What did GOP win on Obamacare? Not much

October 17, 2013: 10:58 AM ET




One will come from the Health Secretary detailing the income checks the insurance exchanges will use. The other will come from the department's Inspector General reviewing the effectiveness of the verification procedures.

It's a far cry from the initial demand made by House Republicans -- that the Inspector General certify that the system "successfully and consistently verifies" applicants' income before issuing the subsidies.



Even with the new verification reports, confirming someone's income will never be an easy or precise task. That's because the subsidies are based on the following year's income, and few people know exactly what they will earn in the future.

Here's how the verification process works:

Step 1: When signing up for an Obamacare plan on the exchanges, applicants must enter their estimated earnings for the next year. So they apply for federal assistance now by estimating the income they'll receive in 2014. If they qualify, the subsidies are applied in advance to reduce the cost of their monthly premiums throughout 2014.

Step 2: In the 36 states using the federal exchange, the estimates of all applications are then checked against Internal Revenue Service and Social Security records, looking for large discrepancies. If the amount supplied can't be confirmed through federal records, it will be checked against wage information employers send to Equifax, a credit reporting agency. After a rule change this summer, states that have built their own exchanges don't have to check every applicant for 2014, verifying only a sample of participants, aid Timothy Jost, professor of law at Washington and Lee University.

Step 3: If the estimate still can't be verified, the exchange will request additional documentation from the applicant.

Step 4: Applicants won't know their exact income until they file their taxes the following year -- 2015, in this case. The IRS must then confirm their actual income at that time. If enrollees underestimated their earnings and ended up getting a larger subsidy than they were ultimately eligible for, they'll have to return part or all of the overpayment.

In the end, the system won't guarantee that everyone who receives a subsidy is eligible for one. Some people genuinely won't know what their future earnings will be, while others will try to game the system.

"Our tax system is largely an honor system," Jost said. "For most Americans, there's no way you can verify in advance what your income will be in a year. All you can do is make your best guess."


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