For the past five years now, millions of Americans have remained blissfully unaware of many of the provisions of the Affordable Care Act. In October, a number of articles highlighted the fact that a lot of people did not know about the open enrollment period that was about to start or about the guaranteed availability of coverage, did not know about the financial assistance they might qualify for, and did not know about the penalties for failure to obtain health insurance. Maybe this will get their attention…
As we enter tax season, we’re seeing a TON of commercials from H&R Block and other tax preparers talking about the new reporting requirements. Individuals and families must report which months they had health insurance and pay a penalty for any months they went without health coverage in 2014. While a lot of people will qualify for an exemption from the mandate penalty, that, too, will require some paperwork. Those that did receive a subsidy will receive a form 1095-a in the mail and will use that when completing their tax returns.
The Washington Post does a good job of explaining the new reconciliation process:
“Most Americans who bought insurance on the exchanges for 2014 received subsidies that helped lower their insurance costs. Many focused only on what their monthly payment would be, without knowing what kind of discount they were getting. But come tax time, people will find out just how much of a subsidy they received — and if they have to pay part of it back.
The complication comes from the fact that many people applied for health insurance using their 2012 tax returns, the most recent paperwork they had at the time. If they saw a big raise after that, they may have to pay back some of the subsidy they received. If they made less than expected, they may be owed a bigger subsidy and see the difference added to their tax refunds.”
While reconciliation will certainly frustrate some people, especially those who owe money back to the government, the extra paperwork that everyone will have to do will raise awareness about the law, and that’s a good thing. Those who do their taxes early and learn that they owe a penalty may even have time to sign up for coverage before the end of the open enrollment period, but there will be a small window.
What Brokers Need to Do
If you haven’t yet teamed up with a tax preparer or two, now’s the time to do it. They could call you when their clients have health insurance questions (and there will be a lot of questions), so this could be a great lead source. Better yet, why not team up with a lot of tax preparers and make sure they have the website address and phone number for your private exchange site? That way, they could cut out the middle man and generate some sales for you without you having to lift a finger.