Friday, September 6, 2013

Fwd: qotd: IRS reporting requirements for managing ACA subsidies and penalties

Quote-of-the-day mailing list

-------- Original Message --------
Subject: qotd: IRS reporting requirements for managing ACA subsidies
and penalties
Date: Fri, 6 Sep 2013 11:13:02 -0700
From: Don McCanne <>
To: Quote-of-the-Day <>

U.S. Department of the Treasury
September 5, 2013
Treasury Issues Proposed Rules for Information Reporting by Employers
and Insurers Under the Affordable Care Act

The ACA provides for information reporting (under Internal Revenue Code
section 6055) by insurers, self-insuring employers, and other parties
that provide health coverage. It also provides for information
reporting (under Code section 6056) by employers that are large enough
to be subject to the employer shared responsibility provisions regarding
the health coverage they offer their full-time employees. These proposed
regulations reflect comments received and an ongoing dialogue with
stakeholders, including plan sponsors, many of whom already offer their
full-time workforce coverage far exceeding the minimum employer shared
responsibility requirements. Nearly 95 percent of employers with more
than 50 full-time employees already offer coverage to their employees.

The proposed rules issued today describe a variety of options to
potentially reduce or streamline information reporting, such as:

* Replacing section 6056 employee statements with Form W-2 reporting on
offers of employer-sponsored coverage to employees, spouses, and dependents.

* Eliminating the need to determine whether particular employees are
full-time if adequate coverage is offered to all potentially full-time

* Allowing employers to report the specific cost to an employee of
purchasing employer-sponsored coverage only if the cost is above a
specified dollar amount.

* Allowing self-insured group health plans to avoid furnishing employee
statements under both section 6055 and section 6056 by furnishing a
single substitute statement.

* Limited reporting for certain self-insured employers offering no-cost
coverage to employees and their families.

* Permitting health insurance issuers to forgo reporting under section
6055 on individual coverage offered through a Marketplace because that
information will be provided by the Marketplace.

* Permitting health insurance issuers, employers, and other reporting
entities under section 6055 to forgo reporting the specific dates of
coverage (instead reporting only the months of coverage), the amount of
any cost-sharing reductions, or the portion of the premium paid by an

The statute calls for employers, insurers, and other reporting entities
to report, among other things:

For section 6055:

* Information about the entity providing coverage, including contact

* A list of individuals with identifying information and the months they
were covered.

For section 6056:

* Information about the applicable large employer offering coverage
(including contact information for the employer and the number of
full-time employees).

* A list of full-time employees and information about the coverage
offered to each, by month, including the cost of self-only coverage.

Once the final rules have been published, reporting entities will be
encouraged to voluntarily implement information reporting in 2014 (when
reporting will be optional), in preparation for the full application of
the reporting provisions in 2015. Real-world testing of reporting
systems in 2014 will contribute to a smoother transition to full
implementation in 2015.

Press Release:

Information Reporting by Applicable Large Employers on Health Insurance
Coverage Offered Under Employer-Sponsored Plans:

Information Reporting of Minimum Essential Coverage:

Comment: Here it is folks. These are the proposed ACA rules on reports
that insurers and employers must file with the IRS - rules that proved
to be so complex that the Obama administration deferred for a year the
requirement that these reports be filed. Without these reports, the
employer mandate could not be enforced. Though this announcement is
about the simplification of the rules, that's not the real story here.

When the Act was crafted, it was recognized that health insurance and
health care was now so expensive that a majority would require subsidies
for insurance premiums and out-of-pocket expenses. It was also
recognized that plans would have to provide a defined set of minimal
"essential health benefits." It was also recognized that many
individuals would not buy health plans for themselves unless they were
threatened with a financial penalty for failing to do so.

It was decided that the Internal Revenue Service was best suited to
administer these subsidies and penalties since they already had income
information that would establish eligibility for the income-indexed
subsidies. They were also in a position to use the tax system to assess
penalties for non-compliance. But there are so many variables that the
rule making process was overwhelmed. Even these new rules issued
yesterday are not yet final and are open to public comment.

If you just glance at the few changes to simplify the rules (listed
above), you will see that even they are quite complex. By the time that
the multitude of variables for each individual are taken into
consideration, you will see that the bureaucracy is living up to its
reputation for complexity that induces intolerable frustrations. This
isn't even necessary. This system is yet another administrative
nightmare in a health care system that is unique in all the world for
its profound administrative waste.

If you are masochistic and want to research this yourself, here are some
resources. Sec. 1502 of the Affordable Care Act amends Part III of
Subchapter A of Chapter 61 of the Internal Revenue Code of 1986 by
adding Subpart D - Sec. 6055 on the reporting of health insurance
coverage. Sec. 1514 of the Affordable Care Act amends Subpart D that was
just added by Sec. 1502, by inserting after Sec. 6055 the new section -
Sec. 6056. So look up Sec. 1502 and Sec. 1514 in the Affordable Care
Act. The newest proposed rules, which are the subject of the Department
of the Treasury release on simplification of the rules (reported above),
are available now online and will be formally published in the Federal
Register on September 9, 2013. The proposed rules, "Information
Reporting by Applicable Large Employers on Health Insurance Coverage
Offered Under Employer-Sponsored Plans," are 72 pages (link above). The
proposed rules, "Information Reporting of Minimum Essential Coverage,"
are 42 pages (link above).

Think of how much simpler it would be if we established a single
national fund to pay for all reasonable health care for everyone and
then funded it with progressive taxes. The tax system is already in
place. We could tweak it so that it is even more equitable. Just think
of the administrative simplification that we could have, as opposed to
the exceedingly meager changes announced yesterday in the highly complex
system established by ACA.

Yes, the more we see of the implementation of the Affordable Care Act,
the more we realize that a single payer national health program is an
imperative. All we have to do is fix Medicare so it works better, and
then include everyone.

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