Questions Submitted by the Public, by Date Posted to the Website. Measuring annual receipts to define a "small" health plan


The criterion for a small health plan has been defined to mean $5 million or less in annual receipts. Is this restricted to receipts, is it only pure premiums, or does it include all revenue, including investment income?


The term "receipts" in the definition of "small health plan" does not include net capital gains or losses, but may include more than just pure premiums. The Secretary adopted the size classification used by the Small Business Administration (SBA) for "small health plans," that is, $5 million or less in annual receipts (13 CFR 121.102). In order to be consistent with the SBA requirements, the meaning of the term "receipts" in the Rule is based on SBA definitions as well. The SBA defines receipts as "'total income' . . . plus the 'cost of goods sold' as these terms are defined or reported on Internal Revenue Service (IRS) Federal tax return forms . . ." but specifically excludes net capital gains or losses, among other things. (13 CFR 121.104.)

The preamble to the privacy rule stated that we consider "pure premiums" to be equivalent to "annual receipts." While these terms will be equivalent for many entities, that may not always be the case. A covered entity should base a determination of whether or not it is a "small health plan" on the relevant SBA regulatory definitions