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IRS Could Easily Signal to 10 Million Uninsured Working Poor Eligibility for Coverage. But It Doesn’t.

| April 11, 2016

health insurance working poor

Invisible poor, invisible patients: 10 million people without health insurance receive the Earned Income Tax Credit, which could easily enable the IRS to signal to them their eligibility for low-cost insurance. (Matt McGee)

Nearly a third of people without health insurance, about 10 million, live in families that received a federal earned income tax credit (EITC) in 2014, according to a new study.

But the Internal Revenue Service doesn’t tell those tax filers that their low and moderate incomes likely mean their households qualify for Medicaid or subsidies to buy coverage on the insurance exchanges.

That’s a lost opportunity to identify people who are eligible but not receiving government assistance to gain health coverage, the researchers say.

About half of the uninsured people in families receiving the earned income tax credit are eligible for significant financial assistance — 4.1 million are eligible for Medicaid, and another 1.1 million are eligible for large subsidies on policies purchased on the federal health law’s insurance exchanges and cost sharing reductions because they have incomes below twice the federal poverty level, said Linda Blumberg, co-author of the study. It was released last week by the nonpartisan Urban Institute, a Washington-based research group.

While the Affordable Care Act has driven down uninsured rates to historic lows the past few years, about 33 million Americans remain uninsured, according to latest Census data.

Some local governments are making efforts to identify the uninsured. New Jersey and Maryland check state income tax filings to find those likely eligible for Medicaid, the state-federal health insurance program for poor. Louisiana and West Virginia, among several, have sent letters to food stamp recipients to invite them to sign up for Medicaid. All they had to do was check a box, sign a form and return it. The states verified their eligibility from information on file.

The Urban Institute said the federal government could do more to find the uninsured by tapping into data it collects from other assistance programs.

“The U.S. Treasury could explore notifying all individuals receiving the EITC in the past year that they may be eligible for substantial financial assistance for coverage,” the report said. “The Treasury could also provide an easy mechanism (such as text messaging) that allows individuals to request a navigator to contact them directly to provide additional information and application assistance.”

But the IRS said it does neither. Instead, its website suggests people go to look for health insurance options, and the agency advises tax preparers to tell people about their insurance options. But many people who receive the earned income tax credit don’t use tax preparers.

That credit offsets income and payroll taxes paid by low- to-moderate-income workers. To receive the credit, workers must file a tax return, even if they are otherwise exempt from doing so. The amount of the benefit depends on a recipient’s income and number of children.

The earned income tax credit is the most common government assistance benefit reported by the uninsured but there are others, the report said. About 23 percent of the uninsured live in households in which at least one child received subsidized lunch at school. Nearly 15 percent of the uninsured are in families receiving food stamps, the report said.

The Urban Institute’s Blumberg said the IRS’s data on the tax credit would help identify people eligible for help. In fact, since 2014 all tax filers must report whether they have health insurance on their annual tax forms, she said.

Blumberg cautioned that just sending a letter to tax filers about their health insurance options might not nudge them to sign up. But she said the IRS could invite interested filers to request a federal health law navigator contact and enroll them. “This is not an easy problem to solve, but identifying ways to reach out to uninsured EITC families is something we should be talking to the IRS about,” she said.

A difficulty involves uninsured people in the 20 states that did not expand Medicaid under Obamacare (among them Florida), said Tricia Brooks, senior fellow at the Georgetown University Center for Children and Families. Many adults who get the credit in those states may not qualify for Medicaid, although some may qualify for premium subsidies on health plans sold on the exchanges.

A better course for the IRS is to target those who qualified for the earned income tax credit in the states that did expand Medicaid, she said.

–Phil Galewitz, Kaiser Health News

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8 Responses for “IRS Could Easily Signal to 10 Million Uninsured Working Poor Eligibility for Coverage. But It Doesn’t.”

  1. Ken Dodge says:

    What could be easier for the IRS than enclosing a notice with every EITC refund check it mails? It would be interesting to learn the percentage of eligible would-be-EITC-recipients who don’t bother to file a return, thereby forfeiting their EITC refund. Most early tax-season customers of tax refund preparer/lenders have their fee-for-file returns prepared as soon as they get their W-2s. Word-of-mouth would serve to reduce to a minimum those who receive a W-2 form but decline to have their returns prepared.

  2. Duke Ganote says:

    I was reading about Sweden’s income tax filing for most employees: since the government tracks your reported earning from employers, it mails YOU a provisional tax form, which you can sign or modify. If that data were securely online, most citizens’ lives could be vastly simplified and improved.

  3. Outsider says:

    So, in order to get an EITC, you must file a tax return. Obviously, they are able to file a tax return, but still unable to check a box and sign their name? Now, we need another government program to get people who are literate enough to file a tax return to check a box and sign their name. WTF, over?

  4. Newbie says:

    I get that the IRS could be more helpful alerting those who could receive subsidies, but the next to the last paragraph is key: “A difficulty involves uninsured people in the 20 states that DID NOT EXPAND MEDICAID UNDER OBAMACARE (AMONG THEM FLORIDA) …….. Many adults who get the credit in those states (Florida) may not qualify for Medicaid, although some may qualify for premium subsidies on health plans sold on the exchanges.” Including this article in a FLAGLER county publication was very misleading, as even if the IRS sent notices, thanks to Mr. Scott a majority would remain uninsured.

  5. Mark says:

    And they get to vote too.

  6. Nancy N. says:

    Outsider, you need to read the article again. The “check a box and sign a form” is a program being run in several states that the article is suggesting should be expanded either at the state or federal level. The article isn’t suggesting that something needs to replace that system, but rather that something like it should be available to everyone.

  7. Outsider says:

    I stand corrected by Nancy. Thank you. Regardless, excluding the elderly and those with disabilities, I find it ridiculous that people have to be coerced into getting free stuff. If they are so lazy they can’t even make the effort to sign up for the free stuff, I guess looking for a job is out of the question.

  8. Sunny says:

    Since our Governor opted out of the Extended Medicaid program the poorest of poor or below poverty level families cannot get anything. There are no subsidies for them and no medicaid programs for them. Obamacare is a FLOP in Florida for many families.

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