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New Year of Open Enrollment Brings Choices, Changes

People who bought insurance through the marketplaces created last year by the new health care law and who were then offered medical coverage through an employer may feel as if they have more choices than ever before. But the arcane rules about federal subsidies for buying coverage could wind up costing them in the long run.

Under the law, those offered employer-sponsored insurance that meets certain federal requirements are not eligible for subsidies that can be used in insurance marketplaces. Those who accept aid they’re not entitled to may wind up having to repay the government when they file their taxes in 2016.

In many cases, workplace insurance will be at least as generous as the plans sold in the marketplaces, noted Lynn Quincy, associate director of health reform policy for Consumers Union, the policy and action division of Consumer Reports. Even if job-based coverage isn’t as generous, she said, people shouldn’t accept federal subsidies that weren’t intended for them.

The details could cause complications for people whose coverage will be renewed in the open enrollment period that started on Nov. 15.

“Clearly, anyone who is cut out of a financially attractive marketplace plan, and has no [Children’s Health Insurance Plan] or Medicaid alternative, is going to be mad,” Quincy said. “But it may be hard for consumers to understand if they are in this situation.”

Especially at risk are workers or their spouses who bought health marketplace plans last year and will re-enroll for 2015 without knowing about possible penalties.

“Is that something that the individual worker is necessarily going to know?” asked Jessica Waltman, senior vice president of government affairs at the National Association of Health Underwriters, which represents insurance agents and brokers. “One of our big concerns is perhaps not. Then someone could be getting a subsidy for more than a year and that’s a significant problem.”

Some employers that previously didn’t sponsor health coverage may begin offering it, because starting in 2015, businesses with 50 or more workers must provide coverage under the law or face fines.

Further complicating matters is the fact that federal officials may renew coverage for ineligible workers because they don’t know who works at businesses that offer insurance that meets minimal coverage and affordability standards.

Changing Circumstances

The coverage for everyone who bought a marketplace plan for this year ends on Dec. 31, no matter when in 2014 their insurance started. Consumers have from Nov. 15 until Dec. 15 to go back and shop again, or put in new information about their income and life circumstances to make sure they still qualify for subsidies. But if customers don’t return to the website by Dec. 15, then officials will automatically re-enroll them for 2015 in the same plan and with the same subsidy.

That automatic renewal brings many dangers, including the possibility that federal officials will authorize subsidies for someone who no longer qualifies or whose subsidy should change.

Employees whose marketplace coverage is renewed could always cancel it if they have other coverage. In that case, they may face the hassle of getting billed for both a marketplace plan and job-related insurance.

“We are definitely on a potential collision course,” said Kevin Kuhlman, legislative affairs manager for the National Federation of Independent Business.

Problems would intensify during the tax filing season of 2016. By that spring, employers will for the first time send the IRS information about covered employees. Once workers file their taxes, the agency could match the companies’ rosters against information about which taxpayers got marketplace subsidies.

If the IRS has the resources and appetite to ask taxpayers to repay subsidy overpayments, then taxpayers could get IRS letters shortly before the 2016 presidential election.

The agency also could chase taxpayers later.

People who enrolled through earlier this year and received subsidies cut their premiums by 76 percent on average, said federal officials. The average annual savings was $3,168.

Defining ‘Affordable’

Even consumers aware of penalties may have trouble sorting out if their employer-sponsored coverage disqualifies them from subsidies. An employer-sponsored plan must meet benefit rules and be affordable for the worker. Both are strictly defined and could be confusing.

For instance, “affordable” coverage means that the cost of job-based insurance for an individual worker — not coverage for the worker’s family — is no more than 9.5 percent of the entire family’s annual income. So an individual whose insurance through an employer costs, say, 10 percent of the family’s income could get a subsidy.

The government has offered minimal warnings to workers. Last year, the Labor Department ordered companies to give workers a 3-page form outlining their coverage choices. But employers only have to give workers the information once, so now it’s voluntary except for new hires, said a Labor Department spokeswoman.

Some companies, but not all, will keep providing the form, said Kulhman.

Steve Wojcik, vice president for public policy for the National Business Group on Health, said large companies hesitate to hand out the form “because this government notice is creating confusion.”

The form does not give workers a simple “yes” or “no” answer about whether they qualify for federal marketplace discounts. Some workers could be puzzled by caveats such as, “Even if your employer intends your coverage to be affordable, you may still be eligible for a premium discount.”

Many companies will just send employees the IRS forms showing that a worker is covered, Wojcik said.

Even the application for someone seeking coverage does not explicitly warn consumers that they can’t get subsidies if their company offers affordable coverage. On the first page of the paper application, the administration urges people to “apply even if you or your child already has health coverage. You could be eligible for lower-cost or free coverage.”

Aaron Albright of the Centers for Medicare and Medicaid Services said the system is designed so that “if consumers answer that they have employer coverage, and answer all the subsequent health coverage questions accurately, the system will determine that they aren’t eligible for premium tax credits.” But the questions are complex.

Albright noted that people who get a job should update their information.

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