Senate Approves Bill to Change ACA’s 1099 Reporting Requirements – Say Ahhh! A Children’s Health Policy Blog

The Senate passed H.R. 4 today to remove the Affordable
Care Act’s enhanced 1099 reporting requirements.  President Obama has not yet indicated whether or not he will sign the bill into law. The White House supports the
bill’s goal of eliminating the enhanced reporting requirements for businesses
but has expressed concerns about the offset that was included to pay for the
lost revenue as it would weaken the affordability protections of the ACA. 

The Senate rejected an amendment offered by Senator
Robert Menendez (D-N.J.) that would disallow the offset if HHS determined that
it would reduce the number of insured individuals or raise insurance premiums.
The amendment failed on a close vote. 

To explain how the offset used in this bill will
weaken the affordability protections of the Affordable Care Act, we turn to the
excellent explanation provided by Katherine Howitt on Community Catalyst’s
Health Policy Hub

Starting in 2014, the Affordable Care Act provides sliding-scale
tax credits to help lower the costs of premiums for people earning up to 400
percent of the Federal Poverty Level (around $73,000 for a family of three.)
The law allows the federal government to pay these tax credits directly to the
insurer each month, so beneficiaries will only be billed for the amount of the
premium they owe in excess of their tax credit. But if a person’s income
changes during the year, they could potentially be eligible for an additional
credit or owe an additional amount when they file their taxes. To strike a
balance between recapturing subsidies and not hitting working families too
hard, Congress placed caps in the ACA on how much low- and moderate-income
families could be required to repay.

Earlier today, that balance was tipped against working
families. Congress paid for the 1099 repeal by increasing the amount by $500,
and sometimes more, that some low- and moderate-income families could have to
repay at the end of the year if their annual income was higher than expected.

For example, a family may start the year off with a very
low income and qualify for substantial premium tax credits each month. Midway
through the year, one family member then gets a new job that raises the
family’s income and offers health insurance, and they stop receiving monthly
premium tax credits. However, at the end of the year that family will have to
repay some of the tax credits they received when their income was lower, since
their annual income turned out to be higher than their expected annual income
when they qualified for the credits. The 1099 repeal bill passed by the Senate
today increases the amount that many families in this situation will have to

This provision is harmful to families and is politically
dangerous because it:

  • Increases
    financial penalties on low- and moderate-income families for having found a
    better job or gotten a raise. These new costs will impose financial hardship on
    already-struggling families.
  • Reduces
    the number of people who will enroll in the advanced tax credits, since they
    will fear this type of unexpected cost. This means fewer people will get the
    coverage they need.
  • Jeopardizes public support for the ACA. Stories of families owing substantial
    unexpected costs could lead to further decline in public support for the law.

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