Obamacare Penalty Seen Snaring Last-Minute Applicants: Taxes

The U.S. health-care law’s tax penalty for not carrying medical coverage next year may catch millions of Americans off-guard.

While the open enrollment period for people to obtain health care through the Obamacare insurance exchanges runs until March 31, some people may face tax penalties for lack of coverage if they wait until the final days to sign up, Bloomberg BNA reported.

Plans purchased between March 1 and March 15 wouldn’t take effect until April and coverage bought in the final days of March wouldn’t kick in until May. The Patient Protection and Affordable Care Act of 2010 requires most Americans have an active health insurance policy by March 31 or pay the higher of 1 percent of their annual income or $95.

“We’ve noticed some interesting chemistry” between these two requirements, said Brian Haile, senior vice president for health policy with Jackson Hewitt Tax Service Inc.

Under the Affordable Care Act, starting Jan. 1, people who have access to affordable coverage and instead remain uninsured for more than three consecutive months will owe the “individual responsibility” tax payment for those months, a Department of Health and Human Services spokeswoman told BNA in an e-mail.

That means an uninsured person eligible for the tax credits must have coverage effective by March 1, 2014, to avoid the penalties, Haile said. The Congressional Budget Office estimates that 6 million people will pay the penalty in 2016.

Alexander’s Complaint

Lamar Alexander, a Tennessee Republican who is the ranking member on the Senate Health, Education, Labor and Pensions Committee, this month called on the Obama administration to “improve” how it communicates about the law.

The administration “has repeatedly advertised that open enrollment starts on October 1, 2013 and ends on March 31, 2014,” Alexander said.

The questions come as the Centers for Medicare & Medicaid Services release a draft technical assistance guidance for entities that have a role in the enrollment process. That guidance is intended to “be a living document, updated regularly, and supported by clarifying bulletins in the interim between updates,” the agency said.

The agency solicited comments on the draft, and it didn’t list a date for submitting them.

The draft guidance describes how the marketplaces set up under the Affordable Care Act for all states are to help people buying health insurance and receiving subsidies or other assistance.

Key Dates

In the individual marketplaces, the initial open enrollment period is from Oct. 1 through March 31, 2014, and coverage begins Jan. 1, 2014, for plan selection that takes place through Dec. 15.

If the plan selection date is between the first and 15th days of the month from Jan. 1 and March 15, 2014, the effective coverage date is the first day of the following month, the draft says. If the plan selection date is between the 16th and last days of the month from Dec. 16 through March 31, 2014, the coverage date is the first day of the second following month.

The draft says that although consumers in the individual marketplaces must normally enroll during the open enrollment periods, the marketplaces must process applications at any time, as eligibility for Medicaid or the Children’s Health Insurance Program isn’t limited to open enrollment periods, Timothy Jost, a professor at Washington and Lee University School of Law, wrote in a blog posting on the Health Affairs website.

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