Personal Finance

H&R Block says health care law fines have more than doubled

HealthCare.gov, where people can buy health insurance, is displayed on a laptop screen.
HealthCare.gov, where people can buy health insurance, is displayed on a laptop screen. The Associated Press

Many people who went without health insurance last year are now seeing fines more than double under President Barack Obama’s health care law, H&R Block said Tuesday.

The Kansas City-based tax preparation company said that among its customers who owe a penalty for the 2015 tax year, the average fine is $383. That compares with $172 for 2014, the company said in a report that marked the halfway point in the current tax season.

Separately, among those who complied with the law and took advantage of its taxpayer-subsidized private health insurance, six in 10 are now having to pay back to the IRS some portion of their financial assistance. Those payments also are trending higher this year, averaging $579, compared with $530 last tax season, Block said.

Although millions of uninsured people have gained coverage through the Affordable Care Act, the update from H&R Block underscores the extent to which the law’s complex provisions remain a challenge for many.

Previously, IRS data had pointed to some of the same problems, as well as an additional concern: Many who received subsidies in 2014 failed to file a tax return as required, jeopardizing their future financial aid.

H&R Block said it expected to see lots of confusion last year, the first time that people had to grapple with the connections between the health law and the income tax system. Such issues don’t seem to have diminished this tax filing season.

“There is still a steep learning curve,” said Mark Ciaramitaro, the company’s vice president for taxes and health care services.

The health care law provides subsidized private health insurance for people who don’t have access to coverage on the job. By using the income tax system to deliver the subsidies as tax credits, the White House and congressional Democrats were able to call the law a middle-class tax cut.

But it also connected two of the most complicated areas for people: health care and taxes. At tax time, people have to account for the subsidies they received for health care or, if they remained uninsured, pay a fine.

Ciaramitaro said many people covered under the law appear to be having problems correctly estimating their incomes for the year ahead.

“This also may be due to the typical higher year-over-year income variability among lower-income households,” he added.

Underestimating income results in a bigger tax credit up front to help pay your premiums. But at tax time any overpayment has to be repaid — usually subtracted from your tax refund. H&R Block said those who owed money back saw about a 20 percent reduction in their federal refunds.

Other findings by Block:

▪ Only 3 percent of its customers with health law subsidies saw no effect on their refunds, meaning they correctly estimated their incomes or called HealthCare.gov to report changes during the year.

▪ More than one in three overestimated their incomes, meaning that received a smaller tax credit than they were entitled to. They got an average of $450 back from the IRS.

▪ As for the health care law’s fines, they’re meant as a stiff nudge to get healthy people who can afford coverage to join the insurance risk pool, thereby helping to keep premiums more manageable for everyone. Exemptions are available for people with low incomes or who face other extenuating circumstances. But the law’s requirement to have coverage or risk fines remains highly unpopular.

The minimum fine went up from $95 in 2014 to $325 for the 2015 tax year. It rises again this year to $695 for an adult uninsured for a full 12 months.

The Associated Press and The Star’s Steve Rosen contributed to this report.

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