Employer mandate delay in health care law means honor system will police subsidies
Charles Rex Arbogast, AP
In the wake of the government's decision to postpone a requirement that employers with 50 or more full-time workers provide health coverage, the honor system will play a more central role in subsidies under the health care law, The Washington Post reported Friday.
According to Reuters, individuals whose employers offer "unaffordable" plans, or those costing more than 9.5 percent of a worker's household income, can received subsidies via tax credit to pay for health insurance. The subsidies are expected to be worth around $5,000 per person annually, and Families USA estimates that just under 26 million Americans are expected to be legitimately eligible.
While employers were previously required to report on the coverage they offer to employees, last week's employer delay means "the federal government will rely more heavily on consumers' self-reported information until 2015, when it plans to have stronger verification systems in place," the Post said.
If there are no external sources of information on what insurance an employer offers, "the exchange may accept the applicant's attestation regarding enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an employer-sponsored plan for the benefit year for which coverage is requested without further verification," the new rule says.
"The shift of employees to the exchanges could cost (the government) a boatload," Nicholas Bagley, a law professor at the University of Michigan, told Reuters. "Some people who are ineligible for subsidies, because their employer offers affordable insurance, may attempt to get subsidies on the exchanges. The IRS will have a hard time policing that sort of conduct."
According to the Post, the new rule scales back state responsibility in double-checking income levels reported by consumers, which determine what tax subsidy they receive. However, lying on the exchange form carries a penalty that can reach up to $25,000 and extra subsidies would have to be paid back when a tax return for 2014 is filed.
"Presumably, since the IRS knows your income, it could claw back these excess subsidies afterwards, if it chooses to," Avik Roy wrote at Forbes. "But the IRS' record of impartiality is, shall we say, contested. And people who don't file tax returns — such as those with incomes below the poverty line — will probably not be subject to that enforcement mechanism. That's the route to enhanced benefits for poor residents of states that don't expand Medicaid.
Delays of portions of the law such as the employer mandate signal two main problems, Yuval Levin wrote at National Review. The first is logistical difficulties in getting new systems in place and ready to use, and the second is the fear of ending up with too few people in the exchanges.
The second concern is likely the driving force behind ongoing public relations efforts surrounding enrollment, Levin said, "and it seems very likely also to be a key factor behind the decision to allow people access to the exchange subsidies without proving they actually qualify for them."
"The goal here is plain as day. The Obama administration is laser-focused on making sure that enough Americans enroll onto Obamacare-subsidized health insurance platforms, because if they do, it will be politically impossible for Republicans to repeal Obamacare in the future," Roy's Forbes article said. "Politics ain't beanbag, they say. But deliberately encouraging tens of billions of dollars of waste, fraud and abuse in order to achieve a political objective is profoundly immoral."
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