Critics of the Patient Protection and Affordable Care Act (PPACA) have been concerned about the recent mandate delay, suggesting it will put everyone on the honor system for income verification and qualification for the tax credits. Because the IRS can pay these tax credits in advance to help consumers buy coverage, critics claim it’s an open invitation to fraud and abuse.
However, recently, the Center for Consumer Information & Insurance Oversight (CCIIO), the agency running the health insurance exchanges under the new law, clarified the guidelines the exchanges will use to verify consumers’ income. To verify income, the exchanges will generally refer to:
- IRS tax filing data
- Social Security household income data
- Wage information employers report to Equifax
If the Social Security Administration, the IRS, and Equifax are unable to provide data to verify the income information a consumer has provided, the consumer will be required to provide an explanation or additional documentation of income. The exchanges plan to request additional documentation from a random sampling of consumers in specific circumstance when:
- Current income information is not available
- There’s a significant discrepancy between the income reported on a tax return and the income provided by the individual
- The individual is unable to provide an acceptable explanation for the discrepancy
If a consumer is unable to supply the requested documentation, the exchange will base eligibility decisions on IRS and Social Security data. If IRS data is unavailable, the exchange will deny access to the tax credits.
In short, regardless of which type of exchange is operating in any given state, the exchange will always check income information submitted by consumers against electronic income data sources. For more information about this topic, read the CCIIO’s Frequently Asked Questions on Health Insurance Marketplaces and Income Verification.
Next steps for employers
Human resources and benefits managers are going to have their hands full with the added compliance and reporting requirements of PPACA. So it’s more crucial than ever to keep accurate and timely data on your employees and stay on top of reporting requirements.
If you’re overwhelmed with the challenges of PPACA compliance, outsourcing your COBRA administration might be just the relief you need. Click to download our free guide about the pros and cons of outsourcing.