- Health and Human Services sent 800,000 Obamacare enrollees incorrect tax information that could cause them to get wrong-sized tax refunds.
- Approximately 50,000 of those people have already filed their taxes using the inaccurate forms.
- The government on Friday began reaching out to Americans who received the inaccurate figures to provide them with the correct information.
Obamacare tax documents used the "wrong benchmark plan"
Approximately 800,000 people who bought coverage through Healthcare.gov received inaccurate tax filing documents, federal officials said Friday. These forms had the wrong price for the local "benchmark plan:" an important number that the government uses to calculate every Obamacare enrollee's subsidy.
Under President Obama's signature healthcare law, middle and low-income Americans are eligible for tax credits to help buy insurance coverage. The size of the tax credit depends on two things. First, there's the individual's income: people who earn less get more help from the government to buy a health plan.
Secondly, the government looks at how much health insurance costs in the area. Buying coverage in Alaska, for example, where the terrain makes it difficult to travel and there's a high cost of living, tends to be way more expensive than buying coverage in the midwest. So Alaskans get higher subsidies than Midwesterners.
To gauge how much (or little) insurance costs in a given area, the federal government relies on a "benchmark plan:" the second-lowest cost silver plan available to a given Healthcare.gov shopper. "Silver plan" refers to the robustness of the coverage — any insurer's silver plan covers, on average, 70 percent of a given enrollee's health-care costs. (Gold plans cover more — 80 percent — and bronze plans, unsurprisingly, cover less, 60 percent).
People who live in areas with more expensive benchmark plans get bigger subsidies. Those who live in areas where the benchmark plan costs less will get less help. And this all makes the benchmark plan a really important number in setting the amount of tax credits any Obamacare enrollee receives.
If the government overstates the price of the benchmark plan — saying it costs $300 in St. Louis, for example, when it actually costs $263 — then an Obamacare enrollee will erroneously think they're getting a much bigger subsidy.
Getting the benchmark plan right matters a lot. And, in 800,000 cases, the government now thinks it messed up.
Details on how the government sent out inaccurate information are sparse
Federal officials did not comment on how, exactly, the inaccurate benchmark plan information was sent out nor did they specify how those wrong figures got used.
They did say that some people were told they got a bigger subsidy than they actually should receive, while others received an underestimate. "It really is a mix," says Healthcare.gov chief executive Kevin Counihan.
The government has begun today sending out new forms to the 800,000 Americans effected by the error. Most of them have not yet filed their taxes, and the government will ask them to use these new forms in lieu of the inaccurate ones sent out earlier.
For the 50,000 people who filed their taxes using the inaccurate forms already, the government is reaching out to them directly by phone to remedy the situation.