IRS Proposes Rules on Disclosure for Health Care Tax Credit Applicants
By Sara Hansard
Publication Date: 04/30/2012
The same day the Internal Revenue Service issued guidance on determining whether a health plan provides minimum value, the Department of Health and Human Services said it intends to develop a standardized method that individuals and employers could use voluntarily to determine whether people applying for subsidies are eligible.
In a bulletin posted April 26 on the Center for Consumer Information and Insurance Oversight website, HHS asked for public comments on the plan, which would be used in 2014 and 2015, the first two years that exchanges will be in operation under the Patient Protection and Affordable Care Act.
The subsidies are advanced payments of premium tax credits.
HHS also asked for comments on developing a long-term verification strategy in the Verification of Access to Employer-Sponsored Coverage Bulletin. The agency did not specify a deadline for comments.
HHS proposed allowing exchanges to verify employer-sponsored coverage until 2016 through use of “limited pre-enrollment verification based on data sources available to an exchange and a post-enrollment verification screening process where data sources are not available during the eligibility determination process.” When pre-enrollment verification is possible, that would be the preferred approach, the bulletin said.
Under PPACA, families with income between 133 percent and 400 percent of the federal poverty level may be eligible for premium tax credits to buy policies through the exchanges. Individuals are eligible for the tax credits only if they are enrolled in employer-sponsored plans, or if their employers do not provide coverage that meets requirements for minimum value and is affordable, according to the bulletin.
IRS issued three notices April 26 requesting comments on how to determine whether a health plan provides minimum value and on several new reporting requirements. Also, on April 27, IRS proposed rules on detail the return information the service may disclose to HSS regarding individuals seeking financial assistance through exchanges.
If exchanges determine that an employee who applies for subsidies is eligible, employers with 50 or more employees may be liable for penalties under PPACA, the bulletin said. HHS issued a final rule on exchange eligibility in March.
No Automated Data Sources Yet
Exchanges will be best able to verify employer-sponsored coverage if they have access to automated data, HHS said in the bulletin. But, it said, “data sources that contain all the information exchanges will be seeking to verify do not currently exist.” Until comprehensive data sources are available, an interim strategy is needed, it said.
HHS said the standardized method it intends to develop could help individuals gather information about available employer coverage, such as employer identification numbers. If employers offer more than one type of coverage, employees may also need help determining which option offers the lowest-cost alternative, the bulletin said.
Employer-sponsored coverage information individuals would need to apply for subsidies could be made available on exchange websites, the bulletin said.
Employers could prepare standard information for the exchanges, which would make it unnecessary for exchanges to request information directly from employers, the bulletin said. Exchanges might access state quarterly wage, new hires, or unemployment databases to verify applicants' employment status, it said.
If exchanges are not able to verify applicants' access to employer-sponsored coverage, exchanges would manually verify coverage, which could require direct contact with employers, it said. HHS also is exploring whether employers could voluntarily submit information directly to private or public databases that exchanges may access, it said.
Determining subsidy eligibility for 2016 and afterward “will depend on the identification and/or development of one or more data sources to support a more comprehensive and automated pre-enrollment verification process,” HHS said. It asked for comments on leveraging data employers are required to report under PPACA on their health plans.
Learn More About the Provisions in the Health Care Legislation
Learn more about the provisions in the health care legislation under PPACA:
Health Care Legislation Update »
The complete text of this article can be found in the BNA Daily Tax Report, April 30, 2012. For comprehensive coverage of taxation, pension, budget, and accounting issues, sign up for a free trial or subscribe to the BNA Daily Tax Report today. Learn more »
© 2012, The Bureau of National Affairs, Inc.