As Obamacare is fully implemented as a national mandate for individuals, the Congressional Budget Office (CBO) estimates that four million people who chose to continue to be uninsured and do not qualify for exemptions will pay a fine on their federal tax return.
The fine starts out at the greater of $95 per person or 1% of income this year, and in 2016 will jump to $695 or 2.5% of income. Although 23 million people are expected to qualify for exemptions, huge delays from an overwhelmed IRS tasked with processing fraudulent Obamacare subsidies and legitimate exemptions ensures a coming administrative disaster.
Obamacare greatly expands the authority and the scope of the Internal Revenue Service. Provisions of the law that resulted in the hiring thousands of new IRS agents and billions in funding include the enforcement of the individual mandate requiring most Americans to buy government-approved health insurance, enforcement of the employer mandate that forces most employers to take money out of workers’ paychecks to purchase health insurance on their behalf, determination of fraudulent Obamacare subsidies, and granting of exemptions to qualifying individuals.
The CBO expects that of the 30 million Americans who remain uninsured by 2016, about 23 million are expected to qualify for exemptions from paying the Obamacare penalty fines. Those groups who are exempt include:
- Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
- People with income so low they are not required to file an income tax return;
- People who have income below 138% of the federal poverty guidelines (federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
- People whose premium exceeds 8% of their income in 2014 (indexed over time);
- People who are incarcerated; and members of Indian tribes;
- Members of “recognized religious sect” with moral objections to health insurance;
- “Health care sharing ministries” who have religious believers that have continuously pooled resources to fund medical expenses since 1999; and
- Personal financial calamity and death in the family.
The challenge for those that believe they “qualify” for exemptions is to apply to the IRS and for the service to have the time to individually process their exemptions while overwhelmed with a massive amount of fraudulent and inappropriate subsidies.
A July audit by the Government Accountability Office (GAO) found that Centers for Medicare & Medicaid Services (CMS) that manage Obamacare enrollments hired contractors that accept documents as authentic unless there are obvious alterations and are not required to detect fraud. When the GAO examined for fraud on the Obamacare exchanges, they found that 91% of fake applicants were able to get subsidized coverage on the exchanges.
House Ways and Means Committee Chairman Dave Camp (R-Michigan) told NBC, “We are seeing a trend with Obamacare information systems: Under every rock, there is incompetence, waste, and the potential for fraud.” Camp added. “Now, we learn that in many cases, the exchange is unable to screen out fake identities or documents.”
Since the Obamacare subsidy frauds are going to be a direct hit on the U.S. Treasury, Congress will undoubtedly direct the IRS to concentrate their staff and resources on stopping fraud and collecting back subsidy dollars, rather than processing exemptions.
“It’s not going to be pretty,” George Brandes, V.P. of health care programs at Jackson Hewitt tax preparation service, told Politico. “Just because you theoretically qualify for hardship, or another exemption, doesn’t mean you’re going to get it.”
About 10% of Americans will remain uninsured when they calculate their income taxes and potential Obamacare penalties for the first time by April 15, 2015. Only those that filled out the exemption application, submitted the evidence regarding their qualification, and had the exemption approved will have received an IRS approved “exemption certification” number in the mail.
Those whose exemption has been approved will then have to fill out a newly drafted tax form that will require the tax filer to state the number of days or months during the year they qualified for an exemption and then calculate how much penalty he or she will owe.
All of this guarantees an administrative disaster as the IRS is inundated with massive amounts of Obamacare paperwork and documents going back and forth. The IRS will be battling millions of Americans about subsidies the IRS determines they were not entitled to and exemptions the IRS will prove they are entitled to.
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