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PPACA: IRS Wrestles with Coverage Reporting Rules

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The Internal Revenue Service (IRS) has come out with a flurry of regulatory documents laying the groundwork for implementing the coverage reporting requirements of the Patient Protection and Affordable Care Act of 2010 (PPACA).

PPACA opponents are fighting the law in the courts and in Congress.

If the law takes effect on schedule and works as drafters expect, it will give individuals and small employers the ability to buy health coverage through a new system of health insurance exchanges, or Web-based insurance supermarkets; require many employers to provide a minimum level of coverage or else pay penalties; and require many individuals to own a minimum level of coverage.

The IRS is on track to be in charge of managing or helping with administration of many of the PPACA health coverage provisions, such as efforts to provide health insurance purchase subsidies. 

Individuals with incomes under 133% of the poverty level are supposed to get health coverage for free starting in 2014.

Individuals with incomes ranging from 133% to 400% of the federal poverty level are supposed to get subsidies in the form of “refundable tax credits,” or credits that will be paid during the year before the individual files a tax return for that year.

IRS has issued one document, a tax return information disclosure rulemaking notice, in connection with efforts to write the regulations it needs to give tax informations to the U.S. Department of Health and Human Services (HHS) and the HHS contractors responsible for determining whether individuals are eligible for health insurance subsidies are other relief.

Under the proposed regulations, the IRS would, for example, be able to give program managers a taxpayer’s filing status, the taxpayer’s family size and the taxpayer’s “modified adjusted gross income,” or the adjusted gross income, if the modified adjusted gross income is not available.

Comments are due July 30.

Another document, IRS Notice 2012-33, asks for comments on the approach the IRS should take to the reporting requirements that would apply to the “large employers” that would have to provide a minimum level of coverage.

One section that PPACA added to the Internal Revenue Code (IRC) — Section 6056 — sets reporting requirements that the IRS can use to administer the employer coverage requirements. The coverage requirements are supposed to take effect in 2014, and taxpayers could file the first information returns in 2015, officials say.

The IRS plans to include advice on minimizing the Section 6056 reporting administrative burden when it proposes the reporting regulations, officials say.

Officials note that PPACA has added other, closely related IRC reporting sections, such as IRC Section 6051, a new Form W-2 health benefits cost reporting requirements, and IRC Section 6055, a set of reporting requirements aimed at minimum essential coverage providers.

In the new notice, the IRS asks for comments about coordinating the IRC Section 6056 reports and the IRC Section 6055 reports.

Comments on Notice 2012-33 are due June 11.

In a third document, IRS Notice 2012-32, the IRS seeks comments on how it could reduce the the burden of IRC Section 6055 minimum coverage reporting requirements on health insurers, government agencies, employers that sponsor self-insured plans and other minimum coverage providers.

Like the Section 6056 information reports, the Secion 6055 information reports would start arriving in 2015, officials say.

In Notice 2012-32, officials ask for comments about matters such as how taxpayers ought to determine when an individual’s coverage begins and ends for purposes of reporting the dates of coverage.

Officials also ask about minimizing duplication of reporting and whether any specific concerns arise when information is being conveyed electronically.

Officials ask at another point about how to identify the person responsible for reporting on government coverage programs, such as Medicaid.

Comments on Notice 2012-32 are due June 12.