Tax risks regarding health insurance begin to attract notice
As the Affordable Care Act inches closer to becoming fully enacted, there is no shortage of worry that the federal health care law is generating throughout the country. As insurers warn that health insurance coverage will become more expensive next year and states continue to battle the Affordable Care Act on general principle, the law’s provisions are beginning to show the possibility that they could expose many consumers throughout the country to significant tax risks.
Federal law offers subsidies for health insurance coverage
Per the Affordable Care Act, all U.S. citizens are required to purchase and maintain health insurance coverage. The federal government will provide subsidies for those that fall below the poverty level in order to make coverage more affordable. Millions of people are expected to benefit from these subsidies, but they could be exposed to serious tax risks in the future. If those receiving subsidies do not accurately project their incomes, they could be faced with costly tax bills that many may not be able to cover.
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Inaccurate income projections could have costly consequences
Consumers will be able to apply for federal subsidies beginning this fall. The federal government, however, will not know how much income any individual consumer makes this year or next year. Instead, the government will have to rely on the only recent and verifiable income information on record: A 2012 tax return, which were filed in the spring on this year. This tax return does not adequately represent the financial status of a particular consumer, especially what that status may be in 2014. A raise in income, a spouse taking on a second job, and various other factors are, thus far, unaccounted for, which could mean millions of consumers may be at risk of financial backlash concerning their health insurance coverage.
Education becomes key to avoiding tax risks
This potential problem is not well known among consumers, and the federal government has begun working to educate people concerning the risks they may face with subsidies. Consumer advocacy groups are also forming up educational efforts to ensure that consumers know the risks they face. Enroll America, a coalition of health care providers and consumer advocates, is one such organization and is planning to launch an aggressive marking campaign to warn consumers of the potential tax risks they may face in the future.