During tax season, I professionally assist taxpayers in preparing and electronically filing their federal and state income tax returns. As most folks know, the creation and expansion of the “Accordable Care Act” has not only transformed the medical delivery system in the United States, but has also significantly impacted the tax preparation process.
Because of the very nature of how premiums are determined for those who enroll for an ACA (or “Marketplace”) Health Insurance policy, the IRS developed a new tax form in 2014 – the 1095A form. Each taxpayer with an ACA Policy during 2014 was required to input all required data from their 1095A form when they filed their 2014 tax return.
Once that data was entered, ACA guidelines dictated whether that taxpayer overpaid or underpaid for their coverage during the prior year. If the taxpayer “overpaid”, that taxpayer was credited on their tax return with the amount of their overpayment (in effect, it was an “extra” refund). If they “underpaid”, the taxpayer was charged on their tax return with the amount of underpayment.
For those who are not familiar with the ACA regulations, that may sound strange. Few service providers give a customer full access to their service for one whole year – but then 1 to 3 months after that year of service has been completed, expect the customer to pay more for that (now) expired service.
But as we know, the Federal government can do whatever it wants to do, whenever it wants to do it, and however it chooses to get it done!
This very unusual method of billing for an ACA Policy is necessitated by the Federal government’s intention to calculate ACA Plan premiums based upon income. Once the U.S. Congress passed off its egregiously lengthy legislation (well over 2,400 pages) to the U.S. Department of Health & Human Services for development into an actually functioning health program, Federal administrators were unable to envision any other way of operating an income-based national health care plan except by forcing it into the Federal income tax system.
The result is that the IRS tax system is utilized for both verification of health coverage and an objective means of reconciling actual, final premium costs for those who are covered by the ACA Marketplace.
In our follow-up article, we will review how an ACA enrollee applies for coverage, and what occurs (over one year later) when her/his “Estimate of Income” for that policy year turns out to be higher or lower than the actual income he/she reports within their officially filed Federal income tax return.