Did Florida's withdrawn 1994 ruling include self-insured health claims and administrative charges in insurance premium tax?

Subject

Self-Insured

Plain-English summary

This January 1994 ruling was withdrawn by TAA 94B8-002 on August 18, 1994. Its original conclusion should not be treated as operative Department guidance.

Before withdrawal, it treated the city's administrative fee, risk-assumption charge, stop-loss arrangement, and incurred claims as components of aggregate taxable premium. It therefore said the insurer properly paid premium tax on the administrative fee, risk charge, and claims paid.

What this means for you

The original ruling analyzed a city-sponsored self-insured health plan integrated with insurer-administered stop-loss coverage, but the source expressly records its later withdrawal.

Common questions

Did the original ruling tax only stop-loss premiums? No. It also included administrative and risk charges and incurred claims.

Was the city treated as bearing primary insurance responsibility? Yes, in the withdrawn analysis.

Is this ruling still the Department's stated position? No. The official status line says it was withdrawn.

Citations and references

• Fla. Stat. §§ 624.02, 624.03, 624.031, 624.509, 624.603, 627.402, 627.403, 627.652, and 213.22

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94B8-001

Original ruling text

Status: TAA 94(B)8-002, issued August 18, 1994 withdraws this
TAA

Jan 27, 1994

Re: Technical Assistance Advisement No. 94(B)8-001
Insurance Premium Tax, Self-Insured
City of XXX (hereinafter City)

Dear :

City has requested a technical assistance advisement pursuant to
Section 213.22, Florida Statutes.

Issue

Whether the Insurance Premium Tax (Tax) should be assessed
on the amount of claims paid by a third-party administrator
from funds provided by the City.

Background

The facts that you have provided are as follows:

1) The City entered into a contract with XXX Insurance
Company of Florida, previously XXX Insurance Company,
(Insurer), to administer your self-insured health insurance
plan and provide specific and aggregate stop-loss
coverages;
2) The City has established a cash "bank" with Insurer from
which Insurer pays approved claims. The required balance
in the bank is $40,000. The City transfers funds weekly to
maintain the required minimum balance;
3) Insurer's present proposal estimates the tax for the
coming year at $62,376. Last year's Tax was $40,478.
Insurer is paying Tax on the amount of premiums paid for
stop-loss coverage and the claims they are paying; and,
4) The City and Insurer are the only two entities involved.
The plan is not a separate legal organization having its

own existence.

It is the City's position that Tax should only be paid on the
amount of stop-loss premiums paid. You are basing this on your
discussions with Ernst and Young and other insurance
professionals.

Discussion and Law

The following are relevant sections of the Florida Statutes
relative to your question:

1) Section 624.02, F.S., defines "insurance" as a contract
whereby one undertakes to indemnify another or pay or allow
a specified amount or a determinable benefit upon
determinable contingencies. The plan that the City offers
its employees is an insurance plan;
2) Section 624.03, F.S., defines an "insurer" as every
person engaged as indemnitor, surety, or contractor in the
business of entering into contracts of insurance or of
annuity. The City and Insurer are both insurers with the
City bearing primary responsibility;
3) Section 624.031, F.S., defines "self-insurance" as
including any plan, fund, or program which is communicated
or the benefits of which are described in writing to
employees and which has heretofore been or is hereafter
established by or on behalf of any individual, partnership,
association, corporation, trustee, governmental unit,
employer, or employee organization, or any other organized
group, for the purpose of providing for employees or their
beneficiaries through such individual, partnership,
association, corporation, trustee, governmental unit,
employer, or employee organization, or any other group,
benefits in the event of sickness, accident, disability, or
death. The benefits provided by the City are being offered
on a self-insured basis with specific and aggregate stoploss coverages purchased from an insurance company;
4) Section 624.603, F.S., defines "health insurance" as
insurance of human beings against bodily injury,
disablement, or death by accident or accidental means, or
the expense thereof, or against disablement or expense

resulting from sickness, and every insurance appertaining
thereto. The City is acting as the sponsor of a "health
insurance" plan;
5) Section 627.402, F.S., defines a "policy" as a written
contract of or written agreement for or affecting the
certificate thereof, by whatever name called, and includes
all clauses, riders, endorsements, and papers which are a
part thereof. The written information provided by the City
to its employees constitutes a policy;
6) Section 627.403, F.S., defines "Premium" as the
consideration for insurance by whatever name called. Any
assessment, or any membership, policy, survey, inspection,
service, or similar fee or charge in consideration for an
insurance contract is deemed part of the premium. Premium
also includes the entire cost of an insurance plan,
including the administrative fee, the risk assumption
charge, and, in the instance of a minimum premium plan or
stop-loss coverage, the incurred claims whether or not such
claims are paid directly by the insurer. Applying this
concept to your specific situation, the amounts paid to
Insurer in its capacity as an administrator and for stoploss coverage and the incurred claims paid are premiums;
and,
7) Section 627.652, F.S., provides that the terms "policy",
"insurance policy", "health policy", "group health policy",
and "group health insurance policy" include plans of selfinsurance providing health insurance benefits. The selfinsured plan offered by the City to its employees is a
"group health insurance policy".

Department's Position

Under s. 624.509, F.S., the Tax is imposed on insurers,
annually, on the premiums received on account of life and health
insurance policies covering persons resident in Florida. The
City has given its employees health insurance coverage through a
plan of self-insurance integrated with a stop-loss policy issued
and administered by Insurer. Consequently, the administrative
fee, the risk assumption charge and the incurred claims, whether
or not such claims are paid directly by Insurer, are components
of the plan "premium" and, as such, are taxable in the aggregate

under the Tax. It is proper for the Insurer to pay the Insurance
Premium Tax on the administrative fee, the risk assumption
charge, and the claims paid.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request are
public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

James E. Silvey
Tax Law Specialist
Technical Assistance

JES/jes