Gaming Obamacare isn’t as easy as it sounds

Yesterday, The Federalist published an article titled Five Easy Ways To Game Obamacare.  It’s an interesting article, but we thought it might be helpful to add detail about some of the problems with the strategies mentioned. Gaming Obamacare may turn out to be more costly and difficult than you imagine.

Buy nine, get three free

The idea here is that since there’s a 90 day grace period, you can skip the last three payments of the year, sign up for a new plan during open enrollment, and avoid a penalty (since your gap in coverage doesn’t exceed three months).  And the fall-back plan is that if you do end up needing care during the 90 grace period, you can just go back and pay those premiums retroactively to keep that policy active.

Gaming Obamacare isn't as easy as it soundsFirst, the open enrollment window will be different in 2016 and future years.  HHS has proposed a yearly open enrollment window of October 1 to December 15, with all policies effective January 1.  That set of regulations was issued in November, and hasn’t been finalized yet.  Assuming it is finalized as proposed, people could theoretically skip payments for October, November and December, and then sign up for a new plan before December 15.  But this strategy would only work for people who are receiving advance premium tax credits through the exchange.  They’re the only ones who have a 90 day grace period.  People who aren’t getting tax credits have only a 30 day grace period to pay overdue premiums, so if they attempted this, they would be out of luck if they were to need medical care in November or December.

Understate your income

The chart in the article is correct, in that there are caps on the amount of overpaid subsidy that must be repaid, as long as your income is under 400% of the poverty level (if you end up above that amount, any subsidy you received has to be repaid).  But The Federalist article makes it sound like you can just tell the exchange any amount you want and they’ll take your word for it.  That’s not the case.  The federal data hub is used to verify income (that’s the system that went down on Saturday and caused enrollment delays – verifying income is an important part of the enrollment process).

If there are discrepancies or missing data, the enrollees must provide documentation to the exchange.  Remember last fall when coverage was cancelled for people who hadn’t provided proof of income to the exchange?  That process is only going to get more streamlined and sophisticated as time goes on.  So no, you can’t earn $85,000 and just tell the exchange you make $52,000.  Here in Colorado, after you apply, the exchange sends you an email requesting income verification documentation.  Any of the following will work, but you can’t keep your subsidy if you just ignore their request:

  • All wage stubs from an employer showing gross pay for at least a month
  • A copy of your most recent tax return
  • Written documentation from the employer stating gross income with timeframe (hours per week, bi-weekly, monthly, etc.)
  • Self-employment income and expense ledger or receipts
  • Social Security Benefits (retirement/disability/survivor) Award Letter
  • Unemployment benefits award letter
  • Retirement account or pension official documentation of amount received
  • Capital gains income financial statement
  • Investment income financial statement
  • Rental or royalty income on rental agreement
  • Farming or fishing income ledger/profit and loss ledger/receipts
  • Alimony received – show bank statement and a note (client statement)
  • Canceled debts official documentation
  • Court documentation for court awards
  • Jury duty pay stub
  • Any other official documentation that proves the amount you received

Lie about tobacco use

It’s true that there are a lot of shades of grey with this one.  The criteria (tobacco used more than four times per week within the last six months) is vague and hard to enforce.  But a lot of people are still honestly answering the question when enrolling for coverage, and that will likely continue to be the case.  Although the Federalist article is correct in terms of the difficulties involved with policing the tobacco surcharge, it’s incorrect in saying carriers can’t cancel your policy because you provided false information.  This is a myth that has swirled around the ACA for the last five years…. the truth is that carriers CAN still rescind coverage, as long as it’s based on fraud or intentional misrepresentation.  There aren’t nearly as many opportunities for misrepresentation as there were in the past, because the whole medical history section has been removed from individual insurance applications.  But lying about tobacco use is still intentional misrepresentation.  Whether or not the insurance company can prove it (or even whether they want to devote the resources to try) is another issue.  But rescission is still legal if you lie on your application.

Get a benefit-rich plan during open enrollment, use it to have a major procedure done, and then drop your coverage

There are no problems with this, except for the fact that you’d then be uninsured for the rest of the year, with no opportunity to re-enroll (unless you have a qualifying event) until the following year.  That means you’ll pay a penalty for being uninsured for most of the year, and you’ll be on your own if you have a medical issue later in the year.

Theoretically, this strategy could have worked for 2015 if you had a pending major expense that could be treated quickly… you could have enrolled in a gold or platinum plan for January 1, had your treatment in January/February, and then switched to a bronze plan by February 15, with the new coverage taking effect March 1.  But that won’t be possible going forward, since open enrollment for 2016 is scheduled to end on December 15, before the start of the new year.

Jay needed surgery on both knees back in 2008, and since we have a high deductible health insurance policy, we knew it was important to get started as early as possible in the year (we found out about the problem towards the end of 2007, but waited so that we didn’t get stuck paying our deductible two years in a row).  He had his first MRI on January 2, and his last physical therapy visit on December 30, with ongoing treatment throughout the year – and we hurried the process along as much as possible, since we really didn’t want it to extend into 2009.  So although the strategy I just described (which again, won’t work in future years) was possible, there was also a chance that you’d end up stuck with additional pending treatment once the bronze plan kicked in on March 1st.

Pay the tax for being uninsured

I don’t think it’s considered “gaming the system.”  Really, it’s more like cutting off your nose to spite your face, since you’re paying something (the penalty) and getting nothing in return.  Plus, the scenario described (an income level where your premiums are more than 2% of your income) doesn’t take into account the fact that subsidies can also be applied to bronze plans.  Subsidies are calculated based on the second-lowest-cost silver plan in your area, and if your income is between the poverty level and four times the poverty level, the amount you’re expected to pay for that plan varies from 2.01% of your income to 9.56% of your income.  But you can take that subsidy and apply it to a bronze plan and end up paying a lower percentage of your income.  We have a client who is paying 79 cents a month for health insurance this year.  And quite a few who are paying less than ten dollars a month.

So yes, if you really want to remain uninsured, you can pay the penalty instead.  But not only do you get nothing in return for that money (it’s being used to help keep other people insured), you’re also leaving yourself high and dry if and when a major illness or injury strikes.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP.

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