Tuesday, November 12, 2013

IHC Health Plans, Inc. v. Commissioner of Internal Revenue case brief

IHC Health Plans, Inc. v. Commissioner of Internal Revenue case brief summary
325 F.3d 1188 (2003)

Petitioner health maintenance organizations (HMOs) challenged respondent Commissioner of Internal Revenue's decisions denying their requests for tax exemption under 26 U.S.C.S. § 501(c)(3). The United States Tax Court affirmed the decision. The HMOs appealed.


The HMOs furnished group insurance entitling enrollees to services of participating hospitals and physicians. All enrollees paid a premium in order to receive benefits.


  • The appellate court agreed with the tax court and determined that the promotion of health for the benefit of the community was a charitable purpose but the HMOs did not operate primarily for the purpose of promoting health for the benefit of the community. 
  • The HMOs primarily performed a risk-bearing function, and the HMOs provided virtually no free or below-cost health-care services. 
  • The HMOs did not conduct research or offer free educational programs to the public. 
  • Two of the HMOs did not offer their health plans to the general public. 
  • Also, the HMOs did not qualify for tax-exempt status as an integral part of another subsidiary of their parent company that furnished free health-care services.

The appellate court affirmed the tax court's decision.

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