Why Do Even the Democrats Want to Change Obamacare?

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Realizing that the official sign-up season for President Barack Obama’s health care law is over, we now learn that leading congressional Democrats say millions of Americans facing new tax penalties deserve a second chance and want to change the law ….again.

Three senior House members are strongly urging the Obama administration to grant a special sign-up opportunity for uninsured taxpayers who will be facing fines under the law for the first time this year.

The three are Michigan’s Sander Levin, the ranking Democrat on the Ways and Means Committee, and Democratic Reps. Jim McDermott of Washington, and Lloyd Doggett of Texas. All worked to help steer Obama’s law through rancorous congressional debates from 2009-2010.

The lawmakers say they are concerned that many of their constituents will find out about the penalties after it’s already too late for them to sign up for coverage, since open enrollment ended Sunday.

That means they could wind up uninsured for another year, only to owe substantially higher fines in 2016. The fines are collected through the income tax system, which we know is broken or now understaffed.

“For the many families who may now be about to pay a penalty, there should be an opportunity to avoid both further penalties and to obtain affordable health insurance,” said Doggett.

This year is the first time ordinary Americans will experience the complicated interactions between the health care law and taxes. Based on congressional analysis, tax preparation giant H&R Block says roughly 4 million uninsured people will pay penalties.

The IRS has warned that health-care related issues will make its difficult job even harder this filing season and taxpayers should be prepared for long call-center hold times, particularly since the GOP-led Congress has been loath to approve more money for the agency.

“Open enrollment period ended before many Americans filed their taxes,” the three lawmakers said in a statement. “Without a special enrollment period, many people (who will be paying fines) will not have another opportunity to get health coverage this year.

“A special enrollment period will not only help many Americans avoid making an even larger payment next year, but, more importantly, it will help them gain quality health insurance for 2015,” the lawmakers added.

So far, administration officials have deflected questions about whether an extension will be granted. Health and Human Services Secretary Sylvia M. Burwell has authority to grant special enrollment periods under certain circumstances.

Supporters of the law say an extension would mainly help low- to middle-income uninsured people, the same group that Obama’s coverage expansion was intended to serve. But Republicans are probably seeing this latest scenario as another tweak to what they see as unworkable or flawed health care delivery system, “Obamacare.”

Under the individual mandate, the health care law imposes fines on uninsured people whose incomes are deemed high enough to enable them to afford coverage. The goal is to broaden the pool of insured people, therefore raising the “capital, helping to keep premiums in check for everybody so that the government can give the subsidies for the unemployed and uninsured..

Remember, as we have already discussed, the law also offers subsidies to lower the cost of private coverage for people who don’t have job-based health care. That financial assistance is provided through a new tax credit.

Although the tax credit subsidies cover most of the premiums for many people, the coverage requirement and the fines that enforce it remain deeply unpopular.

And the cost of being uninsured in America is going up significantly.

For 2014, the fine was the greater of $95 per person or 1 percent of household income above the threshold for filing taxes. That fine will be collected when taxpayers file their 2014 returns.

But this year the fine will jump to the greater of 2 percent of income or $325. By 2016, the average fine will be about $1,100, based on government figures.

Polls show that many taxpayers are unaware of the potential financial exposure.

Floyd Cable, a real estate agent from Wichita Falls, Texas, said the escalating fines were part of the motivation for him and his wife to sign up last week. Both are self-employed, and stretching to pay health insurance premiums has been a struggle.

“We have been going without insurance the last couple of years just because the rates are so astronomical,” Cable said.

But they were also concerned they could wind up on the wrong side of rising penalties. And, being in his early 60s, Cable said he recognizes the value of having health insurance against unexpected illness.

An extension would probably help people still on the fence, like he was.

“Anything that could be done to give people more time to sort through this, is not only a good move for the administration, but just makes common sense,” Cable said.

Since both the subsidies and penalties under the health law are administered through the tax system, some experts have urged the Obama administration to permanently schedule sign-up season to overlap with tax-filing season.

But, if we keep tweaking the law doesn’t it prove how flawed the law is from the beginning?

In a follow-up to last weeks post, the Associated Press reported that taxpayers who’ve filed their 2014 returns only to learn that the government provided them with erroneous information on health care subsidies won’t be required to submit corrected returns, the Treasury Department said Tuesday.

The decision amounts to a reprieve from paperwork headaches for an estimated 50,000 early filers, out of a pool of some 800,000 HealthCare.gov customers affected by a tax reporting goof disclosed last week.

The majority who haven’t yet filed their tax returns are still being urged to wait until they receive corrected information from the federal Health and Human Services department.

The announcement means those who have filed would save time, effort, and any additional tax preparation fees for correcting returns with erroneous details. “The IRS will not pursue the collection of any additional taxes from these individuals based on updated information in the corrected forms,” said the Treasury statement.

A Treasury official said the government determined that the errors are not significant enough to require taxpayers to refile returns already submitted.

Some of the mistakes favor the government, while others favor the taxpayer. Treasury officials believe it’s basically a wash.

President Barack Obama’s law provides subsidized private health insurance to people who don’t have access to coverage on the job. Because those subsidies are delivered as a tax credit, people who benefit from them have to account to the IRS that they got the correct amount they were legally entitled to.

That’s done on the yearly tax return, with the help of a new form called a 1095-A. It’s like a health care W-2 for people who got subsidized coverage under Obama’s law.

But HHS officials disclosed Friday that forms sent to about 800,000 people contained mistaken information.

The tax-document mistake was a self-inflicted wound after what Obama had personally touted as a successful open-enrollment season, with about 11.4 million people signed up for 2015 coverage.

HealthCare.gov said in a blog post that the federal mistake happened when information on this year’s premiums was substituted for what should have been 2014 numbers. Those premium numbers were for a “benchmark plan” used to calculate subsidies.

People can check by logging in to their accounts at HealthCare.gov, where they should find a message indicating whether they were affected or not. They also can check by phoning the federal customer service center at 800-318-2596.

Treasury also offered some guidance for taxpayers who’ve already filed to see if they may benefit from resubmitting their 2014 returns:

If the corrected “benchmark” premium is higher than the incorrect premium, it may be worth refiling. In an example it provided, Treasury used a $100 difference between the corrected premium and the incorrect one. Individuals were advised to consult their tax preparers.

However, it may not be worth the trouble if the difference is slight.

Federal authorities are also considering a fix for people affected by state-level tax reporting errors. California announced it had made mistakes on forms sent to 100,000 residents.

So, at least the feds will not penalize all who were given incorrect information for a percentage of the 800,000 persons. However, it stills points out the continual problem with the government run system and underlines the need to research and develop an alternate or modified health care delivery system.

I believe that the Supreme Court case this summer is what really has the attention of insurers, and it’s also what you as a consumer and investor should be closely monitoring and next week I will outline the whys.

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