WASHINGTON -- About 800,000 taxpayers who enrolled in insurance policies through healthcare.gov received erroneous tax information from the government and were urged Friday to hold off on filing tax returns until the error could be corrected.
President Barack Obama's administration, under pressure from congressional Democrats, also announced that it would give several million people more time to buy health insurance so they could comply with federal law and avoid tax penalties.
The tax problem, affecting taxpayers in 37 states, is the first big glitch in the federal health exchange's second sign-up period -- and is insignificant compared with the troubled rollout of 2013. Overall this year, the Patient Protection and Affordable Care Act has beaten its enrollment targets, and insurance premiums have generally come in lower than expected.
The issue involves a new government form called a 1095-A, which is like a W-2 form for health care for people who got subsidized private coverage under Obama's law.
People can find out whether they're affected by logging in to their accounts at healthcare.gov, where they should find a message indicating whether they were affected. They also can check by phoning the federal customer service center at (800) 318-2596.
The incorrect insurance information is used in computing taxes. Consumers can expect to receive corrected data in the first week of March. With the new data, officials warned, some taxpayers will owe more and some will owe less.
Healthcare.gov said in a blog post that the federal mistake is tied to the local "benchmark" premiums and happened when information on this year's premiums was substituted for what should have been 2014 numbers.
The administration isn't sure how this error occurred, said Andy Slavitt, a top administration official overseeing the federal health insurance exchanges.
"We're still investigating the cause," Slavitt said during a press call Friday.
On Friday, Republicans seized on the administration's error and the separate announcement that the government was extending enrollment for taxpayers who could be hit with a penalty for not being insured.
"Whether it's providing taxpayers with incorrect subsidy information or having to create special enrollment periods so that taxpayers can avoid costly penalties, Obamacare continues to frustrate and confuse Americans," said Senate Finance Committee chairman Orrin Hatch, R-Utah, in a statement. "The Administration's latest attempt to unilaterally tweak their own law to avoid political fallout once again underscores the failed policies rooted in Obamacare's DNA."
The White House downplayed the glitch. "It's a small percentage of overall tax filers," said spokesman Josh Earnest. "You're talking about less than 1 percent of people who file taxes."
At the Health and Human Services Department, Slavitt said consumers affected by the problem will be notified starting immediately by phone calls and emails.
An estimated 50,000 people who already have filed their taxes will receive special instructions from the Treasury Department, he said. All corrected forms should be available by early March.
The mistake could prove to be a hardship, especially for the low-income workers who qualified for subsidized insurance policies and may be counting on tax refunds -- but now must wait to file their returns.
Consumers Union health-policy director Lynn Quincy said waiting another two or three weeks to file returns may be a challenge for low-income families who are counting on refunds.
"There are a lot of families who count on the refund to make large purchases," she said. "To the extent that they're still getting a refund -- which we hope they are -- it will be hard to wait these extra couple of weeks."
Separately, California announced earlier that it had sent out inaccurate tax forms affecting about 100,000 households. The state is not part of the federal market but runs its own insurance exchange.
'special enrollment period'
The administration also announced a special sign-up extension for uninsured people who would face the health care law's tax penalties for the first time this year. Democratic lawmakers pressed hard for the Obama administration to open a "special enrollment period" around tax filing season for Americans who only then realize they face penalties for failing to purchase health insurance last year.
Slavitt said the period would last from March 15 to April 30, calling the special enrollment as a one-time opportunity, and said it would not be repeated in future years.
Treasury officials said that up to 6 million people might be subject to tax penalties because they were uninsured in 2014. But health officials said they would help consumers obtain exemptions. Federal officials have authorized more than 30 types of exemptions from the penalty for not having insurance.
Millions of consumers received subsidies, in the form of tax credits, to help them pay premiums for coverage purchased through federal and state insurance exchanges last year. The credits were based, in part, on the consumers' projected income for 2014 and the cost of a "benchmark plan."
Slavitt said the government had discovered that the benchmark premiums were incorrectly reported on forms sent to 800,000 taxpayers, about one-fifth of all the forms mailed out by the federal government.
The error by the federal insurance marketplace is similar to what would happen if an employer reported inaccurate information on wages paid to an employee or a corporation reported incorrect information about dividends paid to a stockholder.
Disclosure of the erroneous data sent to many taxpayers came after a three-month open enrollment period that was largely free of the troubles that frustrated consumers in late 2013.
On Tuesday, Obama said 11.4 million people had selected private health insurance plans or renewed their coverage under the Affordable Care Act -- proof, he said, that the law was working "better than we anticipated" and better than critics said.
The new special enrollment period will be available to people in 37 states that use the federal insurance marketplace. Other states may follow the federal policy if they wish, administration officials said.
State-run exchanges in Minnesota and Washington state had already announced this week that they were creating their own special-enrollment opportunities. Minnesota said its extra enrollment period, from March 1 to April 30, would "lessen the tax burden for some Minnesotans" who would otherwise be penalized for lacking coverage in 2015.
The health care law requires Americans to have insurance, obtain an exemption or pay a tax penalty. Slavitt said the new special enrollment period was intended for people who had been unaware of the penalty, which the government calls a "shared responsibility payment."
To qualify for the special enrollment period, consumers must certify that they filed their tax returns and paid the penalty for not having coverage in 2014. They also must certify that they "first became aware of, or understood the implications of, the shared responsibility payment after the end of open enrollment -- Feb. 15, 2015 -- in connection with preparing their 2014 taxes."
Democrats like Sen. Tammy Baldwin of Wisconsin and Rep. Lloyd Doggett of Texas, who had urged the move, welcomed the announcement Friday.
"Taxpayers seeing the financial consequences of being uninsured will be able to enroll for coverage sooner, instead of being forced to wait for the next enrollment period," Doggett said.
The special enrollment period serves three purposes for the administration. It will increase the number of people with health insurance, a goal long sought by Obama. It will reduce the number of people who must pay tax penalties, potentially reducing anger at the White House and opposition to the Affordable Care Act. And it will increase the number of people who receive health insurance subsidies and thus have a personal stake in a U.S. Supreme Court case challenging payment of the subsidies in more than 30 states.
If the court rules against the administration in that case, the White House says, it would cause hardship for many low-income people and chaos in insurance markets around the country. More than eight out of 10 people buying insurance through the public exchanges qualify for financial help.
Insurance companies are leery of extended enrollment deadlines, which scramble their timelines for setting policy rates. They also fear that consumers will disregard sign-up periods if they grow accustomed to fluid end dates.
"Given that this is a new process for consumers, this targeted special enrollment period is a sensible approach for those who qualify," said Clare Krusing, a spokesman for America's Health Insurance Plans, a trade group.
Information for this article was contributed by Robert Pear of The New York Times; by Ricardo Alonso-Zaldivar of The Associated Press; and by Jason Millman of The Washington Post.
A Section on 02/21/2015