Taxing medical decision: Get coverage or pay the price

Matt Bapple at Bapple and Bapple in Crown Point said,  “A lot of accountants don’t have the answers yet because it’s so new and still being interpreted as we speak.”

Although a health care professional, Ann Piet never had given much thought to the Affordable Care Act; that is until she retired.

To date, the Affordable Care Act has provided coverage for more than 10 million Americans who previously had no coverage and millions more who were unable to get coverage because of medical conditions or whose coverage was capped.

Piet, 62, had been employed as a school nurse. With an R.N., B.A. and an advanced degree, she has worked in the health care industry for more than 40 years, and always understood the importance of having good health insurance.

But Piet never considered how Obamacare and its requirements could affect her and her spouse.

Under the Act, Americans without health insurance face penalties beginning in the 2014 tax year. Those without coverage will pay a tax penalty of $95 per adult, $285 for a family, or 1 percent of income, whichever is greater. The penalty doubles for this tax year and grows an additional 25 percent by 2016.

When she retired, Piet wasn’t surprised to discover having good health insurance is very expensive. But she was somewhat shocked by the rigors of finding the best coverage for the best price.

Though the penalties for not having health insurance weren’t a major factor in Piet’s insurance decision, she decided to consider the Obamacare program for other reasons.

Through her job, health insurance coverage for herself and her husband, John, had been part of the benefit package offered according to the contract between her former school district and the teacher’s union.

But Piet needed to learn the eligibility requirements to receive a subsidy through the Affordable Care Act to help pay for coverage, or if coverage through the Act would be cheaper than other options.

“I decided to look into Obamacare,” Piet said. “I think we qualify because it’s a change of life situation, but trying to figure out the coverage options and whether we qualify for a subsidy is so confusing.”

The Piets, who live in unincorporated Cook County, are eligible to receive coverage through her former employers, through the Teacher’s Union’s COBRA plan or through the Illinois Teacher Retirement system.

They have decided on the latter with the cost to her of $213.15 a month, and an additional $853.59 a month for John, who is 62 years old and self-employed.

Cobra would have cost $1,300 a month, while keeping her current plan would add another $450 to their premium.

It took Piet untold hours to get quotes and answers.

“All the websites lead to Obamacare,” she said. “It’s hard to find insurance not associated with it and then it was harder to find out if we would qualify for a subsidy associated with it.”

The Piets think they are on the cusp of the income qualification for a subsidy, but don’t know yet.

“We really won’t know our income for 2015 until year’s end,” Piet said. “It depends on John’s business, if I work part-time, and a lot of other things.”

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Those who were covered in 2014 through Obamacare and got a tax credit, must complete a new government form to verify they received the right amount of financial assistance.

If they underestimated their income, they may owe the government money. If it was overestimated, the reverse is true.

“For sure, we don’t want to pay a penalty,” Piet said.

Matt Bapple, owner of the Crown Point–based CPA firm of Bapple & Bapple Inc., agreed there is a lot of confusion about the Affordable Care Act, including coverage, subsidies and penalties.

“It’s been a subject for everyone in the (tax) industry,” Bapple said. “A lot of accountants don’t have the answers yet because it’s so new and still being interpreted as we speak. Interpreting the law is a real challenge. It’s like trying to put a puzzle together with three parts missing.”

Bapple’s son, David, is a member of the 30-year-old family firm. His father gave him his first mission: to learn everything he could about Obamacare and how it affects the business’s clients.

“Now we have an expert in this office, our clients can call on, and they do,” Matt Bapple said .”We did research for every one of them on how it affects them this year and how it will affect them next year.”

Federal tax forms for 2014 include a box, which taxpayers can check to indicate they had health insurance coverage for that year. The U.S. Department of Health and Human Services estimates 75 percent of taxpayers will be in that category.

Those who did not carry health insurance for more than three months in 2014 have to file for an exemption or pay the penalty.

Information on the subject can be found at “www.IRS.gov/ACA or https://www.healthcare.gov/taxes/

Alison Flores, principal tax research analyst for H & R Block, also said her company, the largest tax preparer business in the nation, has found that people are not as informed as they should be about the law, its requirements and its penalties.

“People who aren’t covered (by health insurance) don’t know how much the penalty is or how it would affect them,” Flores said. “As the penalty increases people will need to have a better understanding of the penalty when they make the decision to be covered.”

People can get a policy through the ACA’s marketplace, pay the full price upfront and if they have overestimated their income, they can get a refund, she said.

“If they have underestimated their income, they will need to repay the funds, Flores said. “If you give them honest information and it’s wrong, there isn’t a penalty, but you may end up owing it.”

Because there are so many changes in the law for the 2014 and 2015 years, Flores said she would encourage everyone to seek help from a tax professional to understand how they are affected.

H & R Block provides a calculator on its website, “http://www.hrblock.com/aca-tax-impact/index.html,” where users can learn if they could face a penalty, qualify for an exemption, or may be eligible for the Advance Premium Tax Credit to help with the cost of health insurance, said company spokeswoman Annelise Wiens.