The IRS struck its first blow against Obamacare mandate

When President Trump signed an executive order shortly after taking office created to weaken the Affordable Care Act, some questioned whether the instructions to federal agencies to look for ways to ease the law's burden on businesses and individuals would have any real bite.

In what looks to be the first real blow to Obamacare before its inevitable death, the IRS is following President Donald Trump's directive to ease up on the Affordable Care Act's requirement that everyone have health care or pay a penalty. Those returns are called "silent returns". The IRS previously announced that starting this year, it would reject returns that didn't include that information.

But, the IRS noted, "The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden" on people complying with Obamacare rules.

Now, however, the IRS said it will accept the returns. The IRS says it still maintains the option to follow up with those who elect not to indicate their coverage status, although it's not clear what circumstances might trigger a follow up.

However, the IRS said "taxpayers may receive follow-up questions and correspondence at a future date".

The IRS didn't exactly shout this decision from the rooftops. "The decision, which took effect February 6, was not announced publicly and Townsend said he has not seen it in writing". It's not in a press release or any other prominent position on the site but on a page that requires several clicks to reach from the homepage.

The IRS says it was acting in direct response to Trump's executive order.

What this should mean is that taxpayers may leave line 61 blank and still have their tax returns processed.

For the past two tax filing seasons, people have been required to indicate on their tax returns whether they have such coverage. Townsend said TaxAct "does not plan" to stop prompting users to complete the line.

One of the rules would require customers to provide documented proof that they should be able to buy insurance outside the open enrollment period - a practice that was fairly lax under Obama's administration. For the 2016 tax year, that penalty is equal to 2.5% of your adjusted gross income (AGI), or $695 per adult and $347.50 per child, up to a maximum of $2,085, whichever is higher.

There is, however, one caveat to this newfound freedom. The mandate remains the law, and people are still supposed to pay a penalty for lacking coverage.

Michael Cannon, the health policy director at the libertarian Cato Institute, said in an interview that the Trump administration under the Constitution is required to enforce the mandate unless Congress decides to change the law. In particular, insurers want Trump and Congress to remove a legal cloud over billions of dollars in subsidies that they are obligated to pay to cover deductibles and copayments for low-income people. The Supreme Court ruled in 2012 that the mandate is constitutional as a tax penalty.

"We're doing our best to work through the uncertainties at the federal level and still considering whether we will continue to offer coverage in the same regions for 2018", Vaughn said Wednesday.

The moves announced separately by the Health and Human Services Department and the IRS don't amount to sweeping changes to the Affordable Care Act.

In the absence of voluntary disclosure, it is unclear how the federal agency would determine a person's coverage status or charge a penalty.

  • Larry Hoffman