Millions of taxpayers may see a surprising tax bill in 2014 as the Federal government asks them to repay (claw back) some or all of the new health insurance Premium Tax Credit claimed on the Affordable Care Act insurance exchanges. Could this impact you or someone you know? If so, here is what you need to know. Background A core part of the Affordable Care Act (ObamaCare) was the establishment of a Health Insurance Marketplace where the uninsured shop and sign up for health care insurance. Some states created their own online system while other states opted for the Federal website known as the Federally-facilitated Marketplace (FFM). When using the Marketplace, qualified participants could apply a new insurance Premium Tax Credit to reduce their health insurance bill. Millions of taxpayers are receiving this tax credit each month. The credit can be paid directly to health insurance companies to reduce monthly health insurance premiums. |
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The Insurance Premium Tax Credit Problem Per a recent report from the Department of Health and Human Services, over 85% of the eight million participants who selected health insurance in the new Marketplace tool are using the new Premium Tax Credit to help pay their monthly premium. The qualifications to receive the tax credit are based on self-reported income. The contractor hired by the government to audit this information (Serco) is reporting over 4 million discrepancies between what is claimed on the insurance enrollment to qualify for the tax credit and what can be found in government records about these individuals. The problems consist of:
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Action Steps If you are currently receiving your health insurance through these new exchanges and have been using the Premium Tax Credit to reduce your premium, please consider the following;
The government is currently trying to work through the reported inconsistencies on enrollment forms. Should you receive notice from the government please ask for help. The financial impact of waiting could cause an unpleasant surprise at tax time. |