This is the last weekend of open enrollment for Texans wanting to sign up this year for health insurance through the federally-run marketplace.
For the estimated 3.1 million Texans who are eligible but fail to sign up, there looms a big tax bill come this time next year.
“The penalty will go up a lot in 2016,” said Stacey Pogue, senior health analyst for the Austin-based Center for Public Policy Priorities.
Under terms of the Affordable Care Act, the tax penalty for being uninsured in 2016 rises to $695 per person, or 2.5 percent of your income, she said. The average penalty is expected to be around $950.
“There needs to be a lot more education on the tax penalty,” she said. “The Kaiser Family Foundation did some polling and found that the number who knew about the tax penalty was still in the single digits.”
Healthcare.gov is not easy to navigate.
Mario Schlosser, CEO of Oscar, a new insurer
The penalty for being uninsured is only one of the tax issues related to the ACA this year.
Those with health insurance also need to pay attention to some changes. For most of us, the ACA will have little effect, said IRS Commissioner John Koskinen in a teleconference with reporters last week.
Like last year, meeting the tax obligation of the ACA, for the vast majority of taxpayers, will simply mean checking a box to verify that everyone listed on their return has health coverage, he said.
Although a new tax form — 1095-B or C — will be coming from our insurers or employers as proof of coverage, the commissioner said you do not have to wait for that form to file your taxes, nor do you have to send the form to the IRS with your return.
Also, if anyone on your tax return did not have coverage for the entire year, you can determine if you qualify for one of many coverage exemptions that are available, Koskinen said. An interactive tool at IRS.gov can help determine if you qualify.
$950 Estimated average tax penalty for being uninsured in 2016.
Many who joined the marketplace last year, however, will likely have an unwelcome hit this tax season.
Based on last year’s filings, very few of those who signed up for insurance through the marketplace accurately portrayed their incomes to get subsidies or tax credits available to help cover the cost of premiums, according to a report by the IRS Commissioner to Congress.
Only 8 percent of some 3.5 million taxpayers got it right and did not need to make an adjustment at tax time, he said.
At the same time, half had to pay back some of the federal subsidy when they filed their taxes and reconciled their actual income level with what was reported at sign-up.
While six out of 10 of this group still received a tax refund, it was smaller because of the subsidy payback. The rest had to write a check to pay the difference. Overall, 75 percent owed less than $1,000 that had to be repaid.
On the other hand, 41 percent overestimated their income, and thus were owed more federal subsidy dollars when they filed. The average amount owed to those taxpayers was $640, Koskinen said.
Texas insurers and tax preparers alike are working to help consumers who signed up for so-called Obamacare insurance to understand the tax issues.
“There were a lot of disappointed people who got their refund reduced or had to pay money back last year,” said Walt Hatter, a CPA in Fort Worth.
Hatter suggested that some people shopped for lower premiums on the marketplace by underreporting their income.
“But there’s always a day of reconciliation,” he said. “Some didn’t have the money and had to pay it back on the installment plan.”
Most insurers, as well as the government’s Healthcare.gov website, have calculators to help figure the correct subsidy, but the process can be cumbersome, said Mario Schlosser, CEO of Oscar, a new insurer in the Texas marketplace that has signed up 37,000 in the open enrollment season so far.
“In our experience, those who could sign up are scared away by the complexity,” he said. “Healthcare.gov is not easy to navigate.”
Oscar insurance products are designed to be more transparent and simple in their cost structure, eliminating things like co-pays and co-insurance, Schlosser said. The insurer’s website, www.hioscar.com, also is easier to navigate than most insurers or the marketplace websites.
Blue Cross Blue Shield of Texas took the added step of partnering with the YWCA for a pilot project in south Dallas that offered tax training in Spanish for tax preparers to learn about the how the AHA reconciliation works.
“A lot of the population we serve, especially those bilingual and immigrants, have trouble navigating and managing tax information to see if they qualify for the subsidy,” said Gustavo Bujanda, a spokesman for the insurer.
Overall, marketplace consumers are becoming better buyers of insurance, said Dan McCoy, chief medical officer of BCBS of Texas.
“But there is a learning curve,” he said. “This is a very price-sensitive market. But when you choose a product, it’s important to look at the global benefits — your geography and doctors in the program — and complete the paperwork correctly.”
It’s also important to remember to update any income changes through the year, Pogue said.
“You can go on Healthcare.gov and update,” she said. “If you get a raise or lose your job, you can adjust your premium for the very next month.”
Teresa McUsic’s column appears Saturdays. TMcUsic@SavvyConsumer.net
JPS Health Network will have counselors available on Saturday to help people sign up for Affordable Care Act insurance. Sunday is the enrollment deadline. Assistance will be available — by appointment only — from 8 a.m. to 4 p.m. at two JPS Enrollment and Eligibility locations at 1325 S. Main St. in Fort Worth and 1030 Arkansas Lane in Arlington. To make an appointment, call 817-702-1001.