House 1099 Fix Bill Could Affect Health Subsidy Rules

Both bills would cancel the effects of a provision in the Patient Protection and Affordable Care Act (PPACA) that would raise money for implementing PPACA by requiring affected businesses to file Form 1099 reports with the Internal Revenue Service for each vendor with whom the business has conducted more than $600 in business in a tax year.

If implementing as written, the PPACA provision would take effect in 2012.

The Camp bill also would cancel the effects of a new real estate expense reporting requirement that was included in a bill signed into law after PPACA.

The Camp bill would pay for anticipated revenue reductions by imposing more aggressive requirements for clawing back excess advance health insurance premium assistance credits.

Some in Congress or elsewhere are trying to repeal or block implementation of the PPACA, a major part of the Affordable Care Act package.

If the act takes effect as written, it will require many individuals to own a minimum level of health coverage starting in 2014. To expand access to coverage and ease the sting of the coverage requirement, PPACA is supposed to create new premium assistance tax credits. Consumers will get the credits at the beginning of the year, to help pay for health coverage.

When consumers get more help than the credits allow, the government is supposed to

try to get consumers to pay back the excess amounts.

Some taxpayers may get thousands of dollars in excess subsidies because they think understating their incomes to get bigger subsidies is a good deal, Ways and Means staffers say in a summary explaining the Camp bill.

Even when taxpayers are doing their best to give accurate income estimates, they will be using income information that may be out of date, the staffers say.

The first health insurance premium assistance tax credits are supposed to be paid in January 2014.

Most of the consumers who get those first credits will be applying in 2013 using their most recent tax returns, which will be for the 2012 tax year, the staffers say.

Consumers' finances may change significantly in two years because of factors such as job changes and promotions, the staffers say.

"Subsidies could therefore be provided to many individuals with actual incomes that exceed subsidy eligibility thresholds," the staffers say.

The original drafters of PPACA included a clawback provision. They also acknowledged that lower-income taxpayers might have a hard time paying back excess credits, and they limited the size of premium assistance credit clawbacks that low-income taxpayers must pay.

PPACA limits premium assistance clawbacks to:

• $600 for taxpayers earning less than 200% of the federal poverty level (FPL).
• $1,000 for taxpayers at 200% to 250% of the FPL.
• $1,500 for taxpayers at 250% to 300% of the FPL.
• $2,000 for taxpayers at 300% to 350% of the FPL.
• $2,500 for taxpayers at 350% to 400% of the FPL.
• $3,000 for taxpayers at 400% to 450% of the FPL
• $3,500 for taxpayers at 450% to 500% of the FPL.
• No clawback cap for taxpayers earning more than 500% of the FPL.

The Camp bill would set the following clawback caps:

• $600 for taxpayers at less than 200% of the FPL.
• $1,500 for taxpayers at 200% to 300% of the FPL.
• $2,500 for taxpayers at 300% to 400% of the FPL.
• No clawback cap for taxpayers earning more than 400% of the FPL.

Analysts at the Joint Committee on Taxation say the 1099 fix would add $263 million to the deficit in 2012 and add $22 billion to the deficit through 2021.

The Camp bill premium assistance payback rules change could raise about $25 billion in extra revenue over that 10-year period, the analysts estimate.

Because of the change in the premium assistance payback rules, the Camp bill as a whole could reduce the budget deficit by $166 million over the same period, the analysts say.