Affordable Care Act’s unexpected side affect: IOU to the IRS


By design, many Americans were “Grubered.”

From SF Gate: A $13,000 tax bill was the last thing Bill and Cathy Stapp expected when they signed up for Covered California health insurance in late 2013.

The Stapps estimated that their combined income would be less than $63,000 in 2014 — making them eligible under the Affordable Care Act to get financial assistance from the federal government taxpayers to help pay their health insurance premiums. They were approved by Covered California and began receiving subsidized health benefits in early 2014, the first year the health law, often called Obamacare, went into effect.

But in April 2015, the Alameda couple got an unwelcome surprise from their tax preparer: They owed the U.S. Treasury $13,568. It turned out that they’d earned about $80,000 in 2014, with the extra due to Social Security income they hadn’t counted. It was too much to receive the financial assistance. So the Stapps, who typically get a small refund at tax time, were on the hook to pay it all back to the IRS.

“We get it, we owe the money,” Cathy Stapp said. “But it’s a drag.”

The couple’s situation reflects the confusion that many people experienced signing up for coverage through the health exchanges, particularly in the chaotic early days. At the time the Stapps were applying, Covered California was just getting off the ground, and there were plenty of questions about how the new system would work — including what counted as income.

The most common adjustment occurs if people get a raise or bonus during the year — or if they’re an independent contractor and end up getting more work than they predicted. Under such circumstances, they are supposed to contact Covered California, and their tax credits are to be adjusted accordingly. The agency sends notices and letters to policyholders two to three times a year, reminding them to update their income if they need to.

But not everyone is aware of this. And many who get their income from a variety of sources, such as contracting jobs, investments and Social Security, are not always clear on what they should report as income.

It is unclear how many Americans are paying back some or all of the financial assistance they received to buy health insurance because their income turned out to be higher than they projected. The most recent analysis of the issue was done in 2015 by H&R Block, which found that 52 percent of people who enrolled in health insurance through Affordable Care Act marketplaces around the country ended up paying back some of the subsidies. The average amount was $530.

In the Stapps’ case, one complication was that the health insurance premium subsidies are structured as advance tax credits. So people have to make an educated guess as to what their income will be the next year. This can be especially tricky if their income is close to the cutoff for eligibility, which is 400 percent of the federal poverty level — $48,200 for a single person and $64,960 for a family of two like the Stapps.

Neither Bill, 68, nor Cathy, 62, have been on Covered California plans for more than two years — Bill is now on Medicare and Cathy receives health insurance through her new employer. But they are still paying off their IRS bill, making minimum monthly payments of $250 or, in months when they have extra cash, more. They still owe about $9,000 for what is essentially a loan from the federal government they didn’t realize they were signing up for.

The couple had remained on the Covered California plans until the end of 2015 because they thought they could make changes only during the open enrollment period, which is November to January. Because their income exceeded $63,000 in 2015 as well, they ended up owing the IRS an additional $13,000 in 2016.

Cathy Stapp acknowledges that they could have been more vigilant when it came time to renew the plans. Covered California subscribers can in fact cancel their plans at any time, not just during open enrollment. But Bill is frustrated because he feels Covered California should have done more to inform them they earned too much to qualify for the subsidized insurance plans. They said an enrollment counselor who initially helped them sign up over the phone told them their income qualified them for Covered California, but did not factor in Bill’s Social Security income.

The Stapps spoke with representatives at a Covered California call center in 2014 and 2015, but there is no certified agent listed on their account as having assisted with their initial application, according to Covered California. The person the couple said they spoke with said he did not enroll them.

“We make our best estimate of the tax credit for consumers based on the information they provide in their application,” said Covered California spokeswoman Amy Palmer. “But … the official premium tax credit they receive or have to pay back is determined in the tax process with the IRS.”

To pay off the IRS bill, the Stapps are delaying other expenses, such as repairs and improvements for their home.

“It’s a big financial burden,” Bill Stapp said. “We made a mistake accepting Covered California.”

By many measures, California is viewed as a standout success story when it comes to the Affordable Care Act. The state’s uninsured rate is at all-time low 7 percent, and 1.5 million people signed up for Covered California insurance during the most recent open enrollment period — a statistic state officials consider a feat, especially given that the Trump administration and the Republican-led Congress have repeatedly sought to repeal the health law.

But the Stapps’ predicament shows that for some Californians, the health law has created unexpected and inconvenient consequences.

“The difficulty is for some people, (paying back the subsidies) ends up being a lot of money,” said Larry Levitt, a health policy analyst at the Kaiser Family Foundation. “You bought health insurance under the assumption you’d be getting a big tax credit, and all of a sudden you have to pay it all back. This makes planning very difficult for people.”


15 responses to “Affordable Care Act’s unexpected side affect: IOU to the IRS

  1. Bill and Cathy Stapp warrant no sympathy. They unknowingly (or knowingly) omitted their Social Security earnings from their annual income, which enabled them to qualify for Obamacare subsidies. Those subsidies are paid by taxpayers and should be returned.

    Liked by 2 people

  2. Washington (or any state) writing health care policies is like me performing brain surgery. My patients won’t die from their brain tumors but the hacksaw to the noggin is going to finish them off.

    Liked by 3 people

  3. Reblogged this on kommonsentsjane and commented:

    Rebloggted on kommonsentsjane/blogkommonsents.

    For your information – if you have Obamacare.


    Liked by 1 person

  4. The strange lives we lead when living under the leftist paradises which we have come to know and love. Too often, we don’t even sign up for becoming their victims.

    Swedish dental hygienist was fired for reporting 80% of child migrants are adults:

    Liked by 2 people

  5. My husband had his own small business so we had”obamacare” for a year. Could barely afford the premiums for the two of us, even with the kids qualifying for medicaid. A check-up still cost $80. The docors we could go to were very limited despite our city having tons of doctors. Pharmacies on every street corner but there was only one we were supposed to use, a little local pharmacy with very short hours and very far from our house. The whole thing was a scam. Next year, the premiums doubled, so we went without health insurance for the next few years. We recently moved and now he is working for a corperation but the income is very normal. But the health insurance for a family of 5 would take almost his entire pay! Ten years ago he worked for the same kind of company and he could easily afford health, dental, the works for all of us. Obama has permanently destroyed our ability to have insurance. I truly dont know what to do and I really dont like the idea of getting the kids on the medicaid again. Not only do I feel a sense of mooching but it seems like a bad idea to have the government so directly involved in their healthcare. The stories about the sick babies in England are to me a warning of what can happen with too much gov power over your children. At the same time it is a gamble for us to have no insurance.

    Liked by 4 people

    • Chris . . . . Thank you for sharing your experience. I certainly do agree, Obummer deliberately screwed the productive people in this country out of having medical insurance at a reasonable rate. This whole fiasco was an attempt to shift monies to those who do not work, many of whom are idle due to choice. I am so sorry that this has proven so devastating to your family. God Bless and Keep You!

      Liked by 4 people

    • sixlittlerabbits

      Two families with children who I know have joined healthcare ministries that provide coverage that is acceptable to the federal government: Christian Healthcare Ministries in Braybarton Ohio, or CHM; and Samaritan Ministries. HTH.

      Liked by 3 people

  6. I have no sympathy; I’ve seen it too many times in our tax practice. People get an advance premium tax credit, do NOT tell us when they get a new job, a second job, win a couple thousand through the lottery – and then are mad when they have to pay the credit back. It is NOT the job of the IRS or the state to track your income – that job is YOURS. If you want the benefit (that you’re not entitled to, that the rest of us are paying for), you also have to take the responsibility.

    Yes, Chris’ family situation is a direct result of aca. And it’s absolutely obscene. The same anti-price-fixing laws (Sherman & Clayton Acts) apply to the medical industry but NO ONE enforces them. Enforcement of those laws would drop the price of medical care by over half.

    For now, Chris, why don’t you investigate the health sharing ministries? Medi-Share, Liberty, and two others (names escape me for the moment) are out there. The costs are very reasonable. Good luck to you!

    Liked by 3 people

  7. Yeah. Let’s put everybody in the country on a plan like this and within half a generation everybody will be living equally………………..miserably.

    Liked by 3 people

  8. Looking at that picture of Mustafá I can’t help thinking of the people he stole the money with Obamacare and helped himself and many of the clan become millionaires in eight years. He and Michael sporting expensive clothes, investing stolen money in new adventures and LAUGHING it all at the expense of the millions of Americans THAT WERE MADE or else, purchase the biggest fraud against the American people.

    Liked by 3 people

  9. Reblogged this on On the Patio and commented:

    Anyone surprised here? Not me! But this is a markedly common story. It needs to be aired.

    Liked by 1 person

  10. Let us not forget, it took a majority of corrupt, venal, and traitorous, supreme court judges, to enact this felonious, so called “affordable care act” or more accurately ‘obama fraud care’.

    Only the ignorant, traitorous liars, or cowards,…referred to obama as president.

    Liked by 1 person

  11. So sorry to hear details of the Obamacare Ponzi scam that frauded our hardest-working citizens into thinking that they were going to receive “affordable health care.” What they GOT was reformed health INSURANCE that favored the non-working or even illegal (at least here in CA…but, remember when Obama “promised” that illegals would not be covered?????) …..with “care” not even a concern or promise of the scheme. Having our health care through our employer is one of the things that keeps my husband and I working …and plan to beyond our “retirement” years, until we can achieve a sort of “homeostasis” with an earned (after age 70) access to our regular health insurance plan of all these years….coupled with any gov’t Medi-plan that MIGHT still be in place then, and so on.

    Liked by 2 people

    • Yep. People kept telling them but they liked their “boy” anyway. The companies that paid him did quite well, I’m sure. That’s why he smirks.

      Liked by 3 people

  12. Obamacare– it’s like not having insurance but still having to pay out the butt for it.

    Liked by 5 people

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