Report: 1 Million Americans Getting Wrong Obamacare Subsidies

Saturday, 17 May 2014 11:25 AM

By Sandy Fitzgerald

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More than one million Americans may be receiving the wrong Obamacare subsidies and the government has not been able to solve the issue yet — meaning people who inadvertently got too much money could face crippling tax bills in upcoming years.

According to internal documents and people familiar with the situation, Americans who listed incomes on their insurance applications that differ significantly with what is on file with the Internal Revenue Service are likely receiving too much money, reports The Washington Post.

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"I have this sick feeling that there are these people out there who have made unintentional errors, and in a few years will be subject to massive tax bills,” said Jessica Waltman, senior vice president for government affairs at the National Association of Health Underwriters, a lobbying group for health insurance brokers.

Normally, customers are notified if there is a problem with their applications and told to upload or mail in their proof of income. But only a few have done that, say IRS documents, and even for those who have, the federal computer system for the marketplace isn't able to match the proof with the application because the capability to do that hasn't been built.

The unprocessed documents are being stored at federal contractor Serco's Kentucky office as the improper subsidies keep being paid, and under current rules, people who get the subsidies will be required to return the extra money next year.

Federal health officials and Serco, facing pressure from the White House, are starting this weekend to resolve the inconsistencies. Serco, however, is facing its own issues, with dozens of workers complaining this past week that they're sitting idle,  playing games, or looking busy punching a computer button every 10 minutes because they're not being given enough work to fill their days.

The subsidy issue is one of the computer problems that have been going on since the Obamacare marketplace website, HealthCare.gov, floundered when it was launched last October.

And although contractors have corrected many of the problems that made it difficult for Americans to choose a health plan, many parts of the website are still defective or not finished

Since the operational system isn't complete, it is impossible for federal officials to know how many of the 8 million people who have signed up for healthcare coverage have paid their premiums, or how many enrollments were attempted but never completed.

Members of the Obama administration, however, promised congressional Republicans last year that an income-verification system would be in place.

Since the computer system isn't capable of doing the income comparisons, Serco workers will have to do the work by hand. But at first, sources told The Post, the work will focus on the approximately one million cases in which people enrolled or tried to enroll faced questions about their citizenship status.

Immigration documents, like the income information, are also caught in the backlog, meaning that sorting out the income issue and the improper subsidies will not start until summer, likely causing recipients to receive even higher tax repayment bills next year.

“The marketplace has successfully processed tens of millions of pieces of data — everything from Social Security numbers to tribal status to annual income," said Julie Bataille, communications director for the Centers for Medicare and Medicaid Services, which oversees Obamacare. "While most data matched up right away during the application process, we take seriously the cases that require more work and have a system in place to expeditiously resolve these data inconsistencies, We’re working every day to make sure individuals and families get the tax credits they deserve and that no one is receiving a tax credit they shouldn’t.”

But about 5.5 million of the 8 million people who signed up for insurance coverage this year did so through the federal insurance exchange, and the internal documents examined by The Post shows that about 3 million of those applications contained at least one inconsistency.

Income discrepancies amount for the most frequent inconsistencies, the report said, showing up on 1.1 million to 1.5 million out of nearly 4 million inconsistencies, and customers have mailed in about 650,000 examples of proof of income.

“The longer it takes and the more months . . . go by, the more serious the consequences of any error that may have occurred,” said Judy Solomon, vice president for health policy at the Center on Budget and Policy Priorities.

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