STUMP » Articles » Obamacare Tax Watch: Drop After Tax Day Move » 20 April 2015, 01:48

Like Megan McArdle, I wasn’t exactly expecting this move:

Meanwhile, Louise Radnofsky of the Wall Street Journal offers an example of Effect 3, which I confess hadn’t occurred to me: folks who were covered in 2014, got their refund docked to cover subsidy overpayments, and therefore decided to cancel their insurance for this year.

At first blush, this seems irrational. You don’t need to cancel your insurance to make sure that your tax refund remains intact; you just need to do a better job of estimating your income when you go to buy your insurance so that you don’t end up with overpayments. Of course, the taxpayer in question might not have bought the insurance if she’d known what it was actually going to cost her. Evidence suggests that the level of participation in the insurance exchanges is directly tied to how big a subsidy you get.

I don’t want to overgeneralize from one example; we don’t know how many people will follow in the footsteps of Marta Chapman, the woman in Radnofsky’s article who decided to cancel her insurance. This law is incredibly complicated, with all sorts of unforeseen consequences and interactions between the various parts. Anyone who confidently predicts what is going to happen next with enrollment is likely to confidently make a fool of themselves.

I think I’m not all that surprised.

Given all of the larding of benefits in Obamacare – all the “free” crap insurers are supposed to put in the coverage, much of which has minimal value for most people, and people are willing to get the coverage only if someone else is essentially paying for it.

But let’s go to the WSJ article for details.

The tax filing season has uncovered lingering wrinkles in the 2010 health-care law that have caused headaches for consumers who incorrectly estimated their income, didn’t use a government exchange to buy an insurance plan or changed coverage during the year.

Marta Chapman saw her anticipated $850 federal refund wiped out because she received too much in advance tax credits in 2014 to pay her insurance premiums under the Affordable Care Act. That prompted her to drop her plan for this year.

“I canceled because I was very upset. To me it was kind of a trick,” said the 48-year-old personal-care aide in Aztec, N.M. “If I knew that, I wouldn’t have got the insurance.”

Doesn’t seem irrational to me. She may not have felt the coverage was worth the money she paid for it plus $850.

Dave Kitenplon of St. Petersburg, Fla., had planned to claim as much as $14,000 of tax credits toward premiums he had already paid. But he found out he isn’t eligible for the credits because he didn’t use HealthCare.gov to buy his health plan. Florida didn’t set up its own exchange.

Mr. Kitenplon, 63 years old, said his income as an accountant for family-owned real-estate partnerships was uncertain. So for 2014 he opted to pay the full monthly premium for himself and his wife for a plan sold both on and off HealthCare.gov and claim any credits he qualified for after.

He doesn’t see why consumers should be required to use HealthCare.gov or miss out on credits. The policy, he said, should be changed—especially since the website wasn’t working well for the 2014 open enrollment season.

“There’s no logic to it,” said Mr. Kitenplon, who signed up for insurance for this year through the website. Federal officials said the requirement to buy through the site was clear, and important because it allowed the government to check whether people were eligible for credits.

That also seems like a reasonable objection to me. I mean, Mr. Kitenplon’s objection, not the Feds’.

Obamacare was incredibly complicated and the government kept moving the goalposts, just ad hoc, in reaction to various screwups. How were people to know they could only get credits through the exchanges?

The longest-lasting ramifications for the law may be posed by people like Ms. Chapman, who said she was especially upset because she tried to do everything right. Her tax preparer suspects that when she applied for coverage and premium credits, her income of $23,000 was counted but her husband’s Social Security benefit of $9,000 a year was overlooked.

As a result, she had to repay about $900, slightly more than the value of her entire expected refund. Ms. Chapman had planned to use the refund to pay off the last $250 of copayments for a biopsy she had while using her new insurance, and put the rest in an emergency fund. If she needs medical care this year, she plans to go back to a low-cost community health center.

Best wishes to Ms. Chapman.

Wait til she sees what the penalty for having no coverage is next year.

I’m rolling over my “pissed off taxpayers” prediction til next year as well. This is going to be just as bad next year.