Code Section 139D

Code Section	Effective Date	Name of Act	Name of Provision	10yr Revenue Estimate ($millions)
36B, 139D, and 4980H	**See note below	Revenue Provision of the Department of Defense and Full-Year Continuing Appropriations Act of 2011	Free Choice Vouchers	418
139D	12/31/2013	Patient Protection and Affordable Care Act	Free Choice Vouchers	*See note below
139D	3/23/2010	Patient Protection and Affordable Care Act	Exclusion of Health Benefits Provided by Indian Tribal Governments	Loss of less than 50

**Note on Effective Date

The provision is effective as if included in the provisions of, and the amendments made by, the provisions of PPACA to which they relate.

*Note on Revenue Estimate

See table 3 of CBO estimate letter addressed to Speaker Pelosi on March 20, 2010, http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/113xx/doc11379/amendreconprop.pdf

Free Choice Vouchers

Explanation of Provision

The provision repeals the statutory provisions relating to free choice vouchers.

Free Choice Vouchers

1. Provision of vouchers

Employers offering minimum essential coverage through an eligible employer-sponsored plan and paying a portion of that coverage must provide qualified employees with a voucher whose value can be applied to purchase of a health plan through the Exchange. Qualified employees are employees whose required contribution for employer sponsored minimum essential coverage exceeds eight percent, but does not exceed 9.8 percent of the employee’s household income for the taxable year and the employee’s total household income does not exceed 400 percent of the poverty line for the family. In addition, the employee must not participate in the employer’s health plan.

The value of the voucher is equal to the dollar value of the employer contribution to the employer offered health plan. If multiple plans are offered by the employer, the value of the voucher is the dollar amount that would be paid if the employee chose the plan for which the employer would pay the largest percentage of the premium cost.⁹⁶⁴ The value of the voucher is for self-only coverage unless the individual purchases family coverage in the Exchange. Under the provision, for purposes of calculating the dollar value of the employer contribution, the premium for any health plan is determined under rules similar to the rules of section 2204 of PHSA, except that the amount is adjusted for age and category of enrollment in accordance with regulations established by the Secretary.

In the case of years after 2014, the eight percent and the 9.8 percent are indexed to the excess of premium growth over income growth for the preceding calendar year.

2. Use of vouchers

Vouchers can be used in the Exchange towards the monthly premium of any qualified health plan in the Exchange. The value of the voucher to the extent it is used for the purchase of a health plan is not includable in gross income. If the value of the voucher exceeds the premium of the health plan chosen by the employee, the employee is paid the excess value of the voucher. The excess amount received by the employee is includible in the employee’s gross income.

If an individual receives a voucher, the individual is disqualified from receiving any tax credit or cost sharing credit for the purchase of a plan in the Exchange. Similarly, if any employee receives a free choice voucher, the employer is not be assessed a shared responsibility payment on behalf of that employee.⁹⁶⁵

3. Definition of terms

The terms used for this provision have the same meaning as any term used in the provision for the requirement to maintain minimum essential coverage (section 1501 of the Act and new section 5000A). Thus for example, the terms ‘‘household income,’’ ‘‘poverty line,’’ ‘‘required contribution,’’ and ‘‘eligible employer-sponsored plan’’ have the same meaning for both provisions. Thus, the required contribution includes the amount of any salary reduction contribution.

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Exclusion of Health Benefits Provided by Indian Tribal Governments

Explanation of Provision

The provision allows an exclusion from gross income for the value of specified Indian tribe health care benefits. The exclusion applies to the value of: (1) health services or benefits provided or purchased by the Indian Health Service (‘‘IHS’’), either directly or indirectly, through a grant to or a contract or compact with an Indian tribe or tribal organization or through programs of third parties funded by the IHS; ⁹⁴² (2) medical care (in the form of provided or purchased medical care services, accident or health insurance or an arrangement having the same effect, or amounts paid directly or indirectly, to reimburse the member for expenses incurred for medical care) provided by an Indian tribe or tribal organization to a member of an Indian tribe, including the member’s spouse or dependents; ⁹⁴³ (3) accident or health plan coverage (or an arrangement having the same effect) provided by an Indian tribe or tribal organization for medical care to a member of an Indian tribe, including the member’s spouse or dependents; and (4) any other medical care provided by an Indian tribe or tribal organization that supplements, replaces, or substitutes for the programs and services provided by the Federal government to Indian tribes or Indians.

This provision does not apply to any amount which is deducted or excluded from gross income under another provision of the Code. No change made by the provision is intended to create an inference with respect to the exclusion from gross income of benefits provided prior to the date of enactment (March 23, 2010). Additionally, no inference is intended with respect to the tax treatment of other benefits provided by an Indian tribe or tribal organization not covered by this provision.

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942- The term ‘‘Indian tribe’’ means any Indian tribe, band, nation, pueblo, or other organized group or community, including any Alaska Native village, or regional or village corporation, as defined by, or established pursuant to, the Alaska Native Claims Settlement Act (43 U.S.C. 1601 et seq.), which is recognized as eligible for the special programs and services provided by the United States to Indians because of their status as Indians. The term ‘‘tribal organization’’ has the same meaning as such term in section 4(l) of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 450b(1)).
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943- The terms ‘‘accident or health insurance’’ and ‘‘accident or health plan’’ have the same meaning as when used in section 105. The term ‘‘medical care’’ is the same as the definition under section 213. For purposes of the provision, dependents are determined under section 152, but without regard to subsections (b)(1), (b)(2), and (d)(1)(B). Section 152(b)(1) generally provides that if an individual is a dependent of another taxpayer during a taxable year such individual is treated as having no dependents for such taxable year. Section 152(b)(2) provides that a married individual filing a joint return with his or her spouse is not treated as a dependent of a taxpayer. Section 152(d)(1)(B) provides that a ‘‘qualifying relative’’ (i.e., a relative that qualifies as a dependent) does not include a person whose gross income for the calendar year in which the taxable year begins equals or exceeds the exempt amount (as defined under section 151).
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964- For example, if an employer offering the same plans for $200 and $300 offers a flat $180 contribution for all plans, a contribution of 90 percent for the $200 plan and a contribution of 60 percent for the $300 plan, and the value of the voucher would equal the value of the contribution to the $200 since it received a 90 percent contribution, a value of $180. However, if the firm offers a $150 contribution to the $200 plan (75 percent) and a $200 contribution to the $300 plan (67 percent), the value of the voucher is based on the plan receiving the greater percentage paid by the employer and would be $150. If a firm offers health plans with monthly premiums of $200 and $300 and provides a payment of 60 percent of any plan purchased, the value of the voucher will be 60 percent the higher premium plan, in this case, 60 percent of $300 or $180.
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965- Section 1513 of the Patient Protection and Affordable Care Act, Pub. L. No. 111–148, and new Code section 4980H.
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