Tags: Healthcare Reform | US | Health Overhaul | Penalties

Millions in Health Coverage Gap Seek to Avoid Tax Penalty

Saturday, 14 Feb 2015 12:53 PM

Enrollment drives are being held across the country to help people beat Sunday's deadline to sign up for health insurance through the federal marketplace.

But in Texas and nearly two dozen other states where millions of people fall into a so-called coverage gap, the outreach effort has involved more than just signups.

Nonprofits and other health groups are making sure these people know what steps to take to avoid a federal penalty for not having insurance.

About four million Americans fall into the coverage gap, earning too little to qualify for federal subsidies for private insurance but too much for Medicaid.

The hole has become so noticeable that the Internal Revenue Service on Monday issued a form for taxpayers in the 22 states that didn't expand Medicaid to claim an exemption if their household income is equal to or less than 138 percent of the federal poverty level, or about $16,104 for an individual or $32,913 for a four-person household. Undocumented immigrants, prisoners and members of Indian tribes are also exempt.

People in the gap can file for hardship exemptions. The U.S. Treasury estimates between 10 and 20 percent of taxpayers will claim an exemption.

To make a case for exemption, taxpayers must first apply for coverage through the insurance exchange. Those denied are directed to Medicaid, and if they do not qualify, they must file the tax form.

The Affordable Care Act "was written assuming states were going to expand Medicaid. Now we have a situation where we have some states that did not expand it and their residents are left in this gap," said Cheryl Parcham, the private insurance director of Washington, D.C.-based nonprofit Families USA.

The Supreme Court ruled in 2012 that Congress cannot force states to expand their Medicaid programs.

Jill Hanken, the director of HealthCare.gov enrollment at the Virginia Poverty Law Center, said groups like hers are communicating with volunteer tax preparers in the state to help get the word out that people who fall into the gap may be exempt from the penalty.

"It's a real problem in all the non-expansion states, so we're trying to provide the best information we can," she said.

The penalty will rise to either 2 percent of income or $325, whichever is higher, for individuals this year, and 2.5 percent or $695 in 2016.

The Treasury estimates that between 10 and 20 percent of taxpayers nationwide will file for an exemption from the penalty on their 2014 tax returns.

The exemptions will stay in place as the rollout of the health care law continues, Petty said.

"People going online to try to do this, they're running blind," said Brendan Riley, a navigator in Raleigh, N.C.

Opponents of the healthcare law are taking a case to the Supreme Court next month that challenges the validity of the law's subsidies in states that have not set up their own insurance markets, which is most of them.

If the court agrees with the plaintiffs, at least 6.5 million people will lose subsidies for their premiums and other costs. Most would drop coverage.

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Enrollment drives are being held across the country to help people beat Sunday's deadline to sign up for health insurance through the federal marketplace.But in Texas and nearly two dozen other states where millions of people fall into a so-called coverage gap, the outreach...
US, Health Overhaul, Penalties
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2015-53-14
Saturday, 14 Feb 2015 12:53 PM
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