Covered CA complicates tax preparation

Many Californians will be headed into tax season with their paperwork in disarray thanks to their state health care exchange, Covered California. The program is the state’s implementation of the Affordable Care Act, or Obamacare.

In a repeat of follies reported last year, Covered CA has struggled to supply thousands of consumers with tax forms before the April 15 filing deadline for individual tax returns. That is deepening confusion, uncertainty and fear related to the Obamacare tax penalty taking effect for the first time this IRS season for those who have not signed up for any insurance.

For insurance agents, the woes compounded frustration surrounding the complex and often inadequate interplay between Covered CA and Medi-Cal, the state’s version of Medicare. Medicare was expanded substantially this past year under a provision of Obamacare.

A numbers game

Covered CA executives have had to keep several bureaucratic plates spinning since Obamacare passed its first anniversary in the Golden State last October. Resources and attention were divided among processing enrollments, pushing for new signups and providing qualified exceptions for those the exchange needed to get on the books to keep numbers at or near targets for the original Feb. 15 deadline.

The effort was a partial success. As the Sacramento Business Journal reported, 944,000 enrollees “renewed coverage for 2015 before the end of last year for total enrollment in the individual marketplace of more than 1.4 million.”

Although executives strove to hit a goal of 1.7 million enrollees, they fell back on a fix familiar to Obamacare watchers: create an extension until April 30. Another wave of signups, the Journal reported, were “expected in the current special enrollment period through April 30 for people who claim they were unaware of the new tax penalty for foregoing insurance.”

Crunch time

Whether or not their claims were grounded in fact, enrollees eligible for the April extension faced a less frustrating time filing taxes than those who simply didn’t receive the necessary paperwork from Covered CA. As CBS San Francisco reported, “Covered California now acknowledges at least 4,500 enrollees had not received their tax forms. That’s in addition to the more than 100,000 who received inaccurate forms.” And more residents have begun to discover they need to “file a dispute to get a form and wait up to 60 days, well past April 15th.”

In an interview with KPIX 5 published by CBS, Covered CA spokesperson Dana Howard admitted responsibility for the chaos, but attributed the challenge to an unprecedented type of bureaucratic wire-crossing. “This is the first time that tax forms and taxes have been intertwined with health care,” Howard said.

Californians in the crunch have had to rely on their own resources or those supplied by the media to get a handle on the changes. To help consumers understand what kind of problems they faced, Southern California Public Radio recently offered an explainer breaking down the thicket of mistakes.

“The Covered California errors,” it noted, “revolve around inconsistencies of enrollment in subsidized health insurance plans. For instance, someone may have been enrolled for only three months but the tax form says they were enrolled for six months. (The federal problem was different – it was about incorrect premiums on the forms.)”

But if enrollees didn’t yet receive a postcard from Covered CA, they would have had to catch the error themselves. Potentially, a lot could be on the line.

“Covered California’s mistake matters,” SCPR observed, “because the amount a household owes in taxes will depend on the amount of subsidy they received. And if the form — known as a 1095A — says they received more than they really did, their tax rate will be based on those erroneous figures.”

It remains to be seen how well Californians will be able to avoid another round of confusion after the April 30 enrollment deadline and the 60-day tax delay tick past.

Agents balk

For their part, California insurance agents have amassed grievances of their own. Aside from any troubles they may have with their own, private health care policies, they shouldered the brunt of the work load in signing up enrollees under Obamacare — despite receiving what some claim to be little or no assistance on the other end of the telephone or internet.

Agent-driven signups made up 43 percent of new enrollments in Covered CA, the Los Angeles Times reported, compared to 30 percent who self-enrolled and just 10 percent who relied on a so-called “certified enrollment counselor or navigator.”

One agent told Insurance Business America the signup process had become a “nightmare,” with “non-existent” communication plaguing her interaction with both Covered CA and Medi-Cal.