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  • The IRS requires taxpayers to confirm their health insurance coverage for the tax year
  • The IRS has a key role in health insurance through tax credits and deductions
  • The IRS uses self-reporting along with systems information to confirm coverage
  • The IRS uses premium tax credit information to track coverage


The IRS can verify the existence of health insurance coverage for any family or individual. The Affordable Care Act set up a system of reports based on sign ups, premium payments, and dropped coverage. The individual or family group taxpayer must also file tax documents at the end of the year which add to the record of participation, set-up the balancing of tax credits, and proof for deductions.

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The Information Network


Health insurance has an information network consisting of the major payers in the health insurance industry under Obamacare. The first group in line are the insurance companies that issue insurance health policies. They work by selling policies on the federal Marketplace and state exchanges. Together, they make the single place to get health insurance, advanced premium tax credits, and other financial assistance authorized by the Affordable Care Act.

Growing the Database

As the exclusive place to get coverage and premium tax credits, millions of eligible subscribers have visited the Marketplace to find insurance options. Visitors that fill out applications get into the overall database. They will get offers of assistance in completing registration and prompts when the application does not move forward quickly.

The CMS performs support functions that help with verification by the IRS. The CMS confirms applicant’s identity; this is a required step before an applicant can use the Marketplace.

Insurance Company Reporting


The most direct method for IRS to verify health insurance is through the reports required from insurance companies. The section 6055 reports consist of every policy issued by an insurance company that meets the requirements for qualified health insurance. This is an authoritative source of information; it is the business records of an insurance company or another provider of health Insurance coverage. The items below describe the participants.

  • Voluntary insurer reports began in 2014. It changed to required Reports for the 2014=5 calendar year.
  • Required insurer reports began in 2016 for policies issued in 2015.
  • Employer-sponsors do not have to report under section 6055, their carriers must report.

Minimum Essential Coverage


The reporting requirement under section 6055 is the primary tool for the IRS to collect data to verify insurance coverage. The standard for required reports is the minimum essential coverage rule. The following health programs have minimum essential coverage:

  • Medicaid meets the requirement in nearly every state.
  • Medicare Part A stands alone as qualified coverage.
  • Original Medicare meets the requirements for essential coverage.
  • Medicare Advantage exceeds requirements for qualified health plans.
  • The CHIP limits its focus to minors.
  • COBRA is the continuation of major medical benefits.

Marketplace Reporting


The Marketplace and state exchanges provide tax credits to reduce the monthly costs of premiums. The Marketplace reports go to the CMS and the consumers. The Marketplace is the first line of administration of the individual mandate that requires continuous coverage.

CMS shapes rules to make the mandate effective incentive to get coverage. The rule is that the provider must meet the requirements of minimum essential coverage, minimum actuarial value, and effective limits on expenses.

  • The Marketplace and Exchanges provide information into the Centers for Medicare and Medicaid. The CMS keeps a running record of participation including lapses and exemptions.
  • The health insurance providers send information to subscribers that confirm their participation, details costs sharing and explains their rights and benefits.
  • Employers that offer health insurance coverage must document their offers, and these reports provide information about coverage and coverage options. Persons with offers of insurance from an employer can only have limited access to the federal Marketplace programs.
  • The IRS tax documents include advisories on those that must file because they received benefits from the Marketplace must adjust tax credits.

Form 1040 Check-off


At the end of the insurance cycle, subscribers must pay taxes or file a tax return. Anyone that received a Marketplace benefit such as premium tax credits must file a return. The form 1040 has a check-off for taxpayers to confirm that they had qualified health insurance for the entire year. This check-off box was meant to be a self-reporting tool for subscribers to improve the processing time for their tax returns.

The IRS has moved away from this requirement in two ways. First, it announced it would process returns that failed to check the box. Second, it announced that they were studying additional ways to reduce the penalties and other burdens of the Affordable Care Act.

Insurers Must Report

Insurance providers must report details of the coverage during the annual cycle to IRS and the insured person.

Insurance providers send information about registration and coverage to the individual or family policyholder and to the  federal government. They report on status and changes such as failure to pay the individual’s share of the monthly premium.

The Marketplace Must Report

The federal Marketplace keeps records on every sign-up and covered policyholder. They maintain a record that shows coverage, persons covered, and any periods of lapsed coverage. The Marketplace provides a report to the IRS of its participant database. The CMS monitoring has the effect of keeping more customers engaged with their plan providers. The

The CMS monitoring has the effect of keeping more customers engaged with their plan providers. The exemptions help consumers restart coverage rather than struggle further to make up missed payments. The CMS role connects to the need at year-end to account for tax credits and balances. One must adjust those used with those unused when determining their refunds or roll over.

Form 1095: Health Care Information


Form 1095 is the health insurance information document. This is a necessary item for those that got coverage through the Marketplace, and they should wait to get this document before filing their returns. Other taxpayers can file before they receive their 1095 information.

  • Form 1095: Health Insurance Marketplace Statement is proof of enrollment in a federal Marketplace plan. This report from the Obamacare exchanges will enable taxpayers to complete Form 8962.
  • Form 1095-B: Health Coverage is a statement from either a health insurance provider or an employer sponsor concerning the recipient’s health coverage. It lists the coverage and dates of coverage.
  • Form 1095-C is taxpayers proof of an offer of coverage from an employer-sponsored health plan.

The Penalty

The idea of the penalty for no insurance coverage was not to apply the provision and punish the resistant citizen The idea was to encourage participation in health insurance and to get regular medical care. The CMS has liberally applied hardship exemption for two to three month periods.

In 2016, the individual shared responsibility payment was $695. Per adult, $347.50 per each child or minor. The per person penalty ran up to $2,085 for the family unit.

The IRS charges on a one-twelfth basis the greater of $2,085 or 2.5 percent of annual family income. Again, the fee charged by the IRS equals one-twelfth of the overall computation for each month without insurance coverage.



The Affordable Care Act contains authority to grant exemptions from the rule requiring qualified coverage for the entire year. The exemptions for situations such as financial hardship can reduce the taxpayer’s obligation to repay funds advanced for health insurance premiums.

Exemptions create a basis for avoiding the individual shared responsibility payment for any period in which the taxpayer or family member lacked qualified health insurance coverage.

Liberally Applied Exemption Rules

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Obamacare put out a lot of information to help people avoid the penalty and get coverage by any means available. The goal was to expand coverage rather than to collect penalty fees. The below-listed items describe coverage options after open enrollment:

  • Special Enrollment Periods are based on qualifying life events. These changes in status require a new sixty-day period to get minimum essential coverage.
  • Medicaid is open year-round for qualified applicants. The rules for Medicaid eligibility come from the states, and the federal government reviews the program standards for fairness.
  • The CHIP is a national program operated by the states with support for the federal government. The CHIP protects minors and children in need of medical care.

The Individual Mandate

The Affordable Care Act requires insurers to accept qualified applicants.They may not discriminate on the basis of prior or existing health conditions. The opposite applies to eligible residents; they must buy health insurance or pay the penalty called the Individual Shared Responsibility Provision.

Open Enrollment Period


Open enrollment is the best opportunity to get qualified health insurance. Plans purchased through the Marketplace or state exchanges have their guarantee that they meet the requirements of law. The close of the Open Enrollment Period ends the opportunity to buy health insurance until the next insurance cycle. Those that failed or refused to get coverage during the open enrollment may have to pay the individual penalty for each month without coverage.

After Open Enrollment

The period after open enrollment can be a long wait to qualified coverage unless one has an exemption or a change in status that qualifies for a special enrollment period. The options available include the below-listed items. Some state exchanges have extended the time for enrollment. Occasionally, the federal government has done the same.

These extra periods for sign-up offer the last opportunity for some applicants to get insurance without waiting many months.

  • Exemptions can excuse the lack of insurance for one or two months of the annual cycle. Essentially a type of forgiveness, this exemption recognizes the occasional impact of financial urgency. The document that establishes this exemption is a message or statement from the federal Marketplace operated by the Centers for Medicare and Medicaid.
  • Life Events are changes in status that require a new opportunity to purchase health insurance. Life events include a number of common occurrences that states and the federal government have recognized. The sixty day period to get new insurance runs from the event or the notification of the event.

Self-employed Tax deduction

Self-employed persons can deduct the costs of health insurance from their taxable income. The self-employed tax deduction is not dependent on other factors such as the size of the medical expense in proportion to overall income.

Exemptions Procedures


The IRS will know all that has been recorded about coverage, covered family members, and any periods without coverage. The IRS also has information about exemptions. They will not apply them automatically. The Marketplace system provides some exemptions for temporary hardship. The CMS notifies subscribers that have had a lapse in payments

The CMS notifies subscribers that have had a lapse in payments for a two-month grace period for reinstatement. The Marketplace or the Centers for Medicare and Medicaid has authority to issue exemptions for several kinds of hardship. The below-listed items describe some widely used exemptions.

  • The temporary hardship exemption covers one to two months; it forgives the uninsured months without penalty
  • The Affordability exemption for family and individual policies. If there are no available policies at 8.13 percent of annual family income, then the applicant can get an exemption for affordability.
  • The exemption for affordability for employer-sponsored plans is 9.5 percent of annual family income.

Role of the CMS

IRS is not the primary administrative agency that operates the health insurance program. The rules and regulations come from IRS, the Department of Labor, and the Department of Health and Human Services. The Agency with direct oversight of the Marketplace and health Insurance plans is the Centers for Medicare and Medicaid.

The role of the CMS in verification of coverage is significant The CMS monitors the premium payments and detects those that lapse or miss two or more payments. They send out notices to the policyholder and the insurance company informing of their determinations on the hardship exemption.

CMS Provides ID Protection

Security must be at the root of any system that accounts for individuals and health information. ID proof is the role of the CMS. When applicants use the Marketplace website, the CMS undertakes an examination of background factors to confirm and verify identity. The CMS uses its best resources internally and commercial contractors externally to focus on identity and reliable proofs such as credit information.

Verification of Identity Issues


The CMS works with applicants that cannot easily verify their identity. They can provide an opportunity to complete the application for a Marketplace account while continuing to work through the issues of Identity verification. The danger is that someone might abuse an identity and create obligations using another person’s name.

The Current Status is Change


Under executive order, the IRS announced that there might be changes ahead in the filing process and claims for health insurance deductions. Since the situation is new and yet to be resolved, taxpayers should stay alerted for news about the filing process.

Until such additional changes emerge, they should follow existing procedures for proof of coverage, tax credits, and medical expense deductions. The parameters of change may be deceptive, the Obamacare approach to verification, exemptions, and coverage were favorable to consumers. There were many efforts and arrangements to help uninsured applicants avoid the penalty provision.

IRS Can Verify Coverage


During the insurance cycle, IRS can verify coverage by the reports from the Marketplace under section 6055. At the end of the cycle, IRS can verify the information required on the tax return.

Form 1040 requires information from the consumer. The IRS has since announced that it will process returns that fail to indicate coverage for the entire year. There may be further changes regarding enforcement of the individual shared responsibility provision.

The Marketplace issues an annual report for each policyholder that states a requirement to file taxes to resolve issues affecting premium tax credit. These notices go to every person that used an advanced tax credit.

When selecting insurance that meets the requirements for minimum essential coverage, comparison shopping is a preferred method. Comparison shopping can help select high-value policies that fit the consumer’s needs.

Enter your zip code now and compare health insurance quotes below to guarantee coverage by the next tax season.

[su_spoiler title=”References:” icon=”caret-square” style=”fancy” open=”yes”]

  1. http://obamacarefacts.com/insurance-exchange/health-insurance-marketplace/
  2. http://obamacarefacts.com/2015/04/06/1095-a-form-updates-treasury-and-irs-april/
  3. https://www.irs.gov/affordable-care-act/questions-and-answers-on-information-reporting-by-health-coverage-providers-section-6055
  4. https://www.federalregister.gov/documents/2013/08/30/2013-21157/shared-responsibility-payment-for-not-maintaining-minimum-essential-coverage
  5. http://obamacarefacts.com/tax-deductions-for-medical-expenses/
  6. https://www.irs.gov/uac/am-i-eligible-for-a-coverage-exemption-or-required-to-make-an-individual-shared-responsibility-payment
  7. http://obamacarefacts.com/2015/01/15/rise-in-healthcare-coverage-and-affordablity/
  8. http://obamacarefacts.com/2016/03/03/paying-back-tax-credits/
  9. https://www.irs.gov/affordable-care-act/individuals-and-families/reporting-health-coverage-on-irs-tax-forms
  10. http://obamacarefacts.com/questions/where-does-tax-penalty-money-go/
  11. https://www.healthcare.gov/health-coverage-exemptions/forms-how-to-apply/
  12. http://obamacarefacts.com/form-8965-health-coverage-exemptions/
  13. https://www.irs.gov/affordable-care-act/individuals-and-families/individual-shared-responsibility-provision
  14. https://www.healthcare.gov/quick-guide/dates-and-deadlines/
  15. https://www.irs.gov/affordable-care-act/four-tax-facts-about-the-health-care-law-for-individuals
  16. https://www.irs.gov/uac/newsroom/dont-miss-the-health-insurance-deduction-if-youre-self-employed
  17. https://www.healthcare.gov/how-we-use-your-data/
  18. http://obamacarefacts.com/2014/12/02/family-affordability-glitch/
  19. https://www.medicare.gov/about-us/affordable-care-act/medicare-and-the-marketplace.html
  20. https://marketplace.cms.gov/outreach-and-education/your-marketplace-application.pdf
  21. https://marketplace.cms.gov/technical-assistance-resources/submitting-supporting-documents.pdf
  22. http://obamacarefacts.com/2017/01/23/trumps-executive-order-on-obamacare-explained/
  23. https://www.healthcare.gov/taxes-reconciling/


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