Health Care Reform Gets House Committee Checkup

Workers buying plans through a public exchange face new tax reporting requirements

By Bill Leonard Sep 12, 2014
The health subcommittee of the House Committee on Ways and Means checked the pulse of efforts to implement the Patient Protection and Affordable Care Act (PPACA) by holding a hearing on Sept. 10, 2014.

As the final quarter of 2014 approaches, the continuing rollout of the health care reform law will affect millions of U.S. workers who now face the challenges of selecting and enrolling in health care plans through a public exchange and dealing with new tax reporting requirements.

“Today, we have the chance to look in the rearview mirror and judge the results rather than the promises,” said Rep. Kevin Brady, R-Texas, chairman of the subcommittee. “And we have the opportunity to look forward to next year, to see what other changes and surprises may lay ahead for the American people.”

Several subcommittee members raised questions about recent efforts by the Internal Revenue Service (IRS) and the Department of Health and Human Services to implement the law. The congressmen pointed to the troubled launch of the government’s website in October 2013 and asked for guarantees that there would not be a repeat performance this year.

“The administration has assured us that the next steps should be smooth sailing. Unfortunately, this year’s open enrollment has been delayed until Nov. 15” for selecting and purchasing health plans through the law's marketplace of public exchanges, Brady said. “Also, worried that individuals won’t re-enroll, the Centers for Medicare and Medicaid Services recently announced that if individuals do not select a new plan by Dec. 15 they will be auto-enrolled in their old plan.”

Brady questioned Andrew Slavitt, principal deputy administrator for the Centers of Medicare and Medicaid Services (CMS), about the delays and problems created when a computer hacker broke into in July and planted malicious software on the website.

“How can we expect the American people to trust us with their vital personal information when something like this happens?” Brady asked.

Slavitt replied that he was well aware a trust gap existed between his agency and the American people.

“While I cannot control what happened in the past, I can assure you that we are working hard to ensure the system operates smoothly and securely,” he said. “I believe the best way for us to regain the trust of American citizens is through transparency. We are being open about what we are doing and trying to achieve.”

Slavitt assured the subcommittee that the CMS was prepared to move ahead with the 2014 open enrollment period and that the process was delayed several weeks to test the system. He told the committee members that so far things looked good for the Nov. 15 start date.

“As we embark on the second open enrollment period, CMS is concentrating now on several critical priorities to build on the progress from the first year of operations,” he testified. “We are focused on increasing the value to consumers by continuing to improve the information, plan options and affordability of the shopping experience.”

IRS and Individual Mandate

IRS Commissioner John A. Koskinen testified during the hearing about the new tax implications of the PPACA’s “individual mandate.” He explained that the IRS has developed new forms so that taxpayers can calculate if they qualify for “a premium tax credit” under the reform law. If a taxpayer qualifies for the premium tax credit, he can choose to have his health insurer receive advance payments of the tax credit. At the end of the coverage year, taxpayers who opted for advance payment of the credit will have to reconcile these payments on their tax returns based on actual income earned in 2014.

“The tax credits are paid based on an estimate of what an individual will earn during the year,” Koskinen explained. “Those who earn more than the estimate and received the tax credit could end up owing more in taxes, and their refund will be less. Those who earned less will be eligible for a higher credit and will get more money back.”

Members of the subcommittee were concerned that the new tax reporting requirements would be confusing for taxpayers. Koskinen assured the congressmen that the vast majority of taxpayers would not be required to do the extra calculations for the tax credit.

“Most people will simply check a box on their 1040 form that shows they receive their health insurance through their employers,” Koskinen said. “The IRS receives nearly 150 million tax returns each year, and we estimate that [on] 125 to 130 million of those returns taxpayers will simply just have to check a box.”

The remaining taxpayers, several committee members said, likely would worry about the IRS using the new reporting requirements to come down hard on them if they made errors when making the new calculations and providing new information.

“We are working hard to get the message out just how these new requirements will work,” Koskinen said. “We put notices on the IRS website and have released several YouTube videos. Also, we have made a considerable effort to get the message out through social media sites like Twitter and Tumblr.”

Koskinen added that the IRS was seriously strapped for resources when implementing the new tax requirements of the PPACA. He told the subcommittee that President Barack Obama’s requests for more than $400 million in additional funding for the IRS to help implement the new requirements of the law had been denied by Congress.

“We still are obligated under the law to enforce the statute, so we had to shift money and resources around to make sure we can fulfill these obligations,” he said.

Bill Leonard is a senior writer for SHRM.

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