When healthcare.gov opens for the third enrollment season next Sunday, people visiting the site to buy or continue their insurance coverage will see a new question pop up: “Did your household file a 2014 tax return and reconcile any premium tax credit you used?”
For tens of thousands of people the answer to that question is no, and if so they may lose their Obamacare health insurance subsidies this January.
Taxes, Forms And Obamacare
While it may seem odd that anyone would not file an annual tax return, assuming that they weren’t deliberately trying to evade paying taxes, many of those at risk of losing their insurance subsidies have incomes so low that they aren’t required to file returns.
But now, under the Affordable Care Act, anyone who receives a subsidy to help them pay for insurance must also file a tax return. For people who simply aren’t used to filing returns, this stipulation – and the complexity of one of the form that they have to file to retain their subsidy – comes as an unpleasant shock.
And in some cases, filing out the paperwork is a requirement that they simply may not be capable of complying with. Those receiving subsidies to pay for healthcare must also fill out a form, (I.R.S. Form 8962) which is reportedly a challenge for many to complete.
The amount of the subsidy a person receives to help pay for healthcare is based in part on how much income the recipient estimates they will have in the coming year. This estimate is then reconciled by filing IRS 8962, which requires people to compare the tax credits that they received based on their projected income with the amount they were legally eligible to receive based on their actual income.
If they received more credit than they were entitled to, they must pay back the excess. If they received less, they’ll get a refund. If they don’t file, they lose their subsidy.
The Rising Cost Of Health Insurance
Without subsidies, many people are likely to find healthcare insurance unaffordable. Particularly now, as prices for insurance are set to rise sharply this year.
Across all 37 states that rely on the federal exchange as the enrollment system for people who buy Obamacare health plans, the cost of the most popular “silver plan” (chosen by 68 percent of enrollees) will increase on average 7.5 percent next year. In some states, such as Arizona, Silver plan rates in Arizona will go up by 17.5 percent, while others such as Illinois will see rate rises of around 6.1%.
Last year, the average rise in cost for a Silver Plan was 2.1%.
The price increase further complicates the issue for those people who didn’t file that tax return. The IRS says 710,000 people who had received subsidies under the Affordable Care Act had not filed tax returns and had not requested more time to do so.
An additional 760,000 people who received subsidies and did file returns did not attach the required form comparing how much they collected in subsidies with the amount they were entitled to receive.
If those people do not head back to healthcare.gov during the open enrollment period, they may be automatically re-enrolled in the same or similar health plans at the plan’s new, more expensive price – but with no subsidies.
What To Do If You Lost Your Subsidy
Anyone who does lose their subsidies on Jan. 1 may be able to have them restored by going to HealthCare.gov before the open enrollment period ends on Jan. 31 and confirming – under penalty of perjury- that they have filed tax returns for 2014.
Don’t wait until right before the deadline – those who don’t report filing until the last two weeks of January will not have their subsidies reinstated until March 1. Those who make their declaration and select or continue their current health plan by December 15 will be able to retain their subsidies starting Jan 1, when their 2016 health plan coverage begins.
If consumers attest, under penalty of perjury, that they filed their tax returns, and if they select health plans by Dec. 15, they can keep subsidies for coverage starting Jan. 1.