Glitch: 'I Have to Pay Back My Obamacare Subsidy'

Guy Benson
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Posted: Feb 20, 2015 12:30 PM
Glitch: 'I Have to Pay Back My Obamacare Subsidy'

We've been warning about the millions of Americans who are likely to experience a turbulent tax season because of Obamacare, thanks in large part to the federal website's still-unfinished "back end" -- which has resulted in inaccurate subsidies being paid out. CNN profiles one of those millions:

Janice Riddle got a nasty surprise when she filled out her tax return this year. The Los Angeles resident had applied for Obamacare in late 2013, when she was unemployed. She qualified for a hefty subsidy of $470 a month, leaving her with a monthly premium of $1 for the cheapest plan available. Riddle landed a job in early 2014 at a life insurance agency, but since her new employer didn't offer health benefits, she kept her Obamacare plan. However, she didn't update her income with the California exchange, which she acknowledges was her mistake. Now, she has to pay back the entire subsidy, which is forcing her to dip into her savings..."I was blindsided that the subsidy has to be paid back," said Riddle, adding she didn't even use the coverage, which she had until she qualified for Medicare in October. "I'm in shock...but I have no choice. Do I want to argue with the IRS or the Obama administration?" Like Riddle, many Americans on the exchange will likely have to pay back some or all of their subsidies. Between 4.5 million and 7.5 million taxpayers received subsidies for insurance premiums when they signed up for coverage on Obamacare exchanges, federal officials said. These folks had to forecast their 2014 income when they applied. Those who underestimated their earnings either will receive smaller tax refunds or will owe the IRS money.

That one-dollar monthly premium was pretty sweet -- until it wasn't. Ms. Riddle is fortunate to not have run up against unpleasant out-of-pocket realities or maddeningly narrow coverage networks, either of which may have proven more costly than her surprise tax bill.  Her plight is technically "her fault" for having failed to keep up and comply with Obamacare's moving parts. In that sense, she's in a similar position to others harmed by the law's inertia, such as people who signed up for less expensive plans last year, only to discover that they were automatically re-enrolled…after their plans' price tags increased in 2015.  Many consumers faced the choice (perhaps unwittingly) of paying more for coverage or once again going through the hassle of changing plans.  But Riddle isn't alone in tax headache territory, CBS News reports:

If you're among the roughly 20 million people affected by the Affordable Care Act -- either because you bought insurance through health exchanges or will be subject to penalties or exemptions for failing to get coverage -- filing a tax return just got a lot harder. Indeed, potentially millions of people who never before had to file tax returns will now need to file as the result of the health law…[Obamacare's] subsidies that may appear to simply lower the cost of insurance premiums are actually "advance premium tax credits" that are paid directly to health insurers. Because those credits are made on each taxpayer's behalf, it's up to individual taxpayers to determine whether the "advance payment" was too much or too little. Though many of these individuals have never had to file before -- they simply earned too little to be required to file -- they will now need to complete tax returns to reconcile the Obamacare subsidies they got with what they owe, according to the IRS...Meanwhile, those who didn't buy insurance or had a lapse in coverage that exceeded three months will need to determine whether they're subject to a tax penalty. Both situations involve slogging through new forms and dozens of pages of instructions.

As we mentioned earlier in the week, Democrats are now seeking 13th-hour relief for people caught off guard by the results of that tax "slog."  Liberals who voted against Republican efforts to delay the individual mandate tax are now very concerned about the sir constituents' interactions with the individual mandate tax.  The Washington Post explores this amusing, predictable political panic in a piece entitled, "Democrats Are Bracing for Another Obamacare backlash:"

The Obamacare window technically just closed this weekend, but a new round of political headaches could just be beginning for the administration. That's because it's tax season, and many Americans could soon be getting an unwelcome surprise that they owe the government a penalty for skipping health insurance coverage. Up to 6 million Americans are expected to pay a penalty for not having coverage in 2014, according to recent Obama administration projections. The 2014 penalty for this tax season is $95, or 1 percent of family income — purposefully on the weaker side to let people adjust to this new coverage scheme. Most of the uninsured won't actually face the penalty because they'll qualify for an exemption, either related to their inability to afford coverage or some other hardship. But it's likely that a lot of people who will have to pay don't know it yet. Despite the unpopularity of the individual mandate and the high-stakes Supreme Court case over it three years ago, there's still limited awareness of the penalty among those who could risk triggering it.

The Obama administration effectively classified Obamacare itself as a "hardship," thanks to which virtually any American can qualify for an exemption (people can simply state that they cannot afford the "Affordable" Care Act -- which is true in many cases). But how many people are aware of this escape hatch? I'll leave you with the latest in a long string of unilateral implementation delays.

UPDATE - Democrats are getting their special/extended open enrollment period after all, as the administration careens from one Obamacare mess to another.  Officials say they aren't sure what caused the latest screw-up, which reportedly impacted one out of every five forms the federal government sent out.  Earlier this month, the president told his supporters at Vox that Healthcare.gov was working "flawlessly."