What happens when you mix health care and taxes — the two most complicated systems in the nation? When things go wrong, you can end up with something exponentially more complex.
When JoAnne Nagler of Burlingame signed up for health insurance through Covered California early last year, she had no idea that an apparent $1,539 billing mistake would take her down a rabbit hole of paperwork, phone calls, appeals and erroneous tax forms that would consume more than 50 hours of her life and prevent her from filing her 2015 tax return on time.
Nagler and her husband are not the first to run into tax troubles involving Covered California, the state’s health insurance exchange, set up under the 2010 Affordable Care Act.
In late February, tens of thousands of Blue Shield and Kaiser Permanente customers who enrolled through Covered California received erroneous tax forms saying they did not have health insurance last year when they actually did. That problem was resolved fairly quickly with the issuance of new forms. Nagler’s wasn’t.
Because Covered California is an independent public entity within state government, when consumers have trouble, it’s hard to know where to turn. Unlike many other government agencies, Covered California has no consumer advocate or ombudsman.
‘No accountability’
Nagler, who goes by JoAnneh, and her husband, Mike, “are supporters of the Affordable Care Act, and we believe in what Covered California has set out to do,” she said. “It’s the delivery system that’s a mess. There’s no accountability, there’s no follow-through, and there’s no one to get the answers from as a consumer.”
Covered California spokesman Dana Howard said, “We are tenaciously working on a satisfactory resolution for the customer; however, this is an atypical case with complexities that have required more time than we would like to see.”
To understand Nagler’s odyssey, it’s important to know a few things about Obamacare.
People who buy individual health insurance through a government marketplace such as Covered California can get premium subsidies if their income is less than 400 percent of the federal poverty level for their household size. The lower their income, the bigger the subsidy. (For 2016 income limits, see http://bit.ly/23sTViH.)
The subsidy for each year is based on that year’s adjusted gross income, which many people — especially the self- employed — don’t know for certain until the year is over and they do their taxes. Most other government subsidies are based on the prior year’s income.
If you qualify for a subsidy, you can have it applied against your monthly premium. This is called the advanced premium tax credit, or APTC. When you do your taxes for the year, you figure out how much tax credit you should have received, based on your actual income, and compare it with how much you actually got each month. If you received too much, you pay back the difference with your tax return. If you received too little, you get the difference refunded on your return.
Options for paying
If you don’t want to run the risk of having to pay back money, you can pay your full insurance premium each month and get your entire subsidy when you file your return. But most people choose the advanced credit.
In February 2015, Nagler applied for a Kaiser policy through Covered California, after consulting with the San Mateo County Health System, which is listed as a “certified enroller” on Covered California’s website.
The enroller told Nagler that she was eligible for a $171 monthly premium subsidy, based on her 2013 income. She hadn’t done her 2014 taxes yet, and 2015 was just starting, so she knew her subsidy could change. She is a self-employed author and yoga teacher, and her income fluctuates.
She said the enroller told her that if she checked a box on the application, Covered California would verify her household income when she filed her 2014 tax return and adjust her tax credit if necessary. She was not told that if her income exceeded a certain limit ($62,920 for a two-person household in 2015), she would get no subsidy at all.
So Nagler enrolled in Kaiser starting March 2015, opting for the credit in advance.
“In October, we got a letter from Covered California that said we hadn’t filed our 2014 taxes, when of course we had,” she said. When Nagler called back and reported that her actual income for 2014 was just over $70,000, “they told us that we were not eligible for a stipend and that we owed all the money back. That’s $171 for nine months, or $1,539. When we asked how to pay it back, Covered California said that Kaiser would bill us within the month,” she said.
Sure enough, Nagler got a notice from Kaiser saying she owed $1,539 in “subsidy adjustments,” and her full premium of $863 for December. She paid the $1,539 by check on Nov. 4.
Here’s where things started to go awry.
Wrong information
Despite what Covered California told Nagler, Howard said Kaiser never should have billed her for the credit. Instead, Nagler should have repaid it with her 2015 tax return. But Nagler wasn’t told that.
In mid-January, Nagler got Form 1095-A. This form is issued by marketplaces to customers and the IRS. It shows how much the household paid for insurance each month and its monthly premium subsidy. Taxpayers use it to fill out their tax return.
The form showed that the Naglers had gotten a $171 tax credit from March through December, even though they had repaid the credit for March through November and got no subsidy for December.
“When we called Covered California, no service staff could confirm that we had paid the money back,” she said. Kaiser could verify that the check for $1,539 was posted on Nov. 10, “but they could not verify that Covered California had received the information that we had paid.”
Nagler said she made at least five phone calls to Covered California, including two with Kaiser representatives conferenced in. At least one call lasted for more than two hours, she said. “When looking in our file, the people at Covered California could see there was a notation in our account on a certain date,” but they couldn’t tell what the notation was about.
“Then we tried the dispute process. We filed two disputes online with Covered California (on Jan. 23 and Feb. 12) but got no response to either,” she said.
On Feb. 25, Nagler filed an appeal with the California Department of Social Services. This department does not “govern” Covered California — it is a “contracted appeals entity,” Howard said. “When appeals are submitted, DSS sorts the paperwork and then forwards the cases to Covered California staff who perform the analysis of the appeals and work towards an informal resolution,” he said.
Consumers can use the appeals process to request an “eligibility hearing” before an administrative law judge. However, Nagler was not disputing her eligibility. Her request for an appeal of her 1095-A was rejected, because the appeals process does not cover incorrect 1095-A forms.
Vendor’s errors
Making matters worse, on March 22, the Naglers received another 1095-A, which was identical to the first except that a box marked “void” was checked. Howard said this second 1095-A was sent to the Naglers in error by the same unidentified vendor that sent the erroneous 1095-A forms to the tens of thousands of Kaiser and Blue Shield customers. However, Howard said Nagler’s incorrect form was not part of that snafu, which I wrote about last month.
Nagler first contacted me on March 29 after reading that column. I forwarded her complaint to Covered California the same day. Although Covered California responded to me, it did not respond to Nagler until two weeks later.
“We’ve had our taxes ready for two months and can’t file them. Our accountant says it’s absolutely a bad idea to file with the erroneous 1095-A,” Nagler said. “At this juncture we’re pulling our hair out.”
Kaiser would not discuss Nagler’s case, other than to say, “Sometimes one or both of our organizations makes a mistake, and when that happens, we are committed to resolving the matter to our members’ satisfaction and then working to make sure the error doesn’t happen again.”
Not resolved yet
Finally, on Wednesday, Nagler got a call from two Covered California reps. They said they would have Kaiser refund her tax credits she paid, so she could properly pay them when she filed her 2015 tax return. Nagler has decided to file for an extension. “I am not filing my taxes until I have a check for $1,539 in my hand and a correct 1095-A,” she said.
Amy Palmer, Covered California’s chief spokeswoman, acknowledged, “This is not acceptable for a consumer who tried to do everything right.”