DPSS ePolicy

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Reasonable Explanation is the ability to provide income verification through a verbal or written explanation in an attempt to resolve/clarify discrepancies between the self-attested income and information received through the available electronic data sources.  The opportunity to provide a Reasonable Explanation must be given at application and annual Renewal (RE) without requiring additional manual income verification if the discrepancy is resolved.  This policy also releases the form DHCS 7103, Request for Additional Income Information for Medi-Cal (MC), to be included when the opportunity for the explanation needs to be mailed.  Throughout this document, the Reasonable Explanation will be referred to as Reasonable Explanation of Income (REI).

REI has only been approved for use in verifying income discrepancies as outlined in the Requirements section of this document; therefore, REI policy cannot be used to verify any other discrepancies. 

The California Department of Health Care Services (DHCS) introduced REI as an additional step in the income verification process for Modified Adjusted Gross Income (MAGI) and Non-MAGI MC eligibility determination at application and RE.

Pursuant to 42 Code of Federal Regulations (CFR) § 435.907(f) and 42 CFR § 435.916(a)(3)(1)(B), initial applications and REs are signed under penalty of perjury.  Therefore, REI that is provided by the applicant/beneficiary does not require a signature under penalty of perjury as it only provides additional clarification to support income discrepancies.

Furthermore, per 42 CFR 435.952(c)(2), when income information attested by the applicant/beneficiary is not reasonably compatible with data obtained through electronic data source(s) or there is a discrepancy, additional information must be requested.  This includes a verbal or written statement from the applicant/beneficiary which reasonably explains the discrepancy.

Income Verification Hierarchy

The income verification hierarchy below must be followed in sequence.  Step 1 only applies to MAGI eligibility.  For Non-MAGI eligibility, the income hierarchy will always start with the Administrative Verification Process, steps 2 through 4.

1. E-verification:  If self-attested income (for MAGI eligibility):
   • Is reasonably compatible, stop here and accept the e-verified income.  
   • Is not reasonably compatible (not e-verified), then proceed to step 2.
     
     Note:  At RE e-verification occurs during the Auto-RE process with the e-HIT; therefore, the e-verification process was already completed.  E-verification must not be attempted again.  
      
2. Ex-Parte:  Review of all available information on file or available through electronic sources to determine MC eligibility.  If ex-parte for income:
   • Is successful, stop here and process with the information found.
     Note:  Successful ex-parte cannot be used to determine Non-MAGI eligibility when benefits result in Share of Cost (SOC) or increase in SOC.
     
     
   • Is not successful, proceed to step 3.  
     
     
3. Reasonable Explanation of Income:  Attempt to resolve income discrepancy between the individual’s self-attested income amount and information received/found through electronic data source for MAGI and Non-MAGI through verbal or written explanation unless it meets an REI Exception*.
   
   • If REI is obtained:
     • Successfully clarifies the discrepancy, then stop here and accept the REI as income verification.
       Note: Successful REI cannot be used to determine Non-MAGI eligibility when benefits result in SOC or increase in SOC.
       
       
     • Does not successfully clarify the discrepancy or REI Exception* applies, then proceed to step 4.  
        
   • *REI Exception:  REI does not apply and should not be obtained in the following situations:
     • Self-attests to income from an employer or source not known to the county; or
     • Does not have a social security number on file, which will prevent the income information from being verified through electronic sources.
       
       Under these situations, income verification must be requested following the income verification hierarchy for applicants/beneficiaries.
        
4. Verification Document:  Request documentation to verify the self-attested income.  As a method of last resort, a sworn/written statement may be accepted as income verification.  The statement must include the date, details about the income, the source, the amount, and it must be signed under penalty of perjury with a handwritten or telephonic signature. 

Reasonable Explanation of Income for MAGI Medi-Cal

When income is not e-verified and ex-parte is not successful, the applicant/beneficiary must be given the opportunity to explain the discrepancy that is consistent with current information found in their case file that resolves/clarifies the difference.  

Reasonable Explanation of Income for Non-MAGI Medi-Cal

Since e-verification of income is not checked/attempted to determine eligibility for Non-MAGI MC via the FDHS, the applicant/beneficiary must be given the opportunity to explain the discrepancies between the self-attested income and discrepancies with data found in the following electronic sources, including but not limited to:

• Medi-Cal Eligibility Data System (MEDS);
• Income Eligibility and Verification System (IEVS); or 
• VCI-R, when applicable. 
  

The guidance on the use of VCI-R for the ABD-FPL program for Non-MAGI determination must be followed. 

Form DHCS 7103, Request for Additional Income Information for Medi-Cal

When the REI cannot be obtained via telephone or in-person, the DHCS 7103 form should be sent in conjunction with the appropriate request for information form (i.e., CW 2200, Request for Verification or MC 355, Medi-Cal Request for Information with its respective due date) in an attempt to obtain REI and/or the verification document.  The DHCS 7103 form cannot be mailed by itself.

List of Reasonable Explanation of Income 

Provided REI Clarifies the Discrepancy

The following list of explanations is not an exhaustive list as an applicant/beneficiary may have other causes that are not included, which can be accepted.  If the applicant/beneficiary provides one of these explanations and is consistent with existing case information, a verification document is not required to process the case.  The REI may be:

1. Changes in employment or income, such as:
   • Job loss;
   • Decrease in hours;
   • Working on commissions;
   • Fluctuating income;
   • Seasonal income; or
   • Self-employment related reasons.
      
2. Changes in household, such as:
   • Marital status; or 
   • Household member moving in or out of the home (e.g., divorce).
      
3. Life events, such as: 
   • Homelessness; 
   • Victim of identity theft;
   • Victim of a natural disaster; or
   • Domestic violence/intimate partner violence.
      
4. Other
   • Do not file taxes; or
   • Have not yet filed taxes.

Provided REI Does Not Clarify the Discrepancy

If an individual provides an REI that is not supported by existing case information, it cannot be considered an explanation that reasonably explains the discrepancy.  For example:

1. If an individual provides an REI that the employer reduced their work hours; however, there is no evidence on file that any prior employment existed.  Then, the REI will not resolve the discrepancy and income verification is needed.
   
   
2. If an individual provides an REI that their income did not e-verify due to a household change (e.g., recent divorce) and nothing on the case file supports that the individual was married.  Then, REI will not resolve the discrepancy and income verification is needed.
   
   
3. Furthermore, an REI that would not resolve an income discrepancy would include, but is not limited to: 
   • Reporting income from an employer not known in the case file (e.g., new employment).
   • Reporting income from the following that are not known to the case file:
     • Dividends;
     • Royalties; or
     • Capital Gains.

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