Staring at a big price hike for new mandatory health plan
By Calvin Woodward
Associated Press
WASHINGTON (AP) — The new health care law helps some people, hurts others and confuses almost everyone. Hoping to simplify things a bit, The Associated Press asked its Twitter, Facebook and Google Plus followers for their real-life questions about the program and the problems they’re running into as the March 31 deadline approaches to sign up for coverage in new insurance markets.
Four of their questions and AP’s answers:
WHEN YOU LOSE YOUR PLAN
Q: “My premium AND my deductible are doubling ... in order to comply with Obamacare — I liked my coverage before and I was promised repeatedly I could keep it. My husband is self-employed so we don’t get the breaks big corporations do. My question is how are self-employed people supposed to afford insurance under the ‘Affordable Healthcare Act’?” — Amber Wiser Thompson, Saint Clairsville, Ohio.
Her story: When she posed the question, she and her self-employed husband were facing soaring costs for a new health plan starting this month. Their insurer was discontinuing their old plan because it didn’t meet standards of the Affordable Care Act. The insurer’s replacement plan cost $1,100 a month with a $5,000 deductible — in both respects, twice what they’ve been paying. More than 4 million Americans similarly found themselves scrambling for new private coverage when their old plans were pulled from the market because they didn’t comply with Obamacare.
A: Instead of accepting a new and more expensive replacement plan from an insurance company that discontinues your policy, shop for coverage on the HealthCare.gov exchange, see if terms are better than you have now — and check whether you qualify for a subsidy.
What happened: The Thompsons did just that and found a policy on the Ohio exchange that headed off the big cost increase. It’s also from the same insurer. “I have an almost identical policy with the same premium and deductible that I did before,” Amber Wiser Thompson said.
There’s a catch though. Their costs stayed about the same only because they qualified for a tax credit on the exchange. Because her husband has gone into his own business, the family’s income this year is highly unpredictable. If her husband makes too much money, the couple will lose their subsidy and see their costs jump after all. In that case, they may have to pay back thousands of dollars.
“It seemed to be something I just couldn’t get around,” Thompson said. “I researched and filled out applications and was on the phone for about three days to get to this point.”
Once she found the new policy, she learned that she and her husband might have been able to keep the old policy after all because it apparently was being extended at the last minute. But she decided to go with the new coverage, she said, describing her situation in a phone interview and emails. “There was no way I was going through that again so I left well enough alone.”
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WHEN THE PENALTY HITS
Q: “If I don’t sign up, when does the penalty start to affect my wallet? How much is the penalty? How is the penalty collected?” — Shanna Derringer, Manning, S.C.
A: You’re likely to feel the penalty in early 2015, when you file your taxes for this year. That’s when you’re supposed to verify to the IRS that you’ve got coverage. (If you don’t make enough money to have to file a federal tax form, you don’t need to buy coverage under the law.)
The penalty for this year is $95 for an individual or 1 percent of income over $10,000, whichever is greater. So someone who makes $30,000 in 2014, let’s say, could be charged $200.
The penalty jumps after that. In 2015, it’ll be $325 for an individual or 2 percent of income, whichever is more. In 2016, $695 or 2.5 percent.
There are caps involved, and different numbers for families, making the math even trickier. But why do math when the Tax Policy Center will do it for you? Plug in your income and dependents here and see: http://goo.gl/A4MKxh
As for how it’s collected, if you are due a tax refund, the IRS can deduct the penalty from what it gives back to you. Otherwise, the IRS will tell you what you owe. One more thing: The government considers how many months during the year you’ve been without insurance. So if you lacked coverage for half the year, you could be subject to half the penalty.
More detail on who needs insurance and how the penalty works: http://goo.gl/Rw469s
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THE INTERNAL REVENUE SERVICE AND ME
Q: “Is it really true that the IRS can’t do anything to you if you refuse to get insurance and also refuse to pay the penalty?” — David Myer, 46, a consulting geophysicist in Encinitas, Calif.
A: You could say the IRS has one hand tied behind its back here. But that still leaves the other hand. The tax collectors don’t have nearly as many tools to go after insurance avoiders as it has to enforce tax laws. It can, however, dip into people’s tax refunds to collect the penalty for those who don’t get health insurance. Most filers qualify for a tax refund, so they would be exposed to that collection tactic. Beyond that, it can send insistent letters, and who wants to get those?
Elizabeth Maresca, a former IRS trial attorney, told the AP that an unfriendly letter about an outstanding health insurance penalty probably will have much the same effect as one about tax arrears. “Most people pay because they’re scared, and I don’t think that’s going to change,” she said.
That said, the IRS can’t seize bank accounts, dock wages, charge interest on unpaid penalties or apply criminal or civil sanctions to force people to obtain health coverage.
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CAN I JOIN THE EXCHANGE?
Q: “Why are there limits as to who can sign up? If someone has an employer plan that they don’t like, they can’t switch the plan to one of the new ones.” — Duane E. Maddy, a graphic designer and digital artist in Dunbar, W.Va.
A: It’s true, the new system is set up so people who get health insurance at work stay on it. For better or worse, the law aims to preserve employer-based insurance, not give everyone an easy bailout to the new individual markets.
That said, you can shop for coverage in the new state exchanges even if you have insurance at work. But it may not make financial sense to switch. It depends on whether your work insurance is considered affordable. If it’s not, you may be able to get a subsidized plan on the exchange — and a better deal.
What’s unaffordable? The government defines it this way: If you are paying more than 9.5 percent of your income for your health insurance premiums at work, you’re paying too much. You can move to an exchange plan and possibly get subsidized premiums there.
So you’ll have to do some math and wade through fine print to see what your options might be. It’s also possible to switch to an exchange if your workplace plan fails to meet certain other conditions, although most job-based coverage is expected to meet that test. To be sure, the government doesn’t make any of this easy to understand.
