Under the Affordable Care Act, Marketplaces provide a single point of access for individuals to enroll in qualified health plans, apply for income-based subsidies to offset the cost of these plans, which are paid directly to health-insurance issuers and, as applicable, obtain an eligibility determination for other health coverage programs, such as Medicaid or the Children’s Health Insurance Program. The Department of Health and Human Services (HHS) operates the Federally-Facilitated Marketplace (FFM) in about two-thirds of the states.

To be eligible to enroll in a QHP through a Marketplace, an individual must be:

Marketplaces, in turn, are required by law to verify application information to determine eligibility for enrollment and, if applicable, determine eligibility for the income-based subsidies. These verification steps include:

In particular, the ACA requires that consumer-provided information be verified and that determinations of eligibility be made, through either an electronic verification system or another method approved by HHS. To implement this verification process, HHS developed the Federal Data Services Hub (FDSH), which acts as a portal for exchanging information between the FFM, State-Based Marketplaces (SBMs), and Medicaid agencies, among other entities, and HHS’s external partners, including other federal agencies. The Marketplace uses the FDSH in an attempt to verify the applicant information necessary to support an eligibility determination is consistent with external data sources.

For qualifying applicants, the Act provides two forms of subsidies for consumers enrolling in QHPs, both of which are paid directly to insurers on consumers’ behalf. One is a federal income tax credit, which enrollees may elect to receive in advance, and which reduces a consumer’s monthly premium payment. This is known as the APTC. The other, known as cost-sharing reduction (CSR), is a discount that lowers the amount consumers pay for out-of- pocket charges for deductibles, coinsurance, and copayments.

When applicants apply for coverage they report family size and the amount of projected household income. Based, in part, on that information, the Marketplace will calculate the maximum allowable amount of APTC. An applicant can then decide if he or she wants all, some, or none of the estimated credit paid in advance, in the form of payment to the applicant’s insurer that reduces the applicant’s monthly premium payment.

If an applicant chooses to have all or some of their estimated credit paid in advance, the applicant is required to “reconcile” on his or her federal tax return the amount of APTC payments the government sent to the applicant’s insurer on the applicant’s behalf with the actual tax credit for which the applicant qualifies based on household income and family size reported on the return.

To facilitate this reconciliation process, the Marketplace reports monthly Exchange Periodic Data (EPD) to IRS and sends enrollees Form 1095-A, Health Insurance Marketplace Statement which reports, among other things, the amount of APTC paid on behalf of the enrollee. This information is necessary for enrollees to complete their tax returns. The accuracy of information reported on this form is important for determining an applicant’s tax liability, and ultimately, government revenues.

The ACA added IRC 6103(l)(21), which permits the disclosure of return information to assist Marketplaces with income verification as part of the eligibility and enrollment process.

The ACA added IRC 36B(f)(3), which requires Marketplaces to report certain information to the IRS and to individuals who enroll, or enroll a family member, in a QHP through the Marketplace.

See ACA home page: https://www.irs.gov/affordable-care-act for additional information and authority.

Commonly used terms relating to the Affordable Care Act:

ACA home page: https://www.irs.gov/affordable-care-act

Form 1095-A, Health Insurance Marketplace Statement

Form 8962, Premium Tax Credit (PTC)

Pub 501, Exemptions, Standard Deduction, and Filing Information

The IFSV process receives requests and provides responses from/to HHS regarding household income and family size for an applicant requesting an eligibility determination for financial assistance.

Household income is the sum of the following:

MAGI is the sum of the following:

In addition to income and family size information, IRS also provides information to the Marketplace on each tax filer and tax filer spouse reported that failed to reconcile (FTR) APTC received in a prior year.

HHS sends requests to IRS that are directed to the IFSV application via Enterprise Service Bus (ESB).

ESB will include data from the Coverage Data Repository (CDR) to IFSV along with the HHS request. IFSV will then process the request and send a response back to HHS via ESB.

Requests are generated and processed based on individual transactions initiated by the Marketplace in near-real-time. However, the annual redetermination process involves the generation and processing of batch requests.

The following conditions and/or assumptions apply to the IFSV process.

Initial income verifications by Marketplaces are performed during the open enrollment period and throughout the year if an individual enrolls during a special enrollment period.

Income verifications for self-reported changes in income during the coverage year will occur throughout the year.

Annual redeterminations for all individuals enrolled in a QHP through the Marketplace and who previously requested an eligibility determination for financial assistance will generally occur between August and October.

IFSV performed for the purposes of determining eligibility for SRP exemptions will be performed throughout the year.

HHS and IRS will exchange information via the FDSH in near real-time during normal service hours in accordance with separately executed service level agreements between HHS and IRS.

Upon request and subject to strict privacy and security rules, IRS will disclose the following information about taxpayers applying for assistance or certain SRP exemptions:

In general, IRS will provide HHS with the most recent tax return information on file.

This information may not be disclosed to any other entity, including individuals applying at a Marketplace or individuals involved in assisting consumers in the application process, e.g., navigators, agents and brokers.

During open enrollment each year, the IRS conducts a FTR analysis as part of IFSV. As part of this effort, the IRS will always run two years of FTR.

To support this functionality, a UWR must be submitted to Information Technology (IT) by July 31 of the year prior to the open enrollment period.

In order to update the APTC calculator by September 1 to service re-enrollment requests in advance of open enrollment, a UWR to update the APTC table must be submitted by January 31 of the enrollment year. The applicable percentage table is published in a revenue procedure issued by IRS Counsel and should be available before January of the enrollment year and one year in advance of the applicable tax year.

To update Pub 501 reference tables, a UWR must be submitted by the IT established work request submission deadline, which is currently January 31 of the calendar year. The UWR submitted in January acts as a placeholder UWR which is routed for approval. The business then updates the placeholder UWR with the new figures when the tax year Form 1040 instructions and / or Pub 501 are published in December.

In order to calculate these amounts, the computation engine uses the following inputs: information the applicant provided about their family composition, projected household income, and other factors, such as whether those enrolling are eligible for other, non-Marketplace coverage.

The IRS does not retain information about the applicant once it has sent the results to the Marketplace through the FSDH. IRS and HHS retain the raw data they exchange only to provide calculation results and perform IT integrity checks.

Marketplaces retain a record of the amount of APTC that the applicant chooses to accept and reports the amount paid on the consumer’s behalf to IRS.

Marketplaces must report the following information on Form 1095-A annually to the IRS for each tax household enrolled in a QHP:

Marketplaces must also provide the monthly premium for the plan in which the individuals enroll, however:

Marketplaces must provide the following information monthly to the IRS for each tax family (families for which there is a responsible adult as well as families for which there is a tax filer) enrolled in a QHP:

On a monthly basis the Marketplace must generate a transmission, otherwise referred to as Exchange Periodic Data (EPD), which contains information about policies purchased through the Marketplace and SRP exemption determinations for the purposes of IRS tax administration. See IRM 25.21.3.4.2 for a list of EPD data elements reported by Marketplaces, as required under IRC 36B(f)(3).

The monthly data feed is cumulative containing monthly data for each month from the start of the coverage year in January through the most recent completed month. For example, a monthly transmission produced in September would contain information for each month from January through August.

IRS receives monthly data and performs data integrity and quality checks and communicates with Marketplaces to correct errors.

Each subsequent EPD submission overlays any previously accepted and processed submission.

Marketplaces are required to submit EPD through the FDSH for each month during the coverage year, include new data from the previous month and all months cumulative data from the calendar year.

EPD submissions may also contain corrections, and added or removed policies (if any) for previous months identified by Marketplace.

The monthly transmission will only include policy information for QHPs sold through the Marketplace.

Monthly EPD are expected to be sent on or before the 15th of each month following the month of coverage and will include data through the end of the previous months.

Marketplaces must correct erroneous or outdated information in the next monthly report.

If the monthly information must be corrected after the final monthly submission on January 15 following the coverage year, corrections should be made as quickly as possible and submitted by the 15th of the month following the month in which the correction was identified.

There will be one 1095-A per policy. In the event multiple families are enrolled in a single QHP, a 1095-A must be sent to each tax filer or Other Relevant Adult.

Taxpayers will use the 1095-A to compute the amount of premium tax credit and file an accurate tax return. The IRS will receive the same information as the tax filer (or other relevant adult).

The 1095-A will only include policy information for QHPs sold through the Marketplace.

The 1095-A should represent a subset of the data elements provided in EPD.

Form 1095-A are researchable using the IDRS command code IRPOL or Business Objects Form 1095-A application.

Marketplaces must send the Form 1095-A to the tax filer (or other relevant adult) and a copy electronically transmitted to IRS no later than January 31 of each year.

One of the truly unique characteristics of the ACA from a tax administration standpoint is the receipt, processing, and use of third party data for at-filing processing checks.

Some of the key elements used at-filing include SSNs, Exchange Identifier, Policy Number, premium, APTC, and second lowest cost silver plan (SLCSP) premium amounts.

In addition, Marketplaces provide other data elements required to support various aspects of at-filing and post-filing tax administration.