Days after delaying health insurance requirements for employers with more than 50 employees, the Department of Health and Human Services has decided to roll back requirements for new state online insurance marketplaces to verify the income and health coverage status of people who apply for subsidized coverage.
The new healthcare reform law is slated to begin offering health coverage through state marketplaces, or exchanges, beginning Oct. 1, 2013. But to receive tax subsidies to help buy insurance, enrollees must have incomes ranging from 100% to 400% of the federal poverty line and not have access to affordable insurance through an employer.
Until now, the administration had proposed that exchanges verify whether new applicants receive employer-sponsored insurance benefits through random checks. It also sought to require marketplaces to verify each enrollee's income status.
But final regulations released quietly on Friday by the Department of Health and Human Services give 16 states and the District of Columbia, which are setting up their own exchanges, until 2015 to begin random sampling of enrollees' employer-insurance status. The rules also allow only random - rather than comprehensive - checks on income eligibility in 2014. We presume the same rules will apply to the other state exchanges being managed by HHS.
For a year, consumers will be on the honor system for subsidies and will self-report information about eligibility for employer sponsored coverage. In all 50 states, though, the federal government will scale back oversight of what applicants say they earn. That move, could lead to some consumers under-reporting their income to qualify for larger tax credits.
The changes, which point to new technical and bureaucratic challenges at the state and federal levels, raise new questions about how successfully the Affordable Care Act can be implemented. The tax credit portion of the law is scheduled to go into effect on Jan. 1, 2014, but the administration's latest move acknowledges that state exchanges, HHS and the IRS are unable to implement the complex verification systems.
The current rules prohibit employees with affordable employer coverage from receiving tax credits, but if the exchanges are not verifying income or employer health coverage then how will they know who is eligible for the tax credit. Which raises a couple of additional questions:
If a consumer "mistakenly" receives a tax credit for thousands of dollars in 2014, will the IRS try to recover the tax credit?
Assuming the verification system is in place for 2015, will the employee, who received the tax credit in 2014, then lose the monthly tax credit in 2015 because his employer offers affordable health insurance?
