By S. Gottlieb
The Obama Administration announced a “tech surge” to try and repair the busted Obamacare web site, but even bigger problems lie ahead. The next wave of woes will relate to the coverage itself, and will saddle some consumers with significant and unexpected costs.
People will undoubtedly find that subsidies that they received were miscalculated, and that they owe more money than they were told.
The current IT problems are a sideshow to these looming harms. The next wave of troubles will be hard to fix. The President will need to seek relief from Congress.
Under Obamacare, consumers are eligible to benefit from two different streams of subsidies.
The first category of subsidies (dubbed “premium tax credits”) is based on family income, and will be used to offset the cost of buying the health plans.
The second category of subsidies is less well known.
Dubbed the “cost-sharing subsidies,” these payments help pay for out-of-pocket expenses such as deductibles and co-pays. The “cost-sharing subsidies” also provide a sort of re-insurance to lower someone’s costs when they hit their catastrophic limits as a result of a major illness.
Problems with the way both categories of subsidies are being calculated will saddle consumers with unexpected costs.
On that first category of subsidies – “tax credits” meant to offset the premiums – it’s now clear that a lot of the current IT problems stem directly from the failure of Healthcare.gov to reliably calculate these payments.
Figuring out how much premium subsidy an individual or family is entitled to requires that the Healthcare.gov “hub” communicate across servers housed at state Medicaid agencies, the Internal Revenue Service, Health and Human Services, and the Department of Homeland Security (among other federal agencies). That necessary data sharing has proven too much for the site’s architecture to handle.
This is what’s causing so many applications to get kicked out – but what about those applications that make it all the way through? At least half a dozen states have already said publicly that their systems are coming up with the wrong calculations.
It’s a sure bet that some consumers who make it through the web site’s maze, and enroll, will also have their subsidies calculated incorrectly.
Under current law, those who get more money than they were eligible for will see the excess payments clawed back on their subsequent years’ tax return.
As for the second category of subsidies, the cost sharing subsidies, the problems could be even worse.
Unlike subsidies for premiums, these subsidies are subject to cuts under the sequester. (The Commonwealth Fund drafted a lucid but unfortunately little-noticed summary of these problems earlier this year). What this means is that some of the reductions consumers expect in cost of their medical care will never materialize.
This will hit hardest those who actually use their healthcare insurance, especially people with catastrophic medical bills.
Read more at FORBES.