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The exchanges are set to roll out on October 1, in less than two weeks. In other words, it’s crunch time. And in this morning’s Wall Street Journal comes word that the exchange software, for which the government has spent upwards of $88 million, still can’t correctly calculate the amount of subsidies that an individual applicant is eligible for. “There’s a blanket acknowledgment that rates are being calculated incorrectly,” one senior insurance executive told the WSJ. “Our tech and operations people are very concerned about the problems they’re seeing and the potential of them to stick around.”
How does it work?
The exchanges offer individuals a subsidy on a sliding scale, depending on your income, to purchase insurance. If your income is near the poverty line, you get almost a full subsidy. If you make two to three times the federal poverty level—say $25,000 to $35,000 a year for a childless unmarried adult—you get a partial subsidy. And if you make more than four times the federal poverty level—about $46,000 a year—you don’t get any subsidy at all.
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If enrollees’ subsidies are calculated incorrectly, it could mean that some people gain much larger subsidies than they’re eligible for under the law, and others miss out on subsidies they would otherwise obtain.
This should not be difficult to calculate.
In general, when there are problems like this, and the program rolls out anyway, the result is substantial amounts of waste, fraud, and abuse. We already know that the government will be relying on the “honor system” for people to report their incomes, and thereby their eligibility, for exchange subsidies. Combine that with the fact that the exchange software can’t calculate what your subsidy actually is, and the result is that many people will be able to game the system to gain larger subsidies than the law intends.
My goodness - we are in deep doo-doo with this. We are going to be hemorrhaging money big time, legally and illegally.
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