Great comment on the difficulty subsidy verification from Matthewd in the Obamacare thread:
One point about the real time reporting of payroll information: I don’t see how this can be done through the IRS. The IRS doesn’t have real time payroll information in the first place. There is no proposal or legislation in place for companies to report real time payroll information to the IRS. HHS has admitted as much in their response to comments: “no comprehensive data source will be available by October 1, 2013. Current legislative and operational barriers prohibit HHS from requiring employers to report information directly to Exchanges or requiring Exchanges to obtain employer data from the Internal Revenue Service.” (CMS-2334-F p. 349)
To do the verification, the exchanges must contact employers directly, because not only do they need to confirm income, they need to confirm whether or not the employer offers any insurance plans, whether or not those insurance plans meet the minimum requirements of the law, and whether or not the individual applicant is eligible for coverage under the employer’s plan(s). (The last part is important, since it eliminates any efficiency you might get from knowing you’ve already contacted employer ABC for a previous applicant A and know they have the XYZ plan–you don’t know whether new applicant B is also eligible for the same XYZ plan.) This is information that only the employer can provide. The law reads “the exchange must verify”. How do they do that? Phone, fax, email, snail mail.
For all of the talk about how automated the process will be with all the information from separate databases tied together, apparently no one ever thought about how this little bit would be accomplished. Beyond “the exchange must verify” there is nothing in the bill AFAIK that specifies how the exchanges are supposed to do that.
With that perspective, there really is no code to rip out of the exchanges for that part of the subsidy verification process, because it could never be written in the first place.
Note: it doesn’t actually have to be real-time, as in up-to-the-minute, but it does need to be fairly fresh–more fresh than I was under the impression the IRS could really generate when the law was passed. Of course, they’ve had years to work on it.
But as Matthewd points out, the other hurdles are . . . formidable. I’m tempted to say “insurmountable”. We’re describing a system that would probably take weeks or months in a normal government office with a caseworker assigned.
Of course, Obamacare is not designed for verification to take months, and it certainly doesn’t have the budget for an individual person to manually contact employers and the IRS to check out your income data.
This tends to bolster my suspicion that the employer mandate is going to go away because it’s simply unworkable. But that has big implications. Here’s Ezra Klein describing the role of the mandate in 2009 (h/t commenter solzhenitsyninspace):
CBO Gives Us the Key to Health-Care Reform: The Employer Mandate
The big news of the morning is a new version of the Senate HELP Committee’s health-care reform bill that seems to have everyone confused. The short version is this: CBO estimates that by 2019 the bill will cover 21 million people at a cost of $597 billion. But — and this is important — the HELP Committee’s bill doesn’t include the Medicaid expansion, because Medicaid is under the sole jurisdiction of the Finance Committee. But if Medicaid is expanded to 150 percent, it will cover an additional 20 million at a cost of about $1 trillion. Add in the savings that Finance is expected to get from reforming Medicare and you’re looking at a bill that will cost $1 trillion to $1.3 trillion and cover 42 million people (which would mean 97 percent of the legal population in 2019 would have health insurance) by 2019.
The importance of this set of numbers can be understood only in terms of the catastrophe that was the last set of numbers. On June 15, the Congressional Budget Office scored an incomplete version of this bill. The office estimated that it would cost $1 trillion over 10 years and cover 16 million people. It would’ve cost, in other words, 70 percent more and covered 20 percent fewer people. The big question, then, is what accounts for the change? And luckily, there’s a simple answer: the employer mandate.
The June 15th proposal didn’t include an employer mandate. And without one, the news was grim: Employers would drop coverage for 15 million employees and send them to the Health Insurance Exchange where they would need government subsidies to afford health insurance. That meant costs exploded and coverage contracted. Health reform looked like a bum deal.
But oh, what a difference a mandate makes: The new version of the HELP bill includes an employer mandate for firms with more than 25 workers. Every full-time worker who isn’t given health-care coverage triggers a penalty of $750. Every part-time employee not given coverage costs $375. Doesn’t seem like very much, does it? But it’s enough. In Massachusetts, the employer mandate has been a success with a piddling $295 penalty. Indeed, the evidence we have suggests that the small penalty creates a massive change in behavior.
And you see the result in CBO’s latest score. The June 15 report estimated that 15 million Americans would lose their employer-based coverage under HELP’s bill. Today’s report estimates that a mere 150,000 will lose their coverage. That’s nothing. And it means that a lot more Americans end up insured and the government spends a lot less in subsidies.
The employer mandate may have been bad policy (Ezra is now calling for its repeal), but there was a reason it was included in the final version of the law. I don’t think it’s an exaggeration to say that without it, we wouldn’t have had a health care law.
Unfortunately, the employer mandate seems to be technically . . . rather challenging. And manual verification is not going to fly; the political cost of that sort of hassle and wait would be enormous. The financial cost wouldn’t be so little either. No wonder they’ve given up on it, for the nonce. One suspects that income verification may be not far behind; they’ll let the IRS sort it out at tax time.
Of course, that raises as many questions as it answers. Why on earth are we just hearing about this now? And what other little surprises might be around the corner?