Government shutdown threatens health care tax credits, Democrats warn

Six Democratic leaders of committees in the House and Senate have written to Trump administration officials expressing concern that the partial government shutdown will prevent the federal government from paying the cost of Advance Premium Tax Credits to provide health coverage for millions of Americans who rely on Obamacare.

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The east front of the Capitol building stands in Washington, D.C., U.S., on Monday, Jan. 3, 2011. President Barack Obama and Democrats are preparing to confront a strengthened Republican opposition to tax, spending and immigration priorities when the 112th session of Congress convenes this week after Democrats lost control of the House during midterm elections. Photographer: Andrew Harrer/Bloomberg

In a letter Monday, they noted the Internal Revenue Service and Treasury Department have been left unfunded by the shutdown and are responsible for paying the tax credits.

“Families are facing a shutdown health care tax that increases their premiums and threatens their health coverage,” wrote Senate Finance Committee ranking member Ron Wyden, D-Ore., Senate HELP (Health, Education, Labor and Pensions) Committee ranking member Patty Murray, D-Wash., Senate Aging Committee ranking member Bob Casey, D-Pennsylvania, House Energy and Commerce Committee chairman Frank Pallone, Jr., D-New Jersey, House Ways and Means Committee chairman Richard Neal, D-Massachusetts, and House Education and Labor Committee chairman Bobby Scott, D-Virginia, in a letter addressed to Treasury Secretary Steven Mnuchin and Health and Human Services Secretary Alex Azar, with IRS Commissioner Charles Rettig also CC’ed. “Due to the cessation of most IRS operations, we are concerned that some taxpayers will face an unexpected spike in premiums for their health care coverage due to delayed payments of APTCs. We strongly urge you and your agencies to ensure consumers are not faced with insurmountable premium costs or loss of coverage as a result of this unnecessary shutdown.”

The IRS has brought back some of the approximately 70,000 employees who have been furloughed since the partial government began so they can prepare the IRS’s systems for the opening of tax season, release guidance on the new tax law, and process income verification forms for mortgage applications. However, most of the employees will not be paid until the shutdown ends, and the lawmakers are concerned that the lack of funding could adversely affect those who count on a tax credit to lower their monthly premiums. They warned that taxpayers whose applications or tax filings require additional review from the IRS could be left to choose whether to pay their unsubsidized premium or drop their coverage altogether. They noted that the Treasury Department also has plays a major role to play in assessing and approving State Innovation Waivers, also known as Section 1332 waivers, that states need to submit well in advance to ensure they go into effect in time to make a difference. They warned the shutdown is adding more uncertainty to the U.S. health care system, while threatening higher premiums and potential coverage losses for people who get their health insurance from the government-run marketplaces.

"If the shutdown continues, we have concerns regarding the ability of the IRS to adequately prepare for the distribution of APTCs not only for the remainder of plan year 2019, but also in plan year 2020," the lawmakers wrote. "An array of systems, forms and instructions must be updated in order for the Marketplace application system to operate effectively, and a large and extended absence of IRS staff could have long-term implications for the operations of the tax components of Marketplace applications and coverage."

Small business advocacy groups are also becoming worried as the government shutdown drags on to a record length. “The government shutdown has created additional uncertainty during a critical time when small businesses are starting a new fiscal year," said Keith Hall, president and CEO of the National Association for the Self-Employed, in a statement Monday. "Small businesses must continue to abide by their tax obligations, including paying quarterly tax estimates and adhering to all filing deadlines. However, the federal government is unlikely to keep their end of the deal by processing tax refunds on time and providing small businesses access to critical answers they may have to questions about filing for the first time under the new tax law.

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