Tax season brings new Affordable Care Act wrinkles

Welcome to the first post-Affordable Care Act tax season, complete with new forms to fill out - the 1095-A! - and even more numbers to crunch. That is, if you bought health insurance last year on the Obamacare marketplace.

"If you got a 1095-A form and you got the advance credit [subsidy], you must file a tax return," said Jackie Perlman, principal tax research analyst at H&R Block's Tax Institute.

Well, not so fast. About 800,000 forms sent out by the government contained an error, the administration said Friday; it urged recipients to hold off filing for now. (More on that mess below.)

Most consumers who went without coverage last year - they would not have gotten a 1095-A-should be prepared to pay a fine of $95 for an adult and $47.50 for each child, or 1 percent of their household income, whichever is greater. The penalty escalates this year to $325 for an adult and $162.50 for each child, or 2 percent of household income.

"A lot of people say, 'It is only $95,' " Perlman said. "If you are single and have a high income, it could be significantly more."

Bethany Willis, for one, doesn't think the fine is fair. She was among the hundreds of thousands of people who fell into the so-called Medicaid gap last year, before Pennsylvania expanded its program on Jan. 1. She made too much to qualify for Medicaid but not enough for a subsidy.

She might qualify for an exemption but will have to apply. "I don't think I should have to pay a penalty for something I couldn't afford," said Willis, who has Crohn's disease.

Willis, 41, of North Philadelphia, lost her job as an art therapy teacher in 2012 and now works in a hospital part time. She was trying to buy subsidized insurance last week, taking advantage of a seven-day extension of last Sunday's deadline for people who had been trying but couldn't finish the sign-up process.

On Friday, the Department of Health and Human Services offered another reprieve - a new special enrollment period for the federal marketplace, specifically for people who are subject to the penalty for going without health insurance in 2014 because they "were unaware or didn't understand the implications of the fee for not enrolliing in coverage" and would be penalized again in 2015.

Buying coverage during this period, from March 15 to April 30, will not absolve consumers from paying last year's fee, due on April 15. It is just another chance to avoid this year's bigger penalty, which would be due next year. (Confused? Go to https://localhelp.healthcare.gov/ or call 1-800-318-2596.)

The latest numbers show that more than 11 million people selected plans or automatically renewed in existing plans during the regular enrollment period, which ended Feb. 15. That will likely grow after the two extensions.

"We are very pleased with this second year," Kevin Counihan, federal marketplace CEO, told reporters earlier in the week. "We still have a ways to go."

Other than the upcoming special enrollment period for people who didn't understand the mandate for individuals to buy coverage, consumers can buy insurance from the marketplace only if they experience a life-changing event, such as marriage, a baby, or losing job-based health insurance. Insurance is still available on the private market rather than the subsidized Obamacare marketplace. It will likely cost more but can help avoid the steeper penalty next year.

Medicaid, which now covers legal residents earning up to 138 percent of the federal poverty level ($16,243 for a household of one, $33,465 for four), also has year-round sign-ups (Pennsylvania: www.healthchoicespa.com; New Jersey: www.njfamilycare.org).

In any case, if you receive a 1095-A - the Health Insurance Marketplace Statement - you must file a tax return. "It doesn't matter what your income is," Perlman said.

The 1095-A shows how much you paid for insurance, the gross premium, and the amount used to calculate subsidies.

When you signed up for subsidized premiums, achieved by applying tax credits in advance, "you estimated your income and you estimated your family size," Perlman said.

The reconciliation, she said, calculates the subsidy you received against the subsidy you were actually entitled to. The two don't always match.

Perlman's comments were made before the Obama administration said Friday that one-fifth of the forms contained errors.

The 1095-A shows figures used to calculate subsidies. The calculations are based on the cost of a specific benchmark plan, which is different in each insurance market around the country. It is that benchmark premium that is incorrect on some of the forms.

The government said that corrected versions should arrive in the mail the first week of March. Since the benchmark plan error affects the amount of subsidy, some taxpayers will discover that they owe more than they thought, the administration said. Others will owe less.

"If your form is affected by this issue, you'll get a call and email from us in the next few days, and you will get a message in your Marketplace account here on HealthCare.gov," the Department of Health and Human Services wrote Friday on its blog, https://www.healthcare.gov/blog/is-your-form-1095a-correct/.

The post contains additional details, although nothing for people who have already filed using an incorrect form. For them, the blog said: "Additional information will be provided shortly."

The error, of course, may not be the only cause of confusion.

Some people may not have realized how much their premiums were subsidized to begin with. "It was paid to the insurer. It can be a pain point, no doubt about it," Perlman said.

If you qualified for a subsidy but didn't take it, you must file a claim with the IRS to get the credit. But if you received too much subsidy, Uncle Sam is going to want his money back.

What you owe is not subject to IRS penalties, and you don't have to make a lump-sum payment. The tax return is due by April 15, as usual.

Tax preparers may be able to help sort things out. Perlman said H&R Block would also try to help people who were uninsured last year find out whether they qualify for an exemption, like a financial or medical hardship. But the bottom line, she said, is people need to be responsible.

"I would do whatever I could to try and obtain insurance," she said.

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This article was written in partnership with Kaiser Health News, an editorially independent program of the Kaiser Family Foundation.