A federal official at a Sioux Falls seminar warned people not to cheat in applying for subsidies on the new health insurance exchanges that will open Oct. 1 in South Dakota and other states.
“This is all adjudicated at tax time. If folks try to play the system, it’ll all come out in the end,” said Jeff Hinson, regional administrator from the Denver office of the Centers for Medicare and Medicaid Services.
Consumers who misstate their income to qualify for greater subsidies as they buy insurance “will settle up with the IRS,” Hinson said.
He spoke to 40 people at a seminar Thursday the federal government sponsored at the AARP South Dakota office in Sioux Falls. The audience included representatives of several South Dakota agencies who will be assisting consumers seeking to buy insurance this fall in order to comply with the federal Affordable Care Act. Each state will be opening an Internet marketplace, called an insurance exchange, to help consumers enroll during a six-month period running from Oct. 1 through March 31 to comply with the federal Affordable Care Act.
Most South Dakotans will not need to concern themselves with the new exchange, because they already carry insurance either through an employer plan, a private policy, Medicare or Medicaid.
Uninsured eligible for exchanges
For many of the uninsured, though, about 71,000 people in South Dakota, the exchange will be one avenue toward acquiring coverage as now mandated under the Affordable Care Act.
For them, enrolling will require them to declare their income for the coming year as a step toward calculating if they are eligible for a government subsidy and, if so, how much of a subsidy. In most cases, a lower income will lead to a higher subsidy, as long as the person enrolling earns one to four times the federal poverty level.
That process would require people enrolling this fall to declare their expected income for 2014 and then in April 2015 to complete their annual income tax return vouching for their 2014 earnings. Any discrepancies would turn up then. In a Q&A session at the seminar, Hinson said he did not know specifically how the IRS would rectify those situations, but it might be a matter of mathematical calculations in completing form 1040.
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Updates allowed if income changes
Hinson acknowledged that is a long gap from enrollment to tax time, about 18 months, during which a lot can change for individual earners. Many of the uninsured are service industry workers or people who have part-time jobs or unpredictable hours and don’t know what they’ll be making. The online marketplace will have a provision for people to report updates on their personal situations as a way to recompute their subsidies, he said.
The format will work on something like an honors system at the front end as people enroll and make updates, but with precision at the back end when they file their tax returns.
“Be as honest as you can,” he said.
The audience included several navigators and enrollment counselors who are certified under government programs to help people sign up for insurance starting Oct. 1.
John Mengenhausen, CEO of the Horizon Health Care Center in Howard, asked about residents who do not file tax returns because they do not earn enough money. He said his office often works with clients who haven’t completed a tax return in 10 years.
Hinson said they will have to file a return in order to be eligible for a subsidy at the insurance exchange.
‘I think it’ll work’
Kim Jones, navigator coordinator for the South Dakota Community Action Association in Brookings, said the system is complex but an opportunity to help many of the uninsured secure coverage for the first time.
“I think it’ll work. That’ll be our role, to unblock that road and explain what is not understandable,” she said.
Someone buying insurance on the exchange will need to supply personal details, including a Social Security number.
Some in the audience wondered if that presented a red flag because of the risk of fraud.
“You have to give Social Security information, which we say don’t ever do,” said Sarah Jennings, state director for AARP.
Hinson noted a distinction. He said enrollment online will result from a consumer initiating the transaction, not the other way around. Legitimate enrollment never will involve someone calling a consumer to start the process.
Someone signing up for coverage at the exchange could pay for the coverage either online with a credit card or by sending a check through the U.S. mail, depending on arrangements the insurance carrier works out with the consumer, Hinson said.