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Health Insurance Federal Exchanges Will Verify All Applicants' Income, CMS Officials Say

By Emily Ethridge, CQ Roll Call

Centers for Medicare and Medicaid Services (CMS) officials guaranteed lawmakers last week that they will do a "100 percent" review of income levels that applicants report to the federally run health insurance exchanges, but state exchanges do not have to conduct the same kind of review.

CMS Administrator Marilyn Tavenner said that the 100 percent check applies to the federally run health exchanges, which means that state-run exchanges can continue to delay some of their income-checking requirements for one year. Subsidies for purchasing insurance in the exchanges will be based on an applicant's income.

"We will do a 100 percent review of self attestation," Tavenner said at a House Energy and Commerce hearing. She later clarified that the "100 percent" review in the federal exchanges will be of the subset of applications for subsidies that cannot be verified through current income data sources, including the Internal Revenue Service and Equifax, a consumer credit reporting agency.

House Republicans remained confused and concerned about the administration's verification procedures and questioned whether officials would be able to identify inappropriate subsidy payments.

House Speaker John A. Boehner, R-Ohio, said in a recent statement that the House would vote "in the coming weeks and months" on a bill that would require verification of income for people applying for subsidies.

Rep. Bill Cassidy, R-La., noted that states running their own exchanges will still not be required in 2014 to verify all applicants' reported incomes, even if they don't match up with existing data sources.

Gary Cohen, deputy administrator and director of the CMS Center for Consumer Information and Insurance Oversight, said the administration would issue additional guidance this week on the income verification procedures.

Cohen also promised lawmakers at a House Ways and Means Committee hearing that the administration would review "100 percent" of the applications for subsidies that cannot be identified through existing data sources. Judging from what Tavenner said, that standard would apply to the federal exchanges.

"We said we were going to sample, and now we've concluded that the sample size is going to be 100 percent," said Cohen at the hearing. "So we always said we were going to do it – we just said we were going to do some; now we're saying we'll do all."

In July, Department of Health and Human Services (HHS) officials said they would delay for one year some of the requirements for states operating their own exchanges to verify applicants' reported income and health insurance status.

The HHS rule says that in 2014, state exchanges can accept an applicant's reported income, even if it is much lower than what was reported on the applicant's most recent tax return, without additional sources of data to confirm the decrease. States doing that would still have to conduct additional verification on a random sample of those applicants.

"States do have the option to do 100 percent or some sample," Tavenner told reporters after the hearing.

In the federal exchanges, however, officials will do additional verification on 100 percent of those applicants whose incomes can't be verified through current income data sources – not on only a random sample.

As Cohen described it, when applicants report their expected income to the federally run marketplaces, HHS will check that information against available data sources from the Internal Revenue Service (IRS) and the Social Security Administration, and also through Equifax if necessary.

If the income can't be verified and matched through those sources, HHS will ask the applicant for further information and documentation, such as pay stubs, to verify their reported income. Tavenner said it's that subset of applications that will receive a 100 percent check.

Wisconsin Republican Paul D. Ryan questioned how the IRS would recapture subsidies paid improperly. He offered a few scenarios, including one of a 25-year-old woman who could get coverage through her parents' insurance plan but instead applies for and receives a subsidy to buy insurance on the exchange. He asked how the IRS would recapture that overpayment.

"What are you going to do? Are you going to make this person pay back?" asked Ryan. "Is that going to be two years of subsidies going to people that are not eligible for it?"

Several Republicans also questioned the IRS's ability to reclaim advance subsidy payments that were made in error or were too big, noting the IRS has not been able to recapture such payments made in other programs such as the earned income tax credit.

IRS Principal Deputy Commissioner Danny Werfel emphasized the difference between the earned income tax credit and the health subsidies, noting that with the health subsidies, consumers do not receive any money from the government. Instead, the government payments go to insurance companies, and the consumer pays a lower premium for his health insurance plan.

Werfel also noted that once taxes are filed, the IRS will review a person's actual income and the subsidy amount they received, and provide a refund if a person was not paid enough, or ask for a payback if the person received too little.

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