Obamacare offers massive opportunity for fraud

To get an Obamacare health insurance subsidy, assuming one can get on the website, people have to state their annual incomes. The website has no way to verify income.

Based on this unverifiable information, a person is presented with certain policies and options. For example, a person may get a $500 per month policy with a $100, $200 or $300 per month subsidy – or no subsidy – depending on the annual income submitted.

This subsidy is paid out every month. The subsidy comes in the form of a prepaid tax credit. So, 14 months after getting the insurance and the monthly subsidy, tax returns are filed. If a person’s return matches the annual income stated on his insurance application then everything works out. But if a person’s income is higher than estimated, then the subsidy is less and that person owes the government the difference and his monthly insurance payments go up, reflecting the reduction in the subsidy.

Human nature being what it is, what is the likelihood that a person is going to underestimate his unverifiable annual income and get the higher subsidy? And when the bill comes due at tax time, what is the likelihood that person is tempted to fudge on his or her tax return to make it reflect the underestimated income?

The possibility for fraud and deceit is massive. And the consequences are that the truthful and honest will end up paying even more for their health insurance to subsidize the frauds.

David Welsh