On June 26, 2013, the Internal Revenue Service released Notice 2013-41 to provide guidance on whether or when an individual is eligible for minimum essential health coverage under Medicaid, Medicare, Children’s Health Insurance Program (“CHIP”), or TRICARE programs for purposes of the premium tax credit under Section 36B of the Internal Revenue Code of 1986, as amended (“Code”). This guidance helps implement the Patient Protection and Affordable Care Act, as amended (the federal health care reform law). Beginning next year, an individual may generally receive health insurance coverage subsidized by the premium tax credit only for months the individual is enrolled in a qualified health plan through an Affordable Insurance Exchange and is not eligible for other minimum essential coverage. The guidance is effective for taxable years ending after December 31, 2013.
The guidance first provides that individuals who lose CHIP or Medicaid coverage due to the nonpayment of premiums are not eligible for health coverage subsidized by the premium tax credit during the “lockout” period (the period during which they are not eligible to re-enroll in either program). However, individuals who are not eligible for CHIP because they must wait out a pre-enrollment waiting period qualify for the premium tax credit.
In addition, the guidance clarifies that an individual is eligible for minimum essential coverage under Medicaid or Medicare as a result of disease or illness only upon a favorable determination of eligibility for coverage by the responsible agency. Specifically, the determination must be based on a finding of disability or blindness for Medicaid and solely on a finding of disability or illness for Medicare. Finally, an individual only qualifies for minimum essential health coverage under Medicare Part A requiring the payment of premiums, state high-risk pools, student health plans, and TRICARE military coverage if they are actually enrolled in the coverage.
Fraser Stryker is a leader in employee benefits and tax law. Attorneys in the Firm’s Employee Benefits Practice Group advise businesses, governments, and nonprofit/tax-exempt organizations on a wide variety of tax and employee benefits matters, transactions, and litigation. Fraser Stryker helps employers implement and maintain innovative and cost-effective employee benefit plans that attract and retain top talent. Attorneys on the Firm’s Patient Protection and Affordable Care Act & Health Care Reform Response Team advise businesses, political subdivisions and other governmental entities, health care organizations, and tax-exempt entities on all aspects of health care reform implementation and compliance. For more information, or if you would like to discuss the Act or the employer shared responsibility requirements, please contact Nicole R. Konen, or Emily Wischnowski.
Formed in 1898, Fraser Stryker has grown to become a nationally recognized law firm that represents local, national, and multinational clients in complex business transactions and litigation matters. Fraser Stryker attorneys participate actively in a wide array of community organizations. Visit our home page for more information about us.
This article is provided by Fraser Stryker for general informational purposes and is not intended to be and should not be construed as legal advice on any specific facts or circumstances.
Circular 230 Disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any U.S. tax advice contained in this communication (including any attachments) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code, or (ii) promoting, marketing or recommending to another party any matters addressed herein.