Subsidy Clawback Abuse?

[RayNY]

Tax Break Can Help With Health Coverage, But There's A Catch – Capsules - The KHN Blog

No citation for their information, but Kaiser is pretty reputable.

"But with the (copay/deductible cost-sharing) subsidies, if a person's income changes during the year, he or she won't be responsible for any extra costs."

AKA, if you're in one of those bottom brackets of income and take advantage of the cost-sharing subsidies, you will never be responsible for paying any of that subsidy back.

Sorry to beat a dead horse, but this is (potentially, pending official proof and not just Kaiser's word) another subsidy abuse loophole.

 

[AllenChicago]

Since even the basic exchange-related verification systems are non-functional, I say that the launch of ObamaCare's core programs will be like a newly discovered gold-mine for cheaters and criminals.

 

[Yagents]

Or scam artists that aren't licensed or insured.........some may call them navigators.

I met with a prospect yesterday, a highly skeptical one, who wanted to know everything about me before releasing his SSN and bank account info to me. I had to bring up my license under the DOI website, and other comforting items. I laughed as I shared with him the role of a navigator. What would they show/do to prove they have something to lose if they steal clients info?

 

[Ann H]

Tax Break Can Help With Health Coverage, But There's A Catch – Capsules - The KHN Blog

No citation for their information, but Kaiser is pretty reputable.

"But with the (copay/deductible cost-sharing) subsidies, if a person's income changes during the year, he or she won't be responsible for any extra costs."

AKA, if you're in one of those bottom brackets of income and take advantage of the cost-sharing subsidies, you will never be responsible for paying any of that subsidy back.

Sorry to beat a dead horse, but this is (potentially, pending official proof and not just Kaiser's word) another subsidy abuse loophole.

I can't specifically confirm, but I can say that I have not read anything that states that there is a clawback for CSR (Cost Sharing Reductions).

I can only imagine the possible abuse scenarios. Normally, the IRS considers 20% mistatement of income to be gross mistatement and it triggers a whole set of penalties and fraud charges.

 

[RayNY]

20% is a pretty broad window.

$100k (>400%FPL, fam of 4) compared to 15% less ($85k, about 350%FPL, subsidy eligible)

Or, enough to get you from 300% fpl to <250% where you get cost sharing reductions (50% reduction from 300% is ~15%, rough number).

People smart enough to game the system are smart enough to figure out how much they can game without getting caught. Getting under that 250%FPL level means you're in the next tier of premium subsidy and eligible for 33% cost sharing subsidy. That can be a big payday for someone at 300%fpl in the first place.

 

[Ann H]

20% is a pretty broad window.

$100k (>400%FPL, fam of 4) compared to 15% less ($85k, about 350%FPL, subsidy eligible)

Or, enough to get you from 300% fpl to <250% where you get cost sharing reductions (50% reduction from 300% is ~15%, rough number).

People smart enough to game the system are smart enough to figure out how much they can game without getting caught. Getting under that 250%FPL level means you're in the next tier of premium subsidy and eligible for 33% cost sharing subsidy. That can be a big payday for someone at 300%fpl in the first place.

I think you are right that there will be a lot of gaming. If the person in your example knew they were going to have expensive medical treatment (say cancer treatment, or even a hip replacement), then proper planning would be key. There are legal ways to lower your MAGI income - like Schedule C Business expenses, loss on sale of investments, etc. Since any misstatement of income is fraud, and 20% triggers automatic fraud alerts, perhaps anyone planing on "gaming" should change to "legal financial planning", to maximize their advantages.

 

[RayNY]

Ann, we both know the only difference between the two is how well you pull it off

The estimate for subsidy payout has already more than doubled in the past 3 years. Considering these obvious loopholes, the lack of teeth in the clawback guidance, and our gov't habit of underestimating everything by a long shot (not to mention the loss of employer mandate and caddilac tax income) the financial outlook of this program is more grim every day.

 

[Yagents]

Implementing Health Reform: Transferring Information Among The Exchanges, The IRS, And Taxpayers – Health Affairs Blog

 

[kgmom219]

There are two issues here. The first is whether HHS and the IRS, as well as the federally facilitated and state exchanges, can provide accurate information to taxpayers by the end of January 2015. They will have to do this at the same time they are redetermining eligibility and reenrolling millions of individuals who were enrolled for 2014, and enrolling millions of new enrollees for 2015. It is likely that an effort equal to or greater than that which saved the exchanges in the fall of 2013 will be needed again this year to accomplish this Herculean task.

The second is whether individuals can figure out how to report their insurance coverage and to calculate properly the premium tax credits they are due, and compare these to those that have been paid in advance. It is likely that some of the individuals receiving tax credits will have never filed returns before, or only filed a 1040-EZ or 1040-A. Many will be illiterate, at least in English, or innumerate. Most will probably have to turn to tax preparation services for assistance, which had better be prepared to help them figure this out. It is also to be hoped that the IRS will deal with taxpayers who find this all overwhelming with patience and understanding.

On, I am SURE HHS and the State exchanges can get this done. On time. I'll take Executive Orders for $200, Alex.

 

[somarco]

Silly girl.

Healthcare.flub is working like a charm.

Ding dong the witch is dead.

Jost has an outstanding reputation for hitting the nail on the head.

Piece of cake.