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Covered California and Obamacare related questions from consumers, employers and agents are answered by Phil Daigle with the best information available at the time. Archived entries may no longer be accurate as the Covered California and Obamacare knowledge-base is evolving quickly. TO REQUEST A PERSONAL RESPONSE INCLUDE EMAIL ADDRESS.


Is Employer Coverage Verified?

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Question: How does Covered CA obtain information from individuals who have affordable employer coverage and submit application for coverage through exchange.

Answer: There is no requirement for employers to supply information about their employees' health care coverage, at least for the 2014 tax year. Nor have I seen any verification requests from Covered California to applicants.

4 Comments

I agree Max.

I take the time to inform my clients, and inform them until I have a strong and clear sense they understand, that there is potential for tax subsidy having to be paid back in 2015, when the client files their taxes in 2014, when at this after-end-of-year point in time they must then actually CLAIM their tax credit.

What many have a hard time wrapping their head around is that the Federal government is currently, month to month, only providing a tax-free loan (paid directly to the insurance carrier on their behalf) as an advance on an anticipated and projected tax credit; a tax credit which the tax filer still has to actually CLAIM… but to CLAIM only AFTER this current 2014 year ends, when the tax filer files their taxes in 2015 for this current in-total 2014 year.

Thanks for the update, Fred. The term people will have to learn on or before April 15, 2015 is “reconcile” (or “reconciliation”). The IRS will require the taxpayer to reconcile actual income, eligibility (not simply enrollment) for employer-sponsored minimum essential coverage (MEC) at any time in 2014, number of months of enrollment in MEC for each member of the household, premium tax credits received and premium tax credits allowed.

When the numbers don’t properly reconcile, the taxpayer will be required to repay some or all of the premium tax credits received in advance — or may receive additional unclaimed credits due as a tax refund. This promises to be a wake up call for many taxpayers who are unaware of the potential for the “clawback.”

I’ve tried to make it clear to my clients that there is this potential looming over them.

We should be careful not to confuse the separate issues of (1) what Covered California will do to verify eligibility for employer-sponsored coverage DURING the application process and (2) what the IRS will do AFTER the fact in order to insure that the applicant has complied with the law.

It is true that for 2014, Covered California will only perform extremely limited verification on an applicant’s statement on eligibility for employer-sponsored coverage. So to that extent, applicants are on the honor system, including those who incorrectly file for advance premium tax credits (APTC) and/or cost-sharing reduction (CSR) despite being eligible for affordable employer-sponsored coverage. But of course, the 2014 IRS tax forms will require applicants to figure their correct premium tax credit, and you can be sure that the detailed instructions will require taxpayers to effectively reaffirm their complete eligibility for the credit. So there’s no free lunch unless you want to file an incorrect tax return.

For coverage (and APTC and CSR) beginning in 2015 and beyond, it’s possible that Covered CA (in conjunction with HHS) will expand its verification of an applicant’s eligibility for employer-sponsored coverage, though there’s been little to indicate that the federal government can quickly develop a system similar to what is being done now for income verification.

And also beginning with the tax year of 2015, the IRS will require “applicable large employers” to report on the type and premium cost of the health insurance coverage that was offered to each employee during 2015. So for the 2015 tax year, it will be easier for the IRS to catch credits that were incorrectly claimed (despite eligibility for affordable employer-sponsored coverage) immediately upon tax filing. This employer filing requirement on health coverage (which is different from the informational reporting on W-2’s of the employer cost of health coverage) will be similar to the wage reporting that is already done every year, and the final regulations for that process were recently released on 3/10/14:

https://www.federalregister.gov/articles/2014/03/10/2014-05050/information-reporting-by-applicable-large-employers-on-health-insurance-coverage-offered-under

As far as 2014 is concerned, everything is on an “hon or” system. What the IRS is going to do is unknown. Employers are now being required to report on the Form W2 the total value of health benefits provided by the employer. There is no way on the current W2 to identify how many persons this amount covers — employee only, employee+spouse and/or dependent(s).

There is currently no requirement for employers to report to anyone who has or does not have coverage when available, and there probably never will be, because gathering and managing all that data on a national basis would be a data collection, retention, and security nightmare.

And given the fact that some 25% of all computer systems maintained by government agencies in the US are still using the Windows XP OS, which will no longer be supported by Microsoft in a few days, there are far more pressing data security issues to be dealt with that require money to solve (and those solutions are temporary at best).

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