February 24, 2015

More Obamacare Incompetence


  • Almost one million people received bad Obamacare tax forms.

  • The administration allowed subsidies to more than 300,000 people who didn’t have legal residence.

  • The special enrollment period gives people the option of buying overpriced, undesirable coverage or paying a tax penalty.

  • Exchange enrollment underperforms CBO estimates again.


In the last two weeks, the American people learned that 300,000 people without lawful residence received subsidies, and the administration sent bad Obamacare tax information to 800,000 people. Once again the administration has shown itself incompetent at implementing Obamacare.

FIASCO TABLE

Administration tax error causes delays and added costs for taxpayers

In a news dump last Friday, the Obama administration revealed it had messed up tax forms for 800,000 people who purchased insurance through the federal exchange. The errors occurred on the 1095-A forms sent to exchange enrollees by the Department of Health and Human Services. These forms provide people the subsidy information they need to file their taxes. In a stunning display of incompetence, HHS had wrong information on about one in every five forms. Apparently, HHS used premium information for 2015 instead of 2014.

According to the administration, about 50,000 people had already filed their tax forms using the wrong information. Thousands of other people probably will also file returns in the next few weeks using the incorrect information. They will now have to spend more time and money to refile their taxes. The corrected 1095-A forms are not expected to be available until early March. As a result, many people will have their refund checks delayed by weeks, if not months. California has reported that it also messed up Obamacare tax forms for 100,000 people.

Improper subsidies went to 300,000

On February 11, the Wall Street Journal reported that the administration was finally terminating exchange plans for 200,000 people without proof of legal residence. This follows a September 2014 announcement when the administration told insurers to drop around 112,000 people who failed to respond to letters asking for more information about their legal status. According to the report, “[t]he latest batch of people had replied to their letters, but the federal government said the additional documents they sent were insufficient to verify they were lawfully in the country.” Most of the people recently cut off had coverage for at least a year.

The 300,000 people who received unlawful premium subsidies likely cost federal taxpayers more than $500 million. Most of this money will never be repaid. This loss results from the Obama administration’s decision to allow rampant waste, fraud, and abuse in order to boost the number of people it could say were enrolled in Obamacare.

Special enrollment period offers two bad options

On February 20, the administration announced a seven-week special enrollment period from March 15 to April 30 for people who learn when they file their tax returns that they must pay the individual mandate penalty. Without a special enrollment period, many of these people would be subject to the penalty for 2015 before realizing that they owed the penalty in 2014.

Treasury estimates that as many as six million people will have to pay the penalty for 2014. That penalty will be the greater of $95 per person or one percent of household income. In 2015, the penalty increases to the greater of $325 per person or two percent of household income. According to surveys, only about half of the uninsured are aware of Obamacare’s individual mandate. Many people will face two bad options: purchase Obamacare’s costly, high deductible, narrow network coverage or pay hundreds or thousands of dollars in penalties.

Exchange enrollment projections will likely drop again

In its January 2015 baseline, CBO assumed an average of 12 million people enrolled in exchange coverage during the year – a drop from its April 2014 estimate of 13 million. Given the enrollment data so far, CBO will likely further reduce its projection for 2015 to around 11 million people. That number would be in keeping with the 20 percent drop-off in enrollment last year, as people gained coverage through new jobs or failed to pay for the insurance they signed up for on the exchanges. Through the first nine months of 2014, the total net increase in private market coverage was less than 900,000 people, as 89 percent of the net coverage gain occurred in Medicaid.

Issue Tag: Health Care