Kaiser report finds many will have to pay back portion of health care subsidies

In the run-up to the April 15 filing deadline, new links between tax season and coverage under the federal health law are coming more clearly into focus.

On Tuesday, a new report ­estimated that about half of households that were eligible for federal tax credits to buy health insurance last year through new government-run exchanges might now owe the government some repayment. That's because income fluctuations during 2014 resulted in overpayment of subsidies to those households.

On the flip side, the report says about 45 percent of households could get refunds because their income was lower than expected when they applied for coverage.

The impact could be muted in Minnesota, however, because ­relatively few people in the state qualified for tax credits in the first place, said Cynthia Cox, a researcher who contributed to the Kaiser Family Foundation report.

Meanwhile, Minnesota's MNsure exchange said Tuesday that health insurance counselors will be teaming up with tax professionals over the next several weeks to connect people to coverage for 2015.

People who lacked health insurance last year are now calculating their tax penalty under the federal Affordable Care Act and have a ­special chance to buy coverage for this year.

"Once they found out that they were paying a penalty because they didn't have any insurance, they'd say: 'What can I do?' " said Cecelia Benimon with the Minneapolis-based nonprofit Bii Gii Wiin Community Development Loan Fund, one of the tax assistance groups that's partnering with MNsure.

Starting in 2014, the vast majority of Americans were required to have health insurance or pay a tax penalty. In addition to the coverage mandate, the health law offers income-based tax credits available to people who buy coverage through a government-run health insurance exchange.

In Minnesota, MNsure officials have said that about 16,000 people are splitting roughly $30.9 million in tax credit subsidies for coverage purchased last year.

In 2014, insurance shoppers had the option of receiving tax ­credits in advance, so the subsidies could discount premium costs. Advance tax credits were awarded based on an estimate of income, with the understanding that people would have to reconcile expected vs. actual income when filing taxes.

It's likely that very few people were 100 percent accurate projecting their 2014 income, said Cox of the Kaiser Family Foundation. That explains why the group projects that about 50 percent of subsidy-eligible households likely owe some repayment, while about 45 percent likely will receive a refund, according to the foundation's report.

Cox said she didn't know why that ratio of repayments to refunds wouldn't apply to Minnesota.

Health law subsidies primarily go to lower income people, researchers wrote, so some could struggle to cover the cost of a surprise repayment, the report states.

But the Minnesota impact likely is limited, Cox said, because the state has large public health insurance programs, as well as below-average commercial insurance premiums across much of the state. For both reasons, fewer people in Minnesota last year needed tax credits to make their health insurance premiums affordable as defined by the federal health law.

It's unclear how many Minnesotans will find they must pay a tax penalty for lacking coverage in 2014. Those who find during tax season that they must pay, however, have a special enrollment period for signing up through MNsure that lasts until April 30.

By partnering with tax preparers, MNsure officials hope to help people enroll in coverage at a time when one consequence of lacking health insurance is clear.

"Minnesotans are glad to have the ability to apply for coverage immediately, and the timing is good because the information they need to prepare their taxes is the same information needed to complete a health care application," said Ralonda Mason, supervising attorney and MNsure navigator at Mid-Minnesota Legal Aid in St. Cloud, in a statement. "Although we cannot help consumers reduce the penalty for 2014, they leave feeling good about the fact that they have minimized the tax penalty for 2015."

MNsure enrollees in 2014 have been receiving new tax forms called 1095-A, which detail the value of tax credits for which they're eligible for coverage purchased on the exchange. While MNsure expected to distribute all forms by late January and early February, thousands of forms were held back for weeks to check their accuracy.

Joe Campbell, a MNsure spokesman, said Tuesday that all forms have now been mailed.

Christopher Snowbeck • 612-673-4744