Definition of the Term “Coverage Month” for Computing the Premium Tax Credit

DEPARTMENT OF THE TREASURY <SUBAGY>Internal Revenue Service</SUBAGY> <CFR>26 CFR Part 1</CFR> <DEPDOC>[REG-116787-23]</DEPDOC> <RIN>RIN 1545-BR31</RIN> <SUBJECT>Definition of the Term “Coverage Month” for Computing the Premium Tax Credit</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Internal Revenue Service (IRS), Treasury. <HD SOURCE="HED">ACTION:</HD> Notice of proposed rulemaking and public hearing. <SUM> <HD SOURCE="HED">SUMMARY:</HD> This document contains proposed regulations that would amend the definition of “coverage month” and amend certain other rules in existing income tax regulations regarding the computation of an individual taxpayer's premium tax credit (PTC). The proposed coverage month amendment generally would provide that, in computing a PTC, a month may be a coverage month for an individual if the amount of the premium paid, including by advance payments of the PTC (APTC), for the month for the individual's coverage is sufficient to avoid termination of the individual's coverage for that month. The proposal also would amend the existing regulations relating to the amount of enrollment premiums used in computing the taxpayer's monthly PTC if a portion of the monthly enrollment premium for a coverage month is unpaid. Finally, the proposed regulations would clarify when an individual is considered to be ineligible for coverage under a State's Basic Health Program (BHP). The proposed regulations would affect taxpayers who enroll themselves, or enroll a family member, in individual health insurance coverage through a Health Insurance Exchange (Exchange) and may be allowed a PTC for the coverage. This document also provides a notice of a public hearing on these proposed regulations. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Electronic or written comments must be received by November 1, 2024. A public hearing on this proposed regulation has been scheduled for December 13, 2024, at 10:00 a.m. ET. Requests to speak and outlines of topics to be discussed at the public hearing must be received by November 1, 2024. If no outlines are received by November 1, 2024, the public hearing will be cancelled. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Commenters are strongly encouraged to submit public comments electronically. Submit electronic submissions via the Federal eRulemaking Portal at <E T="03">https://www.regulations.gov</E> (indicate IRS and REG-116787-23) by following the online instructions for submitting comments. Once submitted to the Federal eRulemaking Portal, comments cannot be edited or withdrawn. The Department of the Treasury (Treasury Department) and the IRS will publish for public availability any comments to the IRS's public docket. Send paper submissions to: CC:PA:01:PR (REG-116787-23), Room 5203, Internal Revenue Service, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Concerning the proposed regulations, Clara Raymond at (202) 317-4718; concerning submission of comments or outlines, or requests for a public hearing, Vivian Hayes at (202) 317-6901 (not toll-free numbers) or <E T="03">publichearings@irs.gov</E> (preferred). </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> <HD SOURCE="HD1">Authority</HD> This document contains proposed amendments to the Income Tax Regulations (26 CFR part 1) under section 36B of the Internal Revenue Code (Code). Section 36B(h) provides an express delegation of authority for the Secretary of the Treasury or her delegate to prescribe regulations as may be necessary to carry out section 36B, including regulations that provide for the coordination of the credit allowed under 36B with the program for advance payment of the credit under section 1412 of the Affordable Care Act. <SU>1</SU> <FTREF/> The proposed regulations are also issued under the express delegation of authority under section 7805 of the Code. <FTNT> <SU>1</SU>  The Affordable Care Act (or ACA) refers to the Patient Protection and Affordable Care Act (Pub. L. 111-148, enacted on March 23, 2010), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152, enacted on March 30, 2010). </FTNT> <HD SOURCE="HD1">Background</HD> <HD SOURCE="HD2">I. Definition of “Coverage Month” and Computation of PTC</HD> Section 36B provides a PTC for applicable taxpayers who meet certain eligibility requirements, including that a member of the taxpayer's family enrolls in a qualified health plan (QHP) through an Exchange for one or more “coverage months.” Section 1.36B-3(c)(1) provides that a month is a coverage month for an individual if (i) as of the first day of the month, the individual is enrolled in a QHP through an Exchange; (ii) the taxpayer pays the taxpayer's share of the premium for the individual's coverage under the plan for the month by the unextended due date for filing the taxpayer's income tax return for that taxable year, or the full premium for the month is paid by APTC; and (iii) the individual is not eligible for the full calendar month for minimum essential coverage (within the meaning of § 1.36B-2(c)) other than coverage described in section 5000A(f)(1)(C) of the Code (relating to coverage in the individual market). Section 1.36B-3(d)(1) provides that the PTC (also called the premium assistance amount) for a coverage month is the lesser of (i) the premiums for the month, reduced by any amounts that were refunded, for one or more QHPs in which a taxpayer or a member of the taxpayer's family enrolls (enrollment premiums); or (ii) the excess of the adjusted monthly premium for the applicable benchmark plan over <FR>1/12</FR> of the product of a taxpayer's household income and the applicable percentage for the taxable year. Family is defined in § 1.36B-1(d), and the applicable percentage is defined in § 1.36B-3(g). Section 36B(f)(3) and § 1.36B-5 require Exchanges to report to QHP enrollees and the IRS certain information, including monthly enrollment premiums, needed to compute the PTC allowed for the enrollee. This information is reported to enrollees on IRS Form 1095-A, <E T="03">Health Insurance Marketplace Statement.</E> The Centers for Medicare & Medicaid Services (CMS), part of the Department of Health and Human Services (HHS), is responsible for the Form 1095-A reporting for Exchanges that use the Federal eligibility and enrollment platform (Federally-facilitated Exchanges, or FFEs, and State-based Exchanges on the Federal platform, or SBE-FPs). State Exchanges with their own platforms (State Exchanges) are responsible for the Form 1095-A reporting for individuals who enroll in their State Exchange. HHS regulations at 45 CFR 156.270(d) implement section 1412(c)(2)(B)(iv)(II) of the Affordable Care Act to require issuers of QHPs to allow a “grace period” for enrollees for whom APTC is paid but who fail to timely pay their share of the premium for the coverage. In general, a QHP issuer must provide a grace period of 3 consecutive months for such an enrollee before the issuer may terminate the enrollee's coverage. During the first month of the grace period, the QHP issuer must pay all appropriate claims for services rendered, and, during the second and third months of the grace period, the QHP issuer may pend claims. HHS regulations at 45 CFR 155.400(g) allow issuers to implement a premium payment threshold policy under which issuers can consider enrollees to have paid all amounts due if the enrollees pay an amount sufficient to maintain a percentage of total premium paid out of the total premium owed equal to or greater than a level prescribed by the issuer, provided that the level and the policy are applied in a uniform manner to all enrollees. If an enrollee satisfies these conditions, the issuer may provide coverage even though the full enrollment premium is not paid. In certain States, issuers also may provide coverage without payment of the full enrollment premium if a State department of insurance prohibits an issuer from terminating QHP coverage during a declared emergency. For a month for which a taxpayer's share of the enrollment premium is not paid in full, the current instructions for Form 1095-A require Exchanges to report $0 on Form 1095-A as the enrollment premium for that month, which signals to the taxpayer and the IRS that no PTC is allowed for that month (non-payment month) because a month in which the premium is not paid in full is not a coverage month. Thus, if an individual is enrolled in a QHP with APTC for a month but does not pay the full amount of the monthly premium as permitted under 45 CFR 156.270(d), 45 CFR 155.400(g), or applicable State law, $0 should be reported as the enrollment premium for the month, and a PTC is not allowed for that month for the coverage. CMS has informed the Treasury Department and the IRS that, because CMS is not the entity that collects premium payments from an enrollee, implementing the section 36B definition of coverage month is challenging for CMS in situations in which the taxpayer's share of the premium is not paid in full but the taxpayer (or the taxpayer's enrollee) nevertheless may remain enrolled in a QHP with APTC, if applicable, under 45 CFR 156.270(d), 45 CFR 155.400(g), or applicable State law. An audit by the HHS Office of Inspector General  <SU>2</SU> <FTREF/> found that CMS currently reports to FFE and SBE-FP enrollees and the IRS on Form 1095-A the full enrollment premium for the first month of a grace period, notwithstanding that the taxpayer's share of the full premium for that month may never have been paid. Similarly, CMS currently reports to FFE and SBE-FP enrollees and the IRS on Form 1095-A the full enrollment premium (1) for months for which an issuer provides coverage to enrollees who satisfy the premium payment threshold, and (2) for months for which an issuer has been ord ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 41k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━