New Rule May Pave Way for 'Obamacare Liar Subsidies'

New rules guiding the implementation of the Affordable Care Act, or "Obamacare," say that there will be no attempt to verify eligibility for the new law's insurance subsidies. Rather, the program will rely upon people's honesty when reporting their income. The editors of The Wall Street Journal are calling the new rule a "liar subsidy" to suggest that those willing to be dishonest will be getting free money from the federal government to purchase health insurance.

The Washington Post discovered the rule among the 606 pages of new rules released on Friday. Government agencies typically release information that they prefer to have limited press scrutiny late on Friday before a slow news cycle. HHS had the additional benefit of last Friday coming after Independence Day, a federal holiday.

The new rule states that the new health care exchanges where individuals will be able to obtain government subsidized health insurance will have "temporarily expanded discretion to accept an attestation of projected annual household income without further verification," according to WSJ.

The reason for the new rule, apparently, is that verifying applicants income would be too difficult. Doing so would not be feasible due to "operational barriers" and "a large amount of systems development," according to HHS.

The WSJ mocked this reasoning from HHS: "It's true that coordinating and managing vast amounts of information from hundreds of millions of Americans and corporations, and monitoring compliance with more than 10,000 pages of fine-print Federal Register regulations so far, is hard to do. Yet that is the system Democrats installed when they passed the law, which is not supposed to be optional due to administrative incompetence."

If HHS's honor system produces the same amount of fraud as the Earned Income Tax Credit, the WSJ editors estimate, the "liar subsidy" could result in $250 billion per year going to those who are not eligible for the subsidy.

Another possible complication of the new law pointed out by Robert Laszewski, president of Health Policy and Strategy Associates, on his blog, is that honest taxpayers could end up with a large tax bill if they misunderstand or misestimate their future income on the health insurance application.

"I can also imagine," he wrote, "lots of innocent consumers getting their subsidy all bollixed up on the front-end (Do you know your likely "modified adjusted gross income" for 2014?) only to get hit with a whopper tax bill when they finally reconcile all of this on their 2014 tax return. For example, a family of four getting subsidies based upon 200% of the poverty level but ending up making 250% of the poverty level for the year, would see a retroactive liability of about $1,700 on their tax return because of subsidy overpayments."

The rule change came the same week that HHS announced it would delay implementation of the employer mandate to provide health insurance, a key component of the new law. The employer mandate, along with the individual mandate, to purchase health insurance was supposed to help keep down the costs of healthcare by forcing more healthy people into the system.

The conservative WSJ editors see the new rule as a deliberate attempt to expand government-run healthcare by encouraging more people to join the healthcare exchanges.

"That's because the health planners are terrified that enough healthy, low-cost people won't sign up and therefore the Affordable Care Act's strict regulations on underwriting and risk-pooling will blow up insurance markets. As more and more of ObamaCare tumbles, the Administration is resorting to anything that can salvage the goal of permanently expanding the U.S. entitlement state," they wrote.

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