Bowing to intense pressure, the Obama administration said Friday it will give uninsured Americans exposed to Obamacare’s tax for lacking insurance a six-week grace period to enroll in coverage on HealthCare.gov and avoid heftier penalties next year, even though they missed last weekend’s deadline to sign up.
At the same time, it admitted it made an error on crucial tax forms for 800,000 customers — roughly one of every five — on the federal marketplace, prompting Republicans to renew their attacks on President Obama’s signature law.
The special enrollment period will last from March 15 to April 30 and apply to federal-exchange customers in 37 states who, while filing their taxes, “learn for the first time of the need to pay a fee,” said Andy Slavitt, principal deputy administrator at the Centers for Medicare and Medicaid Services.
The administration has estimated that up to 6 million people will be subject to the “individual mandate” tax for not holding insurance last year, although it has not projected how many will take advantage of the special enrollment period. The government will not offer relief from the 2014 penalty, which is the greater of $95 or 1 percent of household income above the filing threshold.
Friday’s move was not unexpected, as the administration had been openly mulling the relief period, and three state-run exchanges had already extended extra time to penalty payers.
But in a twist, the agency said it is scrambling to fix a tax-form blunder could delay tax returns for hundreds of thousands of customers.
Officials said the incorrect forms, which are needed to reconcile customers’ 2014 income with the subsidies they received to pay for coverage from HealthCare.gov, used the wrong benchmark premium level against which their subsidy is calculated.
The agency is investigating how it happened. It believes 50,000 users may have filed their taxes already, putting pressure on CMS to notify customers, starting Friday, about the error as they can send out corrected forms by the first week of March.
Republicans pounced on the error.
“This is beyond embarrassing for President Obama and is an unfair blow to taxpayers who are once again left holding the bag for this administration’s incompetence,” Rep. Diane Black, Tennessee Republican, said.
Tax-season hiccups could set the administration back in its efforts to build on the law’s success. Earlier this week, the White House celebrated a preliminary estimate of 11.4 million signups on the overhaul’s exchange nationwide through Sunday’s deadline, although most customers who were “in line” got additional time to finish up.
Obamacare is already under threat by a Republican-majority Congress, and a Supreme Court decision due by June could invalidate subsidies for customers in 34 states that rely on the federal exchange, uprooting the law in two-thirds of the country.
Hoping to stem more headaches, the administration said HealthCare.gov customers who want to enroll March 15-April 30 must attest they have not enrolled already in the federal exchange, that they paid a fee for lacking insurance in 2014 and that they first realized it when they completed their tax returns.
Officials offered the relief because Obamacare’s Feb. 15 signup deadline didn’t match up with the tax deadline on April 15, leaving two months of in-between for filers to discover the tax penalty on Americans who can afford insurance, yet do not acquire and do not qualify for an exemption from the federal government.
The 2015 penalty for lacking insurance is $325 or 2 percent of household income.
HHS hadn’t signaled it would provide relief until now, because it wanted potential enrollees to flock to the exchanges during the standard enrollment period that began Nov. 15 and ended Sunday.
Congressional Democrats had called on the agency to help out customers on the federal exchange, while state portals in Washington State, Minnesota and Vermont offered extra time before HHS made their move.
California’s state-run exchange followed suit later Friday, announcing a special enrollment period for penalty payers from Feb. 23 to April 30.
Friday’s decision does not affect the remaining exchanges run by 10 states and the District of Columbia.
“They’re welcome to mirror the federal marketplace’s policy if they like,” Mr. Slavitt said.