Former Internal Revenue Service (IRS) Commissioner Fred T. Goldberg, Jr. said the Affordable Care Act (ACA) popularly known as Obama Care in its current form will cause “needless administrative and compliance quagmire for millions of Americans”, during a hearing conducted by the House Committee On Ways and Means Subcommittee on Oversight.
The Affordable Care Act is designed to help Americans obtain health insurance through subsidies structured as tax credits, which will be determined by exchanges that are operated by the Department Health and Human Services. The exchanges will be responsible for connecting people with insurance providers, and it will shoulder portions of the insurance costs through federal payments.
Goldberg explained in his testimony that the ACA promotes access to health insurance through phased out tax credits for individuals and families who purchase coverage on Exchanges. Under the law, the Exchanges are required to determine the amount of the tax credit based on two-year old tax return information. According to him, it is wrong to use the two-year old tax returns as a basis in determining tax credits because the situation of individuals and families constantly changes. Changes in circumstances include losing a job, families move, child goes to College etc.
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He said the system is complicated because millions of individuals and families need to contact the exchanges every year to provide correct information regarding their current personal and financial situation. He emphasized that the Government exchanges will constantly come up with a wrong tax credit subsidy based on the outdated Internal Revenue Service tax returns.
Goldberg also wrote in his testimony, that every year the Internal Revenue Service will prepare forms for taxpayers who purchased insurance on exchanges to determine their health insurance tax credit. Taxpayers will use IRS the forms in filing their yearly tax returns. The Exchanges and the Internal Revenue Service are required to interact and share information regarding the correct amount of health insurance tax credit for every individual and family.
According to Golberg, the exchanges “will be starting from scratch — with no experienced workforce, no tested technology and no history of dealing properly with confidential taxpayer information. It’s a safe bet that they will not have anything like the resources they need to do the job the way it should be done.”
Goldberg said the exchanges “need to develop sophisticated and responsive infrastructure” capable of dealing with the unique circumstances of individuals and families that meet their expectations. Exchanges also need to compute the net cost of an individual or family insurance in “real time.”
According to Goldberg the challenges in implementing the ACA or ObamaCare can be resolved. He recommended the following:
Do not give the Exchanges the responsibility to determine the amount of tax credits entitle to individuals and families based on two-year old tax returns.
Based on the Supreme Court ruling, consider the fact that the revenue provisions on the ACA are tax provisions that need to be structured and administered properly.
Goldberg served as Internal Revenue Service Commissioner during the administration of President George H.W. Bush.