• Consumers’ next Obamacare challenge: Tax forms

    Posted on October 10, 2014 by in Breaking News

    Life Insurance, Medicare, CJB InsurancePolitico by Paige Winfield Cunningham and Mackenzie Weinger –

    If consumers thought logging on to HealthCare.gov was a headache, sorting through complex forms ahead of tax deadline day 2015 is their next big Obamacare challenge.

    The health care law’s benefits are rolling out, but its major math problems start next year as the IRS tries to ensure that millions of Americans are correctly calculating their benefits and that those who don’t have coverage are penalized unless they qualify for an exemption.

    That means much new paper-shuffling between now and April 15, which could be especially confusing for low- and middle-income Americans unaccustomed to lots of reporting to the IRS. The insurance exchanges and employers must send consumers details about their health plan and benefits or exemptions in time for them to file a tax return. If any of that information is delayed or wrong, tax refunds could be delayed.

    “We’re having some trepidation,” said Judy Solomon, vice president for health policy at the liberal Center for Budget and Policy Priorities. “This is going to be another new thing just like the roll out of HealthCare.gov.”

    Last month, the Obama administration released drafts of the forms employers and individuals will have to fill out. But those leave unanswered many questions about how it’ll all work. The details are expected to be included in “practical” instructions the agency plans to release later this month that will detail how to complete the new forms, the IRS said.

    At this point, the new forms look “very daunting” for taxpayers, said Mark Ciaramitaro, vice president of health care services at H&R Block. “Overall, we expect the complexity level is just going to go up for a significant group of moderate- to low-income people, whether they got insurance through the marketplace or they didn’t.”

    Before they can file a tax return, individuals will have to get documents from their state- or federal-run exchange about the plan they bought and any subsidies they received. Or, if they’re covered through an employer, they’ll have to provide proof of that. If they qualify for an exemption from having coverage, they’ll have to send that to the IRS, too.

    But if they completely ignore the question of having health coverage, now a new line on the standard 1040, it’s unclear how the IRS will respond, says George Brandes, vice president of health care programs at Jackson Hewitt. The result, he worries, could be that filers trying to comply with the law are penalized with delays while those ducking it aren’t.

    “You’re at much greater risk for having things gummed up if you’ve done what you’re supposed to do,” Brandes said. “We’re not name calling here — it’s just sort of a recognition of the reality of how this is going to work.”

    Tax Foundation economist Alan Cole agrees and, like many experts, doesn’t expect the IRS to vigorously enforce the law’s individual mandate in its first year, using this upcoming filing season more as a trial run.

    “Especially given that this is low stakes, that this is the first year of the mandate, and that it’s small, I would not expect a serious crackdown of any sorts this coming year,” he said.

    Applying for an exemption is another point of potential confusion, advocates and experts say. The Congressional Budget Office expects millions of Americans who remain uninsured to qualify. As for the penalty, CBO in June downgraded the number of people it estimates will pay the fine from 6 million to 4 million.

    The administration has provided a long list of reasons why someone could be excused from the mandate. Some exemptions — like belonging to a religious organization that opposes insurance or joining a health care sharing ministry — must be applied for through the person’s exchange. Tax filers would then receive a certificate of exemption to provide to the IRS.

    The application requirements for some of those exemptions are “hopelessly complex,” Brandes said, pointing to one that addresses people in states that didn’t expand Medicaid. “They created a blanket exemption for those folks, but they also created an impossible application process. It’s craziness,” he said.

    Other exemptions, like one granted to people unable to find a premium costing less than 8 percent of their income, must be applied for directly on a tax return.

    And some low-income earners who qualify for an exemption during open enrollment may find themselves ineligible if their earnings increase later in the year — making coverage suddenly affordable.

    “That is so complicated,” CBPP’s Solomon said. “How does anyone understand that? The folks who are helping consumers are reeling. A consumer can’t be expected to understand this.”

    To top it off, applying for an exemption via the federal exchange can be done only via regular mail.

    “It’s just a paper process, and that’s a problem,” said Cheryl Fish-Parcham, private insurance program director for Families USA, an advocacy group that supports the Affordable Care Act. She also said she’s heard anecdotally that some people haven’t heard back about whether they’re exempt from the individual mandate.

    Centers for Medicare & Medicaid Services spokesman Aaron Albright said that each application for an exemption is reviewed on a “case-by-case basis” and that every person will be notified whether the exemption is granted or denied.

    Then there’s the challenge of making sure people collect the subsidies for which their income qualifies them. Because the monthly subsidies are based on an estimate of what people will earn during the year, some Americans are expected to owe the IRS if they ultimately earned more than expected.

    To prevent the possibility of owing Uncle Sam at the end of the year, people are supposed to quickly report to HealthCare.gov or their state-run exchange if their income changes over the course of the year. But not everyone may know that, said Anthony Wright, executive director for Health Access California, a consumer advocacy group.

    “I think there’s a lot of burden to just educate people so it doesn’t become an issue,” Wright said.

    Experts aren’t just worried about the problems taxpayers could have as they try to navigate such complicated requirements. Exchange enrollees won’t be able to file their taxes until it sends them a 1095-A form, and there are some concerns that the forms will be late, especially in states with struggling exchanges.

    Albright said that won’t happen. “People will get their information in time for tax season,” he said.

    Yet the skeptics fear that some taxpayers could be faced with delayed returns.

    “There’s just not a good track record out there for us to suggest the 1095-As are going to be delivered on time,” said Chris Condeluci, who served as tax counsel for Senate Finance Committee Republicans during drafting of the ACA.

    For many of the people Obamacare was targeting, this could be a potential “nightmare,” said Ed Haislmaier, senior research fellow at the conservative Heritage Foundation, which staunchly opposes the law. “For people who have fairly simple returns and tend to file early, the simple lack of a necessary piece of paper if it’s not generated in time will delay their ability to do that,” he said.

    And even if the forms aren’t late, Brandes is concerned that the information on them could be riddled with inaccuracies. “They’re still processing inconsistencies from last time around,” he noted. “This is taxmaggedon here.”

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