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As March 31 Deadline Nears: Going Without Health Insurance Will Likely Cost You At Tax Time

| March 26, 2014

Single-payer head games don't apply anymore. (Nesri)

Single-payer head games don’t apply anymore. (Nesri)

Health insurance navigator Barb Silnes has been warning consumers that they will likely pay a tax penalty if they don’t sign up for insurance very soon.

Some reply that they’ll swallow the penalty — and maybe get coverage later this year.

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But in most cases that won’t be possible, Silnes tells them. If consumers miss their chance to enroll this time around, the next chance is mid-November, with a few exceptions.

“That’s when I get their attention,” said Silnes, who works out of the Jane Addams Resource Corp. in Chicago’s Ravenswood neighborhood.

The Obama administration has long said that consumers must enroll in a health insurance plan by March 31 or face financial consequences. On Tuesday evening, the Washington Post reported that federal officials had granted applicants a little more breathing room. People who have begun to apply for coverage on the healthcare.gov federal marketplace site, but do not finish in time, will have until about mid-April to ask for an extension.

But the basic equation doesn’t change: Decisions made now on health insurance have an impact that stretches to tax time 2015.

The mandate that most people obtain insurance or pay a penalty is the linchpin of the federal health care overhaul. Without it, younger, healthier people might not enroll in high enough numbers to compensate for those who have preexisting conditions, who often cost the system more.

The Supreme Court focused on the tax penalty in its decision upholding the Affordable Care Act in 2012, ruling that while the federal government does not have the constitutional power to require people to buy insurance, it can levy a related tax.

For consumers, the flip side of the tax penalties is the law’s tax benefits. To make insurance more affordable, the law qualifies most low- to moderate-income people for government credits that can be used to lower the cost of monthly premiums of plans obtained through the federal or state insurance marketplaces.

The basic penalty for going without insurance is $95 or 1 percent of modified adjusted household income, whichever is higher. But many complicating factors can increase the burden.

“The $95 thing is a myth for most folks,” said Brian Haile, senior vice president for health policy with Jackson Hewitt Tax Service, which has made it a point of business strategy to help its customers avoid the law’s tax penalties. He said most uninsured people will pay much more.

“If you choose not to get insurance, we respect that choice, but what we absolutely want to ensure is that you’re not surprised,” Haile said.

The mandate to buy insurance remains politically controversial. Some Republican members of Congress have argued that it has too many exceptions to be effective, including 14 hardship exemptions such as having a recent death in the family, being a victim of domestic abuse, being unable to pay medical expenses in the past 24 months or having a policy canceled and considering the available options unaffordable.

This month House Republicans voted to delay the so-called individual mandate by five years, though such legislation wouldn’t survive the Democrat-controlled Senate or Obama’s promised veto.

Here’s what you should know about tax penalties and credits as you make your insurance choices:

• Some groups are exempt from the penalty. Those include people for whom the cost of health insurance would exceed 8 percent of household income in 2014, prison inmates, members of an Indian tribe or certain religious faiths with objections to insurance, people whose income is too low for them to file a tax return, people living in the U.S. illegally and those who qualify for a hardship exemption.

• If just one member of your family isn’t covered, penalties apply. According to Haile, for a family of five with one uninsured adult whose modified adjusted gross income is $68,000, the penalty would be $477 for the first year. For example, a “boomerang” son or daughter age 26 or older has moved back home. Claiming that uninsured person as a dependent on your taxes could “cost you more than a spare bedroom,” Haile said.

• Penalties get worse each year. For 2014 the tax penalty is 1 percent of modified adjusted household income or $95 per adult and $47.50 per child (up to a maximum of $285 per family), whichever is more. In 2015 penalties rise to 2 percent of income or $325 per adult and $162.50 per child; in 2016 and beyond it will be 2.5 percent or $695 per adult and $347.50 per child. (Higher maximum penalties will apply.) An online calculator that helps determine the likely penalty is available at taxpolicycenter.org.

• Missing next year’s deadline means a double whammy. Your actions this spring seal your fate for the 2015 tax season. But if you also don’t sign up in the next enrollment period, from Nov. 15 to Feb. 15, “you are locking yourself into two years of penalties,” said Mark Ciaramitaro, vice president of health care enrollment services for H&R Block. If a taxpayer doesn’t realize that until next April, it will then be too late to buy a policy.

• Many insurance buyers will qualify for tax credits. The credits, which vary according to income and family size, can go directly to the insurer, reducing your monthly bills. Or you can pay the full premium and get a lump sum as part of your tax refund next year. For a family of four, incomes from $23,550 to $94,000 may qualify.

The income criteria are based on the modified adjusted gross income listed on 2013 tax forms and an estimate of this year’s pay. If you guess too high on your 2014 income, you will wind up paying too much for your insurance and will get some money back when you settle up at tax time next year. If you guess too low, you may have to pay more.

“A lot of people seem to be thinking, I’m going to put my income as low as possible to get the highest credit I can and the government won’t know. Yes, the government will figure it out and will adjust your tax refund next year,” Ciaramitaro said.

Haile said the people who face the biggest decisions about whether to buy insurance that comes with tax credits are those near the income limits.

Say your family of four’s income is $94,000, so you barely qualify for monthly credits to help with payments. Then you get an unexpected $400 bonus. “It could be the most expensive bonus you ever receive,” Haile said, because it could push you over the limit for receiving credits and you may have to pay them back.

The law does set some limits on what a person must pay back if family income exceeds estimates. For example, a family at 300 percent of the federal poverty level ($71,550 for a family of four) would have to pay back a maximum of $2,500. But there is no such cap if, by the end of the year, income is over 400 percent of the poverty level.


The credits may even come into play when two people are deciding whether to get married, Haile said. If their combined incomes on a joint return put the couple over the limit, they would miss out on the monthly help with premiums they could have gotten individually.

What almost everyone agrees on is that the tax implications are complicated. That’s where the navigators come in, and they are stepping up their outreach activities as time runs out to sign up.

Tim van Alstyne, a navigator with Community Counseling Centers of Chicago, said his appointments and phone consultations have been ramping up for weeks. He said there is much confusion about the penalties but he tells people that between the state’s broader Medicaid options (thanks to its decision to expand the program) and the available tax credits, “no one really has to pay a penalty.”

In addition to the newly allowed extension, there are other exceptions to the March 31 deadline. People experiencing life changes that affect their insurance status — such as marriage, divorce or loss of a job that provided coverage — will be able to buy a health plan later in the year. And people who qualify for Medicaid can enroll at any time.

Steve Mullen, 56, who lives in the Old Irving Park neighborhood, had been uninsured since his COBRA eligibility ran out in June. He knew he wanted to sign up for new insurance under the law, he said, but put it off until this month for financial reasons.

After meeting with Heartland Health Centers navigator Felicia Fredricks for just under an hour and a half, Mullen found a plan for himself and his wife with tax credits. He said Fredricks helped him with tax information he wouldn’t have known.

“Had I not worked with Felicia, I would have made a big mistake,” he said, in reference to questions about filing jointly. “I didn’t realize how closely the Affordable Care Act and your tax filing status were connected.”

Vivian Ezeji, another navigator for Heartland, says she’s getting questions about how to project income accurately to determine tax credits when a person’s pay changes from month to month. Consumers are required to report changes in pay or family size to the marketplace so credits can be adjusted, she noted.

Information on finding a navigator is available at localhelp.healthcare.gov.

A number of companies are using tax season to raise awareness about health insurance options. In addition to materials available through Jackson Hewitt, H&R Block is partnering with Chicago-based insurance portal GoHealth to help people get coverage; options are laid out at hrblock.com/healthcare. TurboTax is working with eHealthInsurance.com, a private online national exchange.

Illinois residents also can compare plans and enroll directly through healthcare.gov.

–Marcia Frellick, Chicago Tribune and Kaiser Health News

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13 Responses for “As March 31 Deadline Nears: Going Without Health Insurance Will Likely Cost You At Tax Time”

  1. dlf says:

    So now we are going to blame the insurance companies for a program that a neighbor hood organizer forced on us. GIVE ME A BREAK. In the end it will cost all of more at some time or another. If this is such a great program why do we keep seeing the government extending the deadlines and why is the neighbor hood organizer and his family are exempt, oh, I forgot they are in China on spring break. Where are you and your kids at on spring break …..Palm Coast or Flagler Beach?

    • Obama 2014 says:

      President Obama enrolled in the federal health-care insurance exchanges, selecting a bronze-tiered insurance plan on the D.C. marketplace on December 23, 2013 .

      Would you rather Obama being son of a former president that started a war in a country we didn’t need to to avenge his daddy? How about a billionaire that buys companies, crushes their profits and then sends the jobs to other countries while the American workers our out of work?

      The president’s wife and kids are in China meeting with China’s 1st lady and people in their country. Just like ever other 1st lady has in the last 60 years.

      Also, all those “cancelled Policies” should not have been sold. These innocent insurance companies broke the law by selling them after March of 2010 but used their customers because they believed the entire law would be found unconstitutional. If I had one of these policies I would be contacting a lawyer and demand they refund my money for selling me a product that was not following the law.

  2. Florida Native. says:

    As a decorated US veteran with access to the VA heath care system I think my lucky stars I don’t have to deal with Barack Obama and his worthless and socialist welfare programs. God bless America.

    • Pierre Tristam says:

      The medals of irony in that comment remind me of the tea party’s priceless chant: “Keep government off my Medicare.”

      • dlf says:

        And what a great job they have done in screwing that program up, just like social security, post office, home land security, food stamps, IRS, should I go on with the great job YOUR big government has done? Name me one program, that BIG BROTHER has done effectively and efficiently, just one, thank you.

      • Col Dave says:

        Thank God for the TEA PARTY !!!!!!

    • Obama 2014 says:

      Yea and the GOP really cares about you.

      They only cared about you when you fought for this country. Now that you need help they will not increase funding for you and the rest of our nations greatest citizens. Thousands of men and women coming back from fighting the GOP war games and some of them may not get help.

      February 27, 2014
      Republicans block Senate bill to boost veterans’ benefits
      A bill to increase spending for veterans’ services failed to move forward in the Senate, despite support from 54 Democrats and two Republicans. Democrats noted that more than two dozen veterans groups supported the legislation. But Republicans said they still favor helping veterans while also wanting to be prudent about federal spending.

      Put your money where your mouth is , Stop using our “socialist welfare programs” and pay for it yourself.

    • Anita says:

      Thank you for your service, decorated veteran. Now, tell me what you think of the increasing number of veterans, decorated or not, whose families are subsisting on food stamps and are looking at cuts in their benefits, thanks to the present congressional zeal to cut the costs of feeding the needy by any means necessary? What will you say to the disabled survivor of “Desert Storm” ande “Iraqui Freedom” when you see him or her with Snap coupons at Publix?

      And while you’re in the mood to communicate, tell Rick Scott to expand Medicaid so that all of the unemployed in this, the county with the highest rate of unemployment in the state, don’t have to wind up in hospital emergency rooms for non-emergency problems because they have NO insurance at all. .

  3. Genie says:

    So sad….pay up or face the IRS. What a country and what terrible choices.

  4. A.S.F. says:

    If the Democrats and President Obama are guilty of one aggregious thing, it is caving in and “negotiating” too much and for too long with insurance companies, big Pharma and and the medical lobbies. You can’t negotiate in good faith with a perpetually ravenous beast. You want to cut out some of the unnecessary, uncalled for fat in medical care (besides the massive amounts of fraud that President Obama is already making a dent it?) Try cutting out the huge “bonuses” some the directors of these “non-profit” insurance companies get every year, let alone the pay-outs they receive when these “non-profits” sell out and become for-profits. And the companies in the business sector that are dropping healthcare benefits for their employees and pensioners, using Obamacare as an excuse, will be wreaking in profits from that move as well. Do you think they will be returning the bulk of those profits to the employees and pensioners? Good luck waiting for that one to happen! The greedy and self-serving are always on the look out to suit their own ends. They will use the ignorance, fears and desperation of the masses to do so, given the opportunity. I hope against hope that we disappoint them this time!

  5. JtFlagler says:

    The mantra years ago was “study hard in school, get a higher education so you get a good job, work that job and provide for your family, be successful.” Not anymore! Even if you do those things you can’t equal what those who’ve done nothing their entire life. You come out in the end with working your entire life to provide benefits and exemptions to them and barely putting food on the table for your family. I just absolutely love the exemption for “people living in the U.S. illegally”.

    • A.S.F. says:

      The poor are not your enemy. The poor spend most of their time and energy just trying to exist on the most basic of levels from day to day. They are not sitting on couches, eating bon-bons and laughing at you while you sweat and slave to provide them with the magnificent welfare checks being funneled to them by the evil Socialist forces currently holding our nation hostage. Are people really stupid enough to think that being poor is a rig-a-ding time? Has Conservative America conveniently forgotten how many of THEIR ancestors came to the US from far away places–Do you really think your family tree sprang out of American soil like cabbages? Or perhaps the Stork brought your ancestors here? I guess compassion doesn’t stand a chance against self-interest until it is YOUR turn to be vulnerable and need some help from someone. Perhaps, one day, when you or a family member of your’s is old or disabled and requires care and/or assistance from someone who happens to be from another race or place, you will think differently–or end up wishing that you had.

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