By Katie Kerwin McCrimmon
A Health News Colorado reader saved a Gilpin County couple from a $7,500 tax bill.
Steve and Sharon Hall had qualified for subsidies through Colorado’s health exchange, then at tax time faced having to pay back every cent because their income was slightly over the limit.
The Halls shared their story of being given $619.68 every month last year through Connect for Health Colorado to help lower the cost of their health insurance. (Click here to read Couple owes Uncle Sam $7,500 as exchange tax troubles trip up thousands.)
In order to qualify for the subsidies, the Halls had given exchange workers detailed proof of their income. Connect for Health renewed the Halls’ subsidies for 2015.
But, when their accountant did their taxes this spring, the Halls discovered that they had been precariously close to the cap for qualifying for subsidies when they applied in 2013. Then their income barely exceeded the cap and they fell off what health policy experts call the income “cliff.” Once the Halls fell off the cliff — earning just over 400 percent of the federal poverty level — they no longer qualified for any help and their accountant told them they’d have to pay back all the money.
When John Luhman, a health insurance broker with ALLHEALTHOPTIONS.com read about the Halls, he got in touch to see if a last-minute IRA might lower their income just enough to help them qualify again.
Everyone stepped up to help and on April 15, the Halls worked with their credit union and their accountant. They found that Luhman’s solution would work.
The Halls since have filed an amended return and will get a refund now instead of owing Uncle Sam $7,500. They’ll be able to pay back the home equity loan they used to cover the tax bill and are looking forward to a trip in Colorado and New Mexico.
“He helped us dodge a financial cruise missile,” Steve Hall said of Luhman’s help.
“We’re so grateful,” said Sharon Hall.
Luhman said he learned about the IRA option after he dealt with a client in Grand County who found out in December that her family’s income was heading over the $62,040 limit. The woman’s husband had to cut back his hours in December and that family dodged an $11,000 tax hit.
A couple of Luhman’s clients earned more money than anticipated for good reasons. One won the Power Ball, and of course, no longer qualified for subsidies.
But for self-employed people, fluctuating incomes can be a real challenge. Luhman has learned that there’s still time for self-employed people to get some help if their income has exceeded the cap. If they filed an extension, they could set up an SEP, the equivalent of a 401K retirement savings account for self-employed people.
In the Halls’ case, Luhman read about their dilemma on April 13 and figured they had just enough time to escape from their tax bill.
“I read all this stuff and saw that and said, ‘Whoa!’ For me, it was one minute of my time to say, ‘Hey guys, you have two days to fix this.’”
He said insurance brokers have had to develop entirely new areas of expertise.
“It’s almost like we have to be accountants and financial planners and the health insurance comes last,” Luhman said.
He said Connect for Health’s call center workers and health coverage guides need much better training.
“They need to go train 1,800 people about IRAs. They need to teach people how to solve problems and not be dumbfounded and blank when they get asked about it,” he said.
Like many people who have struggled with Colorado’s exchange, Sharon Hall is self-employed. Her husband works for an employer that doesn’t provide health insurance. Both 62, they had been excited to afford insurance, but said no one ever warned them about the subsidy income cap.
When they learned about it, the Halls canceled the insurance plan they had bought for 2015 through Connect for Health and switched to a less expensive plan they bought off the exchange.
Even though the Halls would be very close to qualifying for subsidies again this year, Sharon Hall said she’s not risking it.
“We’re still so close. We wouldn’t have done it in the first place if we’d had that information. I’m just grateful that we’re no longer connected to Connect for Health.”
Actually, they’re not quite disconnected.
After completing their new tax forms, the Halls got a surprise in the mail over the weekend: a bill from Kaiser Permanente saying they were late paying for the exchange insurance plan they had canceled in March.
The Halls have a cancellation number from Connect for Health, but communications between the exchange and health insurance carriers have been slow for many months.
A Kaiser spokeswoman could not comment on the Halls’ case due to patient privacy concerns, but said she would help them.
Connect for Health spokesman Luke Clarke said he was “glad the Halls found a solution with a tax adviser.”
With respect to the bills for the canceled plan, he pledged “to makes sure there’s no hang up on our side of the transaction.”
Sharon Hall plans to keep close tabs on the Kaiser bills since she doesn’t want her credit rating to suffer.
And she has no plans to shop any further at Connect for Health. While many people are grateful to the exchange for the insurance they’ve gotten, the Halls are among thousands who have struggled with sign-up or customer service problems.
“The problem is, if you think you’ll get a subsidy through the Affordable Care Act, you can’t go anywhere else,” Sharon Hall said.
“The fact that we’re away from these people is a relief. Then we get this (late payment) letter.
“How do you scrape these people off your shoe?”