April Surprise
There's a scheduling flaw in the implementation of Obamacare that is just now becoming a reality. I noticed this flaw quite some time ago, but haven't mentioned it in a while. [Editorial note: I just know I wrote about this subject previously, but a quick check of the archives didn't provide me with a linkable example, sorry.] This flaw is about to become apparent to millions of procrastinatory Americans. Some in the media and political worlds are now noticing this, but it likely won't be until April that this surprise dawns on most.
The problem should have been apparent to all, since it is a function of how the income tax system works and how the insurance industry works. The two operate on different calendars, in two significant ways. The first is that the insurance industry prefers to hold their "open enrollment" periods at the end of the calendar year, while income taxes aren't filled out until -- at the earliest -- February. The second is the difference in how the two operate. The insurance industry is proactive in payment, and income taxes are always after-the-fact. Combined, these differences are going to trap many into a long period of paying for their mistake -- twice as long as it really should be, if this scheduling conflict had been properly planned beforehand.
That all sounds complicated, but it's really not. You sign up for health care before the year starts, you file your income taxes after the tax year ends. But because Obamacare has a penalty in it (call it a "tax" or a "penalty" depending on how much you love or hate the Supreme Court's ruling on the issue, I suppose), the books won't be balanced for over a year for choosing not to buy insurance.
To put this a different way, people who decided in the 2013-2014 Obamacare open enrollment period not to buy insurance for 2014 will just now be paying the penalty, when they fill out their tax forms. People who missed the deadline (last Sunday) to sign up for the 2014-2015 open enrollment period are going to pay the penalty next April.
This is pretty straightforward. But because the schedules don't overlap this year (the tax deadline is after the open enrollment period has already closed), those who were unaware of the Obamacare penalty are now doomed to pay it again next year, and won't have a chance to avoid it until the 2016 tax year. This locks them in to paying the penalty for two years before they have a chance to change their minds.
Now, you could argue that this has all been well-known to anyone who bothered to find out about it. It hasn't been a secret, or anything. But the sad fact is that millions of Americans are unaware that there even is a tax penalty for being uninsured (half of uninsured Americans were not aware of the penalty, according to a recent Harris Poll).
The first year the penalty will be $95, or one percent of your income -- whichever is greater. This means anyone making more than $9,500 a year is going to pay a higher penalty (take your income and lop off two zeros at the end to see what you would have to pay). This is the penalty that will come due on the tax forms you fill out this year. Next year, however, that penalty increases to $325 or two percent of your income (whichever is greater). That's a steep jump, and that's what people who were unaware of the penalty and have not bought insurance are going to be paying next year (since open enrollment is already over).
Now, not everyone is going to pay this penalty. There are multiple exemptions. Change jobs, get married, have a baby, or experience any other major life change, and you are allowed to sign up for insurance outside the open enrollment period. On top of this, there is a pretty generous "hardship clause" so the penalty won't hit those who simply can't afford insurance even at the prices offered. So not every person without health insurance will be paying the penalty. Even so, estimates are that up to six million people will have to pay.
Which raises a political problem. The penalty is supposed to be there to encourage everyone to buy insurance. The logic is simple: you're going to have to pay, and you can choose to pay a tax penalty or you can choose to buy health insurance. If you buy health insurance, you actually get something for your money. If you don't, it just goes to the government anyway. Now, $95 a year isn't going to buy much health insurance. But the penalties rise over time, so eventually it's going to be a pretty easy decision for most to make -- get something for your money, or don't.
But, politically, it might behoove the government to avoid double-penalizing the uninformed, the first time around. When all those people fill out their taxes and discover they owe a penalty they didn't even know about (one that might triple next year), many will be motivated to fix the problem. But they will be unable to do so until the next open enrollment period begins (which won't come until October).
Sure, fixing this problem would be solving a problem of people not becoming properly informed (which is really their fault, in a big way). But politically a one-time solution might be the way to go. Open enrollment back up for a short period of time (two weeks, say), right after April 15. Perhaps limit it only to those who did indeed have to pay the penalty on their 2014 taxes. This way, those who were surprised by the penalty would get a second chance to get right for 2015, so they wouldn't have to pay twice for the same mistake. Not everyone affected would take this opportunity, but it's a pretty safe bet that a goodly percentage would (especially when they see how much the penalty increases next year).
It's reported that the secretary of Health and Human Services is currently considering this idea. She says she'll announce a decision within the next two weeks. It seems like a reasonable idea, especially since it would be a one-time fix. This is the first time the tax penalty has appeared on tax forms, so next year people couldn't reasonably claim they were unaware of the problem. We wouldn't have to have a special "after-Tax Day" enrollment period in any other year than this one, in other words. Sure, it allows a loophole for procrastinators and the uninformed. Sure, they should have thought about this and found out about it before now. But that's an argument for penalizing them once, for the first year they declined to buy insurance. It seems overly harsh to also lock them into another year's penalty for the same mistake, though. The whole point of Obamacare is to get people insured, after all, not to penalize them and raise tax money. Most of these people are (by definition) low-information health insurance consumers -- those who may never have experienced an "open enrollment" period before in their lives, and who didn't understand the consequences of ignoring this window. Giving them a second chance (for one year only) seems like the right thing to do.
-- Chris Weigant
Follow Chris on Twitter: @ChrisWeigant
Just another example of how crappy TrainWreckCare was put together..
If only Democrats actually thought things thru and worked towards a viable healthcare upgrade...
If only Democrats hadn't been so intent on pushing their agenda, by hook, by crook and by parliamentary shenanigans...
If only.....
This is ya'alls TrainWreckCare...
How do you like it now??
Michale
M- The Democrats DID think it thru...and astutely concluded that a more cost effective and user friendly health plan based on a well proven health care system like Medicare or (Insert First World Model here) hadn't an F'in chance in Hell of passage thru House and Senate circa 2008. They learned that lesson back to the Clinton years. So, they went for the clunky, insurance company friendly, Romney model, on the sound basis that it better to have that now than a some other "market based" plan never, which, is what Republicans were offering.
CW-
Low income families who made the first enrollment deadline were wise to re-enroll if there was any substantial increase in their income during 2014. Take a part time job? That could easily triple your (subsidized) monthly premium. I suspect a lot of families will find their refund check is much smaller than expected. Internet and cable blowback in 5..4..3...2...
Some of us who managed to enroll during the early glitch plagued days of late 2013 found we were locked out of our computer accounts for the Jan 2014 deadline. I was able to enroll over the phone, but it was slow, and the full range of option plan in my state weren't presented. I ended up with a cheaper, but somewhat less comprehensive plan than I would have wanted, had I known about it. I could probably appeal this, and might even win, but the difference isn't enough to make me fight the battle.
Dealing with Insurance Company vs Doctors is still as messy as ever. I had surgery last year, signed off on by both my insurance carrier and the surgical team. Six months later, the surgical center sends me a notice that they won't accept my insurance, please pay cash. A quick call to my carrier consumer advocate, who says the surgical center is wrong, don't pay them anything, we'll take care of it. Another angry surgical center letter arrives one month later, they reject the insurance check. Another call to my carrier, who says, don't worry, tell the surgical center to call this number, then call us back, then call the surgeons just to make sure we're all on the same page. That worked. Some would call this a train wreck, I'd call it misplaced luggage, found and returned. We got Amtrak, not a shiny maglev train.
The surgery went well, US medical technology is still first rate.
CW,
Your "April Surprise" makes no sense. A "year" is not nine months. There's no reason anyone should have until April to obtain coverage. In order to be covered for a calendar year you must obtain coverage before that calendar year starts. It ain't rocket science.
People had three years to become aware of ACAs requirements. Claiming not to know insurance is required is no excuse.
The April deadline for filing taxes is irrelevant. It's also the deadline for filing taxes, not paying them. Nearly all income taxes are paid when the income is received. After filing in April taxes are adjusted to arrive at the final tax obligation.
2015 taxes aren't paid in April 2016. They're paid starting in Jan 2015, through Dec 2015 when the income is earned. Having complying coverage means obtaining healthcare coverage effective Jan 2015 through Dec 2015. The period is the same as is typical for income taxes. One calendar year. January to December.
There is no problem. There is no "double penalizing."
2016 taxes are typically paid Jan 2015 through Dec 2015, as the income is received. Taxes are not paid in April. They are adjusted in April to arrive at the final total obligation.
Complying ACA coverage for 2015 likewise must begin no later than Jan 2015 through Dec 2015. One calendar year.
There was a three year grace period for people to become aware of their obligations. This is no surprise. There is no problem. No "double penalty."
You do not have until April to pay income taxes. You do not get until April to obtain healthcare.
Don't seem able to post comments. I'll try again.
There is no "April Surprise."
Taxes are not paid in April. They are paid when income is received. For individuals that's typically each paycheck. For business its typically monthly. 2015 taxes are paid Jan 2015 through Dec 2015. ACA requires coverage for calendar year 2015 from Jan 2015 through Dec 2015. The same as with income taxes.
The previous years taxes are adjusted in April to arrive at the final obligation, but are generally required to have already been paid.
And people had three years to become aware of ACAs requirements. There is no problem. No inconsistency. No "double penalization." And no "April Surprise."
Don't seem able to post comments. I'll try again.
There is no "April Surprise."
Taxes are not paid in April. They are paid when income is received. For individuals that's typically each paycheck. For business its typically monthly. 2015 taxes are paid Jan 2015 through Dec 2015. ACA requires coverage for calendar year 2015 from Jan 2015 through Dec 2015. The same as with income taxes.
The previous years taxes are adjusted in April to arrive at the final obligation, but are generally required to have already been paid.
And people had three years to become aware of ACAs requirements. There is no problem. No inconsistency. No "double penalization." And no "April Surprise."
The whole point of Obamacare is to get people insured, after all, not to penalize them and raise tax money.
Where have YOU been the last 6 years??
The ENTIRE idea is to raise tax money!!
Michale
Since my last comment got through I'll try this one again. (Fifth try!)
There is no "April surprise." We do not pay taxes in April. For most the tax year is Jan through Dec. Taxes are paid when income is received. Typically for wage earners that's each paycheck. For business its usually monthly installments.
To have qualifying healthcare for 2015 it must be in force by Jan 2015. Taxes for 2015 are paid beginning Jan 2015. The tax year is Jan 2015 through Dec 2015. There is no difference.
April is the deadline for filing taxes, and for final adjustments to taxes. Excepting final adjustments the taxes must already have been paid for the preceding year during the preceding year.
People had three years from the passage of ACA to become aware of, and meet their obligations under it. If they've failed to avail themselves of the time there's no reason to believe another three and a half months would make a difference. There's nothing radical or difficult about the concept that a calendar year begins in Jan and ends in Dec.
There is no "problem." No "April surprise." No "double penalization."
OK, the repeat LewDan comments are entirely my (and my auto-filter's) fault. So don't give him grief for multiple postings, as they were all temporarily "eaten" by the filter. I approved them all in an effort to train the filter to accept all comments from LewDan.
Again, the fault is mine, not his.
-CW
TheStig -
First, sorry for the delay in posting the comment. See the comment thread on Wednesday's article for further info.
Second, glad to hear the surgery went well. The US has the best health system (for those who can afford it), which was kind of the whole problem in the first place, right? Anyway, hope you're all better now!
:-)
LewDan -
OK, I'm an (intentional) Luddite when it comes to the way health insurance works. For instance, I have a big moral problem with the entire concept of "open enrollment" -- what other insurance is sold in this fashion? Home insurance, auto insuance, none of them have some artificial calendar window that if you miss it, you're screwed for a year. So sorry if those biases are leaking out in my commentary, but that's the basis of my beef with the calendar.
You're correct as well about the tax year. I've actually always maintained your position, and have gotten into arguments with friends who brag about how big their refund is -- "But that's stupid -- it just means you didn't estimate it right!" -- to estimate your taxes correctly means the smallest possible refund or penalty. Otherwise, you're just (in essence) lending your own money to the government, for them to make interest on all year long, until you fill out your tax form!
So, anyway, where was I? Right -- I agree with the technical point you're making, but I can't make that particular point in every article I write about taxes, so I slipped into the common shorthand when writing about it here. Mea culpa and all that.
Having said all that, the real reason I wrote this is in defense of the young and stupid. Mostly because of memories of when I was young and stupid. Now, I am old and somewhat-less-stupid, but I certainly could see myself ignoring politics for 4 or 5 years and getting caught in this double-penalty trap. Not everyone pays attention, and penalizing them once is one thing, but penalizing them twice for one stupid mistake (ignoring Obamacare for two years straight) seemed a bit much.
Michale -
You couldn't be wronger (to coin a word).
Obamacare, like Romneycare before it (remember, this was a conservative plan from the get-go), uses the tax penalties to encourage people to sign up for insurance. It imposes a cost on those who refuse to (as the Republicans used to say) "take personal responsibility for themselves".
But, over time, the tax revenues are projected to go DOWN. As more and more people decide that paying the insurance companies is a better deal (because you get something for your money), the less tax money comes in.
To put it another way: when Obamacare tax penalties go down, that's a measure that Obamacare is working correctly -- because more and more people are buying insurance. And that's the REAL intent of the law, not raising taxes.
So far, it's working. Uninsured rates have gone down significantly (from like 18% to 13%) and will likely go down for the next few years as well...
So, sorry, but you're just flat-out wrong. Taxes are the stick to get people to move towards the carrot of having health insurance.
-CW
TS,
So, they went for the clunky, insurance company friendly, Romney model, on the sound basis that it better to have that now than a some other "market based" plan never, which, is what Republicans were offering.
So, in other words, it's all the Republicans fault..
Siiiggghhhhhhhhhhhh
It must be nice to be part of a Political Ideology that is NEVER responsible for ANYTHING, eh? :D
CW,
But, over time, the tax revenues are projected to go DOWN.
Yea.. And the Website was "projected" to be flawless.. :D
To put it another way: when Obamacare tax penalties go down, that's a measure that Obamacare is working correctly -- because more and more people are buying insurance. And that's the REAL intent of the law, not raising taxes.
That's the STATED intent...
But I wouldn't trust this administration if they said the sky was blue and water was wet..
Too many blatant and politically expedient lies...
So far, it's working. Uninsured rates have gone down significantly (from like 18% to 13%) and will likely go down for the next few years as well...
Whooopee doo.. That's what happens when the government puts a gun to people's heads.. They get a whole 5% drop in uninsured rates..
And for those that ARE insured, rates are rising 300% or more.. Doctors are opting out of coverage programs and let's not forget the millions that had their policies cancelled even though they were incessantly promised that if they liked their plans and doctors, they could keep their plans and doctors..
But, I'll conditionally concede your point..
Tax revenues are *projected* to go down..
When they do, I'll concede that collecting new taxes wasn't the goal..
Fair? :D
Michale
CW,
"I have a big moral problem with the entire concept of "open enrollment" -- what other insurance is sold in this fashion?"
Other types of insurance are actually insurance, but health insurance really isn't. At least to some degree, it's a pre-paid medical plan. Insurance is supposed to pay for unexpected losses, but health insurance plans pay for things like preventive care and prescription drugs for chronic diseases. Open enrollment periods also prevent people from buying the cheapest plan right up until they need an expensive surgery, switching to the most generous plan for a few months, and then switching back to the cheap plan. It's a necessary evil until we replace the predatory Medical-Insurance Industrial Complex with a single payer plan. The other option is even higher rates.
. It's a necessary evil until we replace the predatory Medical-Insurance Industrial Complex with a single payer plan.
Yea, cuz single-payer has worked so well in other countries that have it..
The prevailing mood around this thread is that the US has the best medical program (technology wise) in the world..
Do you think such a technological edge would have been possible under a single payer??
If you do think that, I have some swampland down here in FL I would love to sell you... :D
Michale
Rather than waiving the penalty, why not just give those who didn't sign up any additional year to pay up, plus market rate interest? I think that strategy will reduce noncompliance in year two and out without as much hard feeling from the low information crowd and principled dissenters
Michale,
America has the most expensive medical care, not the best. Other countries, especially those with single payer, have better medical care, with better patient health outcomes.
Once again, the Right justifies its policy position based on what they want to believe rather than reality. Its debatable whether we have a technological edge in medicine. What is not debatable is that a technological edge that's inaccessible is useless. If you cannot afford the technology it doesn't matter if you have it.
"Trickle-down" doesn't work any better in medicine than it does in economics. High medical technology profits do not equate to superior healthcare for all.
"The US has the best health system"
-CW
I agree with CW...
Michale
The penalties are being phased in. They are not particularly onerous this year. The whole point, as it is famously with mules, is to hit them upside the head, just to get their attention.
Anyone who is still "uninformed" as to their obligation at this point would appear to require it.
'"The US has the best health system"
-CW
I agree with CW...
Michale'
Reality is otherwise. Another winger delusion is that if someone else also mistakenly believes what you do then you must be correct.
As my daddy taught me: "When you've got something good you don't have to force it on people. They will steal it from you."
No one is trying to copy our health system. We are debating the merits of Single Payer.
Reality is otherwise. Another winger delusion is that if someone else also mistakenly believes what you do then you must be correct.
You can be insulting as you wish...
Doesn't change the fact that I agree with CW...
We are debating the merits of Single Payer.
Or, in this case, lack thereof... :D
Michale
Michale [16] -
You forgot a part:
The US has the best health system (for those who can afford it)
Please provide full quotes, in the future...
:-)
-CW
General comment:
I'm glad HHS decided to take my advice. One-time extension of the open enrollment period for all the uninformed/slackers/procrastinators is a good thing, overall. Sure, they're idiots, but I have a real soft spot for idiots of this nature. So let them sign up! Don't double-penalize them!
:-)
-CW
@LewDan
[18]
I don't know of any country that has single payer and I don't know where Americans got this concept. All first world countries, except for the USA, have universal healthcare but none of them are "single payer" as far as I'm aware. Perhaps when Americans say "single payer" they actually mean something else?
Charles Gaba from ACA Signups.net had this to say about tax season extensions:
2/20/15
[N]o sooner had every single state officially announced an enrollment extension period (either "full" or "standing in line by midnight") than a few states started issuing special "Tax Season" enrollment periods, ostensibly limited to those who had to pay the 2014 penalty, didn't get covered in time for 2015 and officially "didn't know" about the penalty (although that last point is awfully hard to prove).
By the end of the day we went from 3 states having announced official #ACATaxTime periods to 42 states, and I'm pretty sure the remaining 9 will cave on this point within the next few days.