Obama administration wants to use IRS to hawk Obamacare

The administration wants to use the IRS to hawk Obamacare, drawing fire from Republicans, who fear President Obama is turning the tax agency into part of his political operation by enlisting it in the health care effort.

Administration officials want to use IRS files to identify and contact the millions of Americans who have refused to sign up for insurance and are instead paying the “individual mandate” tax for going without coverage.

Officials say it makes sense to harness the IRS because the tax agency knows who hasn’t signed up and would be good candidates for outreach.

IRS officials insisted they wouldn’t share any private information with other agencies but said they didn’t see any problems in helping sell Obamacare by sending letters to holdouts.

“This particular mailing is consistent with our practices and the tax administration requirements set forth in the law,” the IRS said in a statement about its plans.

The IRS said it frequently makes tax filers aware of other government benefits, such as the earned income tax credit for low- and moderate-income workers.

Republicans said that if the IRS is willing to use its files to help sell Obamacare, it should also work with the Homeland Security Department to identify illegal immigrants living and working in the U.S.

“We should use our federal government — the right hand, the left hand and other hand needs to know what the other is doing,” said Rep. Steve King, Iowa Republican. “It doesn’t trouble me that they do that [for health care], but it does trouble me they refuse to do that when it comes to immigration.”

Mr. King authored a bill that requires the Treasury to share taxpayer identity information with those agencies to figure out which employers paid wages and benefits to illegal immigrants. Those employers would be denied tax deductions on the payments, an effort to cancel out a jobs magnet for people to enter the U.S. illegally.

That legislation has never earned administration backing.

Other Republicans go further than Mr. King, saying they didn’t want the IRS to collaborate with the Centers for Medicare and Medicaid Services, which helps administer the Obamacare exchanges.

House Majority Leader Kevin McCarthy, California Republican; Majority Whip Steve Scalise, Louisiana Republican; and Rep. Kevin Brady, Texas Republican and chairman of the tax-writing House Ways and Means Committee, told IRS Commissioner John Koskinen last week that they “strongly object” to any strategy that uses taxpayer information to promote Obamacare.

The effort raises legal and privacy concerns and “demonstrates the extent to which the Administration is willing to use the power of the IRS to insert itself into the lives of individuals who have made a legal and personal choice not to purchase a health plan,” the lawmakers wrote.

CMS said officials worked closely with legal counsel to make sure the notices did not flout privacy laws.

The program mirrors an effort in Massachusetts, where the state Department of Revenue sent notices about the state-run Obamacare exchange to residents whose state tax returns said they didn’t hold insurance.

Massachusetts Health Connector spokesman Jason Lefferts said the exchange did not receive any taxpayer information. The first round of notices went out last year, and they hope to gauge its usefulness as it enters a second year of the program, he said.

Republican objections at the federal level mark the latest fight over Obamacare in a pivotal year for the program.

Mr. Obama is trying to put his signature law on firmer footing after a string of setbacks, including the exodus of major insurers who say they lost money on sicker-than-expected customers who snapped up subsidized coverage in the early rounds.

The individual mandate was supposed to balance out those customers by forcing healthy Americans into the insurance risk pool. But the tax penalty, which rises from a baseline of $95 in 2014 to $695 this year, hasn’t been a strong enough incentive.

The administration says it plans to promote the Obamacare exchanges among millennials through social media and community events while improving the HealthCare.gov experience on tablets and smartphones.

Yet its decision to target penalty payers — a population with a high proportion of young adults — is proving controversial.

Mr. King said the IRS and Social Security Administration can identify likely illegal immigrants, but the administration has shown no interest in connecting them with the deportation agency.

Illegal immigrants aren’t supposed to have Social Security numbers, but the tax agency issues them Individual Taxpayer Identification Numbers, or ITINs, so those who are working on the books can still pay taxes.

Mr. Koskinen has opposed using ITINs for other purposes, saying his job is to collect taxes, not police immigration.

Republicans have given Mr. Koskinen a deadline Tuesday to explain how the IRS plans to identify who will receive Obamacare letters and what the correspondence would look like.

Some say the tactic could backfire with young adults.

“They won’t want to by the expensive insurance they neither want nor need,” said Grace Marie-Turner, president of the Galen Institute, which promotes “free market” health care policies.

“And the IRS is particularly targeting young healthy people who are being forced to pay much more for their insurance than they are expected to consume in medical services,” she said. “I don’t think these aggressive IRS targeting strategies are going to go over well with millennials.”