STUMP » Articles » Obamacare Tax Watch: The Pain Won't Stop » 2 May 2015, 17:48

Pretty much never.

Let’s see what the tax experts have as their Obamacare tax season postmortem

More than three-quarters of exchange plan users have been using the premium tax credits to pay for coverage, and more than 80 percent of the tax credit users have been getting it through the advance premium tax credit (APTC) mechanism.

H&R Block found that 42 percent of its APTC-using customers underestimated their income and ended up having to pay extra money to the government. In effect, those miscalculations cost those customers $729 in reconciliation payments per return. But most of those customers were expecting to get big income tax refunds. The miscalculations reduced the customers’ refunds an average of 33 percent, rather than forcing them to pay cash out of their own pockets.

The customers who overestimated their income ended up getting an average of $425 back from the government. That increased their refund by an average of about 18 percent.

H&R Block also looked at the penalties that people who failed to own minimum essential coverage (MEC) throughout 2014 ended up paying.

The average “individual shared responsibility” penalty payment rose to $178 by the end of the season, up from $172 earlier in the season. The penalty cut the affected taxpayers’ refunds by an average of 7 percent.

Of course, some say the penalties are too low: [wait, I thought it was a tax. or a fee. WHATEVER]

They may not be crunching all the numbers associated with health insurance, but folks whose incomes are three to four times the federal poverty level may be doing enough math to decide they’d rather pay the penalty for not having coverage than pay the premiums required to have exchange coverage.

Avalere released an analysis of the pay-vs.-penalty scenario established by the Patient Protection and Affordable Care Act, and theorized that one reason individuals with certain incomes continue to resist purchasing coverage is that the mandate’s going-bare penalty is substantially lower than annual premiums for insurance.

…..
“Penalties associated with the individual mandate, which grow in 2015, might be too low to attract enrollment, particularly among middle-income, healthy individuals,” Avalere said. “Earlier this week, the Department of Health and Human Services (HHS) announced that 68,000 people enrolled in exchange coverage through HealthCare.gov as part of a special enrollment period for individuals paying the individual mandate penalty on their 2014 tax filings. That lackluster uptake of the special enrollment period is driven, in part, because for most people individual mandate penalties are much lower than actual costs of coverage.”

Fancy that.

Back to the article and an amusing typo:

For instance, a 237-year-old who earns three, four or five times the federal poverty level would “save” about $1,600 by paying the penalty rather than the premium.

You can go to the link. Maybe they will have fixed it.

They mean 27-year-olds, of course. The issue is not only the tax/penalty/whatever is “too low”, but that the premiums charged on younger people (specifically, younger men) are way too high due to Obamacare age-rating restrictions.

The deal is much better for older folks who have much higher utilization rates.

Finally, here is a surprise some people on the exchanges will get:

4. Did not reconcile group
Members of this group are people who received premium tax credit subsidies in advance in 2014 and failed to file a tax return this year to reconcile the amounts they should have received with the amounts they actually received.

The MOEN will tell those people that they must file tax returns and go through premium tax credit reconciliation, then go to the exchange for a new eligibility determination, before they can sign up for new exchange subsidies. Otherwise, the exchange will re-enroll those people in exchange coverage for 2016 without providing subsidy help.

H&R Block has suggested that there may be a large block of people receiving exchange plan subsidies who have failed to file tax returns, possibly because of confusion about how PPACA works, or how tax filing works.

Let me put this in plain English: a bunch of people receiving subsidies through Obamacare exchanges, who did not file tax returns (appropriately – i.e., with all the new forms – and it’s not only 1095As), will find their subsidies going =poof=.

Yes, they can do all the paperwork, but here’s the deal: they may find their subsidies booted for next re-up….in Nov 1, 2015 – Jan 31, 2016.

So this will be a fun election year issue.

I didn’t see them explain what a MOEN is, but from the doc explaining the new procedure, it’s a Marketplace Open Enrollment
Notice. This is going to be very confusing for people who can least afford a screw up.

Way to make the lives of those with moderate incomes so much more difficult! I’m sure they’re going to appreciate losing their coverage because of an overly complicated process that they have no hope of understanding.