CMS Issues Guidance Clarifying Policy On Income Verification by Health Exchanges

Wednesday, August 7, 2013

By Ralph Lindeman

The Centers for Medicare & Medicaid Services released guidance Aug. 5 clarifying the circumstances in which state-based health insurance marketplaces would be allowed to accept less than full income verification from consumers applying for federal subsidies to help them purchase health coverage.

In the two-page guidance, presented in a “Frequently-Asked-Questions” format, CMS said the marketplaces, or exchanges, “would always use data from tax filings and Social Security data to verify household income information provided on an application, and in many cases, will also use current wage information that is available electronically.”

CMS said exchanges would be permitted to bypass certain income verification requirements only during 2014–the first year exchanges will begin operation–and only in limited circumstances, which it went on to specify.

Final Rule Sparks Controversy

The guidance follows CMS’s release in July of a comprehensive final rule (CMS 2334-F) covering exchange eligibility determinations. Among other things, the rule said exchanges would not need to verify household income in every case where an applicant’s self-reported income had dropped by more than 10 percent below the most recent data available from the Internal Revenue Service (130 HCDR, 7/8/13).

In those circumstances, CMS said it would allow exchanges to require follow-up verification from a “statistically significant sample” of applicants who were unable to provide the initial verification information.

The July announcement triggered concerns that CMS was opening the door to fraud by allowing applicants for federal subsidies–also known as “premium tax credits”–to “self attest” as to their income eligibility.
At an Aug. 1 hearing of the House Ways and Means Committee, Rep. Dave Camp (R-Mich.), the committee’s chairman, questioned whether IRS could effectively monitor premium tax credit payouts under the self-attestation and sampling procedures established by CMS in the final rule (149 HCDR, 8/2/13).

No Exceptions on Federal Exchange

In the Aug. 5 guidance, CMS clarified that exceptions to the full income verification requirements would apply only to exchanges operated in the 16 states and District of Columbia that have opted to build and operate their own exchanges.

In the 34 states not building their own exchanges–where the so-called federally facilitated exchange will operate–CMS said it will require full income verification in all instances. “Since publication of the final rule, we have ascertained that there are sufficient resources to ask every individual in this circumstance for such documentation with no exceptions,” the CMS guidance said.

Verification Process Explained

In explaining how income verification would be handled on the exchanges, the CMS guidance said information provided by an applicant would first be checked against information from the IRS and Social Security Administration.


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