Why 2 million penalized taxpayers will become uninsured

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January 2, 2015 by Tony Novak

Imagine that you are one of the estimated 2 million Americans that HHS indicated last week have received 2014 health insurance subsidies that they did not deserve. The enrolled for health insurance in late 2013 or early 2014 under overly optimistic estimates of subsidies by health insurance navigators eager to make more sales. Now it is tax filing time and suppose that the tax return calculation indicates, for discussion purposes, that the subsidy should have been $50 per month and not $200 per month. You were paying $28 per month for insurance in 2014 and the rate increased to $35 per month in 2015. But now you realize that you owe the federal government a tax repayment of $2,250 (15 months X $150). But that is only the first slap in the face. Next you realize that your new monthly health insurance expense is increasing, effective immediately, from $35 to $185 per month as a result of the miscalculation. This falls like a second slap in the face. How do you feel about your Obamacare coverage now?

What is likely to be your reaction? I predict that the first call after leaving the tax preparer’s office is to the health insurance company to cancel coverage.

The point of my post here is to illustrate why I think that the federal government’s announcement last week about subsidy over-payments directly translates to an equivalent number of people who will become uninsured again. In effect, this entire cycle turns out to be a wasted effort and budget with regard to these 2 million Americans and may result in a 5% increase in the number of uninsureds.

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