Some Minnesotans who received a subsidy last year to help cover the cost of their health insurance may be in for a surprise when they file their tax return for 2014. At least one constituent reported to me that they must pay several hundred dollars of additional tax to cover the subsidy they received from the federal government to defray the cost of insurance. To be fair, this is not a problem brought on by the troubled MnSure exchange in Minnesota. It has to do with incomes that turned out to be under-estimated, which resulted in subsidies received that were too large.
Back when folks signed up for health coverage and the associated subsidies for last year, 2013 incomes were used to determine the level of subsidy. However, if the actual income for 2014 increased by a certain level, it changed or eliminated the subsidy amount people were entitled to receive. That’s the reason why some will have to pay income tax on that subsidy, although they had no idea this might happen. And even if they knew, it would have been very difficult, if not impossible, to get back into the MnSure system to make a change in income, which would have also resulted in a lower subsidy and higher health insurance premiums.
In addition, an announcement late last week from Washington told of an error in sending out tax information to nearly one million Americans. It’s a new form called 1095-A, and it goes to all who received a subsidy to help with the cost of health insurance. This situation also serves as a strong message illustrating the new and complicated link between health care law and taxes. Nationally, it’s estimated the wrong information was sent out to one in five of those who received subsidies. The information represents a tax reporting error on the government’s part that will slow down the filing season, especially for those who file early in hopes of receiving a refund.
I attended the opening of a new exhibit on space flight at the Science Museum of Minnesota last Thursday evening in St. Paul. On hand to mark the occasion was Colonel Mike Fossum, an astronaut who spent nearly six months aboard the International Space Station and has walked in space on seven separate occasions. He gave an excellent speech and then opened the floor to questions from the audience. One of the questions pertained to motivating today’s kids to get more involved in activities that might increase their interest in space exploration. I thought Col. Fossum’s answer was excellent when he said that kids should be “unplugged” from their video games and cell phones, and that they should spend more time outside, playing and looking up at the stars above them.