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One of the most debated parts of the health care law is the requirement that most Americans buy insurance starting this year. If they don’t, they face a fine of $95 or 1 percent of their income, whichever is more.
But it’s not clear that the IRS will deploy much in the way of resources to aggressively search for individuals who don’t get coverage this first year. Enforcement of the individual mandate likely will be a huge challenge for the agency, both because of the difficulties in figuring out who doesn’t have insurance and the political problems it would pose for the Obama administration.
“I’d be very surprised if there’s much in the way of enforcement. It just doesn’t seem plausible,” said Federal Policy Group Managing Director Ken Kies, a former top congressional aide. “The IRS is in a tough spot. They don’t have the resources to do this. This is a whole different responsibility for them they never had before.”
The insurance requirement has never been popular in polls, and congressional Republicans have made it a major issue. This month, House Republicans unveiled a bill (HR 4064) to delay the requirement, often called the “individual mandate.”
But it’s not clear if a postponement is even needed given the realities faced by the IRS and the fact that many people will be exempt.
The first question: How will the agency know if someone didn’t have health coverage in 2014? The simplified answer: Taxpayers will tell them. If confused or dishonest taxpayers don’t report it accurately, chances are the IRS will not know right away.
Even if the Obama administration wanted to track down every person who did not have coverage in 2014, the agency will not have all the data it needs to accomplish that. This year the IRS is not expected to have any massive database pinpointing which taxpayers have coverage. With 140 million tax returns to process, the agency will need to primarily rely on self-reporting the first year.
“Individuals will report their own coverage on the 2014 income tax return that they file in 2015,” wrote IRS officials in an emailed response to questions. “The accuracy of the information shown on the tax return is the responsibility of the taxpayer.”
The exchanges also will report who’s on their insurance rolls, but the Congressional Budget Office projects that will only account for about 6 million Americans.
This situation is expected to just be temporary, though — there will be more detailed reporting by employers and insurers in later years that will give the IRS a fuller picture of who’s insured.
The law’s authors and regulators also allow for a long and growing list of exemptions to the mandate, making the IRS enforcement duties more complex. The latest came when the administration exempted people whose health insurance policies were canceled because the coverage did not meet benefit requirements under the health care law.
A few of these exemptions — such as a waiver for people with a religious objection to health coverage or financial hardship — require individuals to get certificates from the new marketplaces.