(Bloomberg) — Regulators moved to limit a potential loophole that critics say could have been used for fraud in the new state insurance systems set up by the Affordable Care Act.
Centers for Medicare and Medicaid Services rules would have allowed some people to bypass income-verification requirements when applying for federal subsidies to help them purchase health coverage, Bloomberg BNA reported. This week, the agency said the allowances would only be made in the first year and only under limited circumstances.
“Income verification on the exchanges will be a lot more substantive than we initially thought,” says Timothy Jost, a professor of health law and policy at Washington & Lee University School of Law.
The Congressional Budget Office estimates that 7 million Americans will initially participate in the exchanges, created by the ACA.
The rules, released in July, said exchanges wouldn’t need to verify household income in every case where an applicant’s self-reported income dropped by more than 10% below the most recent data available from the Internal Revenue Service. The agency was going to let exchanges get follow-up verification from a “statistically significant sample” of applicants who were unable to provide the initial verification information.
The announcement triggered concern in Congress that the agency was opening the door to fraud by allowing applicants for federal subsidies — also known as “premium tax credits” — to “self attest” as to their income eligibility.
At an Aug. 1 hearing of the House Ways and Means Committee, Representative Dave Camp, the committee’s Republican chairman from Michigan, questioned whether the IRS could effectively monitor premium tax credit payouts under those procedures.
In the two-page guidance issued this week, CMS clarified that exceptions to the full income verification requirements would apply only to exchanges operated in the 16 states and D.C. that have opted to build and operate their own exchanges.
In the 34 states not building their own exchanges — where the so-called federally facilitated exchange will operate — CMS said it will require full income verification in all instances.
“Since publication of the final rule, we have ascertained that there are sufficient resources to ask every individual in this circumstance for such documentation with no exceptions,” the agency’s guidance said.
In explaining how income verification would be handled in the exchanges, the agency said data provided by an applicant would be checked against information from the IRS and the Social Security Administration.
If the IRS and SSA can’t verify the income data, the information is compared with wage information from employers provided by Equifax, a credit-reporting and income database firm. If Equifax can’t substantiate it, the exchange must request an explanation or additional documentation.
If the applicant meets all other eligibility requirements, the exchange will provide premium tax credits or other cost-sharing reductions for 90 days.
If the applicant fails to provide the additional documentation, the exchange will determine eligibility based on the most recent IRS and SSA data. If the data are unavailable, the exchange will discontinue any advance payments of the premium tax credits, the guidance said.
“The hope has always been that exchanges would be doing real-time eligibility verification,” Jost says. “Now we know there will be more cases when final determinations will not be done in real time. But I think for most people, it’s going to mean the exchange will tell them, ‘go get a pay stub and fax it to us.’ I think there will be very few cases when it’s going to take 90 days to clarify income eligibility.”
Register or login for access to this item and much more
All Employee Benefit Adviser content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access