GAO Finds it Easy to Fake Application for Premium Tax Credit

Post Date: 8/8/14
Last Updated: 8/12/14


Cross References
- GAO-14-705T, July 23, 2014

The United States Government Accountability Office (GAO) has testified before Congress its preliminary results of an undercover testing of enrollment controls for health care coverage and consumer subsidies under the Patient Protection and Affordable Care Act of 2010 (PPACA). The Act provides for the establishment of health insurance exchanges (marketplaces) where consumers can compare and select private health insurance plans. PPACA also expands the availability of subsidized health care coverage. The Congressional Budget Office estimates the net federal cost of subsidized coverage at $36 billion for fiscal year 2014.

The law requires marketplaces to verify application information to determine enrollment eligibility and, if applicable, eligibility for subsidies. These subsidies include the Premium Assistance Credit under IRC section 36B, and the cost-sharing subsidy for individuals with high-deductible plans. Individuals enrolling for health insurance through the marketplace qualify for the Premium Assistance Credit when household income is between 100% and 400% of the federal poverty level for the family size involved, and the individual does not receive health insurance through an employer or a spouse's employer. Eligible individuals report their income to the health insurance exchange, and the exchange calculates the amount of the subsidy and pays it directly to the insurance plan. The difference between the health insurance premium and the subsidy is then paid by the individual enrolled in the plan.

Results of the Undercover Testing
Centers for Medicare and Medicaid Services (CMS) officials told GAO that they have internal controls for health care coverage eligibility determinations. GAO's undercover testing addressed processes for identity and income verification. The following is a summary of the preliminary results.

For 12 applicant scenarios, GAO tested front-end controls for verifying an applicant's identity or citizenship/immigration status. Marketplace applications require attestations that information provided is neither false nor untrue. In its applications, GAO also stated income at a level to qualify for income-based subsidies to offset premium costs and reduce cost sharing. For 11 of these 12 applications, which were made by phone and online using fictitious identities, GAO obtained subsidized coverage. For one application, the marketplace denied coverage because GAO's fictitious applicant did not provide a Social Security number as part of the test.

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