IRS Deals Major Blow To Obamacare Mandate

Tyler Durden's picture

Submitted by Peter Suderman via,

The tax agency has stopped requiring individual filers to indicate whether they maintained health coverage or paid the mandate penalty as required under the law

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.

Correction: The IRS did not reject silent returns last year, as this story originally indicated. The plan was to go into effect this year, for 2016 returns, but the IRS reversed course on February 3. Reason regrets the error.

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Sweet Chicken's picture

"Shared responsibility"? 

Fuck you

Boris Alatovkrap's picture

"Shared responsibility"? That is equivalent of "Collective Guilt" or "Social Justice"? Socialism is work great… until run out of other people money.

Joe Davola's picture

Last year it took my employer (and the clueless group they farm our benefit management out to) three tries to get us a copy of the form with the correct company name, location and information on it.  Finally they said "Oh well, we tried" - claiming they were within their safe-harbor by attempting to get us the right information.  No one from the IRS came calling, so I figure it was being ignored already.

YouJustMadeTheList's picture
YouJustMadeTheList (not verified) Joe Davola Feb 15, 2017 3:48 PM

"Shared responsibility"


I can tell you what it DOESN'T mean...


It means that none of that is coming out of Lois Lerners $100k a year pension...

847328_3527's picture

"social justice" = YOU pay for ME

eatthebanksters's picture

Koskinen is playing nice with the Trump Adminstration to keep his ass out of jail.

jeff montanye's picture

repeal obamacare and replace it with medicare and the related insurance ppos for everyone, with negotiated drug and healthcare prices like canada, keep no refusal for pre existing conditions and go from there.

only a republican can do it and likely the only republican that can do it is donald trump.
bonderøven-farm ass's picture

Obese basement-dwelling, Hot-Pocket indulging, Ding Dong demolishing, Marxist fuck-tards need you to stay healthy to support their gluttony.

Roughly 70% of health issues are life-style related....

'Shared responsibility'.....Livin the dream 

Chief Wonder Bread's picture

just go full Denninger on the son of a bitch.

Stackers's picture

It worked for Clinton with Dont Ask Dont Tell....

nmewn's picture

All this winning is wearing me out!  ;-)

chubbar's picture

Anyone know why that treasonous cunt was never prosecuted? Couldn't be for lack of evidence.

BarkingCat's picture

Trump should go after her.

Mer her pension a window with bars and 3 crappy meals a day.....for the rest of her life.

phatfawzi's picture

i would go after her and give notice to the media, keeps fucking with me or anyone around me and she will be in jail during the primaries for 2020. 

Arnold's picture

"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."


This  hypocrisy is not galling to the Shadow Government when they choose to break the existing law.

froze25's picture

Well could he simply give an exemption to all living human US citizens?

Son of Loki's picture

The Supreme Cicrus should have declared this mandate unconstitutional from the start.

Forcing threatening taxpayers unless they pay Big Insurance and subsidize no-pays is very very shitty.

Now, fewer and fewer docs even accept this pile of dung.

WayPastCaring's picture

It was irrelevant to me because I simply don't recognize the law as Constitutional, and I completely ignored that box on my tax return and since I never get a refund, they could not do shit to me since they can only deduct the penalty from any refund due. And they never said a peep to me about my 2016 return.

At some point (and I reached mine with this law), civil disobedience is required - my limit was the government attempting to forcibly control the delivery and execution of my health care and the forced attempted redistribution of my resources to others without my consent to the potential detriment of my health.


NoPension's picture

" your return" .....civil disobedience! Haha!

You haven't reached your limit, yet.

Fuck em, boys.

The answer to your question....yes.

Billy the Poet's picture

living human US citizens


That ignores two substantial voting blocks.

Billy the Poet's picture

Dogs are swing voters. They might vote with the sheep, then again maybe they'll vote against them.

Billy the Poet's picture

Now paying the fine will be voluntary just like paying the Federal Income tax supposedly is. Just ask Harry.

WillyGroper's picture

lerner's is fahreeee, donchano?

just like the ride she got on the hard drive.

Obadiah's picture

Hey what happens to these leaches when their Pensions in Fed Bucks go kaplooie and we switch over to the US Treasury Dollars??


Alananda's picture

Always good to read your comments, Boris.  Thanks.

Boris Alatovkrap's picture

Boris is love for you too! … in manly way.

peippe's picture

yes, would hope it would be  manly love, 


Billy the Poet's picture

They'll get you Boris and your little dog Donald too. Or so they say.

Hulk's picture

"in manly way"  I don't think that was the answer most of us wanted to hear Boris !!!

GreatUncle's picture


"Surprise", they don't run out of other peoples money no more ... they just add it to the debt ... $20T and growing. /S


blanketof ash's picture

I don't understand. Why the /S tag?

JRobby's picture

Insurance risk pool

Like most financial concepts, it serves a valid purpose in society until the criminals bastardized it.

Then it turns into another anal rape of society. 


Chuck Walla's picture

"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."

Maybe because it's really a revenue generator disguised as Liberal Progressive "Give a Shite"?

Mac Sledge's picture

i guess that's double speak for "white privilege."

Syrin's picture

People, this is actually BAD news.   The mandate needs to be in place and enforced to the fullest letter of the law.   People need to SUFFER and feel the consequences of this DISASTER.   If you remove the painful aspects, it will stay in place.  If it bankrupts families, they will put pressure on the spineless liberal republicans to remove this fucking piece of shit.

thebigunit's picture

The flaw in your theory is that when people feel pain, they often don't realize who is causing the pain.

The underclass (i.e. the Democrat Party base) is particularly clueless.  Their kneejerk reaction is for the government to fix everything, even government caused problems.

hannah's picture

the 'underclass' isnt paying for obamacare so they dont care. the middle class needs to feel the pain so they stop supporting the left defacto support for obamacare...and other things.

847328_3527's picture

"I'm outraged..."


~ Soweeto Osama

r3phl0x's picture

Give me a break - most of the working middle class already hates the ACA & the US healthcare system generally. That's part of what brought Trump & the repubs back into office bigly.. not enforcing this unconstitutional tax "mandate" will help a little until the entire clusterfuck can be repealed/replaced.

Syrin's picture

Sadly, you are right, but in this particular case, EVERYONE knows it is ObamadoesntCare, and is highly unpopular.   Polls bear that out. 

Billy the Poet's picture

If you remove the painful aspects, it will stay in place.


Ignoring the mandate maximizes the pain because with rootless, healthy youth free to opt out the workaday family types who want insurance will have to bear even more of the burden of those with pre-existing conditions.

JRobby's picture

Deeper into slavery

Like digging a pit at the bottom of the ocean

ExplodingEntropy's picture

In a normal situation you are correct. But saying the ship's doctor is corrupt before the titanic sinks is... correct, but, at this point, does it really even matter anyway?

mkkby's picture

I see a trap. You lie on your return and you are vulnerable to criminal charges. It's not a *mistake*, and they can audit anything going back 7 years. Will Trump be around then, or will IRS change their minds?

Not worth the risk... to me, at least.

John_Coltrane's picture

There is no database available of who are covered by insurance. So, there is no way for the IRS to determine who is actually covered in a given year. So, no one, including me, who can adjust their W-2 or other source of income to have no refund (and you should already be doing this anyway) is or has been paying a dime into this fraud.

It turns out that just as many paid the fine as obtained a plan through the Obamacare website.
So, people don't like to be told what to do. And since many millions more just refused to check the box the level of non-compliance is huge. Everybody, except the freeloading people who got "free" medicaid coverage hates Obamacare. Just repeal it completely via budget reconciliation.

Republicans senators- The FSA is never going to vote for you in any circumstance-so don't hesitate-repeal it. And everybody else hates this monstrosity. That's all you need to win in a landslide in the next election cycle and get a filibuster proof 60 majority in the Senate. Then eliminate the Dept. of Education, Energy, TSA etc. in 2018.