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Major Blow to Obamacare Mandate: IRS Won’t Reject Tax Returns That Don’t Answer Health Insurance Question

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Reason – by Peter Suderman

How much difference does a single line on a tax form make? For Obamacare’s individual mandate, the answer might be quite a lot.

Following President Donald Trump’s executive order instructing agencies to provide relief from the health law, the Internal Revenue Service appears to be taking a more lax approach to the coverage requirement.  

The health law’s individual mandate requires everyone to either maintain qualifying health coverage or pay a tax penalty, known as a “shared responsibility payment.” The IRS was set to require filers to indicate whether they had maintained coverage in 2016 or paid the penalty by filling out line 61 on their form 1040s. Alternatively, they could claim exemption from the mandate by filing a form 8965.

For most filers, filling out line 61 would be mandatory. The IRS would not accept 1040s unless the coverage box was checked, or the shared responsibility payment noted, or the exemption form included. Otherwise they would be labeled “silent returns” and rejected.

Instead, however, filling out that line will be optional.

Earlier this month, the IRS quietly altered its rules to allow the submission of 1040s with nothing on line 61. 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.

But what would have been a mandatory disclosure will instead be voluntary. Silent returns will no longer be automatically rejected. The change is a direct result of the executive order President Donald Trump issued in January directing the government to provide relief from Obamacare to individuals and insurers, within the boundaries of the law.

“The recent executive order directed federal agencies to exercise authority and discretion available to them to reduce potential burden,” the IRS said in a statement to Reason. “Consistent with that, the IRS has decided to make changes that would continue to allow electronic and paper returns to be accepted for processing in instances where a taxpayer doesn’t indicate their coverage status.”

The tax agency says the change will reduce the health law’s strain on taxpayers. “Processing silent returns means that taxpayer returns are not systemically rejected, allowing them to be processed and minimizing burden on taxpayers, including those expecting a refund,” the IRS statement said.

The change may seem minor. But it makes it clear that following Trump’s executive order, the agency’s trajectory is towards a less strict enforcement process.

Although the new policy leaves Obamacare’s individual mandate on the books, it may make it easier for individuals to go without coverage while avoiding the penalty. Essentially, if not explicitly, it is a weakening of the mandate enforcement mechanism.

“It’s hard to enforce something without information,” says Ryan Ellis, a Senior Fellow at the Conservative Reform Network.

The move has already raised questions about its legality. Federal law gives the administration broad authority to provide exemptions from the mandate. But “it does not allow the administration not to enforce the mandate, which it appears they may be doing here,” says Michael Cannon, health policy director at the libertarian Cato Institute. “Unless the Trump administration maintains the mandate is unconstitutional, the Constitution requires them to enforce it.”

“The mandate can only be weakened by Congress,” says Ellis. “This is a change to how the IRS is choosing to enforce it. They will count on voluntary disclosure of non-coverage rather than asking themselves.”

The IRS notes that taxpayers are still required to pay the mandate penalty, if applicable. “Legislative provisions of the ACA law are still in force until changed by the Congress, and taxpayers remain required to follow the law and pay what they may owe‎,” the agency statement said.

Ellis says the new policy doesn’t fully rise to the level of declining to enforce the law. “If the IRS turns a blind eye to people’s status, that isn’t quite not enforcing it,” he says. “It’s more like the IRS wanting to maintain plausible deniability.”

Tax software companies are already making note of the change. Drake Software, which provides services to tax professionals, recently sent out a notice explaining the change in policy. As of February 3, the notice said, the IRS “will now accept an e-filed return that does not indicate either full-year coverage or an individual shared responsibility payment or does not include an exemption on Form 8965, as required by IRS instructions, Form 1040, line 61.”

The mandate is a key component of Obamacare’s coverage scheme, which is built on what experts sometimes describe as a “three-legged stool.” The law requires health insurers to sell to all comers regardless of health history, and offers subsidies to lower income individuals in order to offset the cost of coverage. In order to prevent people from signing up for coverage only after getting sick, it also requires most individuals to maintain qualifying coverage or face a tax penalty. While defending the health law in court, the Obama administration maintained that the mandate was essential to the structure of the law, designed to make sure that people did not take advantage of its protections.

In a 2012 case challenging the law’s insurance requirement, the Supreme Court ruled that the individual mandate was constitutional as a tax penalty. The IRS is in charge of collecting payments.

Some health policy experts have argued that the mandate was already too weak to be effective, as a result of the many exemptions that are included. A 2012 report by the consulting firm Milliman found that the mandate penalty offered only a modest financial incentives for families making 300-400 percent of the federal poverty line. More recently, health insurers have said that individuals signing up for coverage and then quickly dropping it after major health expenses is a key driver of losses, and rising health insurance premiums.

It’s too early to say whether the change will ultimately make any difference. But given the centrality of the mandate to the law’s coverage scheme and the unsteadiness of the law’s health insurance exchanges, with premiums rising and insurers scaling back participation, it is possible that even a marginal weakening of the mandate could cause further dysfunction. Health insurers have said the mandate is a priority, and asked for it to be strengthened. Weaker enforcement of the mandate could cause insurance carriers to further reduce participation in the exchanges. One major insurer, Humana, said today that it would completely exit Obamacare’s exchanges after this year.

It is also possible that congressional Republicans will make it moot by repealing much of the law, including its individual mandate, which, as a tax, can be taken down with just 51 Senate votes.

Regardless of its direct impact, however, the change may signal that the Trump administration intends to water down enforcement of the health law’s most controversial requirement, even if those steps are seemingly small. The Trump administration may not be tearing Obamacare down entirely, but it appears to be taking steps to weaken the law, however subtly, one line at a time.


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10 Responses to Major Blow to Obamacare Mandate: IRS Won’t Reject Tax Returns That Don’t Answer Health Insurance Question

  1. Sunfire says:

    “It is also possible that congressional Republicans will make it moot by repealing much of the law, including its individual mandate, which, as a tax, can be taken down with just 51 Senate votes.”

    Well golly, that sure would be swell of them to repeal a law that was ILLEGAL and never should have been a law in the first place!

  2. Katie says:

    Since the “Income” tax laws apply ONLY to taxable Federal compensation, those working in the PUBLIC sector in some capacity connected to the fed. govt. or some instrumentality thereof, they are liable to pay “income” tax. The 1040 form is what has been provided for those of us in the PRIVATE sector to rebut the assumption that we earned from our pay for labor any receipts that are taxable. The W-2 and 1099 are the information returns that are rebutted declaring you have earned no “wages.” People this is an awesome truth!

  3. Katie says:

    Important reading in connection with the article.


  4. Katie says:

    42 USC § 18115 – Freedom not to participate in Federal health insurance programs

    No individual, company, business, nonprofit entity, or health insurance issuer offering group or individual health insurance coverage shall be required to participate in any Federal health insurance program created under this Act (or any amendments made by this Act), or in any Federal health insurance program expanded by this Act (or any such amendments), and there shall be no penalty or fine imposed upon any such issuer for choosing not to participate in such programs.


    (Pub. L. 111–148, title I, § 1555,Mar. 23, 2010, 124 Stat. 260.)

    References in Text

    This Act, referred to in text, is Pub. L. 111–148, Mar. 23, 2010, 124 Stat. 119, known as the Patient Protection and Affordable Care Act. For complete classification of this Act to the Code, see Short Title note set out under section 18001 of this title and Tables.

    • Henry Shivley says:

      Article the 4: The right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause, supported by Oath or affirmation, and particularly describing the place to be searched, and the persons or things to be seized.
      Any notion of any government compelling a performance from a free national is null and void, as it represents a seizure of the person and/or their property without the due process of the common law, which the government agent is forbidden to participate in, as a government agent.
      The notion of public laws derived from titles, statutes, is erroneous, as the government can make no law to operate in the common law jurisdiction. What they call public law can only be enforced on government agents within the government mechanisms. And Title 42, being federal statute can only operate in the District of Columbia.
      This notion of public law flows directly from the treasonous, unconstitutional, 14th Amendment, which seeks to replace our common law Bill of Rights with statutory civil rights, making the government a third party in our lives. It is not applicable to the American national. We don’t need it. We have the superior law and we should never accept the public law, even if it seems to want to protect us.
      The government enforces public law which cannot exist outside of government and the people enforce common law, which is superior to the government.
      Any public law that one might think is a good thing, I tell you is nothing more than poison candy. What the government giveth, the government can taketh away.

      • tc says:

        Yep. It’s that whole Rights vs. Privileges thing.
        Crazy people marching cause they don’t got their civil privileges.
        “Where’s my privileges?”
        “Somebody give me some privileges!!!”
        “I wanna be privileged!!!”
        And wearing vagina hats.
        If they can talk some idiots into dressing up like giant vaginas then they can talk em into anything.
        I don’t need no privileges.
        I gots my Secret Bill of Rights Society lapel pin and matching belt buckle.
        And enough ammo to keep the cops out of my front yard for at least two weeks.

  5. Katie says:

    Henry, in total agreement with you concerning public law and our common law.
    Henry, I asked Pete for some links I could read regarding your comment, he sent these and said this.
    “Failing to understand that by the design of the tax law (and the tax) individuals voluntarily take upon themselves the operation of the relevant statutes (or have that presumed thanks to the erroneous allegations of others, unless and until those allegations are rebutted).
    This is true of most federal law in one way or another. It doesn’t matter how or whether federal jurisdiction is limited by law or principle in these cases– whatever may be true in that regard, anyone can invoke that jurisdiction upon themselves (or upon others who don’t know enough to reject it, or how to do so).”
    I will say, the “erroneous allegations” Pete suggests are the W-2 and 1099 or any other information return provided ignorantly by the “employer” “payee” to the one working as well as to the IRS. Over time this has occurred and become the norm for most businesses to issue these information returns, of course only to the benefit, until people learn the tax truth and facts, and rebut them, of an over bloated money hungry bureaucracy. Until we shoot em out of here, looks like we gotta do a lot of but kicking-REBUTTING.

  6. Katie says:


    • Henry Shivley says:

      Once we get done hanging them, you can use them for a pinata, that is if you can get past the smell of the shit running down their legs. 🙂

  7. NC says:

    I’m sure they’ll put those without health insurance on a special list, though.

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