(Bloomberg View) — If you got health insurance subsidies last year, and you’re worried that you got too much in federal tax credits and will be faced with a huge tax bill for repayment, then you can worry a little less: The IRS says that people who are liable for repayment (“clawback”) of excess subsidies won’t have to pay by April 15.
See also: IRS waives penalties for late payments linked to PPACA.
It’s not relieving you of the obligation to repay; it’s just saying that you won’t be liable for a penalty if you don’t repay by the deadline. Interest will continue to accrue, but the interest rates that the IRS charges are actually pretty reasonable (and probably much better than what your credit card company charges). It’s the failure-to-pay penalties it layers on top — half a percentage point a month, with even stiffer penalties for failing to file — that really make your tax bill add up fast.
The IRS emphasizes that this is a one-time-only deal, just for 2014. But I’m not sure if you should believe that. This emphasizes one of the problems we’ve spoken about a lot in this space: The political will to impose the costs of the Patient Protection and Affordable Care Act (PPACA) — aka Obamacare — is a lot less strong than the will to distribute the benefits.
At every turn, when it has come time to actually make people bear the price, the government has blinked. The employer mandate was delayed, cuts to Medicare Advantage were delayed, deadlines to purchase insurance were pushed back, and now the need to repay excess subsidies has been eased.
Remember, these payments were increased just a few years back in order to pay for the repeal of a different, unworkable part of the bill: the provision that would have required people to issue 1099s to anyone who sold them more than $600 worth of stuff.
But the political logic is inescapable: A bunch of people are about to find out that they got too much in subsidies, and now they owe the IRS hundreds, possibly even thousands, of dollars. Many of those people won’t have the money, and they are about to get very upset.
So the Barack Obama administration did what it has done before: nursed the program forward with administrative rulings that minimize the political blowback. Presumably the idea is that by the time it actually lets the cost side take effect, so many people will be getting subsidies that it will be effectively impossible to repeal.