An invitation to fraud

Over at NRO, Yuval Levin pursues a basic issue raised by the Obama administration’s delay of Obamacare’s employer mandate, announced this past Tuesday. Following up on the final version of a 600-page regulation released on Friday, Levin observes:

In 2014, applicants can more or less be deemed eligible for subsidies in the state-run exchanges if they say they are eligible. If it has no external sources of information regarding what insurance employers offer, the rule states, “the exchange may accept the applicant’s attestation regarding enrollment in an eligible employer-sponsored plan and eligibility for qualifying coverage in an employer-sponsored plan for the benefit year for which coverage is requested without further verification.” In fact, the exchanges are not only released from the obligation to verify whether applicants are eligible for employer coverage, they are also released from the obligation to confirm applicants’ statements regarding their household incomes before providing them with what is supposed to be an income-based benefit.

Levin adds:

[A]s with the employer-mandate delay, the suspension of verification requirements was justified in the administration’s announcement by pointing to the administration’s inability to pull off what the law requires. Doing so, the rule states, “would involve a large amount of systems development on both the state and federal side, which cannot occur in time for October 1, 2013.” I suspect we’ll be hearing more of that in the coming weeks and months.

Levin draws inferences regarding what is happening outside of public view:

The administration’s contortions in implementing Obamacare have to be understood in light of the fact that only the administration itself really knows how implementation is going. No one else has anything approaching a complete picture, and particularly not regarding the development of the exchanges. The status of the federally-run exchanges, even more than those to be run by the states, remains simply a mystery. The administration has shared scant little information with the public, and even an investigation by the Government Accountability Office (an arm of the Congress) concluded last month that the likelihood that the exchanges will be ready to launch in October as required by law “cannot yet be determined.” The various delays and rule changes announced by the administration are responses to problems they are finding in the process of implementation, and the shape of those responses is among the only clues we have to the shape of the problems they see.

The delay of the individual mandate announced on Tuesday and the delay of the verification requirements for eligibility announced on Friday both suggest the same two kinds of problems: logistical difficulties with getting complex systems into place, and the fear of ending up with too few people in the exchanges.

Thus the invitation to fraud:

Opening the door wide open to fraud could well increase the number of people in the exchanges, but it will also make that number far less meaningful—casting a shadow over whatever is achieved by the enrollment effort set to launch in the fall. It will also, needless to say, increase the cost of the exchange subsidies. The administration is clearly worried enough about enrollment to take that risk and bear that cost. It seems to be operating under the assumption that the way to secure Obamacare’s future is to get as many people as possible into the system and receiving subsidies. Maybe they’re right, and maybe they’re wrong, but they certainly seem increasingly desperate.

Whether Levin’s speculation is correct or not, his understanding of the invitation to fraud extended by the Obama administration appears, as they say, to be on the money.

NOTE: With a nod to this Washington Post article, Avik Roy is covering the same territory in a post with four updates that include a citation of Levin’s post. Roy’s post dives into the regulatory thicket to define the scope of the potential for fraud.


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