Thursday, July 30, 2015
More paying Obamacare fines as subsidies go to people who don’t exist
The IRS fined more than 7.5 million Americans who didn’t have health insurance in 2014, even as Obamacare subsidies flowed to people who didn’t even exist.
The Treasury Department reported last week the number of Americans who faced fines because of the Affordable Care Act’s individual mandate was significantly higher than the Obama administration expected. For 2014, the IRS projected that roughly 6 million would face fines, but the final total was 1.5 million higher.
It was the first year in which buying health insurance was made mandatory under the ACA, with penalties of $95 or 1 percent of total income – whichever was higher – for people who did not comply.
The average penalty collected for the 2014 tax year was about $200, the IRS reported.
“Although we have not yet completed our post-filing analysis, we are committed to conducting additional outreach to taxpayers, including letters to these specific taxpayers who did not have to report or make a payment. These letters will inform them about available exemptions and note that they may benefit from amending their return,” said IRS Commissioner John Koskinen.
Penalties will increase to $395 or 2 percent of income per person in 2015; that will jump to $695 or 2.5 percent of income in 2016.
Those penalties are supposed to force Americans to purchase health insurance — or to at least make it financially wise for them to do so.
To make it easier to buy health insurance, the ACA has a system of subsidies tied to the federal tax code. The IRS is responsible for handing out insurance subsidies to people who use the federal exchange — and will get to continue doing so after last month’s high-profile Supreme Court ruling — while other individuals’ subsidies flow through the state-level exchanges.
But an investigation by the Government Accountability Office recently revealed that fake applicants who enrolled in health insurance programs through the federal exchange were receiving subsidies. Those phony applicants had initially enrolled during 2014, but they were automatically re-enrolled and continued to benefit from tax subsidies in 2015, the GAO said.
The GAO was successful in 11 of 12 attempts to register fictitious people with the federal health insurance exchange. In seven of those cases, the fake applications were missing vital pieces of information, which should have raised red flags during the approval process.