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Comment by tanzam75 | Hacker News Reader

> What percentage of people with individual plans (who need to get new plans) would actually qualify for subsidies? I don't, so I have more options: (1) I can buy another individual plan from my insurer (2) I can shop other insurers or (3) I can buy from california exchange

I don't understand why you're required to use the exchange to get the subsidies, anyway. Why not let people claim the subsidy directly through an insurer? Then turn healthcare.gov into a static site that simply displays the options and redirects to an insurer's web site.

After all, the subsidies are only an estimate. The actual amount is only calculated on the 1040 tax return. So why should this be any different from tax withholding?

We don't make everyone pay estimated taxes through a centralized site. We let employers withhold an estimated amount, and then the IRS balances the accounts annually, in a batch process.

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Well, as I understand it the subsidies result in direct draws on the Federal fisc by the insurers, and the latter can't afford to wait till the next calendar year to get paid. And there's certainly a desire to avoid fraud given that schedule of payments, if I'm correct about it.

Erk: if you're right about estimates and it depending on that years tax return; what do you do if you lose your job and can't afford to pay the unsubsidized rate? What if you earn a lot more money, spend too much of it, and then get hit with a huge bill next April 15th?

I'm disabled and on Medicare so I haven't been looking into these fine details ... this all sounds unworkable to me at first glance, unless it's retrospective based on ... the last year's tax return, but, erk, can't do that either since that don't be doable before the mid-December deadline necessary to get you into a insurer's system.

WTF???

ADDED: this probably explains why the Federal system has to do this, access to IRS payments data (e.g. withholding) is required, it's sensitive data and only they have all of it. Although Experian has a income verification role (people without credit, like sick young adults who can't leave the nest are at last count thoroughly screwed because the Federal site isn't handling this manual intervention well or at all), but I assume that's a double check. Maybe not? Maybe they couldn't get that info out of the IRS's generally high latency (often weeks and months, sometimes years) computer systems?

> And there's certainly a desire to avoid fraud given that schedule of payments, if I'm correct about it.

But why is it any different than the desire to avoid fraud through underwithholding of income tax?

If someone files an in incorrect W-4 and underwithholds by $2000, then the Treasury is out $2000. If someone files a fraudulent insurance application and gets $2000 of unwarranted subsidy, then the Treasury is also out by $2000.

It's the same $2000, whether the Treasury writes some checks to the insurance company, or fails to collect it from an individual on his paychecks. Either way, the $2000 gets paid back on the tax return -- or the IRS goes after you.

> Erk: if you're right about estimates and it depending on that years tax return; what do you do if you lose your job and can't afford to pay the unsubsidized rate? What if you earn a lot more money, spend too much of it, and then get hit with a huge bill next April 15th?

Again, not different in principle from income tax withholding. If you do not withhold the right amount, then you may get hit with a big bill or receive a big refund when you file your 1040.

The main difference is that the subsidy does not automatically adjust. Withholding tends to automatically go up and down with income, because it's calculated by the employer on the paycheck. Whereas the insurance subsidy stays constant unless you make changes.

If you lose your job, you're supposed to tell the exchange so that you can get a bigger subsidy. If your income goes up, you're supposed to tell the exchange so that you can get a smaller subsidy.

The big difference in the first point is who collectible the debt is. Someone who underwithholds has to have that money in the first place to do so. Sure, they may have spent it, but it suggests an ability to earn money commemorate with the debt incurred.

With insurance subsidies, scamming "insurance" companies can sign up nonexistant people etc. and collect those payments from the Treasury until someone catches on months or years down the road. Hence the need to reconcile everything in one central system.

In the case of individuals committing fraud, many would do so simply because they can't pay the higher premiums now demanded of their subgroup (there's a lot of cost shifting), so you have more of a "can't get blood out of a stone", and the optics for the IRS are horrible.

For your latter point, you're saying you make a 2013 enrollment based on partial 2012 data, and if you've got your act together you adjust with healthcare.gov or the linked state site as things change. Which I'm familiar with, the quarterly payments for those who don't withhold ... but I bet this'll hit a lot of people who aren't used to this sort of thing, but the automatic withholding of income that HR/ADT/whomever does for your paycheck....

> Someone who underwithholds has to have that money in the first place to do so. Sure, they may have spent it, but it suggests an ability to earn money commemorate with the debt incurred. ... With insurance subsidies, scamming "insurance" companies can sign up nonexistant people etc.

If you claim an undeserved subsidy, then that means you earn too much for the subsidy. Which means you earn enough to pay for healthcare. You may want to spend it on something else, like your mortgage. But then we're back to the underwithholding situation.

The Social Security Number prevents subsidies from being claimed for nonexistent people. It's like the "phantom dependents" problem on income tax returns. When the IRS began requiring an SSN to be provided for each dependent, the problem went away.

I'm not convinced that fraud would actually be a major problem. It's not like you get the whole year's subsidy at once. You get it a month at a time. Instead of running the income-check interactively, run it as a batch process after the first month of coverage. Then investigate the most egregious cases -- either individual or insurance company fraud.

If an insurance company is committing fraud, take it out of next month's subsidy payments. Remember -- we're already trusting these insurance companies to provide a whole year's worth of coverage, until the next open-enrollment period. They're around to be accountable.

"If you claim an undeserved subsidy, then that means you earn too much for the subsidy. Which means you earn enough to pay for healthcare. You may want to spend it on something else, like your mortgage."

Your last sentence indicates you know the truth about the statement your penultimate sentence makes. Which might be better stated as "Which means you earn enough to pay for healthcare according to this dog's breakfast known as the Affordable Care Act", which following our version of Newspeak for the naming of political bills tells us it's unlikely to be always, or maybe generally affordable.

"The Social Security Number prevents subsidies from being claimed for nonexistent people."

Good point. Change "nonexistent" to "real people under 65 not in the system" (the SSA knows the age). Like illegal aliens using other's SSN numbers, a scammer "insurance" company could just harvest numbers and other ID information for people who aren't buying insurance through Obamacare (hard to say, but a selection of young ones should be fairly safe) and those covered by employer plans, unless and until those people are reported to HHS.

"[Insurance companies will be] around to be accountable."

I'm postulating the creation of new, entirely or partly fraudulent ones (e.g. Obamacare subsidizes the creation of co-ops), or the subversion of existing ones. If there's "free money" to be had, it's likely stupid people will try to grab some, no matter how likely or certain it is they'll get caught.

> Your last sentence indicates you know the truth about the statement your penultimate sentence makes. Which might be better stated as "Which means you earn enough to pay for healthcare according to this dog's breakfast known as the Affordable Care Act", which following our version of Newspeak for the naming of political bills tells us it's unlikely to be always, or maybe generally affordable.

You cut off my actual last sentence in the paragraph, which compared it to underwithholding on income taxes. This is what I keep bringing up, and you keep ignoring. This is not so different from income taxes.

Someone who earns 400% of poverty level owes $5000 in federal income tax, plus maybe another $5000 in local property tax and possibly state income tax. They might want to pay that $10000+ towards their mortgage, rather than to the government.

Since you're clearly very concerned about the financial burdens imposed on those less fortunate among us, I hope you'll support eliminating all taxes on those earning 400% or less of poverty level. We can make up for it by taxing the rich more heavily. What do you say?

Or perhaps we should do the same for health insurance. Single-payer system, paid for by progressive taxation.

I'm suspecting that there's a diversity of situations among the people in the individual market that would make this challenging. These are people who are self-employed, or have low wages, or irregular work.

> I'm suspecting that there's a diversity of situations among the people in the individual market that would make this challenging. These are people who are self-employed, or have low wages, or irregular work.

I'm afraid I don't follow. Why would self-employment or low wages make it more challenging to sign up directly rather than through an exchange?

I'm not proposing any changes to the subsidies. Simply remove the requirement to go through an exchange to get the subsidy.

I don't know how it would be done, but I can only see two scenarios. One is to charge the insured the full, unsubsidized premium, and give the tax credit in 2015. The other is to pay the subsidy to the insurance company throughout the year.

In the former situation, some people just cannot afford it.

In the latter situation, you can have some fraud (by the insurance companies).

I guess they could offer both options, and if you choose the latter, you need to apply through the government, so they can verify that you exist, etc.

I'm not convinced that insurance fraud will actually be a big problem.

Just do a random spot-check of all the policyholders that the insurance company is claiming a subsidy for. If the amount claimed is more than x% over the amount calculated by the government, then the insurance company gets cut off.

Right now, by forcing people to buy on-exchange to get the subsidy, we're essentially doing the spot-check interactively. This is putting tremendous load on the healthcare.gov back-end. There's no reason this couldn't have been done as a batch process instead.

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