Obama's Health Exchanges At Work: Subsidies Now; Income Verification In The By-And-By

By Peter Suderman at Reason. com

There are still huge technical problems yet to be resolved with Obamacare.

For example, the vast majority of people who gained private coverage through Obamacare are being subsidized through the law's system of health insurance tax credits. But about a million of those subsidies are wrong, either too high or too low—it's unclear how many fall on which side—according to The Washington Post.

The law's subsidies are doled out based annual income, and people who apply for coverage are responsible for submitting income data in order to prove eligibility for the subsidies. The problem is that a million or so people have entered incomes that differ substantially from what the Internal Revenue Service (IRS) has on file.

Normally this would be reconciled through a follow-up auditing process; when the system identifies people whose submitted incomes don't match IRS records, those people are asked to send in further paperwork as proof. But only "a fraction" of those people have responded, according to the Post. And even when they have provided additional documentation, it doesn't matter.

The federal computer system at the heart of the insurance marketplace cannot match this proof with the application because that capability has yet to be built, according to the three individuals," the report says.

So piles of unprocessed “proof” documents are sitting in a federal contractor’s Kentucky office, and the government continues to pay insurance subsidies that may be too generous or too meager.

Fun fact: That contractor happens to be Serco, the data entry company which has a $1.2 billion deal under the health law, and which recently generated some negative attention when an anonymous employee said that there was almost no work to do at the company's processing centers.

Another fun fact: The back end system that processes and verifies the subsidies was originally supposed to be completed when the exchanges opened last October. Then, when the exchanges launched with so many problems, officials pushed back the opening to early 2014 so they could concentrate on fixing the consumer-facing end of the system.

It's May, and the back end is still far from complete. Federal health officials won't provide reporters with timelines indicating when they expect it to be complete. And insurers participating in the law have been told to be prepared to continue using the current, manual workaround system until at least September.

The Obama administration doesn't really want to talk about any of this, because they promised this wouldn't be a problem. Or, as the Post puts it, "members of the Obama administration are sensitive because they promised congressional Republicans during budget negotiations last year that a thorough income-verification system would be in place." So far, that obviously isn't the case.

And it won't be for at least several more months. Work will proceed by hand, but income discrepancies won't be up for review until this summer. That's because the administration has another million applications with a different problem: questions about the applicant's citizenship. Those issues will be dealt with first. Even that doesn't fully capture the extent of the application glitches. "Of the roughly 8 million Americans who signed up for coverage this year under the health-care law," the Post says, "about 5.5 million are in the federal insurance exchange. And according to the internal documents, more than half of them — about 3 million people — have an application containing at least one kind of inconsistency." This isn't a small problem, and it likely won't be going away soon.

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