ObamaCare relies on the honor system. Will Americans cheat?

The government is planning to rely on consumers' self-reported information until 2015

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A new delay announced by the Obama administration has ignited another round of fears that the health reform legislation championed by President Barack Obama will not work as he had promised before its passage. Following so closely behind the government's decision earlier this month to postpone the Affordable Care Act's employer mandate by one year, further evidence of implementation difficulties only gave the bill's opponents more reason to suspect the reform would be unsuccessful.

The administration buried a ruling in the Federal Register that delayed the Affordable Care Act's requirement that the new insurance marketplaces verify consumers' health insurance status and their incomes, two pieces essential for the function of the exchange system. Rather, the federal government will rely more heavily on consumers' self-reported information until 2015 — one full year after the individual insurance mandate goes into effect. At that time, the government plans to have a stronger verification system in place.

The verification systems will determine which exchange enrollees qualify for under ObamaCare, particularly the federal subsidies to purchase health insurance that will be made available to those Americans earning less than 400 percent of the federal poverty line, which caps at $45,000 for an individual. Those earning less than 133 percent of the federal poverty line, or about $15,000, will qualify for Medicaid coverage in Washington D.C. and the 23 states that have decided to expand the program.

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Additionally, the federal government needs to know who receives health insurance coverage from an employer; workers whose employer-sponsored insurance policy costs less than 9.5 percent of their income do not qualify for tax credits.

But "legislative and operational barriers" have overwhelmed implementation and the federal government will no longer require Washington D.C. and the 16 states operating their own marketplaces to verify a consumer's claim they they do not receive health insurance from their employer. "The exchange may accept the applicant's attestation regarding enrollment in eligible employer-sponsored plan . . . without further verification," according to the final rule.

Additionally, the decision also scaled back states' responsibility to double-check the income level consumers' report, which determines their tax subsidies. The original regulation required each consumer who reported an income 10 percent lower than what federal records indicated to be audited, but the final rule only requires a statistically significant sample of such cases to be audited. For individuals who are not part of that sample, "the Exchange may accept the attestation of projected annual household income without further verification," the rule stated.

This final rule has spawned such headlines as this one, "Not Qualified For Obamacare's Subsidies? Just Lie — Govt. To Use 'Honor System' Without Verifying Your Eligibility," which graced Forbes' website recently.

However, the government has responded by saying that the risk that some applicants could game the system for subsidies and gain unwarranted tax credits is no greater than the risk of any American cheating on his or her tax form.

"The Marketplace will always check the income information submitted by individuals against electronic income data sources such as tax filings, Social Security data, and current wage information," Marilyn Tavenner, administrator of Medicare and Medicaid, wrote in a "Myth vs Fact" question-answer series on the Department of Health and Human Services website. Furthermore, when federal tax returns are filed the following year, the amount of the subsidy is reconciled with their actual income.

Lying on federal exchange forms carries a fine of as much as $25,000, and any individual who misrepresented his or her income would also have to pay back the extra subsidy.

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