Obamacare Subsidies: Brought To You By the Honor System

Kevin Glass
Posted: Jul 07, 2013 7:48 PM
Obamacare Subsidies: Brought To You By the Honor System

On the heels of Tuesday's report that Obamacare's employer mandate would be delayed by a year, the Obama Administration delayed income-verification requirements for health exchange subsidies. This is another piece of the unraveling that has continued to take place even as the Obama administration has pressed forward with implementation.

From the Washington Post's report:

The verification systems are meant to determine who qualifies for new benefits under the Affordable Care Act. The law includes tax subsidies to purchase health insurance for Americans who earn less than 400 percent of the poverty line, about $45,000 for an individual.

After encountering “legislative and operational barriers,” the federal government will not require the District and the 16 states that are running their own marketplaces to verify a consumer’s statement that they do not receive health insurance from their employer... The rule also scaled back states’ responsibilities to double-check the income levels that consumers report, which determine any tax subsidy they receive.

Avik Roy writes that this is an example of President Obama's attitude of "subsidize first, ask questions later," and that it's a predictable consequence of the Obama administration being completely unprepared for the bureaucratic nightmare that is Obamacare:

According to the law, you aren’t eligible for Obamacare’s subsidies if your employer has offered you what the government considers “affordable” coverage. But if employers are no longer going to report whether or not they’ve offered “affordable” coverage, how can the government verify whether or not workers are eligible for subsidies?

Now we know the answer. The government is going with what Kliff and Somashekhar call “the honor system.” “We have concluded that the…proposed rule is not feasible for implementation for the first year of operations,” say the Centers for Medicare and Medicaid Services.

The feds will also allow people to gain means-tested subsidized coverage on the exchanges without having to…test their means.

There have not been any penalties outlined for people who lie to the government in order to receive insurance subsidies, but there's surely a small contingent of people who are put off by lying to the government in general. Nonetheless, considering fraud runs rampant through other government health programs, it's safe to say that we can expect that to be the case here as well.

Roy also points to his colleague, who has suggested that the entirety of Obamacare be delayed by a year. At the rate that implementation is going, that may very well be the case. Obamacare is the law of the land, but it's still troubling that the Obama administration has decided it can selectively determine when certain parts of the law will actually affect Americans.