Why We Need a Special Enrollment Opportunity for Tax Season

The second open enrollment period for buying coverage through the health insurance marketplaces ends on February 15, just as tax season is getting underway. Now is a good time to raise a proposal that we first suggested after the first open enrollment period last year: Create a “special enrollment period” for people who learn they will have to pay a tax penalty for being uninsured in 2014.

By designating a special enrollment period for these consumers, the government would give people a short window to enroll in a marketplace plan after they file their taxes, thereby minimizing the chances they will incur a second penalty for remaining uninsured in 2015.

Uninsured consumers could be assessed twice for going without health insurance

Here’s the issue: In 2015, for the first time, many individuals and families who were uninsured in 2014 will have to pay a penalty for going without insurance when they file their taxes. This requirement of the Affordable Care Act to have health insurance that meets certain minimum standards went into effect on January 1, 2014. Therefore this tax season is the first time consumers will be faced with a “shared responsibility payment” or “penalty” for going without health insurance.

Because so many people are still learning about how the health insurance landscape and requirements have changed in the last year, uninsured consumers who file their taxes after enrollment ends on February 15 may only learn at that time that they have to pay this penalty for 2014. And this group is likely to be subject to an additional penalty for being uninsured in 2015 because, unless they experience a change in their life circumstances, the deadline for enrolling in marketplace insurance for 2015 has passed.

Consumers who are not eligible for an exemption will have to pay the penalty for being uninsured

Many people who are still uninsured will be eligible for an exemption from the penalty for a variety of reasons, including (but not limited to):

• the health insurance that was available was unaffordable
• their income was too low (that is, it was below the tax filing threshold)
• they were uninsured for less than three months in 2014
• they experienced a hardship that prevented them from being able to apply
• they lived in a state that opted not to expand Medicaid, and their income was below 138 percent of the federal poverty level

But, for being uninsured in 2014, many other uninsured consumers will have to pay either $95 per adult (up to $285 per family) or 1 percent of their family income that is above the tax filing threshold—whichever is greater. And the penalty for going without insurance in 2015 is much higher: $325 per uninsured adult ($975 per family) or 2 percent of family income that is over the tax filing threshold.

A special enrollment opportunity could be used to educate and enroll uninsured consumers

In our report last year, we suggested that HHS establish a “special enrollment opportunity” for people in these circumstances that would allow them a limited amount of time after filing their taxes to apply for insurance. Because so many people still don’t know about the requirements of the Affordable Care Act, such an opportunity should be provided to all people who find themselves in the position of owing a payment for being uninsured.

A significant portion of people who are still uninsured don’t know that financial help is available—or that they may have to pay a penalty for being uninsured. A January 2015 tracking poll released by the Kaiser Family Foundation found that of the uninsured:

• 56 percent are unaware of the financial help that is available to make health insurance more affordable
• 44 percent are unaware that marketplaces where they can buy insurance have been created in their state
• Just 22 percent report knowing at least something about these new marketplaces

Learning about the penalty at the time of tax filing will be immensely frustrating for people. But allowing them the chance to avoid a second penalty for 2015 is not only a matter of common sense and fairness—it also turns this frustrating experience into an opportunity to educate people about the financial help available to consumers who buy insurance through a health insurance marketplace.

Given the large numbers of uninsured people who remain in the dark, it just doesn’t seem fair to assess them not once but twice without taking advantage of what my kids’ teachers would call “a teachable moment.” By allowing people in this circumstance a limited amount of time to apply for health coverage and financial help through a health insurance marketplace after they file their taxes, HHS could further decrease the number of uninsured while simultaneously giving consumers a concrete way to prevent future penalties.