IRS Proposes Updated Regulations For COVID-19 Testing

The Internal Revenue Service released new regulations (REG-109128-21) on November 22 that may help taxpayers, employers, and insurers navigate the complex tax rules surrounding COVID-19 testing and health insurance coverage. This document includes proposed regulations stating “minimum essential coverage,” as that term is used in health insurance-related tax laws, doesn’t include Medicaid coverage that is limited to COVID-19 testing and diagnostic services provided under the Families First Coronavirus Response Act of 2020. These regulations would affect taxpayers who claim the premium tax credit, health insurers, self-insured employers, government agencies, and others that provide minimum essential coverage to individuals, as well as large employers.

The set provides an automatic extension of time for providers of minimum essential coverage to furnish individual statements regarding such coverage, and an alternative method for furnishing individual statements when the shared responsibility payment amount is zero. In addition, it provides an automatic extension of time for “applicable large employers,” typically those with 50 or more full-time or equivalent employees, to furnish statements relating to health insurance that the employer offers to its full-time employees, as required by the ACA.

The proposed regulations clarify some of the guidance issued last year in response to COVID-19 relief legislation. Previously, the IRS said that Medicaid coverage that is limited to COVID-19 testing and diagnostic services, wasn’t considered minimum essential coverage under a government-sponsored program. This means an individual’s eligibility for that coverage for one or more months doesn’t prevent those months from qualifying as coverage months for purposes of determining eligibility for the premium tax credit for health coverage. Lawmakers aimed to amend previous legislation by adding Medicaid coverage for COVID-19 testing and diagnostic services to the health coverage areas listed there that don’t qualify as minimum essential coverage under a government-sponsored program.

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