Once health plan enrollment begins on new state insurance exchanges in October, an estimated 7 million people are expected to purchase individual and small-group coverage by the end of March.
The tax credits aim to help low- and moderate-income people pay for big chunks of their premiums. The credits target people with household incomes between 100 percent and 400 percent of the federal poverty level who cant get affordable health insurance from their employers.
Forty-six percent of uninsured adults and 40 percent of those with individual coverage will be eligible for the federal subsidies, according to the consulting firm Avalere Health. The lower an applicants income, the greater the potential tax credit.
EASY TO TAKE ADVANTAGE
Even though the money will go to insurers and not individuals, congressional Republicans and conservative critics say the application process leaves plenty of wiggle room and incentives for people who want to game the system.
Thats because applicants initially will self-report information about their incomes, citizenship and the quality and cost of any workplace coverage, all of which helps determine their eligibility for the tax credits.
Employers were supposed to provide information about workers health coverage to the Internal Revenue Service, but that requirement was delayed for a year when the Obama administration postponed enforcement of the employer mandate on July 2.
Verifying those facts now requires the government to contact employers and ask for the information, which they may or may not provide. That leaves no quick way to determine whether tax credit applicants have access to affordable workplace coverage.
People are only human. Sometimes theyll fudge in their favor, said Rep. Michael Burgess of Texas, a tea party Republican and staunch critic of the health care law.
LIKELY FRAUD SCENARIOS
Supporters say self-reporting is the norm for many government functions, such as income tax returns.
The potential for fraud could be heightened by enrollment workers who get paid by the number of people they enroll through the exchanges, Burgess said.
He said that scenario was most likely in the 21 states that wouldnt implement the Affordable Care Acts Medicaid expansion, which would extend program coverage to people who earn up to 138 percent of the federal poverty level.
If Im in an income group that would perhaps qualify for Medicaid expansion, but my state isnt doing it and someones getting paid $56 per person for everyone they sign up in the exchange, theres an incentive there to say, You know what? If you could say youre going to mow a few extra lawns and get your income up to this level, you actually qualify for a subsidy in the exchange, Burgess said.
But deterrents exist. People who apply for coverage on the exchanges may face perjury charges for submitting false information. Negligence violations carry a $25,000 fine. Willful violations come with a $250,000 penalty.
And ineligible people who get tax credits will have to pay them back when they file their taxes the following year.