FlowchartTrying to give the new public health insurance exchange system complete, accurate information about household income is difficult and potentially dangerous, witnesses told lawmakers today. Douglas Holtz-Eakin, president of the American Action Forum, presented a colorful, full-page income verification flowchart with seven major sections and three paths that lead to a step labeled “honor system.”

Holtz-Eakin, also a former director of the Congressional Budget Office, said the closer consumers get to going through the exchange system income verification process, the more complicated it looks. If consumers give the wrong information, “the penalty for unintentional negligence could as much as $25,000,” Holtz-Eakin said. “Intentional misrepresentation could result in a fine of $250,000 or incarceration.”

Ron Pollock, executive director of Families USA — a group that supports the Patient Protection and Affordable Care Act (PPACA) and the exchange system — argued that reports of income reporting inconsistencies are less of a problem than they seem. Regulators have developed and will continue to develop workarounds for the problems that have cropped up, he said. 

But Pollock said Congress needs to give exchange managers and other program managers flexibility to help consumers who did their best to provide accurate information. Congress should provide caps on how much money consumers who make mistakes will owe, and provide flexibility that program managers can use to disregard problems that were fixed quickly, the executive added.

Holtz-Eakin, Pollock and others were testifying at a House Ways and Means hearing on PPACA income and insurance information verification.

PPACA has created a premium tax credit subsidy program that moderate-income consumers can use to pay for private “qualified health plan” (QHP) coverage purchased through the new exchange system, and a cost-sharing subsidy that reduces deductibles and other out-of-pocket costs for lower-income QHP users. 

If the PPACA coverage mandate programs work as drafters expect, consumers will have to show that they have “minimum essential coverage” (MEC), or that they qualify for exemptions from the MEC requirements, to avoid paying tax penalties. Consumers who get extra PPACA premium subsidies because of errors or inaccurate projections in household income information may have to try to repay some or all of the premium subsidies they have received.

Employers will have to apply group coverage mandate employee counting workers. Employers that want to avoid penalties will have to insure a certain percentage of certain types of employees; verify that they have provided MEC for those employees; and provide reports on any coverage that is or is not provided.

Katie Mahoney, a health policy specialist at the U.S. Chamber of Commerce, noted that many of the chamber’s member employers have provided excellent group health benefits for many years. For some employers, simply collecting dependent Social Security numbers to meet PPACA and federal agency requirements will be difficult, Mahoney said.

“It is unfortunate that, because of the way the statute is written, these businesses must redirect resources to report on the coverage they offer, rather than use those resources to pay for a greater portion of the cost of that coverage,” Mahoney said.