Cover Oregon scrambles to fix tax credit error

Exchange discovered error as it was preparing report for Internal Revenue Service

File--In this Nov. 18, 2013, file photo, a roomful of people work to process applications for Cover Oregon, the states' health exchange program, in Keizer, Ore., Monday, Nov. 18, 2013. Three months after the failed launch of its online health-insurance enrollment system, the state’s renewed discussions with outside vendors show its desperation to find a working solution. Cover Oregon has had to rely exclusively on paper applications and had to hire more than 400 workers to process them manually. (AP Photo/Don Ryan, file)
File--In this Nov. 18, 2013, file photo, a roomful of people work to process applications for Cover Oregon, the states' health exchange program, in Keizer, Ore., Monday, Nov. 18, 2013. Three months after the failed launch of its online health-insurance enrollment system, the state’s renewed discussions with outside vendors show its desperation to find a working solution. Cover Oregon has had to rely exclusively on paper applications and had to hire more than 400 workers to process them manually. (AP Photo/Don Ryan, file)

BPORTLAND, Ore. (AP) — Cover Oregon is trying to figure out how many people who enrolled in private health insurance plans may owe more tax money as a result of the exchange’s blunder in calculating federal tax credits.

Executive Director Aaron Patnode said the exchange used the wrong formula to calculate credits for individuals and families with incomes between 139% and 400% of the federal poverty line.

In Oregon, about 80% of the 67,500 people who have paid plan premiums qualified for a tax credit.

The error is limited to those who purchased nonstandard plans that cover alternative care beyond the 10 essential health benefits mandated under the Affordable Care Act — such as acupuncture and chiropractic care.

Most plans on the exchange contain only the 10 essential benefits, such as hospitalization, emergency or preventive services.

People who bought plans in Marion and Polk counties could also be affected, because those counties’ standard silver plans — which are used as a benchmark for the tax credits — contain nonessential benefits. Currently, 3,500 people get tax credits in Marion and Polk counties, according to Cover Oregon, though only some would be affected by the error.

In all other counties, the standard plans contain only the essential 10 benefits.

And only people who took their credits in advance would be affected by the error. Under the ACA, people can choose to use some or all of their credit right away to lower their monthly premium, but they can also wait and use it when they file their taxes, reducing the total amount of taxes owed.

“We’re still working to identify the size and scope of this problem,” Patnode said. “It’s a very complicated issue given how individualized the application is.”

The exchange discovered the error as it was preparing a report for the Internal Revenue Service.

Essentially, Patnode said, Cover Oregon based its tax credit calculations on the total value of people’s premiums, instead of basing them on the portion of the plans that represent the 10 essential health benefits.

For those affected by the error, it’s still unclear how much they would have to pay back, officials said. In most cases analyzed thus far, nonessential health benefits represented only a small percent of the plans — about 2% — though in some cases alternative care represented a higher share of the plan.

The amount to be returned to the IRS would depend on the individual’s or family’s income and plan, on how much tax credit was used in advance or other factors. There are limits as to how much would have to be paid back, Patnode said.

Under the ACA, people who receive advance payments of the credit can “reconcile” it on their tax returns — and the amount they would have to repay would be capped if their income is less than 400% of the poverty level. For example, an individual whose income falls under $22,980 wouldn’t have to return more than $300. One whose income falls between $34,470 and $45,960 would not pay back more than $1,250.

Cover Oregon has made federal officials aware of the problem, Patnode said, and is working with them to see if the error-caused additional taxes can be waived, but the state hasn’t heard an answer back thus far.

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