CMS offers narrow individual health tax SEP

The Centers for Medicare & Medicaid Services (CMS) is offering a fix for 2014 HealthCare.gov exchange plan subsidy users who were late to file their 2014 federal income tax returns.

CMS, an arm of the U.S. Department of Health and Human Services (HHS), says in a new notice that it will offer an individual health insurance special enrollment period (SEP) to people who used Patient Protection and Affordable Care Act (PPACA) exchange plan premium subsidy tax credits in 2014 and failed to file 2014 income tax returns in time to qualify for the 2016 exchange tax credit program.

The special tax SEP started Feb. 1 and will last until March 31.

The CMS SEP offer applies directly and only in the states in which HHS runs the exchange enrollment system through HealthCare.gov. State-based exchanges can set their own tax SEP rules.

The ordinary PPACA open enrollment period started Nov. 1, 2015, and ended Jan. 31, 2016 in most of the country. Consumers who want to buy individual major medical coverage today must show that they qualify for some kind of SEP, such as a SEP for people who have moved to new locations, or for people who have lost access to employer-sponsored health coverage.

PPACA drafters created a system that uses tax credits to help low-income and moderate-income consumers pay for exchange plan coverage.

Exchange plan buyers can choose between two different ways of getting the PPACA exchange plan tax credits. 

Tax credit users can get the tax credit after they file their income tax returns for a given year, or they can estimate what they think they will earn during a year, collect the subsidies in the form of “advance premium tax credits” (APTCs), and use the APTC amounts to reduce the amounts they pay out of pocket for health insurance premiums. Most PPACA tax credit users have chosen to get the tax credit help in advance, to reduce the amounts they pay out of pocket for health insurance premiums.

To keep APTC users from lying about their income to increase subsidy amounts, CMS requires APTC users to file income tax returns, report on the exchange plan coverage they actually used and APTC amounts they actually received, and go through a process to reconcile the APTC amounts they were supposed to receive with the APTC amounts they actually received.