Minimum Essential Coverage and Other Rules Regarding the Shared Responsibility Payment for Individuals

SUMMARY: This document contains proposed regulations relating to the requirement to maintain minimum essential coverage enacted by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010, as amended by the TRICARE Affirmation Act and Public Law 111-173. These proposed regulations affect individual taxpayers who may be liable for the shared responsibility payment for not maintaining minimum essential coverage. This document also provides notice of a public hearing on these proposed regulations.

EFFECTIVE DATE: Comments must be received by April 28, 2014. Outlines of topics to be discussed at the public hearing scheduled for May 21, 2014, at 10 a.m., must be received by April 28, 2014.

ADDRESSES: Send submissions to: CC:PA:LPD:PR (REG-141036-13), room 5205, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-141036-13), Courier's Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS REG-141036-13). The public hearing will be held in the IRS Auditorium, Internal Revenue Building, 1111 Constitution Avenue NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT: Concerning the proposed regulations, Sue-Jean Kim or John B. Lovelace, (202) 317-7006; concerning the submission of comments, the public hearing, and to be placed on the building access list to attend the public hearing, Oluwafunmilayo Taylor, (202) 317-6901 (not toll-free numbers).

SUPPLEMENTARY INFORMATION: The collection of information contained in SEC 1.5000A-3(h)(3) and SEC 1.5000A-4(a)(1) of this notice of proposed rulemaking has been reviewed and approved by the Office of Management and Budget in accordance with the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d)) under control number 1545-0074 in conjunction with the final regulations under section 5000A (TD 9632). The information is necessary to determine whether the individual shared responsibility provision applies to a taxpayer and, if it applies, the amount of the payment. Comments on the collection of information should be sent to the Office of Management and Budget, Attn: Desk Officer for the Department of the Treasury, Office of Information and Regulatory Affairs, Washington, DC 20503, with copies to the Internal Revenue Service, Attn: IRS Reports Clearance Officer, SE:W:CAR:MP:T:T:SP, Washington, DC 20224.

Comments on the collection of information should be received by March 28, 2014.

Background

The Patient Protection and Affordable Care Act, Public Law 111-148 (124 Stat. 119 (2010)), and the Health Care and Education Reconciliation Act of 2010, Public Law 111-152 (124 Stat. 1029 (2010)) (collectively, the Affordable Care Act), added section 5000A to the Internal Revenue Code. Section 5000A was subsequently amended by the TRICARE Affirmation Act of 2010, Public Law 111-159 (124 Stat. 1123) and Public Law 111-173 (124 Stat. 1215). Section 5000A provides that, for months beginning after December 31, 2013, a nonexempt individual must maintain minimum essential coverage or make a shared responsibility payment.

Final regulations under section 5000A (TD 9632) were published on August 30, 2013 (78 FR 53646). The preamble to the final regulations indicates that subsequent proposed regulations will provide that coverage under certain government-sponsored programs is not government-sponsored minimum essential coverage. The preamble to the final regulations also describes rules to be included in subsequent regulations for determining, for purposes of the lack of affordable coverage exemption, the required contribution for individuals eligible to enroll in an eligible employer-sponsored plan that provides employer contributions to health reimbursement arrangements (HRAs) or wellness program incentives. These proposed regulations address these issues, consistent with the rules contemplated in the preamble to the final regulations. In addition, these proposed regulations provide or clarify rules under section 5000A addressing the definition of excepted benefits, hardship exemptions that may be claimed on a Federal income tax return, and the computation of the monthly penalty amount.

Minimum Essential Coverage

Section 5000A(f)(1) enumerates the types of health care coverage that qualify as minimum essential coverage. They include, among others, coverage under specified government-sponsored programs and health benefits coverage that the Secretary of Health and Human Services (HHS), in coordination with the Secretary of the Treasury, recognizes as minimum essential coverage. Under section 5000A(f)(1)(A), specified government-sponsored programs include, among other things, the Medicaid program under title XIX of the Social Security Act and medical coverage under chapter 55 of title 10, United States Code, including the TRICARE program.

Section 1.5000A-2(b)(1)(ii) of the final regulations provides that government-sponsored programs that are minimum essential coverage include the Medicaid program under Title XIX of the Social Security Act (42 U.S.C. 1396 and following sections) other than certain Medicaid coverage that may provide limited benefits: (1) Optional coverage of family planning services under section 1902(a)(10)(A)(ii)(XXI) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XXI)); (2) optional coverage of tuberculosis-related services under section 1902(a)(10)(A)(ii)(XII) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)(XI)); (3) coverage of pregnancy-related services under section 1902(a)(10)(A)(ii)(IX) of the Social Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)(IX)); and (4) coverage limited to the treatment of emergency medical conditions in accordance with 8 U.S.C. 1611(b)(1)(A), as authorized by section 1903(v) of the Social Security Act (42 U.S.C. 1396b(v)).

Excepted Benefits

Under section 5000A(f)(3) and SEC 1.5000A-2(g) of the final regulations, minimum essential coverage does not include any health insurance coverage that consists solely of excepted benefits described in section 2791(c)(1), (c)(2), (c)(3), or (c)(4) of the Public Health Service Act (42 U.S.C. 300gg-91(c)), or regulations issued under these provisions (45 CFR 148.220) (excepted benefits regulations). In general, excepted benefits are benefits that are limited in scope or are conditional. Under 2791(b)(1) of the Public Health Service Act (42 U.S.C. 300gg-91(b)(1)), health insurance coverage means benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise and including items and services paid for as medical care) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or health maintenance organization contract offered by a health insurance issuer.

Lack of Affordable Coverage Exemption

Section 5000A(e)(1) and SEC 1.5000A-3(e)(1) of the final regulations provide that an individual is exempt for a month when the individual cannot afford minimum essential coverage. For this purpose, an individual cannot afford minimum essential coverage if the individual's required contribution (determined on an annual basis) for minimum essential coverage exceeds a percentage (8 percent for 2014) of the individual's household income for the most recent taxable year for which the Secretary of HHS, in consultation with the Secretary of the Treasury, determines information is available.

For individuals ineligible for coverage under an eligible employer-sponsored plan, the required contribution is the annual premium for the applicable plan reduced by the premium tax credit allowable under section 36B for the taxable year (determined as if the individual enrolled in a plan through an Exchange for the entire taxable year). The applicable plan is the lowest cost bronze plan available in the Exchange serving the rating area where the individual resides that would cover all members of the individual's nonexempt family taking into account the rating factors that an Exchange would use to determine the cost of coverage. If the Exchange serving the rating area where the individual resides does not offer a single bronze plan that would cover all members of the individual's nonexempt family, the premium for the applicable plan is the sum of the premiums for the lowest cost bronze plans available in the Exchange that provide coverage for all members of the nonexempt family.

Hardship Exemptions

Section 5000A(e)(5) and SEC 1.5000A-3(h)(1) of the final regulations provide that, in general, an individual is exempt for a month that includes a day on which the individual has in effect a hardship exemption certification. A hardship exemption certification is issued by an Exchange under section 1311(d)(4)(H) of the Affordable Care Act (42 U.S.C. 18031(d)(4)(H)) certifying that the individual has suffered a hardship (as that term is defined in 45 CFR 155.605(g)) with respect to the individual's ability to obtain coverage under a qualified health plan. Section 1.5000A-3(h)(3) of the final regulations provides that a taxpayer who meets the requirements of 45 CFR 155.605(g)(3) or 45 CFR 155.605(g)(5) may claim a hardship exemption for a calendar year on a Federal income tax return.

Pursuant to the authority under 45 CFR 155.605(g), the Secretary of HHS has established an additional hardship exemption that applies to individuals enrolling in a qualified health plan through an Exchange prior to the close of the initial open enrollment period. Specifically, an individual may claim a hardship exemption for the months prior to the effective date of the individual's coverage on a Federal income tax return for 2014 without the need to request an exemption from the Exchange. See HHS Centers for Medicare and Medicaid Services, Shared Responsibility Provision Question and Answer (Oct. 28, 2013).

Monthly Penalty Amount

--This is a summary of a Federal Register article originally published on the page number listed below--

Notice of proposed rulemaking and notice of public hearing.

CFR Part: "26 CFR Part 1"

RIN Number: "RIN 1545-BL91"

Citation: "79 FR 4302"

Document Number: "REG-141036-13"

Federal Register Page Number: "4302"

"Proposed Rules"