(Getty Images)
(Getty Images)

By Anna Gorman, Kaiser Health News

Roberta and Curtis Campbell typically look forward to tax time. Most years, they receive a refund – a little extra cash to pay off credit card bills.

But this year the couple got a shock:  According to their tax preparer, they owe the IRS more than $6,000.

That’s the money the Campbells received from the federal government last year to make their Obamacare health coverage more affordable. Roberta, unemployed when she signed up for the plan, got a job halfway through the year and Curtis found full-time work. The couple’s total yearly income became too high to qualify for federal subsidies. Now they have to pay all the money back.

“Oh my goodness, this is just not right,” said Roberta Campbell, who lives in the Sacramento suburb of Roseville. “This is supposed to be a safety net health care, and I am getting burned left and right by having used it.”

As tax day approaches, hundreds of thousands of families who enrolled in plans through the insurance marketplaces could be stuck with unexpected tax bills, according to researchers. Those payments could be as high as $11,000, although most would be several hundred dollars, one study found.

The result is frustration and confusion among some working and middle-class taxpayers, whom the Affordable Care Act was specifically intended to help. The repayment obligations could dissuade people from re-enrolling and provide more fuel to Republicans’ continuing push for a repeal of the law.

The problem is that many consumers didn’t realize that the subsidies were based on their total year-end income and couldn’t reliably project what would happen over the course of the year, said Alyene Senger, research associate at the Heritage Foundation, a conservative think tank.

“How do you know if you are going to get that promotion?” she said. “How do you know what your Christmas bonus is going to be?”

In addition, Senger said the government didn’t go out of its way to publicize the tax consequences of receiving too much in federal subsidies. “It isn’t really something the administration focused on heavily,” she said. “It’s not exactly popular.”

The system was intended to ensure that people received the right amount in subsidies, no more or less than needed. But the means the government chose to reconcile the numbers was the tax system — notorious for its complexity well before the Affordable Care Act passed.

About Half of Obamacare Customers to Owe Repayment

People who enrolled in Obamacare now are realizing that certain positive life changes – a pay raise, a marriage, a spouse’s new job – can turn out to be a liability at tax time. “We are definitely seeing some pain,” said Jackie Perlman, a principal tax research analyst at H&R Block.

H&R Block released a report Tuesday saying that 52 percent of customers who received health coverage through the insurance marketplaces last year underestimated their income and now owe the government. They estimate that the average subsidy repayment amount is $530.

At the same time, about a third of those enrolled in marketplace coverage overestimated their income and are receiving money back – about $365 on average, the report said.

Under the Affordable Care Act, the federal government made subsidies available to people who earned up to 400 percent of the federal poverty level — about $47,000 for an individual and $63,000 for a couple.  For families who ended up making less than that, the federal government limits any repayments that might be due: The poorest consumers will have to repay no more than $300 and most others no more than $2,500. But the Campbells’ income last year exceeded the limit to receive federal help, so they have pay back the whole amount.

Roberta Campbell said she was only trying to do the right thing. Campbell, now 59, lost her job as a program director for the Arthritis Foundation in late 2012. She and her husband, who was working part time as a merchandiser, downsized and moved into a smaller house.

They were left uninsured but were mindful of the federal mandate to be covered as of January 2014. So they signed up for a plan through California’s insurance marketplace, Covered California. The plan cost about $1,400 a month, but they were able to qualify for a monthly subsidy of about $1,000.

“We are rule followers,” she said. “We decided to get insurance because we were supposed to get insurance.”

They barely used the coverage. Roberta and Curtis each went to the doctor once for a checkup.  Then, about halfway through the year, Roberta got a job at UC Davis and became insured through the university. Curtis, who had been working part time, got a full-time job for a magazine distribution company.

They notified Covered California, which Campbell said canceled the insurance after 30 days. But with the new salaries, his pension from a previous career and a brief period of unemployment compensation, the couple’s year-end income totaled about $85,000, making them ineligible for any subsidies.

Their tax preparer told them they would have been better off not getting insurance at all and just paying the fine for being uninsured. In that case, the Campbells say their financial obligation would have been much smaller – about $850.

“The ironic thing is that we tried to pull ourselves up by our bootstraps,” Curtis Campbell said. “Now they are going to penalize us. It’s frustrating.”

It’s not surprising that the projections people made about their income in 2014 in many cases were incorrect, said Gerald Kominski, director of the UCLA Center for Health Policy Research. The first open enrollment period started in October 2013, meaning that some enrollees based their estimates on what they earned in 2012.

Kominski said that policy experts knew there would be significant “churn” of people whose incomes change throughout the year and who would gain or lose their eligibility for subsidized coverage. But he and others said there was less understanding among consumers about how that could affect their taxes.

  • JaneSmith100

    Obamacare needs to be repealed. This is just one of the many examples of why.

    • David A Perro

      yes, but if they had a signficant medical need and were without insurance, instead of a bill for thousands of dollars, they could have instead been faced with a bill for tens or hundreds of thousands and impending bankruptcy.

      and without Obamacare, their insurance premiums, at age 59 would have been far higher than $1400 or wouldn’t have covered their whole health needs.

      • JaneSmith100

        Of course to you, you believe that. But I’m living it. We had insurance, pre-Obamacare of $300-$400 a month. We got thrown off and it’s now $1200 a month. We are middle class and can’t afford it. #thanksObama #thanksDemocrats !

        • microlith

          We had insurance, pre-Obamacare of $300-$400 a month. We got thrown off and it’s now $1200 a month.

          You did? What were the circumstances? What kind of insurance did you have before the ACA came into effect?

          • JaneSmith100

            Same as Silver today & now it’s $1200 a month.

          • microlith

            So in other words, your insurer screwed you over.

          • JaneSmith100

            Nope. It was the state I live in. All plans had to go through their boatd and they SET THE PRICES. Look it up. Covered California board.

    • Ray Fischer

      Because poor people should just die when they get sick, right?

      • JaneSmith100

        I guess you feel it’s better that the middle class people who previously had insurance for their families for about $300 – $400 a month only to be thrown off and now have to pay $1200 for that same coverage is better right, because they’re not paying for it. And 87% of the people on Obamacare are the freebie people like yourself. The middle class/solopreneurs can’t afford health insurance now. Further

        67% of Americans want it repealed.

        Get a job.

        • Theresa89

          Im going to join this discussion bc not all people on obamacare are searching for freebies… Help (Subsidies), yes maybe. Personally i purchased a mybluecare plan that was originally $188, i pay $65 after using all my tax credits towards it. NOW… i have been employed since i have left high school and the military, most of the time working 2 jobs, one full and one part time. I live in PA and can’t get a #2 pencil for free bc i don’t have children and “make too much.” i work at an optometrist office (who ironically doesn’t offer health insurance) and made $17k last year. Of course i make too much for medicaid (which i don’t want anyway) but couldn’t afford to pay $200/month for any health insurance so i dealt with every sickness i had. I feel awful for what is happening to the middle class but i don’t think people such as myself need to be labeled bc of it. I don’t have any kids (i was responsible) and i worked all my adult life.. now don’t quote me on this but i think (or hope) that when obamacare was made, it was made with people like me in mind, not for the jobless or “moochers of society”..

          • JaneSmith100

            FWIW I don’t have a problem with this. But I have a problem with my family not having health ins. And we make six fig and can not pay $1200 a month for it. Right now we are forced to be vegetarians and eat $300 of food bc of taxes. It really sucks being in the middle class right now. We are uninsured.

          • Joe Blow

            If you make 6 figures and can’t handle it. TOUGH.
            And Enjoy being a Vegetarian, it’s Healthy Eating
            PS Get a Life, and a Job, Obviously you have nothing to do.

          • Ray Fischer

            jane smith is obviously a liar pushing propaganda for the right wing

          • JaneSmith100

            Nope.

          • Ray Fischer

            You are either a liar or a greedy idiot who can’t manage a budget. Either way you are a hypocrite because you whine and cry that you have to pay for your health insurance instead of getting it for free even as you act outraged that poor people get help

        • Ray Fischer

          For the right wing fascist the worst insult is to accuse somebody of being poor.

          This elitist fascist just wants poor people to die. Why? So her rich masters can have another million-dollar home in the Bahamas.

          • JaneSmith100

            I really feel pity for people like you. Angry. Sad. Depressed. Have a good life mate. Life is what you make of it.

          • Ray Fischer

            The person who hates poor people and wants them to die says I’m the angry one. The elitist bigot who thinks that being poor is a crime says I’m the one with the problem.

    • loopyduck

      This is one of many examples of why you read the friggin’ instructions. If you had applied ACA-sponsored healthcare or helped someone do it, you’d know that it states in MULTIPLE places that when your financial circumstances change, you need to inform them of it because it will affect your subsidies and therefore your tax situation. It says it in the application, it says it in the mailings people get, it even says it on the status page.

      Why should I feel sorry for people who don’t read the instructions on what they fill out or sign?

      • JaneSmith100

        I assume you’re on subsidies/freebies for it. 87% of the people on Obamacare are getting subsidies. People like you, who post this real angry stuff on the internet to “DEFEND OBAMACARE” are the freebie people.

        • microlith

          People like you, who post this real angry stuff on the internet to “DEFEND OBAMACARE” are the freebie people.

          No, that’s you trying to pigeon hole people so you can dismiss them.

          • JaneSmith100

            Yes that is you Subsidy Person/Lover of Freebies.

          • microlith

            LOL I see you have no capacity for actual argument and must resort to name calling and making blind, baseless assumptions about people you don’t know.

        • loopyduck

          The fact that you think that a person needs a freebie to be curious about stuff that’s going on in the news–a curiosity to see what other people are signing up for, how the process works, and what my taxpayer dollars are going to–speaks volumes about how your mind works.

      • Amber Cooper

        Except the people in this story did know that they needed to inform and they did. It really sucks for people who are trying to do the right thing and end up catching a break by getting a better job, only having to end up paying much more in the long run.

        The government should at least acknowledge that circumstances can change and not punish people for it. As in, if someone was getting subsidies because of low income and then gets a better paying job halfway through the year, the government shouldn’t ask them to pay the subsidies back for the months they were actually still low income.

        I think leaving the burden of proof on each year’s taxes is stupid and poorly thought out.

  • Guest

    No free handout and their unhappy?

    Oh well.

  • Ray Fischer

    No free handout and they’re unhappy?

    Huh

  • JGG

    I’m going to owe money because I got a job partway through the year and though I’m not happy about it, I was glad to have insurance until my employer benefits started

  • DesertCoop .

    Did you know that people who make less than $10,000 a year from what is considered ordinary income are not required to file an income tax return ?

    If you go the IRS [dot] gov website and browse to Individual Taxpayer webpage there is a tool (webpage) that you can use to verify what I am saying is actually “TRUE”. People who make less than $10,000 are not required to file an income tax return.

    How can this be possible ? Well, if a person has ordinary income from one or more jobs, the employer takes out all necessary taxes and if done correctly where enough taxes (Social Security, Medicare, Income taxes) and a person makes less than $10,000 that person will not owe any income taxes after all deductions are made if they were to file an income tax return. Resulting in “no taxes due” on their income and no requirement to file an income tax return.

    Normally, this would only apply to people with ordinary income but, there is a way for people who are self employed to have the benefit of not having to file an income tax return. I say benefit because and as you will see, this opens a door for those who do not want to be part of ObamaCare or Medicaid. Yep, this is also true.

    Under the Affordable Care Act those who are NOT required to file a income tax return are not required to maintain health insurance. Its that simple !

    Forgot to mention the best part of all: You can file “EXEMPT” on your W4 and not pay income taxes all year just to get it back at the end of the year !!!!!

    Do your own research and you will see that you can also not file an income tax return providing you make less than $10,000 of ordinary income, however, there is a way for people who are self-employed to repeat the benefits of non-income tax filing.

    Its too late to effect your 2014 year income but, you can start on your 2015 self-employment tax quarterly payments. That’s Right ? Do you see where this is going ?

    As a self-employed person who makes less than $10,000 a year can file quarterly Self-employment tax payments and if you do it right ! You will not be required to file a Federal Income Tax filing at the end of the year. Now, this will not help those who have children and need to deduct losses and carry those losses to future years but, if you are like me ? Good-bye to filing Federal Income Tax forms and Good Riddance to OBAMACARE !

    Forgot to mention the best part of all: You can file “EXEMPT” on your W4 and not pay income taxes all year just to get it back at the end of the year !!!!!

    • Lisa Chantel Hill Wade

      That is for a single person filing single. You did forget to mention if you do not file a return you cannot get any money you paid into the system and you cannot get earned income credit. The base earnings for a married couple is 20,200 or around there. It is your standard deduction plus your 2 exemptions.

      • DesertCoop .

        What you say is correct ! However, “Any household that makes $10,500 or more is required to file a tax return and is required to maintain health insurance or pay a ObamaCare Tax Penalty”.

        I think most people understand you need to file a tax return to claim tax credits, deduction and exemptions.

        Any Person:

        1. Who files a tax return must have health insurance; and

        2. Anyone who can be claimed as a dependent must also maintain health insurance.

        What I find unfair is virtually every married person and single people with children must have health insurance or be forced in to Medicaid simply because they make $10,500 or more a year.

        While a single person who could make $10,499 does not have to pay for health insurance; does not have to file a tax return and does not have to pay any income taxes.

        The who ObamaCare rules are not fair at all when you consider that people who are poor and between the ages of 55-63 who are forced in to Medicaid only get deferred charges for their Medicaid premiums; managed health provider costs and actual charges by doctors and dentists (as applicable). YES ! People who are between 55-63 are to repay Medicaid upon their DEATH !!!!

        DOES THAT SOUND FAIR EITHER ?

  • Something for nothing sometimes ends up costing something after all.

  • Jennifer Santa Maria

    Perfect example of why we need to stick to free market principles – keep the government OUT OF IT.

  • OhNoes234

    It’s a travesty that they base the subsidies on full year income. Changes to income should really start a new subsidy period. The bottom line is you shouldn’t base affordability on those subsidies. You could easily have a good year which causes insurance to be completely unaffordable.

    In reality, if you can’t afford insurance without subsidy, the only safety net from exorbitant cost is to pay the penalty.

  • Jrose88

    Stupid bitch. “This is supposed to be a safety net health care and I am getting burned left and right by having used it.” Who do you think is getting burned to pay 1k a month when you were unemployed. Middle class struggling families just like you.
    You made 85k last year, pay your own fucking insurance.

  • DesertCoop .

    I just read this story again. This couple is now making $85,000 a year and to me, they can repay the $6,000.00; bow to the east and thank Obama for his great screw over plan.

  • Dwayne Wayne

    I was dead spot on with my income prediction for 2014 and I had to give 52% of my subsidies back anyway.

  • K

    You have to sign a notice if you agree to receiving a subsidy and it is stated clearly in the notice that you have to report changes in income when they happen so that your subsidy amount can be adjusted. It also states clearly that if you underestimate your income you will have to pay back the subsidy in whole or part. If people didn’t read the notice before signing that’s their own fault.

  • Shirley Burts

    We based our insurance on what we made in 2013, but we finally had an up-tick in our income in 2015. We are FINE with being uninsured – Healthy and rarely see the doctor. One visit for a cold by me (which I paid for!) and none by my husband in 2014. We are now being penalized at a rate of over $700 per month on our taxes for taking the deduction offered under the 2013 earning rate. Yes, Obamacare needs to go away. I am healthy and NOT willing to pay for people who go to the doctor for chapped lips!!

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