President Obama. (Official White House Flickr.)
WASHINGTON (TheBlaze/AP) — Millions of people who take advantage of government subsidies to help buy health insurance next year could get stung by surprise tax bills if they don’t accurately project their income.
President Barack Obama’s new health care law will offer subsidies to help people buy private health insurance on state-based exchanges, if they don’t already get coverage through their employers. The subsidies are based on income. The lower your income, the bigger the subsidy.
But the government doesn’t know how much money you’re going to make next year. And when you apply for the subsidy, this fall, it won’t even know how much you’re making this year. So, unless you tell the government otherwise, it will rely on the best information it has: your 2012 tax return, filed this spring.
What happens if you or your spouse gets a raise and your family income goes up in 2014? You could end up with a bigger subsidy than you are entitled to. If that happens, the law says you have to pay back at least part of the money when you file your tax return in the spring of 2015.
That could result in smaller tax refunds or surprise tax bills for millions of middle-income families.
Health care providers, advocates and tax experts say the vast majority of Americans know very little about the new health care law, let alone the kind of detailed information many will need to navigate its system of subsidies and penalties.
“They know it’s out there,” said H&R Block manager Mark Cummings. “But in general, they don’t know anything about it.”
A draft of the application for insurance asks people to project their 2014 income if their current income is not steady or if they expect it to change. The application runs 15 pages for a three-person family, but nowhere does it warn people that they may have to repay part of the subsidy if their income increases.
There’s another wrinkle: The vast majority of taxpayers won’t actually receive the subsidies. Instead, the money will be paid directly to insurance companies and consumers will get the benefit in reduced premiums.
Health care providers and advocates for people who don’t have insurance are planning public awareness campaigns to teach people about the health care law and its benefits.
Enroll America, a coalition of health care providers and advocates, is planning a multimillion-dollar campaign using social media, paid advertising and grass-roots organizing to encourage people who don’t have insurance to sign up for it, said Anne Filipic, a former Obama White House official who is now president of the organization.
The Obama administration says it, too, is working to educate consumers.
“It’s potentially going to come as a shock to individuals who meet that criteria where their income hits a point where they owe money back,” said Rep. Charles Boustany, R-La., chairman of the House Ways and Means oversight subcommittee. “The fact is, with variations in income, people could end up owing money back and that will create consternation and problems for them.”
The subsidies are available to families with incomes up to 400 percent of the poverty level. This year, four times the poverty level is about $62,000 for a two-person family. For a family of four, it’s $94,200.
About 18 million people will be eligible for subsidies, according to the Congressional Budget Office.
If families get bigger subsidies than they are entitled to under the law, the amount they have to repay is capped, based on income and family size. If they get less than they qualify for under the law, the government will pay them the difference in the form of a tax refund.
There are also special rules that protect people who marry or divorce from being required to pay back subsidies just because their marital status changes.
There are four thresholds for repaying the subsidies:
- A family of four making less than $47,000 would have to repay a maximum of $600
- If the same family makes between $47,000 and $70,000, the amount they have to repay is capped at $1,500
- If the same family makes between $70,000 and $94,200, the amount is capped at $2,500
- Families making more than four times the poverty level have to repay the entire subsidy
The total amount of money that taxpayers will have to repay is unclear, but congressional estimates offer some clues.
Twice since the health care law was passed Congress has increased the caps for how much people will have to repay. Combined, the two measures are expected to raise more than $40 billion over the next decade, according to Congress’ Joint Committee on Taxation.
Over at Investor’s Business, the always-interesting John Merline sends word of a troubling development when it comes to Obamacare: The very people it was supposed to help the most – the uninsured – don’t seem to want the damned thing.
After looking at a series of slides posted by Health and Human Services (HHS) that lay out the department’s marketing plan to reel in new customers, IBD’s editorial board notes,
It turns out that the Democrats and the Obama administration apparently didn’t bother to investigate who these uninsured people actually are before they forced through a $1.8 trillion plan to help them.
What they’ve learned since is that more than half of the 48 million who the government says are uninsured aren’t interested in health insurance, which is why they don’t bother to buy it in the first place….
The biggest market segment identified by HHS, in fact, is what it describes as “healthy and young,” who make up 48% of the uninsured population.
They have “a low motivation to enroll” because they are in “excellent to very good health” and so “take health for granted.”…
Then there are the “passive and unengaged,” which make up 15% of the uninsured and also have a “low motivation to enroll” because they “live for today.” They also cite cost as a key factor.
The problem, of course, is that ObamaCare will make insurance vastly more expensive for many of those who fall into these groups by larding on new benefit mandates and placing limits on premium-lowering deductions and co-pays. It will also introduce insurance market rules that force the young and healthy to subsidize premiums for those older and sicker.
HHSRead the whole thing.
Obamacare backers pushed the plan as a way to cover the 50 million Americans who didn’t have health insurance coverage (and let’s be clear that having health insurance isn’t the same thing as having good health). After the law passed, they chucked the idea that 50 million people were going to get covered, usually dropping the number down to around 30 million. Which off the bat is a tell of some sort: Why are we spending trillions of dollars and creating a new, untested program to cover 30 million people (while leaving another 30 million out at sea)? If basic insurance coverage was the goal, wouldn’t giving people some sort of voucher or payment ticket to buy insurance be a cleaner, easier solution (and one that could have been implemented overnight)? Not that such a system wouldn’t have caused all sorts of unintended havoc on the status quo, but it wouldn’t have created an tsunami of uncertainty and guaranteed rate hikes that are everywhere around us.
Here’s HHS’s latest fact sheet on the uninsured.
