Saturday, December 07, 2013

Obamacare Creates Tax/Penalty Dangers for Poverty Stricken

Last week commenter 1pdxchris asked the Oregonian's Brent Hunsberger what would happen if a person under guessed their next year's income in getting Affordable Care Act (Obamacare) subsidies. Hunsberger published his answer today. You'll have to pay back any credits you didn't deserve.
"We're really nervous for people," said Rob Justus, executive director at CASH Oregon, which provides free tax-preparation help for low-income Oregonians. "They could, more out of a desperate sort of guess, really screw themselves over. We're really fearful, especially with a lot of the folks we're working with who are in poverty."

Why the concern? Cover Oregon's mailing will provide your estimated Advanced Premium Tax Credit (APTC). For most taxpayers, it'll be based on the household income reported on your 2012 tax return, said Leslie Smith, Cover Oregon's online trainer.

But if the estimate you provided on your Cover Oregon application for your 2014 income is 10 percent higher or lower than your actual 2012 income, the exchange will rely on your 2014 estimate to calculate your credit, Smith said. The exchange will ask you to submit documentation within 90 days supporting your 2014 estimate, she said.
No word on if there will be penalties to pay for the taxes you owed not being paid on time. However, the helpful advice to avoid bad financial news is either to take no subsidy or less subsidy than you think you deserve. In other words, you would be wise to act as if ACA/Obamacare subsidies had never been passed.
How do you protect yourself? If your income fluctuates a lot from year to year – as it might for Realtors or other self-employed individuals – you can hold off on receiving the credits until you file your 2014 return. That's rough, though, if you don't have enough monthly cash flow to cover the full insurance premium.

You can also apply only a portion of your credit against your premium.
A further suggestion is that the poor get a tax preparer to help--if one can be found.
Still unclear? Who can help you decide how to apply the credit? That's a bit tougher. Insurance agents aren't licensed to give tax advice.
. . .
Many tax advisers aren't up to speed on the act yet. If they are, and they bill by the hour, they don't want to charge individuals who largely can't afford to pay for the advice.

"Many preparers don't want to be involved in that because you have to bill out a lot of time for people who can't afford it," Baldwin[*] said. "Next year when you have to reconcile it, it's even more work. It's not going to be very pleasant."
How about charitable help? Problems there too. "CASH Oregon, which provides free assistance at 130 sites statewide, won't be up and running until January." Further, as quoted above, the CASH Oregon director is "fearful" of effects on the poor of claiming ACA/Obamacare subsidies.

And though H&R Block has a website to help estimate tax credits, it has information on less than half the plans available. Hunsberger found that instead of giving a choice of 80 plans from 10 providers that Cover Oregon gives, H&R Block gave a choice of only 33 plans from 2 providers--a 60% reduction in choice.

So, ACA/Obamacare is not only forcing people to buy medical coverage with bells and whistles they don't want, but making tax filing time so complex that even the poorest among us will need professional tax help to avoid "really screw[ing] themselves over" in receiving health care subsidies.
*From Hunsberger's article:
"I was astonished at what level of work they're going to expect people to do," said David Baldwin, an accountant and member of the American Institute of CPA's tax resource panel committee. "It's going to be hard to implement for someone who can't afford to pay someone to do their own taxes."


MAX Redline said...

Still, the H&R Block site was up and running before the Obamacare site, albeit with limited plan choices. And somehow, I suspect that they didn't spend $300 million+ to put it together.

As for acting as if Obamacare had never been passed: for a majority of people, that's not going to be possible, because unsubsidized rates are anything but affordable. They'll have to take a crapshoot and Hope that their income doesn't Change significantly from their estimate, so they don't end up "really screwing themselves over".

For the mmoment, I've contacted the broker that we obtained insurance through originally, and contacted my provider to keep our original plan. That'll buy us a little more time - although it means we'll lose a month or two of subsidies/credits, it's a lot simpler than dinking around in a rush, and perhaps less expensive, as well.

More on the broker approach, in case anybody's interested: this was really easy for me, as we've worked with her before and found her most helpful. You select your agent, send her/him an email declaring her your agent of record, and the ball gets rolling with less heartburn.

T. D. said...

All good points, Max.

You have boots on the ground in trying to get through Cover Oregon. A broker sounds like a good way to go. I'm glad to hear you can keep your original plan--though only for a year.

You should post your tips. They seem more helpful than the other stuff that is being published.

T. D. said...

Max, I added "subsidies" to clarify that the credits are the only part of the act you can safely ignore.

MAX Redline said...

Good clarification, TD.

Here's what my experience with Oregon has been like, to date:

In early October, I tried the site and read their opening-page advisory to use the correct browser; the site was designed for Internet Explorer only. Other browsers will not work.

Using Internet Explorer, nothing worked.

I returned Oct. 13. Using Internet Explorer, nothing worked. I switched to a different browser, and was able to complete an application. However, the "electronic signature" page didn't work. So I sent the application by email to them anyway. A week or so later, I received a note from them, along with a form to sign and return (because the "electronic signature" page hadn't worked.

That's the last I heard from SmotherOregon. I did, however, receive notice from my present insurer that I can keep our present plan for another year, which I've opted to do (it's only a bit over $400 a month).

Since I'd initially purchased the plan through an insurance broker, I thought I'd email her to see if she's working with SmotherOregon, as it occurred to me that she might be one of the rumored "approved agents". She is.

So I sent her an email designating her as our agent of record, which she will send on to SmotherOregon.

She wrote back to say that I should receive a "selection packet" from SmotherOregon on Monday (tomorrow), but to let her know either way. Based upon my experience to date, I have no great confidence that said packet will arrive, but she says that her contact there assures that it will.

I strongly recommend going through a broker; it costs you nothing and is a more streamlined and communicative approach than anything you're going to get out of a state bureaucracy.

OregonGuy said...

"That's rough, though, if you don't have enough monthly cash flow to cover the full insurance premium."

Since 2001 there have been two times that put severe cash-flow crunches on my biz.

Would I give up my biz, or my insurance?

T. D. said...

Max, I'm glad you published your experience/advice as a post. Your first hand knowledge of the some of the problems and how to deal with them is invaluable.

OG, I thought the same thing when I read that statement. Obamacare raises the rates not only by requiring things people don't need but because the health care insurance companies now have to cover everyone with no way to factor in risk (except, of course, tobacco). So, people who used to have good or even normal health factors in their favor no longer do.

MAX Redline said...

No problem, TD - I left the short version here. As I surmised, despite getting an application in by mid-October, SmotherOregon hasn't returned a packet to me. So calling my provider and telling them to renew my current policy (as opposed to the one they want more than double for) was a good move. I can live without a "free" breast pump for now.

T. D. said...

Based on your counsel, I now tell people to get a broker. I just hope the voters are smarter than the press when it comes to the 2014 elections and holding our governor, our U.S. representatives and senator accountable for this mess.