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IRS eyes employers in PPACA exchange dead zones

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The Internal Revenue Service (IRS) is re-using a small-group health insurance program patch it developed for the 2014 plan year.

The patch will help employers in Iowa qualify for the Patient Protection and Affordable Care Act (PPACA) small-group health insurance tax credit, according to IRS Notice 2015-08.

PPACA Section 1421 created the tax break by adding Section 45R to the Internal Revenue Code (IRC) 45R. 

Now that the PPACA public exchange system is up and running IRC Section 45R requires employers that get the tax credit to use it to pay for qualified health plan (QHP) coverage from a Small Business Health Options Program (SHOP) exchange.

For 2014, the SHOP exchange system had no group plans available for employers in some counties in Wisconsin and most of Washington state.

See also: IRS tough on small-group health tax credit time

This year, employers in those counties can buy SHOP plan coverage, but Iowa is a SHOP plan dead zone. Employers in Cedar Rapids, Des Moines and Iowa City can’t get SHOP plans.

Last year, the IRS let employers in SHOP dead zones to use the tax credit as long as those employers offered coverage that would have qualified for the Section 45R tax credit before Jan. 1, 2014, when the public exchange system came to life.

The IRS will apply similar rules to the SHOP dead zones in Iowa this year, officials say.

The notice applies in all of Iowa except for the following counties: Allamakee, Dickinson, Emmet, Fayette, Howard, Ida, Lyon, O’Brien, Osceola, Plymouth, Sioux, Winneshiek and Woodbury.

The U.S. Department of Health and Human Services (HHS) runs the exchange program in Iowa. HHS has never released national SHOP plan enrollment figures, or SHOP enrollment figures for the HHS-run state exchanges.

Some states have published SHOP enrollment figures. says state exchanges have reported enrolling about 21,000 people in 2015 SHOP plan coverage.