More than half of people who signed up for health insurance through a state exchange or the federal HealthCare.gov website have to repay a portion of their premium subsidy, according to an analysis by H&R Block.
But about one-third of low- and moderate-income Americans who bought coverage through the Affordable Care Act's marketplaces are receiving a larger subsidy than expected, indicating that the healthcare law is merely another piece of the confusing tax-season puzzle.
H&R Block combed through tax returns that have been filed so far and found 52% of people with ACA health coverage are paying back $530 on average because they underestimated their household income. Consequently, they received a larger subsidy than they should have. That's lowering their tax refunds by an average of 17%, H&R Block said.
However, one-third of state and federal health exchange customers overstated their earnings and will receive an extra $365 toward their health premiums.
What's unclear is how many of the people studied by H&R Block also received erroneous forms from the federal government. The CMS said last week that up to 800,000 people who bought insurance on HealthCare.gov were sent incorrect subsidy information on their 1095-A tax forms. However, the Treasury Department has already said people who received the faulty forms won't have to resubmit their tax returns.
The ACA's subsidies are one of the law's core mechanisms for making health coverage affordable. Roughly 87% of people who bought a plan on the federal exchange received a subsidy, also known as an advance premium tax credit. And having a portion of that subsidy clawed back for many could hurt that underlying goal, the very premise of the U.S. Supreme Court case King v. Burwell that will be argued next week.
As much as it says anything about confusion caused by the healthcare law, the H&R Block study reflects that tax season is generally very confusing for people. Many would rather pay someone else to do the work. The IRS estimates professional tax companies or accountants file 60% of individual tax returns.
The H&R Block study also found that the average penalty levied on people who didn't have health insurance was $172. For 2014, uninsured Americans had to pay $95 or 1% of income above a certain threshold, whichever was greater. That will increase to $325 or 2% of income when people file their 2015 tax returns.
Follow Bob Herman on Twitter: @MHbherman