By Katie Kerwin McCrimmon
Tax day is bringing lousy news to some customers of Colorado’s health exchange.
A Gilpin County couple faces a shocking tax bill of nearly $7,500 after Colorado’s health exchange set them up with subsidies that their accountant says they now must give back.
When Steve and Sharon Hall shopped for health insurance back in 2013 through Connect for Health Colorado, they carefully documented their income and estimated they would earn about $62,000 for 2014. No one told them that their income was just $40 shy of the upper limit to qualify for tax subsidies. Sharon is self-employed and Steve’s employer doesn’t provide health insurance. They are both 62 and were excited to buy a good health plan after workers at Colorado’s health exchange gave them documents showing they qualified for $619.68 per month in tax subsidies to help defray the costs of their insurance.
The Halls selected a Kaiser Permanente plan that cost $1,110.52 per month and paid $490.84 out of pocket each month.
All was well until this spring when the Halls got a rude awakening. Their accountant had completed their 2014 taxes. They had earned almost exactly what they’d predicted, but it was a couple of hundred dollars over the limit to qualify for health insurance tax subsidies. The accountant’s verdict: the Halls would have to give back every penny they’d received in tax subsidies to Uncle Sam.
“We went through this very long process with Connect for Health, starting in 2013, with long wait times and being on hold anywhere from 45 minute to several hours. We got shuffled around and they concluded after this onerous process that we were entitled to these subsidies. Now, come tax time, we’re not entitled to them,” Steve Hall said.
Connect for Health had given the Halls more subsidies for 2015, so they immediately pulled out of their exchange plan and bought a much less comprehensive health plan outside the exchange through their broker. They are disappointed at the failings of Colorado’s health exchange since they support the Affordable Care Act.
And they are advising friends to be very wary of Connect for Health.
“It’s too big a risk. This is contracted out to people who are making a lot of money and it’s a mess,” Sharon Hall said. “They wanted as many people to sign up as possible because somebody’s bonus was depending on them.”
Now the Halls must recover from the financial blow of the thousands they spent last year on health insurance and the money they owe Uncle Sam this week.
“We know people that this would bankrupt. This would ruin them, especially at our age.”
To try to recover, the Halls are fixing up an old car they were planning to replace, have canceled vacation plans and will keep working and working.
The Halls are not alone in having tax troubles related to health insurance subsidies.
As of the middle of March, Connect for Health found problems related to tax subsidies or tax forms with about 5,500 accounts, according to spokesman, Luke Clarke.
Among those, some received different information about their tax subsidies from their health insurance company compared to the exchange. Others improperly had their dental coverage reported separately when it should have been included with medical premiums.
Altogether, Clarke said the exchange sent out nearly 108,000 tax forms, so he estimates that problems occurred with about 5 percent of customers.
Among those who have had problems, many like the Halls are irate. But few have any recourse.
Back when the Halls first shopped, they documented multiple conversations with workers at Connect for Health. They even got an email from the former CEO once over an embarrassing security breach. One evening, the Halls signed in to their online account and all the personal information for a Colorado Springs woman and her family popped up on their computer.
The former CEO demanded that they destroy all the evidence of the security breach and insisted that she took the incident “very seriously” and had “staff working through the night to identify how this occurred.”
Despite their many conversations with exchange workers, all the way up to the former head of the organization, the Halls say no one ever warned them that their income put them exceedingly close to the upper limit to qualify for subsidies.
“Are you kidding me? You don’t warn somebody of something like this. This is a disaster and unfortunately our experience has shown us that their people weren’t (properly) trained,” Sharon Hall said.
“We’re a belt-and-suspenders kind of household. If we had been given that information, we would have weighed and discussed it. Knowing our financials, we never would have gone for this,” she said.
Clarke, the exchange spokesman, said he’s “very sympathetic to these customers and their situation.”
But, aside from urging them to go back to their tax adviser, Clarke said there’s nothing he can do.
The lack of any help has further angered Steve Hall.
“Connect for Health had a significant role in setting us up for this financial burden and they have refused to accept their responsibility,” he said.
Clarke disagreed with the Halls’ contention that workers were poorly trained and were trying to boost sign-up numbers. He said all of the workers for Connect for Health “understand tax credits and the implications for our customers’ taxes.” He noted that the Halls used an insurance broker, who should have warned them about the subsidy caps.
“That said, this first tax season has presented a learning curve for all of us and we can incorporate what we are learning in our ongoing training processes,” Clarke said.
Connect for Health Colorado’s Facebook page is full of posts from furious customers who have had to endure long, aggravating hold times to try to get help with their problems.
Among those who also have struggled with tax issues is Rob Boyle of Crested Butte.
A self-employed carpenter, handyman and property manager who owns Red Mountain Builders, Boyle was thrilled to qualify for subsidies since prices for health insurance in resort areas like Crested Butte are exceedingly high.
In Boyle’s case, he said he qualified for about $6,000 in subsidies to help defray annual insurance costs of about $12,000.
With the improving economy, his income began to increase over the estimates he had given Connect for Health workers.
To avoid large tax bills and any penalties at tax time, Boyle increased his tax payments throughout the year.
Then, when it came time to buy insurance for 2015, Boyle found what he thinks is a glitch in the Connect for Health system. The exchange’s tax subsidy calculator is far too generous. He compared the subsidy amounts he should receive through both the federal subsidy calculator and the one that Connect for Health offers.
“I wanted to make sure everything was calculated correctly,” Boyle said.
He found an $800 difference between the federal and state calculators.
Boyle, too, has spent significant time on the phone working with agents at Connect for Health. He wanted them to give him lower tax subsidies.
“I wanted to pay more. We broke it all down. They wanted me to go paycheck by paycheck,” he said.
They kept insisting he qualified for higher subsidies that he thought he should receive.
“They’re overly generous and sooner or later, you’re going to have to pay,” Boyle said.
For 2014 taxes, Boyle said his increased income and errors from Connect’s subsidy calculator have left him owing $2,300.
“I was expecting a little bit of a refund. Instead of a refund, I had to go the other way,” Boyle said.
Like the Halls, Boyle said he’s a supporter of the Affordable Care Act and that he’s not bitter about the problem. He just wants Connect for Health to get the subsidies right.
“The general feeling I have is thanks for Obamacare. But there are bugs in the system that need to get worked out,” Boyle said. “I still look on the bright side of all this. The government is paying for a good chunk of my health insurance.
“But why can’t Connect for Health get their math to sync with the federal government?”
Accountants across the country have been dealing with customers who are contending with new questions about health insurance for the first time this year.
The Halls’ accountant asked not to be named, but said she had seen several cases where people’s incomes have changed, thus causing tax subsidies to be incorrect.
She said the Halls’ case was the most egregious.
“It’s the worst we’ve seen,” the accountant said. “For them, it was a huge blow.”
She’s advising hundreds of clients to be very cautious and follow a new rule of thumb: “overestimate your income as opposed to reporting it exactly.”
“If you get a little more credit (at the end of the year) you’ll be happily surprised. If you (predicted) this year you’d make $60,000 and instead you make $55,000, it will work in your favor.”
The Halls are hoping for continued good health until they qualify for Medicare at age 65. They have no plans to go near Connect for Health ever again, even if they might qualify for subsidies.
Along with money, they’ve wasted countless hours dealing with the challenges of the initial sign-up and the subsequent tax mess.
“They owe me for all the time,” Sharon Hall said. “You can’t buy brain cells. We’ve looked.
“We were led to believe that this is a government site. It may be government-sanctioned, but it’s contracted to people who don’t know what they’re doing.
“The whole thing is a monumental disaster that’s set up to fail,” Sharon Hall said. “When you’re in a position that has this much power, you can really mess up somebody’s life.”