Review of the First Tax Year of the Affordable Care Act and Look Ahead: Part 2

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Yesterday, we began a look at the ACA by examining reconciliation issues. We continue to look at reconciliation issues today before moving on to information returns.  Keith

Reconciliation deadlines

The deadline to attest to reconciliation to receive APTC for January is December 15, 2015. This is the deadline to pick a January plan. See, 45 C.F.R. § 155.410(f)(2); see also, Dates & Deadlines for 2016 Health Insurance on; FFM and FF-SHOP Enrollment Manual p. 13 (Oct. 1, 2015). So far, exchanges have indicated they will not extend this deadline, and no APTC will be paid for January if the attestation is made after that date. This is consistent with the regulations; exchange effective dates are almost always forward-looking. See, 45 C.F.R. §§ 155.310(f); 155.330(f). December 15 should be the deadline that practitioners emphasize to taxpayers who still need to reconcile 2014 APTC.

The exchange effective dates and the past-year reconciliation requirement only affect APTC eligibility. A taxpayer who qualifies under Section 36B may still receive a PTC for January (and other months in 2016) on his tax return. Section 36B does not include a prior-year reconciliation requirement.


What happens if a taxpayer misses the December 15 deadline? I will walk through the consequences for a fictional taxpayer, David. If David has not been auto-enrolled in a 2016 plan, he has until January 31 to apply for 2016 coverage. He should not apply for coverage until he can attest to reconciliation. This scenario will mostly apply to people without a 2015 Qualified Health Plan (QHP), as most taxpayers with a 2015 plan will be auto-enrolled for 2016. See, CCIIO Bulletin 16: Guidance for Issuers on 2016 Reenrollment in the Federally-facilitated Marketplace (FFM), Aug. 25, 2015, available at

If David was auto-enrolled in a QHP for 2016, but the exchange data indicates that he did not reconcile 2014 APTC, he will receive a bill for his unsubsidized January premium. If David misses the December 15 deadline to attest to reconciliation, there are two main possible outcomes regarding David’s health insurance coverage and whether he can get APTC to help pay the premium.

Scenario 1: David pays the full January bill by the deadline.

In scenario 1, David has effectuated his 2016 QHP enrollment by making the first payment. See, 45 C.F.R. § 155.400(e). David can contact the exchange at any time to make a reconciliation attestation and request an APTC determination. Exchanges are required to redetermine eligibility for subsidies upon receipt of new information. 45 C.F.R. § 155.330(a). They are also required to process new applications at any time. 45 C.F.R. § 155.310(c).

If the exchange subsequently finds David eligible for subsidies, the effective date of the change (when David’s premium decreases) depends on when he contacted the exchange. David may need to pay full price for February and possibly later months as well, depending on when he attests to reconciliation. See, 45 C.F.R. § 155.330(f). For February APTC, the change must be reported by January 15. For March APTC, it must be reported by February 15, and so on. Id. State-based exchanges have some flexibility to set a later cutoff date. See, 45 C.F.R. § 155.330(f)(2).

Although David missed the deadline to get APTC for January 2016, he can still receive a PTC for January on his tax return. David has enrolled in qualifying health coverage and paid the premium. If he meets the other eligibility criteria he could receive a PTC at the end of the year.

Scenario 2: David does not pay his premium bill for January.

In this scenario, David’s 2016 QHP enrollment will be cancelled, because he did not pay his bill by the deadline. Health insurance issuers and exchanges have some flexibility to set the deadline. See, FFM and FF-SHOP Enrollment Manual pp. 18 – 19 (Oct. 1, 2014). However, there is no grace period permitted at the beginning of a plan year. See, FFM and FF-SHOP Enrollment Manual p. 19 (Oct. 1, 2015); 45 C.F.R. § 155.400(e). David can still apply for 2016 coverage during the open enrollment period and attest to reconciliation during the application process. The last day of open enrollment is January 31, 2016. David will have a gap in health insurance coverage for at least January and perhaps also February. See, Exhibit 4, Coverage Effective Dates for the 2016 FFMs OEP, FFM and FF-SHOP Enrollment Manual p. 13 (Oct. 1, 2015).

One potentially tricky aspect of this scenario is that David might have to wait until his 2016 auto-enrollment is cancelled before he can reapply. This will depend on the exchange processes. David needs to have his auto-enrollment cancelled in order to avoid owing the unsubsidized premium for January. The worst outcome for David would be for the exchange to process a Change of Circumstance rather than a new enrollment.

If an exchange processed a new application as a change of circumstance because David’s auto-enrollment had not yet been cancelled, then he would still owe the full unsubsidized premium for January. As discussed above, APTCs are not granted retroactively. Unless the situation were corrected, David’s 2016 insurance would eventually be terminated if he could not pay the unsubsidized premiums for the months before APTC became effective.

Under either scenario described above, David can call the exchange and attest to reconciliation as soon as his 2014 tax return is in the mail. It will be important to keep the exchange effective dates in mind when advising assisters and taxpayers about this, particularly leading up to the 15th of each month.

If QHP coverage is terminated outside of open enrollment, a taxpayer cannot reenroll in 2016 coverage without qualifying for a special enrollment period. 45 C.F.R. § 155.410(a)(2).


For most taxpayers who qualify for a PTC, exchange health plans are not affordable without subsidies. The lack of a grace period at the beginning of a plan year actually helps those taxpayers, because they have until January 31 to reconcile and reapply for coverage. Assisters and practitioners must keep in mind the prospective nature of APTC eligibility decisions, and take pains to help taxpayers avoid getting trapped by a bill for unsubsidized January coverage. As mentioned above, the deadline emphasized to taxpayers should be December 15 to avoid a gap in coverage and to avoid confusion regarding an auto-enrollment that needs to be cancelled.

2015 Information Returns

For tax year 2015, two new information returns will help the Service further implement both the Premium Tax Credit and the individual shared responsibility provision. Individuals who were enrolled in government-sponsored or private insurance coverage that is MEC will receive Form 1095-B from a government agency or health insurance company. See generally, I.R.C. § 6055; T.D. 9660, 79 Fed. Reg. 13220 (March 10, 2014); Information Reporting by Providers of Minimum Essential Coverage on In addition, individuals may receive Form 1095-C from a large employer. See generally, I.R.C. § 6056; T.D. 9661, 79 Fed. Reg. 13,231 (March 10, 2014); Information Reporting by Applicable Large Employers on

Form 1095-B is filed by government agencies sponsoring MEC, by private health insurance companies sponsoring MEC (including SHOP coverage but not individual QHPs), and by non-ALE employers who provide self-insured coverage. A substitute form may be used. Treas. Reg. § 1.6055-1(f)(2)(iii).

Form 1095-C is filed only by Applicable Large Employers (ALEs). An ALE for 2015 is generally an employer who averaged 50 or more full-time employees and full-time equivalent employees in 2014. See, I.R.C. § 4980H(c)(2) and Treas. Reg. § 54.4980H-1(a)(4). ALEs must file Form 1095-C to report any offer of health insurance coverage made to a full-time employee, or to report that no offer was made. There are several different codes that ALEs will use to indicate the type of health insurance that was offered, and other codes that identify the status of the employee in each month of the year. See, Instructions to Forms 1094-C and 1095-C. In addition, ALEs can use codes on Form 1095-C and 1094-C to claim transition relief, safe harbors, and other relief for situations in which the ALE is not subject to an ESRP for the employee. Id. ALEs who provide self-insured coverage must complete Part III of Form 1095-C in lieu of filing Form 1095-B as a health insurance issuer. See, Treas. Reg. § 1.6055-1(f)(2)(i).

Form 1095-C’s primary function is to enforce the employer shared responsibility provision. Because of this focus, the form will not always give an individual recipient all the information the recipient needs to determine his or her individual shared responsibility obligation or PTC eligibility. In addition, in certain situations the ALE may furnish a simplified statement to the employee, rather than provide a copy of Form 1095-C. See, Treas. Reg. § 301.6056-1(j)(1) (qualifying offer certification); 79 Fed. Reg. 13,241 (qualifying offer transition relief for 2015). The simplified statement provides even less information, and in some situations may be misleading or incorrect. This is discussed further below.

Both of the new forms are relevant to individuals who wish to claim a PTC. Either form could show that the recipient was eligible for MEC other than individual market coverage, thus disqualifying the recipient from the PTC. See, I.R.C. § 36B(c)(2). The new forms will also help the Service enforce both the individual and the employer shared responsibility provisions by documenting MEC coverage and ALE offers of coverage.

If Form 1095-B shows that an individual had coverage, the individual is probably not eligible for a PTC for that month. I.R.C. § 36B(c)(2). The main exception to this rule is for retroactively-granted Medicaid. See, Treas. Reg. § 1.36B-2(c)(2)(iv). Unfortunately, retroactively-granted Medicaid will be reported on the form the same way as prospectively-granted Medicaid. See, Form 1095-B instructions, example 2, p. 5. If the conflicting coverage is Medicaid, practitioners should investigate whether the taxpayer received retroactive coverage.

For 2015, duplicate coverage requiring repayment of APTC could be a significant problem. A recent U.S. Government Accountability Office report found that some individuals had overlapping APTC and Medicaid, and that government policies and procedures did not adequately prevent this from happening. GAO-16-73, Oct. 9, 2015. Duplicate coverage was not necessarily the beneficiary’s fault. To date the Service has not issued any systemic abatement policy regarding APTC repayment for individuals who unknowingly or unwillingly received APTC at the same time as other coverage.

As mentioned above, there are circumstances in which a large employer does not have to furnish Form 1095-C to its full-time employees. In those situations the employee may receive a simplified statement or a letter in place of Form 1095-C. See, Treas. Reg. § 301.6056-1(j)(1) (qualifying offer certification); 79 Fed. Reg. 13,241 (qualifying offer transition relief for 2015). A qualifying offer is an offer of MEC extended to a full-time employee and his or her spouse and dependents, which provides minimum value and has a premium for employee-only coverage not exceeding 9.5% of the U.S. mainland federal poverty line. See, Treas. Reg. § 301.6056-1(j)(1)(i). This is a slight simplification; for the complete slew of “ifs, ands, and buts” I refer the reader to the regulation.

If a qualifying offer was made for all 12 months of the year, the employee’s simplified statement will say that he or she (and his or her family) is not eligible for a PTC. See, Form 1095-C instructions, p. 7; 79 Fed. Reg. 13,241. However, the employer does not actually have all the information needed to determine this. The statement will be true in most cases, but not all. It might not be true if the employee, spouse, or dependent’s immigration status does not qualify him or her for Medicaid. In that situation, the taxpayer may qualify for a PTC despite having income under 100% of the federal poverty line. I.R.C. § 36B(c)(1)(B). The regulations’ preamble recognizes that a qualifying offer renders an employee and his or her family “generally ineligible” for the PTC, (79 Fed. Reg. at 13,241) but the qualifying term is omitted from the Form 1095-C instructions (see p. 7). This is worrisome, since tax preparers may not expect the substitute statement prescribed by the IRS instructions to be incorrect in some cases.

The ACA information reporting regulations are complicated and their completion for 2015 may be a struggle for some filers. For the 2015 tax year, the Service announced penalty relief for entities who file incomplete or incorrect Forms 1095-B or 1095-C. See, 79 Fed. Reg. at 13,226 (Mar. 10, 2014) (Section 6055 returns); 79 Fed. Reg. at 13,246 (Mar. 10, 2014) (Section 6056 returns). The returns must be timely filed and the filer must make a good faith effort to comply with the requirements of Sections 6055 and 6056. Id. Hopefully, large employers and MEC providers will do their best to report correct information and provide corrected forms when errors are brought to their attention. Penalties could be imposed for incorrect information returns if the issuer refuses to correct an error that is brought to its attention, as that would not indicate a good faith effort to comply with the information reporting requirements. See, Id.; see also Treas. Reg. §§ 1.6055-1(h); 301.6056-1(i).

Recipients of false information returns can sometimes sue for civil damages under Section 7434. However, that provision only applies to the nine information returns listed in I.R.C. § 6724(d)(1)(A). See, I.R.C. 7434(f). The information returns required by sections 6055, 6056, and 36B are not on the list.

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