Almost Anyone Can Claim ObamaCare Tax Credits

What to make of the Center for Medicare & Medicaid Services’ notice that it will pay out retroactive ObamaCare premium tax credits and cost-reducing subsidies to people who have not yet signed up for ObamaCare?

The media have reported that these payments will be dished out to people who bought qualifying health insurance outside an ObamaCare exchange because the exchanges have not been working. According to the New York Times, the new policy is a result of the heroic lobbying of Oregon Governor John Kitzhaber, whose exchange has failed to enroll almost anybody. According to Professor Sara Rosenbaum of George Washington University Law School: “People could have gone to court to obtain benefits denied without due process of law, because of a breakdown in government eligibility systems, and a judge would probably have ordered retroactive relief. The federal government is voluntarily providing equitable relief that a court would have given.”

Well, maybe. But this new executive amendment to ObamaCare does far more than give out subsidies to people who had to buy health insurance off-exchange because the exchanges crashed on take-off. According to the notice:

First, if an individual…has not been enrolled in any health coverage continuously since January 1, 2014…before a successful eligibility determination is obtained, when he or she receives a determination of eligibility for coverage through the Marketplace and enrolls in a QHP through the Marketplace, the Marketplace may allow for coverage retroactive to the date, established by the Marketplace (emphasis mine), on which coverage would have been effective…For instance, the Marketplace may (emphasis mine) establish an effective enrollment date based on the date that the individual originally submitted an application for coverage to the Marketplace. The individual will be treated for all purposes as having been enrolled in the QHP since the effective enrollment date.

Note that an ObamaCare exchange (“Marketplace”) has the power to decide the effective date. The exchange may decide that the effective date is the date the enrollee first surfed the website. But there is nothing in the notice that would prevent an exchange from establishing January 1 as the effective date for any enrollee.

Combined with the other part of the notice, i.e., that people who bought individual insurance outside the ObamaCare exchanges will receive subsidies as if they had enrolled in the exchanges, I believe we have two takeaways from this latest twist to ObamaCare:

1. The Administration is so far behind enrollment goals that it feels the need to tell people who have not enrolled that they will not suffer financially.
2. The biggest winners are the so-called web-based entities, such as e-Health, Inc., which have been lobbying state-based exchanges to allow them to enroll people. The new rule effectively erases the difference between enrolling in an exchange and enrolling via a web-based broker. (At time of writing, eHealth (NASDAQ:EHTH) stock was up 1.10 percent on the day, versus a 0.72 percent drop in the NASDAQ Index.)

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