Last Friday I published the first half of this post. Although I try to keep these posts rather short and understandable, I am not always successful. Sometimes my mind just races with information that I think is important. Before I know what has happened, I have written more than I started out to.
This post picks up where I left off last Friday. My concern is that the truth about the planned health insurance tax-credits can easily be lost in the rosy pictures that politicians are painting with their rhetoric.
HOW MUCH ARE THEY
Many Americans are in for a huge surprise. With politicians blowing sunshine up people’s skirts many middle-class Americans have inferred that they have nothing to worry about since the government will pay their insurance premiums for them.
What the politicians are not saying is that while it is technically true that tax-credit subsidies will be available for households that earn up to 400% of FPL, the “subsidies” will not necessarily cover all of the premium.
The tax credits are to be paid on a sliding scale. Households with a lower annual income will get more of a subsidy.
It had been my intention to share the scale with readers on this blog. Unfortunately, I have not been able to find that chart. The best I could find was a premium estimator that would calculate tax-credits. Those estimates are only good in states that have elected to create a state-based health insurance exchange and have gotten final rates from insurance companies.
Unfortunately, the majority of states have elected to allow the federal Department of Health and Human Services (HHS) create and run the health insurance exchanges.
Since HHS will not publicize rates until sometime in September, I do not trust the tax-credit calculators. Unless you live in a state that has already locked in premiums, they are nothing more than speculation. The correct amount of your tax-credit subsidy may be more or less than what you find on those calculators.
The one thing that is sure is that if you make significantly more than you estimated for your 2014 household income or claim that you are not eligible for affordable health insurance at work when you are, you run a very good chance of owing the I.R.S. in 2015.
As I mentioned above, there is more to qualifying for a health insurance tax credit than just having a household income of less than 400% of FPL. In order to qualify, an individual must also not be eligible for group health insurance at work.
According to the written PPACA, employers with over 50 full-time employees are required to offer group health insurance or pay a “shared responsibility payment.”
On July 2, 2013, Mr. Obama announced that, regardless of the written instructions from congress, that portion of the law would not be enforced in 2014.
On July 5, 2013, President Obama announced that the exchanges would use “The Honor System” to determine eligibility for the tax-credits.
The announcement of “The Honor System” would be nice, however, it is a bit naïve. The fitness club that I attend has a sign on the front door encouraging members to use locks on their lockers since they have experienced a high volume of theft.
If I am unable to trust my gym clothes to “The Honor System” what makes me think that there will not be some Americans who try to take advantage of the new system once they see how much health insurance is going to cost and easy access to “free” money?
Fortunately, most Americans can be trusted. However, even if the number of untrustworthy Americans is only 1% of the population, in a nation with over 300,000,000 million people, that is 3,000,000. If the average subsidy is just $200, that is $600,000,000 taken from the national treasury by fraud.
Before you are tempted to tell a “little white lie” to your health insurance exchange to get “free” money, take the time to read a section of the PPACA that has not been as well publicized.
“Any person who knowingly and willfully provides false or fraudulent information under subsection (b) shall be subject, in addition to any other penalties that may be prescribed by law, to a civil penalty of not more than $250,000.”
President Obama may have selected not to enforce the Employer Mandate and use “The Honor System” in 2013, but his announcement did not waive the mandated penalties for fraud.
If you are caught, not only would you be required to refund the I.R.S. all of the money that was paid to the insurance companies on your behalf, you could also be looking at fines up to $250,000.
Although the tax-credits may be a wonderful option for those who are not impoverished enough to qualify for Medicaid but are not quite in the middle-classes, they could be a problem for many middle-class Americans.
If you are a middle-class American, I encourage you to think twice before you jump at the free money that is being offered by the I.R.S.
Remember that a fish might delight when he finds that he has stumbled on a “free” worm floating in the water until he feels the poke of a fisherman’s hook in his lip.
These tax-credits may be what our mothers warned us about when they taught us, “If it looks too good to be true, it probably is.”
I am not willing to say that the tax-credits will be bad for everyone. However, I am willing to say that you should take the time to do your own research before you run out and claim one.