March 25, 2014

Untrue Horror Stories and the Trouble With Subsidies

Healthcare.gov is giving out wrong subsidy numbers, while a legal challenge to those subsidies is heard.

The list of problems with ObamaCare is already long, from a busted Healthcare.gov rollout to skyrocketing insurance premiums to cancelled plans and so on and so on. But the Philadelphia Inquirer has the scoop on yet another glitch: “Incorrect poverty-level guidelines are automatically telling what could be tens of thousands of eligible people they do not qualify for subsidized insurance. … The mistake raises the price of their insurance by thousands of dollars, making insurance so unaffordable many may just give up and go without.”

How could that happen? The Wall Street Journal’s James Taranto explains, “The error affects consumers in states that haven’t opted into ObamaCare’s Medicaid expansion. … The problem arises because ObamaCare uses two different definitions of the poverty line. Whereas eligibility for subsidies is determined by the 2013 line, eligibility for Medicaid is based on the 2014 line, which is 1.5% higher. The website mistakenly calculates eligibility for subsidies using the 2014 line.” In other words, some number of people are being told they’re not eligible for subsidies when they should be. If they don’t abandon their question but proceed to the next step, they discover they are actually eligible. The reverse is also sometimes happening – a consumer thinks they’re eligible only to later find they’re not.

On top of this problem, subsidies are doled out based on projected income, and therefore will be recalculated when recipients file their 2014 tax returns next year. Many people may earn more than they anticipated and then discover on next year’s tax returns that they must pay back the subsidies they claimed this year via the federal exchange. That’s going to be a nasty surprise. Not to worry, though: Harry Reid assured us, “There’s plenty of horror stories being told [about ObamaCare]. All of them are untrue.”

Meanwhile, yet another problem with the subsidy calculations didn’t properly account for married couples who file taxes separately. The Washington Post reports, “The IRS said in the preamble to those 2012 rules that it would correct the mistake, yet in the nearly two years since then, the Treasury Department has not made the change. And battered spouses have become the leading edge of a small army of people – legally married but filing taxes on their own – stepping up pressure to get an equal chance at affordable health plans.” So the IRS has known about the problem for two years? Perhaps they were too busy targeting Tea Party groups for audit to get around to fixing it.

Finally, subsidies may end altogether for two-thirds of the population. The DC Circuit Court of Appeals is hearing a challenge today to the administration’s lawless interpretation of the actual wording of ObamaCare. The law says subsidies are available only “through an Exchange established by the State.” Well, 34 states opted out and another two failed to meet the criteria. Yet the White House has offered subsidies everywhere anyway.

All of this illustrates the inherent pitfalls in weaving ObamaCare together with the IRS. Arguably the most intrusive agency in all of government is now instrumental in managing your health care. But we leave you with these words from Barack Obama: “I am absolutely confident that you will see millions of people benefitting from this law. It is working the way it should.”

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