In addition to the grueling IT challenge state health benefit exchanges have faced processing the initial surge of enrollments for 2014 coverage for individuals and small employers, their next IT test will be how well they serve as agents of the federal Internal Revenue Service.
The exchanges provide a critical tax reporting and monitoring function for the IRS, reporting small employer contributions to exchange qualified health plans (QHPs) offered their workers and advance income tax credits to subsidize QHPs purchased by individuals. The exchanges also track and report changes in monthly income of households purchasing tax-subsidized QHPs. Finally, the exchanges are charged with processing requests under the various exemption categories specified in the Affordable Care Act that allow individuals to avoid tax penalties for not having health coverage starting in 2014 or to qualify to purchase catastrophic plans.
The key test will be how well the exchanges work on an ongoing basis to obtain and process taxpayer reported data and interface with IRS data obtained through the federal data services hub that serves both federally operated and state-based exchanges. How proficiently and accurately the exchanges execute that function isn’t likely to be fully known until early 2015 when individuals and small businesses file their 2014 tax returns. That’s also when individuals must reconcile amounts they received as advance tax credits reported by the exchanges to purchase exchange-based plans with their actual earnings.
Presumably performing this critical tax function will be easier in the nearly three dozen states where the federal government is operating the exchanges. But with the IT snags in the enrollment process, there can be no guarantees it will go smoothly.
Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email