Alexander Vice President and Assistant Treasurer National Association of Blue Shield Plans Kenneth D. Allen Assistant Washington Counsel Health Insurance Association of America (also representing the American Life Convention and the Life Otto F. Gaus Director, External Accounting Blue Cross Association John J. Nangle Washington Counsel National Association of Independent Insurers (also representing the American Insurance Association and the Bernard Radack Systems Development Officer, Systems Development Division Internal Revenue Service Thomas G. Vitez Tax Research Officer, Research Division, Office of Planning and Research Internal Revenue Service The views expressed in this report are those of the individual members of the task force and should not be construed as necessarily reflecting the opinions of the Internal Revenue Service, any carrier association or carrier. 6 IV. CARRIER VISITS The task force visited several carriers to consult with key officials and observe claims processing and recordkeeping operations. In selecting these carriers, the task force strove for a representative cross-section, based on company size, extent of centralization, degree of automation, different lines of business, and other considerations. Therefore, it is believed that the problems discussed in this report, although perhaps not all-inclusive, are representative of the major areas of concern The carriers visited by the task force were as follows: (a) Blue Cross and Blue Shield Plans: Des Moines, Iowa (b) Life and Health Insurance Companies: Mutual of Omaha Insurance Co., Omaha, Nebraska Pan American Life Insurance Co., New Orleans, Louisiana (c) Property and Casualty Insurance Companies: Allstate Insurance Co., Northbrook, Illinois (a) Self-Insured, Self-Administered Plans Morton International, Inc., Chicago, Illinois All of these organizations were extremely cooperative and helpful in providing the task force with an understanding of their operations and with insights into the impact of information reporting requirements upon their For this valuable assistance and cooperation, the task force activities. wishes to express its appreciation. 7 SUMMARY OF RECOMMENDATIONS A. With respect to assigned payments, the task force makes the commendations listed below. These recommendations are discussed in tail in the succeeding sections of this report. The recommendations e designed to provide additional guidance in the application of Revenue ling 69-595 and to promote the accuracy and completeness of the infortion to be reported. 1. The reporting responsibility for filing information returns on health care payments should be placed on the organization which is identified as the payer on the check or draft; i.e., the Payer of Record. With respect to the first few years of information reporting, carriers, administrators, and third party agents should be given wide latitude to fix by mutual agreement the responsibility for filing information returns. 2. 3. The Income Tax Regulations should be amended to require reporting of payments made directly to professional medical corporations. 4. Payments to hospitals, extended care facilities, home health agencies and other similar facilities should be specifically excluded from information reporting. 5. Payments for drugs, eyeglasses, dentures, prosthetic devices, etc. should be excluded from reporting on the basis that these items are merchandise. However, an exception should be made with respect to merchandise which is included in an assigned payment to a medical 6. All joint payment documents, made payable to a beneficiary an a provider, should be treated as assigned payments to a provider for reporting purposes. 7. Carriers need not concern themselves with the question of whether the named payee is, in fact, the taxable person, or is a conduit for another individual provider, clinic, hospital, medical partnership, corporation, etc. The carrier should simply report payments as having been made to the payee named on the check or draft. If and when further distributions occur, it should be the responsibility of the first tier payee to account for the shift in the income. 8. IRS should develop instructions, including appropriate official forms, for use by carriers in requesting provider TIN's. These instructions should illustrate the more common medical practice arrangements and provide guidelines as to which number should be furnished. 9. Carriers should include a field for the provider's TIN on every assignment form or proof of loss form. Since a claim may cover more than one assignee, several fields may be required, with each appropriately linked to the assignee's name and address. 10. If a carrier requires use of a claim form containing a space for the TIN, the carrier should be deemed by the IRS as having requested the payee's number in accordance with Section 6109 of the Internal Revenue Code. A carrier requiring the insertion of a provider's TIN on a check or draft should also be deemed as being in compliance with Section 6109. |