Families who purchased health insurance and pediatric dental through Covered California are getting a corrected 1095-A Marketplace statement because Covered California forgot to add the pediatric dental insurance premiums on the initial 1095-A. For families who have already filed their taxes with the incorrect information and subsequently received a corrected 1095-A, they may have to revisit their taxes to see if they are due a refund? The good news is that the IRS stated earlier in the year that tax payers will not be held liable for Covered California’s incorrect 1095-As.
D’ho, we forgot to add your pediatric dental premiums
This additional tax stress is brought to Californians because Covered California decided to make pediatric dental insurance separate from the health insurance AND someone at Covered California forgot to read the IRS instructions on how to generate the 1095-As. Pediatric dental insurance is an Essential Health Benefit that was mandated to be in all health insurance plans by the ACA starting in 2014.
2014 Covered California excluded children’s dental
For reasons that still remain a mystery to me, Covered California decided pediatric dental could be offered as a stand-alone plan that families could purchase separately from the health insurance. Aside from the confusion this created on the Covered California website, many families never purchased the pediatric dental insurance for their children 18 years old and younger. When the pediatric dental option finally appeared on the Covered California enrollment website in November of 2013, many families did purchase dental insurance. Most off-exchange health plans built the pediatric dental benefits directly into the health plan which Covered California finally did for 2015.
Pediatric dental is an ACA Essential Health Benefit
Because pediatric dental is an ACA Essential Health Benefit, the premiums paid for children’s dental purchased through Covered California should be included in any reporting just as if the pediatric dental was embedded in the health plan. The IRS explained this to Covered California in instructions for Form 1095-A. Part III – Household Information
Column A. Enter the total monthly premiums for the policy in which the recipient or family members enrolled. Include only the premiums allocable to essential health benefits. If a family member enrolled in a stand-alone dental plan, include the portion of the premiums for the stand-alone dental plan that is allocable to pediatric dental coverage in the total monthly premium. If more than one Form 1095-A is filed for coverage of the recipient’s family for the same months, include the premium for pediatric dental coverage in the amount in column A on only one Form 1095-A.
Revised 1095-A, after filing tax return
Two families who received a corrected 1095-A and noticed an increase in Column A left comments on my website.
I just file my tax today using the first version of 1095-A that received back in January, and I just found out that CoveredCA sent a corrected version of 1095-A in late March and for some reason I just saw this letter and opened it. After comparing two versions, the only difference is Column A (Monthly Premium Amount), in which, in the Corrected 1095-A the amount is about $44, which is the monthly premuim amount I paid for Blueshield Dental Insurance for my two kids. So in total, the difference of Column A is about $528. As to Column B (SLCSP) and Column C (Tax Credit) are the same in earlier and corrected version of 1095-A. My question is will that difference induce tax any that I have to pay to the IRS, or, am I going to get additional refund on top of the tax return as a result of my 2014 filing? FYI, I joined ACA in 2014 from January through December before I got laid off on 12/2/2014.
Calmvresident on IRS waives Covered California incorrect 1095-A tax collection
This announcement was dated 3/20, but I received an IRS letter dated 3/25 requesting I send them a copy of my 1095-A “to support your entries on form 8962″ (I used TurboTax to file way back on Feb 18) I got a corrected 1095-A from CC on 3/15 and then this. The letter also says once they receive my response “We’ll issue any refund due to you in about 6 to 8 weeks” So that means up to three months to receive my refund!! The mistake on the 1095-A was they didn’t include the pediatric dental premium in column A, so now the total is actually about $600 higher. I’m wondering now if I still need to file an amended return after sending in the corrected 1095-A.
After I read the type of correction Covered California was making, I checked the 1095-A of a household who had purchased pediatric dental coverage to compare the revised 1095-A with the initial one issued in January.
Column A has been increased by the amount of the pediatric dental plan purchased for one child under 18 years old.
New 1095-A figures effect tax refunds
The big question, especially for people who have already filed their 2014 taxes, is, “How will this change my tax return?” The good news is that any additional tax liability as a result of filing taxes using an incorrect Covered California 1095-A has been waived under most circumstances by the IRS. (See: IRS waives Covered California incorrect 1095-A collection). The bad news is that like for Calmvresident above, the federal tax return may be delayed and some tax payers may actually be entitled to a larger refund.
What’s affordable health insurance premiums?
The Premium Tax Credit is the difference between the Second Lowest Cost Silver Plan (SLCSP), reported in Column B of the 1095-A and Form 8962 Part I which calculates the household’s “affordable” health insurance premium based on the family or individual’s income. (See: How is the PTC calculated?)
PTC = SLCSP – Affordable Premium Form 8962
Premium Tax Credit limited to premiums paid
The allowable amount of PTC is limited by the total health insurance premiums paid. In other words, a tax payer can’t claim a PTC larger than their health insurance premiums: Form 8962, Part 2, Line 11, Column E. This sort of situation would occur if an individual or family purchased the least expensive Silver plan or Bronze plan and the premiums of the health plan were less than PTC they qualified for. If the premiums from Column A of the 1095-A total $5,000, but Form 8962 determined the household is eligible for a PTC of $6,000, the tax payer can only claim the $5,000 actually paid as the PTC.
Bronze plan members may get larger refund
Now California residents may be receiving a corrected 1095-A with a higher Column A annual premium amount because Covered California added in the pediatric dental insurance premiums. If these families had a Bronze plan and were limited in their PTC, they may now be eligible for a larger PTC. From comments posted to my website it sounds as if the IRS is cross referencing the new Covered California 1095-A data and asking for updated information from the tax payer. Tax payers may have to send in their corrected 1095-A to the IRS in order to be eligible for any increased refund.
Self-employed health insurance deductions
Self-employed individuals may also see an increased PTC if they have already filed their taxes. This is because self-employed individuals can deduct dental insurance premiums, reducing their taxable income.
Self-Employed Health Insurance Deduction
You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for yourself, your spouse, and your dependents. The insurance can also cover your child who was under age 27 at the end of 2014, even if the child was not your dependent. A child includes your son, daughter, stepchild, adopted child, or foster child. A foster child is any child placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction.
Unfortunately, taking the health insurance deduction for self-employed households can be tricky because of the way the PTC income is calculated. (See Publication 974 self-employed deductions). The increased health insurance premiums of the corrected 1095-A Column A will decrease the household’s Modified Adjusted Gross Income making the family eligible for a larger PTC.
Why didn’t the SLCSP amount increase?
In general, all Californians who enrolled in health insurance through Covered California lost out on Premium Tax Credits in 2014 because Covered California only offered stand-alone pediatric dental. Plans that include pediatric dental are more expensive. The premium for the Second Lowest Cost Silver Plan (SLCSP) was artificially low because it didn’t include the children’s dental benefits. A lower SLCSP means less PTC to make up the difference. This seems to disproportionately hurt families that did purchase pediatric dental because they did pay the premiums but it is not reflected in the SLCSP.
Covered California chose the smarter path for 2015 and had pediatric dental embedded into all health plans. While that should save them correcting 10,000 1095-As next year, it is little consolation who are fretting of the revised 1095-As and their taxes this year.