While attention has been laser-focused on Affordable Care Act (ACA) repeal legislation introduced into the House on March 6, two ACA-related reports have been released that have received little attention but are worthy of note. First, the Congressional Budget Office (CBO) released on March 3, 2017 a set of answers to a series of questions posed by the House Committee on the Budget, one of which relates to the ACA. In response to a question regarding how the cost of the ACA compares to cost projections at the time it was adopted, CBO Director Hall stated that in 2017 the CBO and Joint Committee on Taxation projected that the gross cost of the ACA’s insurance coverage provisions would be $214 billion in 2019, but that they are now projected to cost $148 billion. The CBO attributed the reduction in ACA cost to lower than anticipated marketplace enrollment and health care costs, and to the Supreme Court’s decision making the Medicaid expansion optional with the states.
Second, on March 2, the Treasury Inspector General for Tax Administration (TIGTA) released a report on Verification of Premium Tax Credit Claims During the 2016 Tax Filing Season. The report analyzes the IRS’ processing of advance premium tax credit filings in 2016 for the 2015 tax year in great detail.
As of June 30, 2016, the IRS had processed 5.27 million filings involving $20.3 billion in premium tax credits (PTC) and $18.9 billion in advance premium tax credits (APTC). A total of 2.2 million taxpayers received too little APTC and claimed $1.4 billion additional PTC at filing; 2.9 million taxpayers received $3.8 billion in excess APTC, $2.4 billion of which was below the repayment limit and thus was owed back.
Approximately 1 million taxpayers, who received $3.1 billion in APTC, had not filed their tax return and 8962 reconciliation form or requested an extension as of July 1, 2016. About half of these were sent notices by the IRS of their possible termination of APTC for future years, but about half had already been sent such a notice.
The TIGTA determined that as of May 1, 2016, the IRS had correctly determined the amount of tax credits for 4.7 million (97 percent) of the 4.9 million returns filed as of that date. For the remaining 154,744 tax returns, either programming errors resulted in an inaccurate PTC computation or tax returns were not identified as potentially erroneous because the discrepancy amount was below the dollar tolerance for which the IRS will review a claim. The IRS failed to identify potential errors in 123,084 of these returns because it did not receive exchange periodic data from the exchanges. (The TIGTA was additionally unable to determine the accuracy of another 157,931 returns.)
The report criticized some state exchanges for not providing data promptly to the IRS, reducing the ability of the IRS to verify premium tax credit claims. It further criticized the IRS for not cross-checking data obtained from the exchanges with 1095-A reports. It found mismatches between exchange data and the 1095-A forms in 6 percent of cases. The TIGTA also identified problems in shared policy allocations, for example cases where a child is claimed as a dependent by one parent but on the policy of another, and with claims involving marriages part way through a year.
Perhaps most distressingly, the TIGTA found that of the 342,450 notices sent by the IRS to exchanges notifying them that taxpayers who had received APTC had not filed their taxes for 2015, 87,271 (25 percent) of the individuals had in fact filed. The errors were mostly due to the IRS not using the most current filing data to identify individuals who had not filed. These errors put these individuals at risk of having their APTC terminated.
The TIGTA made six recommendations to the IRS, four of which were accepted. The IRS response noted, however, that limited resources preclude it from taking some of the steps recommended.