The federal government sent about $28 billion in Affordable Care Act advance premium tax credit subsidy money to health coverage providers during its 2016 fiscal year.
The Treasury Inspector General for Tax Administration, an agency that monitors the Internal Revenue Service, gave that figure in a new report on how the IRS handled ACA premium tax credit claims for 2014 and 2015.
Federal fiscal year 2016 ended Sept. 30.
Health insurers may have generated about $60 billion in individual major medical premium revenue in calendar year 2016, according to estimates based on mid-year 2016 premium totals from the National Association of Insurance Commissioners.
Together, the TIGTA and NAIC numbers suggest that about half of insurers’ 2016 individual major medical revenue came from the ACA advance premium tax credit program.
The APTC is an income-based subsidy program for exchange plan users. Users can get APTC help if they have household income from 100 percent to 400 percent of the federal poverty level.
An ACA exchange bases APTC subsidy amounts on how much users think they’ll earn during the “coverage year.”
The APTC subsidies go to the health coverage providers, and they cut what the subsidy users spend each month on premiums. An APTC subsidy might help a typical consumer cut the out-of-pocket cost for coverage with a $400 monthly premium to $100.
When APTC users file federal income tax returns for a coverage year, they’re supposed to use Form 8962 to tell the IRS how much subsidy help they received. Some users get too little APTC help and receive cash back from the IRS. Others get too much help and owe money to the IRS.
A small number of exchange users get ACA subsidy help in another form: They ask for the premium tax credit for coverage year early in the following year, when they file their income taxes for the coverage year.
The IRS found that, as of June 30, 2016, the IRS had processed about 5.3 million 2015 returns that included claims for $20.3 billion in tax credits, part of which was $18.9 billion in APTC subsidy help.
In June 2015, the IRS had processed 3 million 2014 returns that included claims for $9.8 billion in ACA premium tax credits, including $9 billion in APTC help.
For the 2015 returns, which were processed in 2016, IRS program errors led to IRS premium tax credit amount calculation errors for 31,493 returns, TIGTA says.
The programming errors led to 16,375 filers getting an average of about $300 too much help each, and 15,118 filers getting an average of $440 too little help each.
ACA public exchange program managers send their own tax credit data files to the IRS. The IRS investigates when the gap between what the exchange reports and what the taxpayer reports is big, but not when the gap is small.
Because of that policy, the IRS failed to investigate exchange-taxpayer data gaps for 903,488 2015 returns.
A majority of the unexamined gaps seemed to hurt taxpayers, rather than helping them, TIGTA says.
A review of the APTC gap data suggests that 511,384 affected filers may have missed out on an average of about $1,000 in help each, and that 392,104 may have gotten away with receiving an average of about $300 too much help each, according to TIGTA.
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