An error by Covered California has left about 24,000 policyholders at risk of losing their federal tax credits in January if they don’t give the state health insurance exchange permission to verify their income.
Covered California is engaged in a last-minute scramble to reach those individuals and families before the end of the month, spokeswoman Lizelda Lopez said.
For policyholders who don’t give the agency their consent by Dec. 31, federal tax credits will not be applied to their January premiums. That means they may need to pay the full, unsubsidized amount of those premiums until they rectify the situation, she said.
"It was our mistake," Lopez said."We thought we had their consent. We don’t."
Covered California needs consent from its enrollees to verify their income against a federal database.
Here’s why: The tax credits consumers receive to reduce their monthly premiums are based on income. Because incomes often fluctuate from year to year, tax credits do, too.
Some enrollees give the agency their consent every year, while others give it for multiple years at a time.
In August, Covered California started reaching out to current enrollees whose consent had expired, Lopez said.
The approximately 24,000 policyholders affected never respond to the agency, but it thought they had, Lopez said. As a result, Covered California sent those policyholders incorrect information about their tax credits for next year that was based on their previous income levels, she said.
"We realized looking over our data that we didn’t have their consent, and didn’t tell them that their (tax credits) would be zeroed out next year as a result," she said.
Once the agency realized its mistake, it started reaching out to affected consumers by phone and email on Sunday.
If those consumers respond by Dec. 31, their tax credits will be recalculated and applied to their January bills, she said.
If they don’t, their tax credits won’t be applied to their January bills and they could owe the full amount of their premiums.
However, once consumers see their bills in January and realize their tax credits weren’t applied, they can contact Covered California to give their consent. At that point, the agency will recalculate their tax credits and apply them retroactively to the beginning of the year, Lopez said.
It will also contact the insurer to reissue a new bill, she said.
A handful of affected consumers called QuoteBroker, an insurance firm based in Valencia, this week for help, said Myles Pappadato, a managing partner. QuoteBroker has roughly 600 Covered California clients.
"It’s the easiest fix in the world," Pappadato said."It’s one button, but it means the world to these people. If it’s not clicked, they’re not going to get the tax credit."
Pappadato is most concerned about the consumers he hasn’t heard from.
"I’m really worried. I have no idea how many of our folks are among them," he said."I know there are others in our book of business, but there’s just no easy way to go about finding them."
Lopez’s advice for consumers who have been contacted by the exchange is to immediately give their consent online, call Covered California at 800-300-1506 or get help from the person who helped them enroll in the first place, such as an insurance agent.
"This affected a very small number of our enrollees," she said."If you have mail from Covered California that you haven’t opened, please do so."