Regional CMS official warns IRS will find subsidy cheats

People should not cheat when they apply for health insurance subsidies under the national healthcare overhaul because income discrepancies will show up later when they file income tax returns, a federal official said.

Uninsured people will be able to seek insurance under a new health exchange beginning Oct. 1. They will have to declare their incomes to determine if they are eligible for a government subsidy to help them afford the health insurance policy.

"This is all adjudicated at tax time. If folks try to play the system, it'll all come out in the end," said Jeff Hinson, regional administrator from the Denver office of the CMS.

People who misstate their incomes to qualify for greater subsidies as they buy insurance "will settle up with the IRS," Hinson said.

Hinson spoke recently at a seminar in Sioux Falls, S.D., that included representatives of several South Dakota agencies that will help people seeking to buy insurance through the exchange, the Sioux Falls Argus Leader reported.

Each state will open an insurance exchange, an Internet marketplace, to help people buy insurance during an enrollment period from Oct. 1 through March 31 to comply with the Affordable Care Act.

Most South Dakotans already have insurance through private policies, group policies offered by their employers, Medicare or Medicaid.

But for many of South Dakota's approximately 71,000 uninsured people, the exchange will help them enroll to get the insurance coverage required by the federal law. They will have to declare their income for the coming year to help calculate if they are eligible for a government subsidy.

The process would require people enrolling this fall to declare their expected income for 2014, and then complete their 2014 tax returns in 2015. At the seminar, Hinson said he did not know how the Internal Revenue Service would handle discrepancies, but it might be a matter of mathematical calculations in completing a tax form.

Hinson also said people will be able to report updates in their earnings.

John Mengenhausen of Horizon Health Center in Howard said his office often works with clients who do not file tax returns because they do not earn enough money. Hinson said those people will have to file tax returns to be eligible for a subsidy to buy insurance.