WASHINGTON — About 800,000 people who bought health insurance through HealthCare.gov last year received incorrect tax information and have been asked to delay filing their returns, Obama administration health officials said Friday, a misstep affecting a critical part of the president’s signature health-care law.
The mistake could slow down tax refunds for many Americans who depend on subsidies to afford coverage under the Affordable Care Act. It’s also drawn further criticism from Republican opponents, who say the error is just the latest evidence that the law is frustrating Americans and doesn’t work.
After a bumpy debut more than a year ago, HealthCare.gov appeared to be running smoothly in recent months. There were no major tech glitches. And just days ago, the administration was trumpeting the wrap-up of an enrollment period that surpassed the president’s goals.
But on Friday, administration officials said nearly one million customers had been notified and asked to delay filing their returns for two or three weeks. About 50,000 people who already filed their 2014 tax returns will likely have to resubmit information to the federal government.
The subsidies are a significant part of the Affordable Care Act’s design. For people earning too much to qualify for Medicaid in their states but who lack other sources for health insurance, the subsidies can make or break whether they can afford coverage.
The health-care law remains under significant political pressure. The Supreme Court is getting ready to hear a case that could eliminate subsidies in states that declined to participate in the Medicaid expansion that was part of the law. If the justices rule against the subsidies, an estimated 8.2 million people could lose their health insurance.
On Friday, Republicans seized on the administration’s error and a separate announcement from officials that the government was extending enrollment for taxpayers who could be hit with penalties for not being insured.
“Whether it’s providing taxpayers with incorrect subsidy information or having to create special enrollment periods so that taxpayers can avoid costly penalties, ‘Obamacare’ continues to frustrate and confuse Americans,” said Senate Finance Committee chairman Orrin Hatch, R-Utah, in a statement. “The Administration’s latest attempt to unilaterally tweak their own law to avoid political fallout once again underscores the failed policies rooted in Obamacare’s DNA.”
The error is tied to the local “benchmark” premiums the government uses to calculate subsidy payments. The cost of the 2015 benchmark plan was listed on some forms, instead of 2014, the Department of Health and Human Services explained in a blog post. The administration isn’t sure how this error occurred, said Andy Slavitt, a top administration official overseeing the federal health insurance exchanges.
“We’re still investigating the cause,” Slavitt said on a press call Friday.
In 2014, the first year of exchange operations, enrollees had two options for receiving financial assistance.
The vast majority chose to receive the money up front based on their projected income. Now that it’s tax season, those consumers need to reconcile the credit if they received too little or too much during the year. The tax preparation firm H&R Block estimates that federal support was too generous for half of subsidy recipients in 2014.
The rest of the enrollees elected to receive the money entirely during tax season through a refund.
Consumers Union health policy director Lynn Quincy said waiting another two or three weeks to file their return may be a challenge for low-income families that are counting on refunds.
“There are a lot of families who count on the refund to make large purchases,” she said. “To the extent that they’re still getting a refund – which we hope they are – it will be hard to wait these extra couple of weeks.”
Quincy’s group had been advising health-care shoppers to take as little as possible of the premium subsidy in advance to avoid a potentially painful process during tax season. However, she acknowledged that would make it difficult for many to afford monthly premiums.
People who received subsidies under the health-care law must fill out a 1095-A tax form, indicating each household member who got coverage and how much in subsidies the government provided each month. If someone received too much in subsidies, he or she will have to pay it back.
“It’s not easy to figure this thing out, even for someone who know what this is all about,” said Bob Williams of the nonpartisan Tax Policy Center.
The administration is urging people it notifies to delay filing their returns until they receive the corrected 1095-A form, likely in early March. That could further delay when this group receives tax returns that many low-income families count on this time of year.
William said he’s unsure if this latest snag is going to affect consumer behavior, since they’re already struggling with the new complex subsidy system. “I think this whole thing was going to cause problems, but it does complicate things,” he said.
This latest wrinkle shows that the law, soon approaching its five-year anniversary, is still a work-in-progress. This marks the first tax season that tax filers are interacting with the new subsidy scheme, and administration officials are trying to head off new potential headaches when they can. The administration also announced new leeway for people who have to pay the new fine for not having health insurance.
Friday’s announcement came just days after a smoother 2015 ACA enrollment period came to a close without major tech glitches. With the aid of a better-functioning enrollment website, at least 11.4 million Americans signed up for 2015 exchange health plans, putting the administration on target to beat its enrollment goal for the year.
Uninsured Americans facing the tax penalty for not having health insurance in 2014 will have a new opportunity to sign up for 2015 health plans. People who learn they’re facing a penalty will now have between March 15 and April 30 to sign up for coverage, the administration said Friday.
The unpopular mandate, which survived a Supreme Court challenge in 2015, was built into the law to discourage people from waiting until they were sick to sign up for coverage since they can no longer be rejected by insurance companies because of a pre-existing medical condition. But Democratic lawmakers and supporters of the law said it was unfair to punish people who weren’t aware of the penalty, which in 2014 was $95 or 1 percent of household income, whichever is greater. The penalty in 2015 jumps to $325, or 2 percent of household income.
“It just makes sense to give these uninsured consumers a chance to purchase insurance right away, rather than making them wait another year to get covered,” said Enroll America president Anne Filipic, whose industry-backed group coordinates enrollment efforts in key states. Administration officials suggested the special enrollment period would be a unique allowance this year, as consumers come to learn about the ACA’s new coverage system.
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