Richmond-Times Dispatch Claims “Nobody Will Check” Income Verification For ACA Subsides

Times-Dispatch: “People Who Want Federal Help Paying For Their Health Insurance Will Not Have To Prove They Are Eligible For It.” A September 23 editorial in the Richmond Times-Dispatch claimed that the Obama administration announced in July that people requesting subsidies under the Affordable Care Act's individual exchanges will not have to prove they are eligible for the subsides nor will anyone “check to see whether you're legally entitled to collect them”:

People who want federal help paying for their health insurance will not have to prove they are eligible for it, the Obama administration has announced. (“Announced” isn't quite the right word, though - given that the decision was buried in a 600-page regulation quietly released over the Fourth of July weekend.) This means you can apply for insurance subsidies through Obamacare's new state-by-state exchanges, and nobody will check to see whether you're legally entitled to collect them. [Richmond Times-Dispatch, 9/23/13]

Government Has Established Subsidy Verification Measures

Full Verification System Is Delayed Until 2015 But Government Will Conduct Audits Of Those Suspected Of Fraud. According to an article in The Washington Post discussing the Obama administration to delay full verification measures until 2015, the federal government will conduct audits for federally managed exchanges and some state exchanges of “a statistically significant sample” of those who underreport their income. [The Washington Post, 7/5/13]

CNN Money: “Exchanges Must Still Check The Applicant's Income Against A Federal Database.” According to a July 15 CNN Money article, eligibility will still be checked against an applicant's income. However, the exchange may “choose to rely on what the applicant says”:

The new rule doesn't fully excuse exchanges from having to verify income, said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

Exchanges must still check the applicant's income against a federal database, which will include information from his federal tax returns and a record of Social Security benefits.

The exchanges will be looking for disparities between what the applicant says and what's in the database.

If it looks like someone is understating his income by more than 10%, and the exchange doesn't have other sources to quickly check against, the exchange may choose to rely on what the applicant says.

But in those cases, the exchange must also conduct a random sample of similar applicants to make sure the verification process is working. [CNN Money, 7/15/13]

Federal Government Already Has Income Verification Tools Which Could Aid In Verifying Eligibility. A September 16 Health Affairs post explained that the federal government can use “Medicaid's third-party liability system and Medicare's coordination-of-benefits mechanisms,” which already collect information on “which companies offer and which employees and dependents receive ESI [employer-sponsored insurance].” [Health Affairs, 9/16/13]

Health Insurance Marketplaces Can Verify “7 In 10 Subsidy-Eligible Consumers” By Ensuring Recipients Or Their Spouse Don't Work For Companies That Offer ESI. The Health Affairs article explained that if health insurance marketplaces establish which employers give employer-sponsored insurance by using federal verification tools, they would “verify eligibility for more than 7 in 10 subsidy-eligible consumers,” which would allow audits to “focus exclusively on subsidy recipients who work for companies that offer ESI.” [Health Affairs, 9/16/13]

CNN Money: Exchanges Are “Only Approving Estimated Tax Credits,” IRS Does Final Subsidy Calculation. According to CNN Money, someone who “slips through the cracks - and gets more of a subsidy than he is entitled to,” can still be identified because the exchanges are “only approving estimated tax credits,” and the “final calculation of a subsidy's size will be done after the fact by the IRS.” [CNN Money, 7/15/13]

Washington Post: “Lying On The Exchange Form Carries With It A Penalty Of As Much As $25,000.” According to an article in The Washington Post, “lying on the exchange form carries with it a penalty of as much as $25,000,” and an individual who lied about income on the form would have to “pay back the extra subsidies when filing a tax return for 2014.” [The Washington Post, 7/5/13]

Government Uses “Honor System” For Other Self-Reporting Information

Government Currently Uses The “Honor System In Situations In Which It Collects Data On Millions Of Individuals.” The Washington Post quoted Washington and Lee University law professor Timothy S. Jost who explained that “the honor system” -- or the consumer self-reporting system that the government will rely on until other verification measures are in place -- is not unprecedented and is used “in situations in which [government] collects data on millions of individuals” such as “people [who] are expected to report their cash tips to the Internal Revenue Service as income.” The article continued:

“An awful lot of the economy is a cash economy,” [Jost] said. “If we had to verify every statement that was made to the IRS, our economy would collapse.” [Washington Post, 7/5/13]