CMS Issues Guidance Clarifying Policy On Income Verification by Health Exchanges

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By Ralph Lindeman  


The Centers for Medicare & Medicaid Services released guidance Aug. 5 clarifying the circumstances in which state-based health insurance marketplaces would be allowed to accept less than full income verification from consumers applying for federal subsidies to help them purchase health coverage.

In the two-page guidance, presented in a “Frequently-Asked-Questions” format, CMS said the marketplaces, or exchanges, “would always use data from tax filings and Social Security data to verify household income information provided on an application, and in many cases, will also use current wage information that is available electronically.”

CMS said exchanges would be permitted to bypass certain income verification requirements only during 2014--the first year exchanges will begin operation--and only in limited circumstances, which it went on to specify.

Final Rule Sparks Controversy

The guidance follows CMS's release in July of a comprehensive final rule (CMS 2334-F) covering exchange eligibility determinations. Among other things, the rule said exchanges would not need to verify household income in every case where an applicant's self-reported income had dropped by more than 10 percent below the most recent data available from the Internal Revenue Service (130 HCDR, 7/8/13).

In those circumstances, CMS said it would allow exchanges to require follow-up verification from a “statistically significant sample” of applicants who were unable to provide the initial verification information.

The July announcement triggered concerns that CMS was opening the door to fraud by allowing applicants for federal subsidies--also known as “premium tax credits”--to “self attest” as to their income eligibility.

At an Aug. 1 hearing of the House Ways and Means Committee, Rep. Dave Camp (R-Mich.), the committee's chairman, questioned whether IRS could effectively monitor premium tax credit payouts under the self-attestation and sampling procedures established by CMS in the final rule (149 HCDR, 8/2/13).

No Exceptions on Federal Exchange

In the Aug. 5 guidance, CMS clarified that exceptions to the full income verification requirements would apply only to exchanges operated in the 16 states and District of Columbia that have opted to build and operate their own exchanges.

In the 34 states not building their own exchanges--where the so-called federally facilitated exchange will operate--CMS said it will require full income verification in all instances. “Since publication of the final rule, we have ascertained that there are sufficient resources to ask every individual in this circumstance for such documentation with no exceptions,” the CMS guidance said.

Verification Process Explained

In explaining how income verification would be handled on the exchanges, the CMS guidance said information provided by an applicant would first be checked against information from the IRS and Social Security Administration.


“It's not a significant change in policy. It's just clarifying that income verification on the exchanges will be a lot more substantive than we initially thought.”  



--Timothy Jost, health law professor

If IRS and SSA are unable to verify the income data provided, then the information will be compared with wage information from employers provided to the exchanges by Equifax, a credit-reporting and income database firm.

If Equifax is not able to substantiate the applicant's income information, the exchange must request an explanation or additional documentation, according to the guidance.

After requesting the additional documentation, if the applicant meets all other eligibility requirements for premium tax credits, the exchange will provide premium tax credits or other cost-sharing reductions for 90 days.

If the applicant fails to provide the additional documentation within the specified time frame, the exchange will determine eligibility based on the most recent IRS and SSA data available. If the data are unavailable, then the exchange will discontinue any advance payments of the premium tax credits, the guidance said.

Limited Exception to Requirements

CMS said “for 2014 only,” it will permit state-based exchanges (not the federally facilitated exchange) to bypass the full income verification requirements when all the following factors exist:

• the exchange has income information from the IRS;

• the applicant reports projected annual household income more than 10 percent below the most recent data available from IRS and SSA;

• Equifax data from an employer is unavailable; and

• the applicant does not provide a reasonable explanation for the inconsistency between what he or she reported and IRS and SSA data.


“In all other cases in which the data submitted by the individual cannot be verified using IRS and SSA data or Equifax data, and the individual does not provide a reasonable explanation for any discrepancy … the marketplace must request additional documentation,” the guidance said.

It emphasized that applicants must attest, under penalty of perjury, that they are not providing false or fraudulent information to the exchange. The guidance also noted that IRS will require repayment of tax credits if an applicant's income for the year following receipt of the credit shows the applicant is not eligible.

'Not a Significant Change.'

Commenting on the CMS guidance, Timothy Jost, a health law and policy expert at Washington and Lee University School of Law, told BNA: “It's not a significant change in policy. It's just clarifying that income verification on the exchanges will be a lot more substantive than we initially thought.”

He added: “The hope has always been that exchanges would be doing real-time eligibility verification. Now we know there will be more cases when final determinations will not be done in real time. But I think for most people, it's going to mean the exchange will tell them, 'go get a pay stub and fax it to us.' I think there will be very few cases when it's going to take 90 days to clarify income eligibility.”

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