- 25.21.3 Marketplace Eligibility Determination and Reporting Requirements
- 18.104.22.168 Program Scope
- 22.214.171.124 Household Income and Family Size Verification (IFSV)
- 126.96.36.199.1 Income and Family Size Verification Process
- 188.8.131.52.2 Conditions and Assumptions
- 184.108.40.206.3 Timing and Frequency
- 220.127.116.11.4 Disclosure of Tax Return Information
- 18.104.22.168.5 Programming Updates: Failure to Reconcile
- 22.214.171.124 Premium Tax Credit Computation Engine (PTC-CE)
- 126.96.36.199.1 Programming Updates for the APTC Table
- 188.8.131.52.2 Programming Updates for the Pub. 501 Reference Tables
- 184.108.40.206 Marketplace Reporting Requirements
- 220.127.116.11.1 Annual Reporting Requirements to the IRS
- 18.104.22.168.2 Monthly Reporting Requirements to the IRS
- 22.214.171.124.3 Exchange Periodic Data (EPD)
- 126.96.36.199.4 Assumptions and Constraints
- 188.8.131.52.5 Timing and Frequency
- 184.108.40.206 Form 1095-A Health Insurance Marketplace Statement
Part 25. Special Topics
Chapter 21. 1 Affordable Care Act
Section 3. Marketplace Eligibility Determination and Reporting Requirements
January 05, 2017
(1) This transmits new IRM 25.21.3, IRS Role in Supporting Affordable Care Act, Marketplace Eligibility Determinations and Reporting Requirements.
(1) This new IRM gives background information to employees on how IRS supports the Marketplace eligibility determination process and the submission of monthly and annual reports to IRS by Marketplaces.
Director, Affordable Care Act
The purpose of this IRM is to provide employees with an overview of the role of IRS to assist in the Affordable Care Act (ACA) provisions relating to:
Household income and family size verification of individuals seeking financial assistance through the Marketplace.
Calculation of the maximum amount of the advance paym of the premium tax credit (APTC).
Transmission of required reports from Marketplaces to the IRS on an annual and monthly basis regarding individuals enrolled in qualified health plans (QHP).
This information is helpful to IRS employees Servicewide, but particularly those involved with handling taxpayer questions, programming ACA systems, examining, and collecting. Oversight of these programs is aligned under the applicable program offices.
Under the Affordable Care Act, Marketplaces provide a single point of access for individuals to enroll in qualified health plans, apply for income-based subsidies to offset the cost of these plans, which are paid directly to health-insurance issuers and, as applicable, obtain an eligibility determination for other health coverage programs, such as Medicaid or the Children’s Health Insurance Program. The Department of Health and Human Services (HHS) operates the Federally-Facilitated Marketplace (FFM) in about two-thirds of the states.
To be eligible to enroll in a QHP through a Marketplace, an individual must be:
A United States citizen or national, or otherwise lawfully present in the U.S.;
Reside in the marketplace service area; and
Not be incarcerated (unless incarcerated while awaiting disposition of charges).
Marketplaces, in turn, are required by law to verify application information to determine eligibility for enrollment and, if applicable, determine eligibility for the income-based subsidies. These verification steps include:
Validating an applicant’s Social Security number (SSN), if one is provided;
Verifying citizenship, status as a national, or lawful presence by comparison with Social Security Administration (SSA) or Department of Homeland Security (DHS) records; and
Verifying household income and family size by comparison against tax-return data from IRS, as well as data on Social Security benefits from SSA.
In particular, the ACA requires that consumer-provided information be verified and that determinations of eligibility be made, through either an electronic verification system or another method approved by HHS. To implement this verification process, HHS developed the Federal Data Services Hub (FDSH), which acts as a portal for exchanging information between the FFM, State-Based Marketplaces (SBMs), and Medicaid agencies, among other entities, and HHS’s external partners, including other federal agencies. The Marketplace uses the FDSH in an attempt to verify the applicant information necessary to support an eligibility determination is consistent with external data sources.
For qualifying applicants, the Act provides two forms of subsidies for consumers enrolling in QHPs, both of which are paid directly to insurers on consumers’ behalf. One is a federal income tax credit, which enrollees may elect to receive in advance, and which reduces a consumer’s monthly premium payment. This is known as the APTC. The other, known as cost-sharing reduction (CSR), is a discount that lowers the amount consumers pay for out-of- pocket charges for deductibles, coinsurance, and copayments.
When applicants apply for coverage they report family size and the amount of projected household income. Based, in part, on that information, the Marketplace will calculate the maximum allowable amount of APTC. An applicant can then decide if he or she wants all, some, or none of the estimated credit paid in advance, in the form of payment to the applicant’s insurer that reduces the applicant’s monthly premium payment.
If an applicant chooses to have all or some of their estimated credit paid in advance, the applicant is required to “reconcile” on his or her federal tax return the amount of APTC payments the government sent to the applicant’s insurer on the applicant’s behalf with the actual tax credit for which the applicant qualifies based on household income and family size reported on the return.
To facilitate this reconciliation process, the Marketplace reports monthly Exchange Periodic Data (EPD) to IRS and sends enrollees Form 1095-A, Health Insurance Marketplace Statement which reports, among other things, the amount of APTC paid on behalf of the enrollee. This information is necessary for enrollees to complete their tax returns. The accuracy of information reported on this form is important for determining an applicant’s tax liability, and ultimately, government revenues.
The ACA added IRC 6103(l)(21), which permits the disclosure of return information to assist Marketplaces with income verification as part of the eligibility and enrollment process.
The ACA added IRC 36B(f)(3), which requires Marketplaces to report certain information to the IRS and to individuals who enroll, or enroll a family member, in a QHP through the Marketplace.
See ACA home page: https://www.irs.gov/affordable-care-act for additional information and authority.
Commonly used terms relating to the Affordable Care Act:
Acronym Definition ACA Affordable Care Act APTC Advance Payments of the Premium Tax Credit ATIN Adoption Taxpayer Identification Number CDR Coverage Data Repository CMS Centers for Medicare and Medicaid Services under HHS CSR Cost-sharing reductions DHS Department of Homeland Security EPD Exchange Periodic Data ESB Enterprise Service Bus FDSH Federal Data Services Hub FFM Federally-Facilitated Marketplace FPL Federal Poverty Line FTR Failure to Reconcile HHI Household Income HHS Department of Health and Human Services IFSV Income and Family Size Verification MAGI Modified Adjusted Gross Income PTC-CE Premium Tax Credit Computation Engine QHP Qualified Health Plan RHCB Remainder of the Household Contribution Benchmark SBM State-Based Marketplace SLCSP Second Lowest Cost Silver Plan SRP Individual Shared Responsibility Payment SSA Social Security Administration SSN Social Security number UWR Unified Work Request XML Extensible Markup Language
This subsection describes the business process that supports the verification of household income and family size for an applicant receiving an eligibility determination for financial assistance.
The ability for Marketplaces to access and use tax return information is a critical component to determine eligibility for APTC and CSR as well as to determine eligibility for certain exemptions from the individual shared responsibility payment (SRP).
The IFSV process receives requests and provides responses from/to HHS regarding household income and family size for an applicant requesting an eligibility determination for financial assistance.
Household income is the sum of the following:
The modified adjusted gross income (MAGI) of the primary applicant and applicant spouse in the HHS request, plus
The MAGI of each dependent applicant in the HHS request who is required to file a tax return for the taxable year.
MAGI is the sum of the following:
Adjusted gross income, plus
The amount (if any) normally excluded by section 911 (the exclusion from gross income for citizens or residents living abroad), plus
Any tax-exempt interest received or accrued during the tax year, plus
Social Security benefits not includable in gross income under IRC 86.
In addition to income and family size information, IRS also provides information to the Marketplace on each tax filer and tax filer spouse reported that failed to reconcile (FTR) APTC received in a prior year.
HHS sends requests to IRS that are directed to the IFSV application via Enterprise Service Bus (ESB).
ESB will include data from the Coverage Data Repository (CDR) to IFSV along with the HHS request. IFSV will then process the request and send a response back to HHS via ESB.
Requests are generated and processed based on individual transactions initiated by the Marketplace in near-real-time. However, the annual redetermination process involves the generation and processing of batch requests.
The following conditions and/or assumptions apply to the IFSV process.
Prior to submitting a request to IRS, the Marketplace must validate the SSN of each individual with the SSA; unvalidated SSNs will not be included in the request to IRS.
In the event that an individual does not have an SSN, that individual will not be included in the IFSV request forwarded to IRS.
The individual did not decline determination of eligibility for financial assistance.
The IRS will not accept the data element Adoption Taxpayer Identification Number (ATIN); Marketplaces will not transmit ATINs.
As part of the initial application for financial assistance, the Marketplace must give individuals the option to obtain tax return information as part of the annual redetermination and renewal processes, for a period not to exceed 5 years based on a single authorization.
Each Marketplace must be uniquely identified when requesting tax return information so that authorization to receive tax return information is validated by IRS prior to any disclosure to HHS.
Initial income verifications by Marketplaces are performed during the open enrollment period and throughout the year if an individual enrolls during a special enrollment period.
Income verifications for self-reported changes in income during the coverage year will occur throughout the year.
Annual redeterminations for all individuals enrolled in a QHP through the Marketplace and who previously requested an eligibility determination for financial assistance will generally occur between August and October.
IFSV performed for the purposes of determining eligibility for SRP exemptions will be performed throughout the year.
HHS and IRS will exchange information via the FDSH in near real-time during normal service hours in accordance with separately executed service level agreements between HHS and IRS.
Upon request and subject to strict privacy and security rules, IRS will disclose the following information about taxpayers applying for assistance or certain SRP exemptions:
The taxpayer’s filing status;
The number of individuals on the taxpayer’s tax return;
Information about the taxpayer’s MAGI and the MAGI of dependents claimed on the return; and
If this information is not available, an indication of why.
In general, IRS will provide HHS with the most recent tax return information on file.
This information may not be disclosed to any other entity, including individuals applying at a Marketplace or individuals involved in assisting consumers in the application process, e.g., navigators, agents and brokers.
During open enrollment each year, the IRS conducts a FTR analysis as part of IFSV. As part of this effort, the IRS will always run two years of FTR.
To support this functionality, a UWR must be submitted to Information Technology (IT) by July 31 of the year prior to the open enrollment period.
This subsection describes the computation engine available to Marketplaces through the FDSH to calculate the maximum allowable amount of the APTC.
Applicants that have been determined eligible for the APTC by the Marketplace can decide to take all, some, or none of the estimated credit paid in advance, in the form of payment to the applicant’s insurer that reduces the applicant’s monthly premium payment.
As part of the eligibility and enrollment process, Marketplaces have the option to use the PTC-CE to calculate the maximum allowable amount of the APTC and also to calculate the Remainder of the Household Contribution Benchmark (RHCB) or they may build their own computation engine.
Instructions for programming updates for the APTC Table and the Pub. 501 Reference Tables are addressed in IRM 220.127.116.11.1 and IRM 18.104.22.168.2.
HHS also retains a record of the amount of the advance payment of the premium tax credit that the applicant chooses to accept and reports the amount of the APTC paid on the consumer s behalf to IRS.
In order to update the APTC calculator by September 1 to service re-enrollment requests in advance of open enrollment, a UWR to update the APTC table must be submitted by January 31 of the enrollment year. The applicable percentage table is published in a revenue procedure issued by IRS Counsel and should be available before January of the enrollment year and one year in advance of the applicable tax year.
To update Pub 501 reference tables, a UWR must be submitted by the IT established work request submission deadline, which is currently January 31 of the calendar year. The UWR submitted in January acts as a placeholder UWR which is routed for approval. The business then updates the placeholder UWR with the new figures when the tax year Form 1040 instructions and / or Pub 501 are published in December.
In order to calculate these amounts, the computation engine uses the following inputs: information the applicant provided about their family composition, projected household income, and other factors, such as whether those enrolling are eligible for other, non-Marketplace coverage.
The IRS does not retain information about the applicant once it has sent the results to the Marketplace through the FSDH. IRS and HHS retain the raw data they exchange only to provide calculation results and perform IT integrity checks.
Marketplaces retain a record of the amount of APTC that the applicant chooses to accept and reports the amount paid on the consumer’s behalf to IRS.
This subsection describes the Marketplace information reporting requirements, the receipt of this information, and how it is used during tax returns processing.
Marketplaces must report to IRS on a monthly and annual basis and furnish to individuals an annual written statement (Form 1095-A) by January 31st of each year that includes the information the Marketplace must report to the IRS.
Individual Marketplaces are required to report certain information to the IRS about individuals who receive from the Marketplace a certificate of exemption from the SRP.
Marketplaces must report the following information on Form 1095-A annually to the IRS for each tax household enrolled in a QHP:
Name, address, and taxpayer identification number (TIN), or date of birth if a TIN is not available, of the tax filer or responsible adult.
Name and TIN, or date of birth if a TIN is not available, of a tax filer’s spouse.
Amount of the APTC for coverage under the plan each month.
For plans for which APTC payments are made, the premium (excluding the premium allocated to benefits in excess of essential health benefits) for the applicable benchmark plan (the second lowest cost silver plan) for purposes of computing APTC.
For plans for which APTC payments are not made, the premium (excluding the premium allocated to benefits in excess of essential health benefits) for the applicable benchmark plan that would apply to all individuals enrolled in the QHP if APTC payments were made for the coverage (in lieu of reporting this information, the Marketplace may provide a reasonable method that a responsible adult may use to determine at the time of filing the tax return the premium for the benchmark plan that applies to the coverage household).
Name and TIN, or date of birth if a TIN is not available, and dates of coverage for each individual covered under the plan.
Coverage start and end dates of the QHP.
Name of the QHP issuer.
Marketplace-assigned policy identification number.
Identifying number assigned by CMS to the Marketplace.
Any other information specified by forms or instructions or in published guidance.
Marketplaces must also provide the monthly premium for the plan in which the individuals enroll, however:
The premium allocated to benefits in excess of essential health benefits is excluded;
The portion of the premium for a stand-alone dental plan allocated to pediatric dental benefits is added, but if a family is enrolled in more than one QHP, the pediatric dental premium is added to the premium for only one QHP; and
The amount is not reduced for APTC.
Marketplaces must provide the following information monthly to the IRS for each tax family (families for which there is a responsible adult as well as families for which there is a tax filer) enrolled in a QHP:
The information required to be reported annually;
For plans for which the APTC payments are made: Names, TINs, or dates of birth if no TIN is available, of the individuals enrolled in the QHP who are expected to be the tax filer’s dependent;
The unique identifying number the Marketplace uses to report data that enables the IRS to associate the data with the proper account from month to month (also known as the IRS Group Identifier);
The issuer’s employer identification number (EIN);
The name and TIN, or date of birth if a TIN is not available, of each individual receiving an exemption from the SRP from the Marketplace, the months for which the exemption is in effect and the exemption certificate number;
If employment information is provided to the Marketplace, the name, address, and EIN of each employer of the tax filer, the tax filer’s spouse, and each enrolled individual;
If employment information is provided to the Marketplace, an indication of whether an employer offered minimum essential coverage that provided minimum value, and, if so, the amount of the employee’s required contribution for self-only coverage; and
Any other information specified by forms or instructions or in published guidance.
On a monthly basis the Marketplace must generate a transmission, otherwise referred to as Exchange Periodic Data (EPD), which contains information about policies purchased through the Marketplace and SRP exemption determinations for the purposes of IRS tax administration. See IRM 22.214.171.124.2 for a list of EPD data elements reported by Marketplaces, as required under IRC 36B(f)(3).
The monthly data feed is cumulative containing monthly data for each month from the start of the coverage year in January through the most recent completed month. For example, a monthly transmission produced in September would contain information for each month from January through August.
IRS receives monthly data and performs data integrity and quality checks and communicates with Marketplaces to correct errors.
Each subsequent EPD submission overlays any previously accepted and processed submission.
Marketplaces are required to submit EPD through the FDSH for each month during the coverage year, include new data from the previous month and all months cumulative data from the calendar year.
EPD submissions may also contain corrections, and added or removed policies (if any) for previous months identified by Marketplace.
The monthly transmission will only include policy information for QHPs sold through the Marketplace.
Monthly EPD are expected to be sent on or before the 15th of each month following the month of coverage and will include data through the end of the previous months.
Marketplaces must correct erroneous or outdated information in the next monthly report.
If the monthly information must be corrected after the final monthly submission on January 15 following the coverage year, corrections should be made as quickly as possible and submitted by the 15th of the month following the month in which the correction was identified.
By January 31st of each year, the Marketplace must furnish a 1095-A to each taxpayer or other relevant adult (otherwise referred to in IRS regulations as the responsible adult) who enrolled or whose family member enrolled in a QHP through the Marketplace.
The Marketplace must furnish this statement regardless of whether APTC is paid on behalf of anyone enrolled in the QHP. Individuals who enroll in a QHP may choose not to receive APTC, but they will need the information a Marketplace reports if they want to claim the premium tax credit on their tax return.
The IRC does not require a Marketplace to furnish a written annual statement to individuals who receive an exemption from the SRP, but will provide these individuals with the information needed for tax filing at the time the exemption decision is made. See IRM 126.96.36.199.1 for a full list of Form 1095-A data elements required under IRC 36B(f)(3).
There will be one 1095-A per policy. In the event multiple families are enrolled in a single QHP, a 1095-A must be sent to each tax filer or Other Relevant Adult.
Taxpayers will use the 1095-A to compute the amount of premium tax credit and file an accurate tax return. The IRS will receive the same information as the tax filer (or other relevant adult).
The 1095-A will only include policy information for QHPs sold through the Marketplace.
The 1095-A should represent a subset of the data elements provided in EPD.
Form 1095-A are researchable using the IDRS command code IRPOL or Business Objects Form 1095-A application.
Marketplaces must send the Form 1095-A to the tax filer (or other relevant adult) and a copy electronically transmitted to IRS no later than January 31 of each year.
One of the truly unique characteristics of the ACA from a tax administration standpoint is the receipt, processing, and use of third party data for at-filing processing checks.
Some of the key elements used at-filing include SSNs, Exchange Identifier, Policy Number, premium, APTC, and second lowest cost silver plan (SLCSP) premium amounts.
In addition, Marketplaces provide other data elements required to support various aspects of at-filing and post-filing tax administration.