One way the ACA aims to make insurance affordable is by giving people a federal subsidy to defray the cost of buying coverage on their state exchange. To qualify, an individual’s income must fall between 100 percent and 400 percent of the poverty line (unless you qualify for Medicaid, in which case the threshold is 133 percent).
The process for determining and delivering these subsidies is perilous. For starters, people are allowed to attest to most of the information on their federal application; it is verified later, creating a risk of incorrect subsidies. Additionally, decisions on 2014 subsidies will be made using 2012 tax data — information that could be out of date in a volatile economy.
The administration’s decision to delay the employer mandate was wise, but it further complicates matters. Under the ACA, if you turn down affordable employer-based coverage, you do not qualify for a subsidy at taxpayer expense. By giving employers a year-long reprieve from reporting their insurance offerings, the administration is now unable to verify whether workers should have access to affordable employer-based insurance in 2014. The result is an even greater risk that many who do not qualify will receive a subsidy.
A 2011 study in the journal Health Affairs predicted that many enrollees will either get a smaller subsidy than necessary or receive one when they shouldn’t qualify. The delay in the employer mandate exacerbates this problem and its related conundrum: Should the government make cash-strapped Americans give back subsidy money? If so, how?
We faced a similar problem with Part D. Because our beneficiaries were seniors, we arranged for premiums to be deducted from their Social Security checks automatically. However, a technical glitch incorrectly calculated some payment amounts. Each month, some seniors were charged about $20 too much, while others were charged $28 too little.
The thought of asking seniors to write a check to the government was unimaginable. But allowing some beneficiaries to get a nearly free ride at taxpayer expense was equally so.
The Obama administration may face such problems on a massive scale. Estimates indicate that the average subsidy could be more than $5,000 a year, with many running well into six digits. Fixing mistakes will mean asking low-income people to repay money they don’t have.
There are no easy solutions for these problems. HHS simply needs to be prepared for what is coming.
Implementing the ACA requires thousands of partners working together. During Part D, the states, insurers and pharmacies were not as prepared as they should have been. Although HHS certainly deserved some of the blame, one of the most important things we did in those first tough weeks was assume full responsibility.