Covered California Sends Wrong Tax Info to 100,000 Customers

Monday, February 16, 2015

As the April 15 income tax deadline approaches, Covered California has a tax tip for its customers. Don’t trust the 1095-A tax form from them until its accuracy has been verified.

The Los Angeles Times reported last week that the health exchange mailed incorrect information to 100,000 people detailing the cost of their insurance and the size of the government subsidy they received. The information is critical to preparation of income tax forms and was widely anticipated by the 800,000 people, out of 1.3 million enrollees, who receive the mailings.

This is the first year people will need to figure in the cost of subsidized healthcare and there was expected to be some confusion and more than a little consternation. The size of the individual subsidies was determined in 2013, based on estimated income in 2014.

A lot of taxpayers can’t reliably make that prediction. People lose their jobs, find jobs or work as contractors with erratic income. The job market is more volatile than ever and despite warnings, a lot of people will be unprepared for their tax bill this year.

For those who, at least, knew there was tax uncertainty baked into subsidized healthcare, the suspense of finding out the size of their tax bite may be extended a few weeks until the exchange issues corrected 1095-A’s. An exchange spokesperson told the Times the fixed forms will be posted to people’s online accounts and they will be notified by e-mail that they can fish them out.

Unfamiliarity with the new tax forms already seems to have sparked a stampede in the direction of tax preparers, according to reporters with the Los Angeles Newspaper Group. “It’s a mess,” Kiak Tae, a tax specialist at ITS Financial Group in Gardena, told them. “Everything is so new that each scenario is different, and a lot of people are really clueless.”

And that was before news broke about the wrong information being mailed out. People are also grappling with how to calculate the Affordable Care Act’s penalty for not signing up for insurance through the exchange or privately. Taxpayers must also calculate their “modified adjusted gross income” (MAGI), which is used to determine the size of the subsidy.

Although people are just now coming to terms with the tax consequences of last year’s guestimate, the deadline for enrolling in 2015 for another was Sunday. Many will not have the benefit of their prepared 2014 tax returns to guide this year’s guess, despite a one-week extension offered to those who started enrollment yesterday with the assistance of a “certified insurance agent, certified enrollment counselor, plan-based enroller, county eligibility worker or Service Center representative at Covered California.”

Covered California hopes the extension corrals some of the 400,000 people they projected would sign up, but didn’t.  

As of Sunday night, there was no mention of the snafu on the Covered California homepage or its 1095-A page.

–Ken Broder


To Learn More:

100,000 California Households Get Incorrect Obamacare Tax Forms (by Chad Terhune, Los Angeles Times)

Affordable Care Act Poses New Challenges for Tax Preparation, Taxpayers (by Neil Nisperos, Inland Valley Daily Bulletin and Susan Abram, Los Angeles Daily News)

Important Tax Forms Being Sent to Covered California Enrollees (by Ken Carlson, Sacramento Bee)

California Falling 400,000 Short of Health Care Sign-Up Goal (by Judy Lin, Associated Press)

Covered California Kicking 10,474 People Off Rolls over Citizenship (by Ken Broder, AllGov California)

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