A new draft regulation would tighten access to health insurance exchange subsidies as federal agencies continue implementing President Donald Trump’s tax law.
The IRS issued a proposed rule Wednesday that would set stricter definitions of who qualifies for tax credit subsidies, toughen eligibility verification requirements and narrow access to financial assistance for noncitizens.
This regulation would complement pending rules from the Health and Human Services Department and the Centers for Medicare and Medicaid Services.
The IRS and the Treasury Department characterized the policies as part of broader Trump administration efforts to reduce fraudulent activity on the exchanges, such as removing enrollees from the rolls and freezing broker enrollment.
“The proposed rules protect eligible taxpayers while strengthening the integrity of the premium tax credit,” IRS CEO Frank Bisignano said in a news release. “The enhanced verification measures are designed to curb improper claims, ensuring these vital tax benefits go strictly to the hardworking Americans who qualify for them.”
Qualified health plan definition
The IRS proposes to redefine “qualified health plans,” which are the only insurance policies compatible with subsidies under the Affordable Care Act of 2010.
Federal and state exchanges would have to have a pre-enrollment verification process in place to perform functions such as checking applicants’ household income and eligibility in order for policies to be considered qualified health plans.
Qualified health plans would not include any policy chosen during a special enrollment period due to changes in the enrollee’s expected household income, meaning people would be ineligible for financial assistance under those circumstances.
Coverage month definition
The rule proposes to update what makes enrollees eligible for subsidies by changing the definition of “coverage month.”
Premium tax credits are calculated monthly, and in order to receive a subsidy for a specific month, enrollees must meet all eligibility requirements during that period.
The agency would not consider a period a “coverage month” if the exchange doesn’t confirm home addresses and immigration status, or if the enrollee doesn’t follow requirements to reconcile their tax credits when they file tax returns.
Medicaid work requirements implications
Generally, enrollees are eligible for ACA coverage should they lose their Medicaid coverage due to income requirements.
But under the IRS proposed rule, the federal government would not extend subsidies to people who lose Medicaid coverage due to noncompliance with the work requirements that take effect in all states by next year, even if they would qualify based on income.
Other verification requirements
Exchanges would need to verify household income and family size; immigration status; eligibility for other coverage; place of residence; and any other information the federal government determines necessary.
If details about an enrollee’s eligibility change midyear, the exchange would be expected to verify that information and adjust the amount of tax credit the enrollee receives.
The law offers an exception to the verification policies. The rule would allow HHS to waive this requirement and offer provisional subsidized coverage to people enrolling through a special enrollment period due to a change in family size, such as a birth or an adoption.
More details on verification will be included in CMS’ forthcoming regulations, the rule says.
Reconciling tax credits
Tax credits are based on enrollees’ approximate income for the year, so they have to reconcile at the end of every year by filing paperwork with their actual income and the amount of tax credit to which they were entitled under the ACA.
The regulation would deny enrollees subsidies if they fail to correctly reconcile with the IRS within one year. Previously, that window was two years.
The rule would also remove a limit on what low- and middle-income enrollees must pay back to the IRS if the tax credits they received exceed what they were entitled to based on their actual income for the year. Under the draft regulation, everyone who receives a larger subsidy than their income dictates would have to repay the full amount, regardless of income.
Immigration policies
The proposed rule would restrict eligibility for premium tax credits to citizens, noncitizen U.S. nationals and some lawful permanent residents.
The rule would block lawfully present immigrants with incomes below poverty from accessing tax credits if they’re ineligible for Medicaid due to their immigration status.