Feds ease income verification for exchanges

The federal government recently said states won’t have to verify the personal income of people receiving Obamacare, at least not in the beginning.

The regulation change came earlier this month and applies to people expected to receive tax credits to help buy insurance through health reform’s newly created marketplaces.

Originally, the feds were going to require state-run exchanges to double check the income consumers report on their applications. Now, for the first year, from 2014 to 2015, consumers will only have to attest that their income is correct.

The government acknowledges there were just too many bureaucratic barriers to implement a more stringent system.

Enrollment is slated to start in October for the health care exchange here – Covered California – and could draw up to two million people. To qualify for the tax credit, you must be between 138 and 400 percent of the Federal Poverty Level. On the top end, that’s around $92,000 for a family of four.

But while the regulations have been relaxed, policy experts warn consumers not to be too lax when it comes to estimating their income.

That’s because even if the state doesn’t notice that you’re fudging about how much money you make, the Internal Revenue Service will.

The IRS will be doling out the tax credits. And it will also verify through tax returns that you meet the income requirements of health reform.

To enroll in Covered California you have to project your income for the year. That figure is used to calculate how big of a tax credit you’ll get to use towards purchasing health insurance. It’s on a sliding scale – people who make less money get a bigger credit and those who make more get a smaller one.  

If at the end of the year you make substantially more than you projected, you will owe money to Uncle Sam.

UCLA health care economist Dylan Roby says that should be a sufficient deterrent for those tempted to make a softball projection. He uses the example of why people pay their taxes in the first place.

“Usually it’s the threat of enforcement that keeps people in line instead of actual penalty,” Roby says. “Less than five percent of taxpayers each year are audited but most people still pay their taxes on time.”

For additional details of how the credits will work see this article from the Center’s John Gonzales.

Other Articles

Prescription for Success: Caring

When pharmacist Steve Chen first saw him, Mike Metcalfe was straight out of a hospital ward following an eight-day diabetic coma.  He was 50,...

Increased responsibility pays health dividends

Dr. Sarah Ma goes over medications and dosages with diabetes patient Joe Navarro. Photo Credit: Anacleto Rapping This article originally...

More time to avoid the Obamacare tax penalty

In my last column, I warned you that March 31 was your last chance to sign up for a health plan from Covered California or the private market if you...
  • 1 of 81

© 2014 California Healthcare Foundation Center for Health Reporting