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Avoiding a second tax penalty over Obamacare

About 6 million people face a tax penalty this year for failing to sign up for health insurance last year. Now, many of those people in New York and elsewhere will get an extra chance to enroll in coverage for this year and avoid a second penalty.

Sign-ups were supposed to close this month, but the Health and Human Services Department announced Friday that it would reopen the marketplaces in 37 states for six weeks in March and April. The goal is to make sure that people who are learning about the deadlines and tax penalties for the first time won’t be shut out of coverage – and forced to pay a penalty – for a second year.

Several states running their own marketplaces, including Washington and Vermont, have announced similar policies. The New York State Health Department on Friday announced it will offer a special enrollment period for people who paid a penalty with their 2014 federal taxes. They can avoid next year’s larger fee by enrolling through the NY State of Health exchange during the special sign-up session that begins March 1 and ends April 30.

To be eligible for the special enrollment period, New Yorkers must attest they paid a penalty with their 2014 taxes and they didn’t know about the insurance mandate until they began to prepare their taxes, the Health Department said Friday.

The health law requires everyone who can afford insurance to obtain it – and charges people who don’t a fee. The fees for failing to get insurance last year will be relatively low – $95 a person or 1 percent of their income – but they rise next year.

Now people who still haven’t signed up for 2015 will get a chance to sign up in March and April. Federal officials provided no estimates of how many people would be affected, but it will certainly be less than 6 million, because not everyone facing a fine has failed to get insurance for this year.

The department’s decision reflected two realities: One, confusion about how Obamacare works remains very high. Several surveys have shown that many of the uninsured don’t understand that there are deadlines for coverage, penalties for failing to get insurance or financial assistance that might make insurance affordable. And two, there’s a basic mismatch between enrollment season and tax season that interferes with the incentive structure of the law. The punishment for not being insured last year comes too late to sign up for this year. That means that without the special period, many people would have been doomed to pay two years’ worth of penalties.

Federal officials were careful to describe the new sign-up period as tightly defined, and as a one-time thing.

“Our intention is that this is one-year-only, for people who have not been in the communication loop around the tax penalty and whose first time learning of it will be filing their taxes this year,” said Andy Slavitt, the principal deputy administrator at the Centers for Medicare and Medicaid Services, the agency that runs the marketplaces.