As Americans fill out their tax forms over the next several weeks, millions are in for a shock. Those who lacked health insurance last year but could afford to buy it will have to pay $95 or 1 percent of income — whichever is greater — to the government.
This is the first tax season in which people are being hit with Affordable Care Act penalties. Unsurprisingly, opinion polls show that many uninsured don’t yet understand the health care law’s deadlines, subsidies and fines. To many, the penalties will come as a very unwelcome surprise.
Obama administration planning threatened to make this entirely predictable situation worse. But, as of Friday, the Health and Human Services Department is in the process of ameliorating the sting that some uninsured will soon face. That’s good, but may not go far enough. Obamacare’s calendar was misplanned, and HHS should consider fixing it permanently.
Here’s the issue: The ACA’s penalties for lacking health insurance in 2015 will be much higher than the $95 assessed on those lacking coverage in 2014. Meanwhile, the deadline to get 2015 coverage passed over the weekend. Yet many of the uninsured might not understand their exposure to any of these penalties until they file their tax forms — as late as April 15. Absent the administration’s new policy, there could have been a large class of people who didn’t have health insurance, had to pay an unexpected penalty for lacking coverage in 2014 and, once they realized their situation, would not have been able to avoid paying another penalty next tax season for lacking coverage in 2015. That would have been utterly unhelpful.
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Thankfully, the Obama administration will reopen health insurance markets from March 15 to April 30. Though many people won’t be able to avoid one penalty, at least they will have the option of avoiding another next tax season. This is a good idea that should have been part of the schedule to begin with, and HHS has the legal flexibility to make it happen.
The administration is putting appropriate limits on its new schedule. The special enrollment period won’t stretch far beyond April 15, and it only applies to people who had to pay a 2014 penalty – not to anyone who might want to buy insurance. Keeping open enrollment going for too long could result in people waiting until they are sick to seek insurance. Extending open enrollment for everyone could allow people who became ill since enrolling earlier this year to exchange meager health plans for more generous ones. This sort of gaming the system could destabilize health marketplace finances for everyone.
On the other hand, a well-planned special enrollment period might have a positive effect on the individual insurance market, especially by enticing more young and healthy people who haven’t paid much attention to the ACA’s phase-in. The system needs such customers to offset the costs of covering the old and sick.
An extension will allow the government to turn this April’s shock into a useful learning moment rather than just a punitive exercise. The administration should now consider proposals for a permanent calendar change, aligning the opportunity to buy coverage with the incentives to purchase insurance that tax season brings.