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Friday, December 8, 2023 | Back issues
Courthouse News Service Courthouse News Service

Exemptions Being Set for Obamacare Tax Penalties

WASHINGTON (CN) - The Centers for Medicare and Medicaid Services (CMS), acting under the Department of Health and Human Services in conjunction with the Internal Revenue Service, plans to implement new rules to the Affordable Care Act (Obamacare) that, in part, exempt eligible individuals from the "shared responsibility" tax/penalty provision of the act. Under the act, individuals who do not comply with all provisions of the act, i.e. get on an insurance plan that provides "minimum essential" coverage, will be taxed through the IRS for not doing so. The new proposed rule, however, would allow state health exchanges to grant exemptions to individuals who qualify. "The Affordable Care Act specifies the categories of individuals who are eligible to receive exemptions from the shared responsibility payment under section 5000A of the [Internal Revenue] Code, which provides nonexempt individuals with a choice: Maintain minimum essential coverage for themselves and any nonexempt family members or include an additional payment with their federal income tax return," the CMS explained. "Many individuals are exempt from the shared responsibility payment, including some whose religious beliefs conflict with acceptance of the benefits of private or public insurance and those who do not have an affordable health insurance coverage option available."

The proposed rule outlines standards for determining which health insurance coverage constitutes minimum essential coverage and proposes a process by which other types of coverage could be recognized as minimum essential coverage. Certain types of existing health coverage are proposed as meeting the requirements for coverage. Plans compliant with the "minimum essential coverage" requirement would include examples such as the government-sponsored programs for Medicare, Medicaid, the Children's Health Insurance Program, military medical coverage such as TRICARE, the healthcare plan for Peace Corps volunteers, and coverage under eligible employer-sponsored plans, coverage under health plans offered in the individual market within a state, and coverage under grandfathered health plans, according to the regulation.

The new proposed rule also implements the responsibility of the Secretary of Health and Human Services, in coordination with the Secretary of the Treasury, to designate other health benefits coverage as minimum essential coverage, and outlines the requirements that other types of individual coverage "must fulfill in order to be certified as minimum essential coverage under the Internal Revenue Code."

In conjunction with the proposed CMS rule, the IRS has adopted a final regulation and proposed a rule relating to the tax credits and liability. The IRS final rule established that an eligible employer-sponsored plan is affordable for individuals if the employee's portion of the premium for self-coverage does not exceed 9.5 percent of the taxpayer's household income. The proposed IRS rule provides guidance on liability for the shared responsibility payment for not maintaining minimum essential coverage, including who is liable and how the payment is computed. The proposed rule also gives notice of a public hearing on the proposals.

The new IRS regulation is effective Feb. 1. Comments on the CMS proposed rule are due March 18, and comments on the IRS proposed rule are due May 2. The IRS public meeting is scheduled for May 29.

To learn more click on the document icon for this regulation and others.

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