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IRS: ACA’s Coverage Requirement Still in Effect

The Affordable Care Act’s (ACA) individual mandate remains in force, so taxpayers “should file their tax returns as they normally would,” the IRS reminded taxpayers yesterday. Specifically, they should continue to indicate on their tax return whether they were insured last year or exempt from the requirement to have health coverage, or whether they owed a penalty for not having coverage.

President Trump’s January 20 executive order directing agencies to “minimize … regulatory burdens” under the ACA prompted the IRS to abandon plans to tighten the reporting of health coverage this tax-filing season. But it didn’t change the individual mandate.

In the first two tax-filing seasons since the individual mandate took effect, the IRS processed returns even if they were “silent,” meaning they didn’t report the filer’s health insurance coverage status. Last year, for example, the IRS processed as many as 4.3 million silent returns.

To lower the number of silent returns, the IRS for tax year 2016 planned to reject silent returns at the time of filing and instruct the taxpayer to correct the omission to minimize taxpayers’ risk of future correspondence from the IRS, including owing an individual mandate penalty. But the President’s January 20 order prompted the agency to stop those plans, and the IRS recently informed tax preparation software vendors that it would continue to accept silent returns. In response, some vendors will now e-file returns even without a response to the health coverage questions, though other vendors will continue requiring answers to these questions prior to e-filing.

Media coverage of the IRS’s decision to continue accepting silent returns will likely confuse tax filers, who may mistakenly think the individual mandate is no longer in effect and may therefore not enroll or stay enrolled in coverage. More generally, it could undermine the individual health insurance market since healthier people are most likely to drop coverage, thereby weakening the risk pool and raising premiums. Like the Administration’s cancellation of ads at the end of open enrollment and new rule raising consumer health costs, this step undercuts the “market stability” that the Administration claims it wants to promote.


Director of Health Insurance and Marketplace Policy