IRS Could Check Who Has Health Care

Published: Thu 14 Jan 2010

Perry Begay

The Internal Revenue Service may start doing double duty because the federal agency is under consideration to become the watchdog that ensures nearly every U.S. resident has health insurance as required in the health care reform measures being considered by Congress.

The IRS could also distribute the subsidies that low-income people would get to pay for their insurance and oversee the tax credits that small businesses would get to help them provide insurance to their employees. That could be as much as much as $140 billion annually.

The federal government would pay insurers to help people buy their insurance through exchanges. The exchanges featured in both bills would be available to the small businesses and people who don't get coverage from their employers.

And because it already is in the tax-collecting business, the IRS would collect the new types of taxes paid by employers, insurers, drug companies and medical device manufacturers. Some people wonder whether the IRS really is up for the new duties. According to the agency, it missed collecting about $290 billion in taxes as recently as 2005. Add to that budget woes, too few staff and antiquated computer systems, and it's easy to see how the doubt can be raised.

To cover the costs of doing the job, the agency could need as much as $10 billion to pay the costs of the new duties alone, according to the Congressional Budget Office. That's nearly as much as its current budget. The current versions of the health care bills don't including such funding but could be added when both legislative bodies negotiate to create a single bill.

There was no comment from the IRS about potential changes in its operations.

Both measures approved before Congress took its winter vacation carry the requirement that residents would have to file proof of insurance with their annual tax returns. The House bill designates the proof begin in 2013 while the Senate puts a 2014 start year on it.

In the House plan, there would be a penalty of up to 2.5 percent of a person's income, up to the average cost of health insurance.

The Senate measure stipulates the penalty would be the greater of $95 or 0.5 percent of an individual's income in its first year. By 2016 it would increase to $750 or 2 percent of annual income, up to the cost of the lowest-priced health plans.