Tag Archives: subsidy

ALERT: Obamacare Trifecta: Subsidy, Penalties and Taxes

Affordable Care Act’s Tax Effects Now Loom for Filers.

For most taxpayers, this will simply mean checking a box on a tax return indicating they had insurance for the full year. But millions of others will have to grapple with new tax forms and calculations that may generate unexpected results.

For instance, most of the 6.7 million people who bought insurance through the exchanges received subsidies, which reduced their monthly premiums. But those subsidies were based on previous years’ income — so people whose incomes have changed will inevitably have to pay some of that money back, while others may receive fatter refunds.

I’m not sure why they say a subsidy was based on someone’s previous years income. The subsidy is based on the applicant’s ESTIMATE of his income for the tax year in question. Also, it’s not clear to me that “most” of the 6.7 million people received subsidies on a monthly basis or received subsidies at all.

The subsidy you receive is reconciled on your tax return to determine if you receive too much, too little or if the account was just right….

RECONCILING People who bought subsidized insurance on the exchanges received what is actually an advance on a tax credit. Since the amount of help taxpayers received was based on 2012 income (Ed note – simply not true), it will need to be reconciled against what they actually earned in 2014 — particularly if they earned more or less and did not update their income data on the exchange.

Some people will be surprised that they must pay some of that money back, or at least have it deducted from what they would have received in a refund. Conversely, people who earned less money in 2014 — and who received subsidies that were too small — may receive money back. Changes in life circumstances — a divorce, marriage, a new child — can also affect those numbers.

“This is the part that can be very complex,” said Kathy Pickering, executive director of the Tax Institute at H&R Block. “People think of the tax credit as a discount on their premium. But realizing it can be something you repay a portion of is going to be a surprise.” (emphasis added)

Let me get this straight, we have a very complex tax return for the lower income portion of the population. Can you spell “RECIPE FOR DISASTER?”

The article also discussed the Obamacare penalty for not having compliant coverage.

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Connect for Health 1st month open enrollment statistics

Connect for Health recently (Dec 17) released enrollment statistics for the 1st month of the 2015 open enrollment period (Nov 15 – Dec 15). They are as follows:

  • Total enrollment: 136,315
  • Medicaid: 7,306   27,306 (corrected 12/29 @ 18:24p)
  • CHP+: 932 (Medicaid for Children)
  • Connect for health (Commercial insurance): 108,077

Although beside the point, I sure wish I know why Connect for Health Colorado calls private individual insurance “commercial” insurance. Never once have I ever told a client I am selling them “commercial” insurance.

Moving on…

I call out the CHP+ enrollment number as bogus. Why? Because the discrepancy between Medicaid and CHP+ is too large. For an adult to qualify for Medicaid, the family (or individual) income must be < 133% of the Federal Poverty Level (FPL). However, for children to qualify for CHP+, the family income only has to be less than 250% of the FPL. Thus it is substantially easier for children to qualify for CHP+ then it is for adults to qualify for Medicaid. In the real world what occurs for families with income between 133% and 250% of the FPL is the children are enrolled in CHP+ and the adults receive a subsidy and select coverage through Connect for Health Colorado.

If the CHP+ enrollment numbers are “bogus” that places the validity of the other enrollment numbers into question as well.

 

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From Plantiff’s supreme court filing

I took just a few moments to scan the Summary section of the lawsuit and found the opening and closing paragraphs of interest.

From the opening paragraph:

As statutory construction cases go, this one is extraordinarily straightforward. There is no legitimate way to construe the phrase “an Exchange established by the State under section 1311” to include one “established by HHS under section 1321.” Congress expressly contemplated both state established Exchanges (in the first instance) and HHS-established Exchanges (if states refused to establish their own); because it specifically singled out for subsidies one type, and only one type, courts must give effect to that plain language.

From the closing paragraph:

If the rule of law means anything, it is that text is not infinitely malleable, and that agencies must follow the law as written—not revise it to “better” achieve what they assume to have been Congress’s purposes. This case may be socially consequential and politically sensitive, but that only heightens the importance of judicial fidelity to the rule of law and well-established interpretive principles. Under those principles, it is clear that the IRS Rule must fall. (emphasis added)

It comes down to “do words mean things.” Unfortunately, in this day and age, it appears that words ARE becoming infinitely malleable.

 

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The Supremes to hear Obamacare case in March

Supreme Court to hear ObamaCare subsidy challenge in March | TheHill.

Justices will hear arguments in King v. Burwell in just under three months, according to the court’s schedule posted Monday afternoon.

The case, led by conservative groups, questions whether the federal government can legally hand out healthcare subsidies in 34 states that have opted out of creating their own exchanges.

View the plantiffs opening brief against the Obamacare subsidy.

From a common sense point of view, we are going to find out if “words mean things.” Color me skeptical.

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ObamaCare fines loom for uninsured

ObamaCare fines loom for uninsured | TheHill.

Consumers face a Feb. 15, 2015, deadline to buy insurance, after which those without coverage could be hit with fines of $325 per adult or 2 percent of family income, whichever is higher.

Uninsured people looking to escape the penalties are turning to the exchanges before they close, while insurance companies and tax preparers are seizing on the looming tax hit as a business opportunity.

There is no doubt that There can be little doubt Obamacare is good for the tax preparation business:

Firms are also offering to help current enrollees understand how changes in income can affect their tax credits to buy coverage. In some cases, they can also help the uninsured select health plans.

In promotional materials, H&R Block and Jackson Hewitt Tax Service say they can provide consumers relief, arguing that healthcare reform is making tax planning more difficult.

“The ACA [Affordable Care Act] has changed the landscape of both healthcare and tax,” H&R Block states online, inviting consumers to calculate their mandate penalty or receive a “tax impact analysis” when they become a client.

Jackson Hewitt urges consumers to stop by one of its locations, promising that their employees “work harder to keep up with the latest tax law changes to protect you from possible penalties — not everyone else does.”

There’s no KISS (Keep it Simple Stupid) within a light year of Obamacare.

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Colorado Exchange struggles with both Consumers and Insurers

Health insurers owed $20 million, worker warns of ‘very low’ 2015 exchange sign-ups | Health News Colorado.

On the consumer front…

“Our enrollments are very, very low because of system issues,” said Jackie Sievers, a director of enrollment for four assistance sites in western Colorado.

She called in to an exchange board meeting and said she only has been able to complete about one in five applications.

“Other sites in my region are reporting 1 percent (completion rates) or even lower. My concern is that our open enrollment period is much shorter this year and we have some pretty significant issues and are having trouble getting people signed up,” Sievers said.

She said the system incorrectly calculates federal tax credits, known as APTC — which stands for advanced premium tax credits. The credits come from the federal government and are designed to make health insurance more affordable. On top of problems with the tax credits, Sievers said anyone seeking coverage through the small business portal, known as SHOP, can’t complete applications. (SHOP is for small group coverage – Ed)

On the insurance company front…

While workers are struggling to help people sign up for 2015, board member Steve ErkenBrack called attention Monday to the fact that exchange system problems have left insurance companies waiting for millions in payments for customers who qualified for federal tax credits this year.

ErkenBrack is president of Rocky Mountain Health Plans, a large insurance carrier. He asked Connect for Health’s interim CEO Gary Drews to do a better job of updating board members on problems the exchange is facing, rather than focusing primarily on rosy updates.

ErkenBrack cited problems with the APTC reimbursements that could cost carriers millions and drive them away from Colorado’s exchange. And he said that Colorado’s systems continue to enroll some customers simultaneously in private plans and Medicaid. So far, about 3,300 people have been caught in the “simultaneous enrollment” snafu. While the customers have double coverage, it’s unclear who will pay their claims: taxpayers or private insurance companies. Furthermore, they are not allowed to receive both Medicaid and federal tax credits. Earlier this year, insurance industry representatives warned that some of the individual claims could reach $1 million each.

“Both of these are critical issues,” ErkenBrack said on Monday.

And let’s pile on while were at it…

Dr. Mike Fallon, another board member, said insurance carriers are “our customers also and if they are not being paid tens of millions,” that’s a significant problem.

“We take this incredibly seriously. This is a big risk for us,” Work said.

Sue Birch, director of Colorado’s Medicaid programs and a non-voting board member, questioned whether the exchange should consider insuring itself in case carriers suffer losses as a result of problems accounting for tax credits.

“There’s enormous potential for liability,” Birch said.

You really can’t make this stuff up. I believe that Connect for Health Colorado has the best of intentions and works very hard. I personally like all the people I’ve met from that organization. All that said, color me “doubtful” they are on the road to success.

 

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Receiving an Obamacare Subsidy? Lookout for form 1095-A

Form 1095-A: New challenge for HealthCare.gov: Tax forms – Yahoo Finance.

The forms are called 1095-As, and list who in each household has health coverage, and how much the government paid each month to subsidize those insurance premiums. Nearly 5 million people have gotten subsidies through HealthCare.gov.

If the forms are delayed past their Jan. 31 deadline, some people may have to wait to file tax returns — and collect their refunds.

A delay of a week or two may not sound like much, but many people depend on their tax refunds to plug holes in family finances.

I feel comfortable predicting some level of chaos. I find it hard to believe that the Department of Health and Human Services, or the state exchanges, are going to suddenly start operating like a well oiled machine when it comes to sending out 1095-A forms.

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Obamacare subsidy? Make sure the Exchange has your income correct

Tax refunds may get hit due to health law credits – Yahoo Finance.

Here’s why: If your income for 2014 is going to be higher than you estimated when you applied for health insurance, then complex connections between the health law and taxes can reduce or even eliminate your tax refund next year.

Maybe you’re collecting more commissions in an improving economy. Or your spouse got a better job. It could trigger an unwelcome surprise.

The danger is that as your income grows, you don’t qualify for as much of a tax credit. Any difference will come out of your tax refund, unless you have promptly reported the changes.

If your income has changed significantly, either up or down, contact healthcare.gov or your state exchange. In Colorado, you can reach the Connect for Health Colorado “marketplace” at 855.752.6749.

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Cheap solutions to Obamacare challenge could work

Cheap solutions to Obamacare challenge could work: Experts.

In advance of Tuesday’s dueling appellate opinions, Obamacare blogger Charles Gaba, who has been tracking enrollment in exchange-sold plans, wrote an article with the headline, “I can save the Affordable Care Act for just $360.00!!”

Gaba wrote there is “an incredibly stupid-sounding solution” to the problem of a potential Supreme Court ruling invalidating the HealthCare.gov subsidies. That solution, Gaba said, is having each of the 36 states spend about $9.95 apiece—or less—on website domain names that would say things like “HealthcareAlabama.gov,” or “HealthcareAlaska.gov.”

“Then, just set up those domains names to repoint to the appropriate subsection of HealthCare.gov,” Gaba wrote.

Gaba suggested that would be enough to have a state “establish” an exchange, without actually having to do the heavy lifting of enrolling them in coverage.

Moncrieff said that idea is not as harebrained as it might appear.

“It’s possible that, yes, you could set up a fake portal website that redirects to HealthCare.gov,” she said. “It’s possible that this could be a very cheap, easy fix.”

And even if that solution wasn’t legal under the ACA, it could take years of new litigation to resolve that question—which would keep the subsidies flowing, she said.

Hey, that’s a great idea! From my July 25th post

However, here is what will most likely work.  I suspect Obamacare supporters will figure out a way to split healthcare.gov to a site that is healthcare.state.gov and that will “solve” the problem. I’m sure it’s more complicated than that but such a strategy will most likely stay one step ahead of the lawsuits. Also, are Republican’s really going to leave people without subsidies? I’m sure there will be a lot of discussion on this issue as time passes, especially if the Supreme Court rules the same as Halbig vs. Burrell.

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Obamacare subsidy error rate

I can’t believe it will be less than the 21% error rate of the Earned Income Tax Credit.

There’s a program called the earned income tax credit, it’s a wage subsidy, it’s simpler. It requires only the information on how much you made and the size of your family. The error rate in payments on that program, what has been around for years, is about 21%.

Video: ObamaCare enrollees at risk of losing subsidies? (I tried to embed with no success)

 

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Thousands to Be Questioned on Eligibility for Health Insurance Subsidies

What a mess – Thousands to Be Questioned on Eligibility for Health Insurance Subsidies – NYTimes.com.

Federal subsidies for the purchase of private insurance are a cornerstone of the Affordable Care Act. More than eight out of 10 people who selected health plans through the exchanges from October through mid-April were eligible for subsidies, including income tax credits. So far this year the federal government has paid out $4.7 billion in subsidies, and the amount is expected to total $900 billion over 10 years.

Since June 1, the government has notified hundreds of thousands of people that “the information in your application doesn’t match what we found in other records.” Accordingly, the notice says, “you need to follow up as soon as possible and provide more documents to make sure the marketplace has the correct information.”

“If you don’t send the needed documents,” it says, “you risk losing your marketplace coverage or help you may be receiving to pay for such coverage.”

Be careful out there.

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ObamaCare Could Overpay $152 Billion In Subsidies

ObamaCare Could Overpay $152 Billion In Subsidies – Investors.com.

Lawmakers have learned that ObamaCare could end up overpaying insurance subsidies by as much as $152 billion. That’s more than the deficit cut Washington once promised ObamaCare would produce.

 

Inquiring minds want to know if the Government can get their money back when subsidies are reconciled on their tax returns. Of course, this would only work for subsidies that were in error due to participant’s mistakes is estimating income. For other situations, such as being ineligible for coverage due to “affordable” coverage being available at work, the returnee is likely to continue to “misstate” or remain ignorant.

After all, subsidy payments depend on individuals’ claims about future incomes, family size, immigration status and the availability of “affordable” coverage at work. Obama promised that all this would be instantly verified during the application process, but the administration now admits that at least 25% of sign-ups could be either ineligible for any subsidies or are getting the wrong amount.

And, since the law restricts the IRS’ ability to “claw back” any overpayments — and caps how much must be repaid — many of those who get too-big subsidies are likely to simply ignore the government’s request to have that money back.

Holtz-Eakin calculates that if the same 21% error rate applies to ObamaCare subsidies, it will mean $152 billion in overpayments in a decade. In other words, these overpayments could easily swamp the $120 billion budget savings the CBO said ObamaCare would produce.

The CBO has given up estimating the budget consequence of the law since it changes on nearly a daily basis.

But the administration has already made vast changes to the law. It delayed the employer mandate, neutered much of the individual mandate, put off cuts to Medicare Advantage, promised bigger insurance industry bailouts and so on. All of these had the effect of raising the net cost of ObamaCare.

President Obama has made so many ad hoc changes, in fact, that the CBO finally gave up even pretending it can predict how ObamaCare will affect the deficit.

Amateur hour. There’s something about Keep It Simple Stupid that politicians just don’t understand. Also, the alluring vision of “big data” and the power of computing allows people to create these grandiose and very complex ideas that are doomed to fail.

 

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Obamacare’s winners include older Americans

Obamacare’s winners include older Americans – CBS News.

For many older Americans who lost jobs during the recession, the quest for health care has been one obstacle after another. They’re unwanted by employers, rejected by insurers, struggling to cover rising medical costs and praying to reach Medicare age before a health crisis.

These luckless people, most in their 50s and 60s, have emerged this month as early winners under the nation’s new health insurance system. Along with their peers who are self-employed or whose jobs do not offer insurance, they have been signing up for coverage in large numbers, submitting new-patient forms at doctor’s offices and filling prescriptions at pharmacies.

“I just cried I was so relieved,” said Maureen Grey, a 58-year-old Chicagoan who finally saw a doctor this month after a fall in September left her in constant pain. Laid off twice from full-time jobs in the past five years, she saw her income drop from $60,000 to $17,800 a year. Now doing temp work, she was uninsured for 18 months before she chose a marketplace plan for $68 a month.

Young invincibles need to sign up quickly or the risk pool will be way to lopsided.

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10 Top Questions Consumers Ask About Obamacare

10 Top Questions Consumers Ask About Obamacare | The Fiscal Times.

  1. How do I sign up, and is the website working better?
  2. When is the deadline to sign up?
  3. How much is the penalty?
  4. What kinds of plans are offered under the new exchanges?
  5. Do I get to keep my doctor?
  6. I heard some of the top hospitals aren’t accepting Obamacare, is that true?
  7. How expensive are Obamacare plans compared to employer-based coverage?
  8. Who qualifies for subsidies?
  9. Where can you find out if you qualify for a subsidy?
  10. How does the subsidy work?

 

Additional information on the Obamacare penalty here.

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