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Doubts Cast Over Obamacare Tax Credit Income Verification

by Mike Godfrey, Tax-News.com, Washington

26 November 2013


The Republican members of the House of Representatives Ways and Means Committee have sent a letter to United States Health and Human Services Secretary Kathleen Sebelius regarding problems with the income verification system for the payment of tax credits designed to defray the cost of purchasing health insurance under the Affordable Care Act (ACA).

The ACA's premium tax credits are designed to defray the cost of purchasing health insurance, based on household income. The Congressional Budget Office (CBO) has estimated that 18m Americans, who currently do not have health insurance or who purchase insurance themselves, could be eligible for the tax credits that will be generally available to individuals and families with incomes between 100 percent and 400 percent of the federal poverty level.

It has also been estimated by the CBO that, when the ACA is fully implemented, individuals and families who qualify for assistance, and enrol in a "qualified health plan," will receive premium tax credits of over USD5,000 per year on average. In addition, there will be larger tax credits for older Americans who face higher premiums, as the amount of the premium tax credit is tied to the amount of the premium payable.

However, led by the Committee's Chairman Dave Camp (R – Michigan), its Republican members pointed out in their letter that recent reports have documented miscalculations of eligibility for the tax credits, which can mislead consumers as to how much their plan will cost them, as well as duplicate enrollments and applications with missing data.

"The law requires you certify to Congress that a system is in place that can accurately verify eligibility, before the tax credits are made available (on January 1, 2014)," the members wrote to Sebelius. "We do not believe you can make that certification today. We also believe it is time to acknowledge that we really do not know if you will be able to do so before January 1."

"If the tax credit and cost sharing eligibility mistakes are not discovered," they added, "many individuals will receive credits and subsidies for which they are not eligible. Once reconciled with their tax filing (by the Internal Revenue Service), most of these individuals will be surprised to learn they are required to pay back the mistaken subsidy."

The members requested that, by November 27, 2013, Sebelius should inform the Committee whether, given that she has yet to forward the required certification, she does not believe she could make that certification at present; on what date she will notify Congress; and what contingency plans she is making to mitigate the consequences of an inability to complete a working verification system.

TAGS: individuals | tax | law | insurance | tax credits | health care | United States | individual income tax

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