How the debt ceiling bill changes PPACA’s income verification rules

The Patient Protection and Affordable Care Act (PPACA) provides premium tax credits to make health insurance affordable to individuals with modest incomes between 100% and 400% of the federal poverty level. These credits are available to those who are not eligible for other qualifying coverage, such as Medicare, or “affordable” employer-sponsored health insurance plans that provide “minimum value.” They are refundable tax credits, applicable for tax years ending after Dec. 31, 2013, available to individuals who purchase coverage through “Affordable Insurance Exchanges,” also known as Marketplaces.

In July 2013, the federal Department of Health and Human Services (HHS) issued a final rule for the exchange’s income verification process, which the Washington Post reported would “significantly scale back” the law’s verification requirement for those receiving federally subsidized coverage. Note however, that the Exchange subsidies are not paid to individuals but, rather, to insurers.

These July 2013 regulations, which were delayed for one year from 2014 until 2015, include two reporting requirements for certain large employers and health insurance coverage providers. Under the final July 2013 HHS regulation, applicants’ income is to be verified against their IRS and Social Security records. When that cannot be achieved, income will be checked against employer records submitted to Equifax. If the IRS, the Social Security Administration, and Equifax cannot provide data to substantiate the income information a consumer has supplied, the consumer will have to provide an explanation or additional documentation of income.

The July 2013 regulation also allows state exchanges to check a statistically valid sample of applicants in cases where an applicant claims income more than 10 percent below what IRS and Social Security records show and there is no Equifax data.

In the summer of 2013, shortly after announcing the one-year delay of the ACA’s employer mandate and its associated reporting requirements, the Administration delayed a requirement that state-run Marketplaces verify an ACA subsidy applicant’s claim that he does not receive employer health insurance. The Administration also relaxed the verification requirements with respect to individuals who reported a significant decrease in income.

H.R. 2775, the 2014 Continuing Appropriations Act containing the bill entitled the No Subsidies without Verification Act, passed in Oct. 2013. In addition to continuing U.S. appropriations, it requires that HHS ensure that the Exchanges verify that individuals applying for coverage in the Marketplace and seeking premium tax credits and cost-sharing reductions are, in fact, eligible for these subsidies. The HHS Secretary must submit a report to Congress by Jan. 1, 2014, detailing the verification procedures, and the Inspector General for HHS must submit a report to Congress by July 1, 2014, on the procedures’ effectiveness.

Section 1001 of the Act requires HHS on the exchanges it runs to: (1) ensure that American Health Benefit Exchanges (healthcare reform’s health care exchanges, also called marketplaces) verify that individuals applying for premium tax credits and reductions in cost-sharing for the purchase of qualified health benefit plans are eligible for such credits and cost sharing reductions consistent with healthcare reform’s requirements and (2) prior to making such credits and reductions available in January 2014, certify to Congress that the Exchanges have a program to verify such eligibility.

The language of H.R. 2775 is unclear regarding the meaning of the term “program.” That term might be construed to go beyond regulations and guidance to encompass operational competence, such as software and enrollment procedures that have been proven to work. Determining whether or not those systems work, however, may not be possible until there is some experience or data that can be used to evaluate the systems.