Yearly Archive: 2013

The next IT challenge for the health benefit exchange marketplace

In addition to the grueling IT challenge state health benefit exchanges have faced processing the initial surge of enrollments for 2014 coverage for individuals and small employers, their next IT test will be how well they serve as agents of the federal Internal Revenue Service.

The exchanges provide a critical tax reporting and monitoring function for the IRS, reporting small employer contributions to exchange qualified health plans (QHPs) offered their workers and advance income tax credits to subsidize QHPs purchased by individuals. The exchanges also track and report changes in monthly income of households purchasing tax-subsidized QHPs. Finally, the exchanges are charged with processing requests under the various exemption categories specified in the Affordable Care Act that allow individuals to avoid tax penalties for not having health coverage starting in 2014 or to qualify to purchase catastrophic plans.

The key test will be how well the exchanges work on an ongoing basis to obtain and process taxpayer reported data and interface with IRS data obtained through the federal data services hub that serves both federally operated and state-based exchanges. How proficiently and accurately the exchanges execute that function isn’t likely to be fully known until early 2015 when individuals and small businesses file their 2014 tax returns. That’s also when individuals must reconcile amounts they received as advance tax credits reported by the exchanges to purchase exchange-based plans with their actual earnings.

Presumably performing this critical tax function will be easier in the nearly three dozen states where the federal government is operating the exchanges. But with the IT snags in the enrollment process, there can be no guarantees it will go smoothly.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Affordability concerns over unsubsidized premiums in individual market

As this blog as previously noted, the Patient Protection and Affordable Care Act’s reform of the individual health insurance market has the potential to generate middle class political blowback among what I’ve dubbed the “401 percenters.” These are households earning more than 400 percent of the federal poverty level — too much to qualify for advance tax credit subsidies to defray premiums for plans offered in the state benefit exchange marketplace. For individuals, that’s an annual income higher than $45,960 and $62,040 for couples.

Two newspaper stories published this month spotlight the 401 percenters with surveys pointing to premium affordability problems, particularly among those in their 50s and 60s. A New York Times analysis found premiums for this age group reaching as high as 20 percent of household income. Even younger people may find coverage unaffordable. For a hypothetical 40-year-old couple, a USA Today analysis found in half of the counties in 34 states where the federal government operates the exchange, the lowest cost bronze plan falls short of the Affordable Care Act’s definition of affordable coverage. Affordable coverage is defined as premiums not exceeding eight percent of income. For older individuals, it’s more problematic. The USA Today analysis found more than one third of the counties don’t offer an affordable plan for any of the four tiers of coverage — bronze, silver, gold or platinum — for those 50 or older and ineligible for subsidies in the exchange marketplace. Affordability is critical to the success of the risk pooling mechanism since affordable premiums bring more covered lives into the pool. Conversely when premiums are unaffordable, the size of the pool is limited, sharply increasing the likelihood of adverse selection taking hold.

The Affordable Care Act allows those whose premiums would place them within the law’s definition of unaffordable coverage to apply for a certificate of exemption from the state exchanges on the basis that payment of such premiums would constitute a financial hardship. In addition to exempting these individuals from the Affordable Care Act’s requirement that all individuals have some form of medical coverage or pay a penalty, the certification entitles them to purchase lower cost “catastrophic” coverage on or off the exchange marketplace. The income of each member of the household must meet the eight percent affordability threshold.

While catastrophic plans offer lower premiums, the tradeoff is high annual deductibles: $6,250 for individuals and $12,500 for families. At least three primary care visits are covered, however. For some households, a higher cost bronze plan that’s Health Savings Account (HSA) compatible may be a better value. Like catastrophic plans, they also come with high deductibles. Deductibles can be paid with pre-tax HSA dollars (but not the premiums). For the self-employed, HSA-compatible bronze plan premiums may be tax deductible. Those in the “401 percenter” cohort would be well advised to consult with their tax advisors for definitive guidance.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Some states expanding Medicaid eligibility through exchange marketplace

Some states that initially decided not to expand Medicaid eligibility guidelines for individuals earning up to 133 percent of federal poverty guidelines as permitted under the Patient Protection and Affordable Care Act are now opting to do so. But instead of directly expanding their existing Medicaid programs, the states want to integrate broadened Medicaid eligibility into their health benefit exchange marketplaces. And they want to do so with some economic incentives for enrollees.

The Washington Post’s Wonkblog reports Iowa joins Arkansas in obtaining a waiver from the U.S. Department of Health and Human Services to use federal dollars funding the Medicaid expansion to subsidize the premiums for commercial plans sold on the exchange marketplace. Iowa’s Marketplace Choice includes a wellness component that waives plan premiums for plan years 2014-16 if participants undergo annual health screenings and follow a doctor-directed wellness regimen.

On December 6, 2013, Pennsylvania submitted its waiver application to the federal government. The Keystone State’s proposed 5-year Healthy Pennsylvania program that would similarly allow those age 21 to 65 earning up to 133 percent of federal poverty to purchase commercial coverage on that state’s exchange. Enrollees earning 50 percent of federal poverty and greater would pay modest premiums that could be reduced with incentives for healthy behaviors and engaging in ongoing work search activities.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Small group most voluntary market segment under ACA – and faces unique viability risks

Of the three major health insurance market segments – large group, small group and individual – small group is the most voluntary market under Patient Protection and Affordable Care Act rules that take effect January 1, 2014.

Large employers, defined by the ACA as employing 50 or more full time workers, are subject to the employer shared responsibility requirement to offer coverage to nearly of these employees. All individuals must have some form of health coverage under pain of a tax penalty for going bare. Small employers on the other hand have the greatest degree of freedom of choice as to whether to play in the small group market.

The ACA strengthens the functionality of the small group market with several provisions. It eliminates risk rating of small employers by health plan issuers. The ACA also enhances the risk pooling power of small employers by combining them into single statewide risk pools. Finally, the law affords small employers the purchasing power of large employers through the Small Employer Health Options Program (SHOP) of the state health benefit exchange marketplace. The SHOP also serves as a benefit administrator of sorts for small employers, helping them select plans and billing them for monthly premiums.

The extent to which these reforms work as intended to shore up the small group market will become clearer over the next few years. There are several factors that could result in the leakage of potential covered lives out of the small group market, potentially adversely affecting the viability of the small group pool and the SHOP, particularly if a significant number of small employers now offering health coverage to their employees adopt them. They include:

  • Opting to participate in “private” exchanges set up by health benefit plan administrators and insurance brokerages instead of the SHOP
  • Offering a defined contribution benefit or stipend to help workers buy their own coverage on the state exchange individual marketplace instead of directly offering coverage
  • Self-insuring for employee health care costs.
 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

New transitional policy to mitigate IT delay affecting Medicaid, CHIP enrollment in federal exchange marketplace

The Obama administration this week announced a new transitional policy for the three dozen states where the federal government is operating state health benefit exchange markets to mitigate an IT glitch affecting enrollees eligible for state assistance programs. The U.S. Department of Health and Human Services issued guidance (.pdf) on the transitional policy November 29. It allows these states to submit abbreviated enrollee data files in order to allow eligibles to enroll for 2014 coverage.

This new, transitional opportunity for states to enroll individuals assessed or determined eligible by the FFM, using the information provided through the AT flat files, will ensure that enrollment can be completed in a timely way without regard to temporary file transfer system issues at either the federal or state level. It will also help states pace their workloads with respect to enrollment of residents who have applied through the FFM.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

States tell Obama: Let the market sort it out

The Patient Protection and Affordable Care Act intervenes massively in the individual and small group health insurance markets. Effective January 1, 2014, it establishes standards on what health plans must offer, who can buy them, when and where they can purchase coverage, and who is eligible for subsidies to defray monthly premiums.

With any market overhaul on the scale of the ACA’s, there is bound to be disruption of the existing marketplace and push back from those adversely affected. Among the first are those who have individual plans that don’t comply with the new ACA coverage standards issued after March 23, 2010 and are thus not grandfathered under the ACA’s grandfathering provision. They are being hit with a double whammy. Not only are these policies being shut down by the end of the year. People who have them are being informed they will have to replace them with richer plans that meet ACA standards – and those more robust plans will cost them more. Their displeasure prompted the Obama administration to accommodate their concerns by giving states the option to keep those plans well into 2015.

So far, a lot of the states including most recently, California, have instead decided they will carry on and let the market sort it out given so little remaining time for regulators, state-operated health exchanges and health plan issuers to make the needed adjustments during the year-end holiday period that would only confuse consumers. State insurance commissioners cited a lack of consensus on the issue in declining a White House meeting this week.

Moreover, some consumers will still have some options to keep their existing coverage if their plan issuer takes advantage of an ACA loophole that allows issuers to “early renew” coverage by December 31, 2013, thereby extending their coverage for as late as December 31, 2014. Still, not everyone with these plans will be happy as they too will likely come with higher premiums thanks to the relentless underlying trend of rising health care costs.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Obama cites “insufficient” ACA grandfather clause for policy cancellation uproar

At a press briefing this week announcing his administration will allow individual and small group health plan issuers to temporarily continue offering plans that don’t meet new Affordable Care Act standards effective January 1, 2014, President Obama blamed a shortcoming in the law for the confusion and angst arising from cancellation notices plan issuers recently sent out informing policyholders their current coverage is being cancelled. That coverage will no longer be ACA compliant effective January 1, the notices explained, thereby requiring policyholders to get into new plans that meet ACA coverage standards that take effect that year. Here’s what the president said, according to a White House transcript of the briefing:

With respect to the pledge I made that if you like your plan, you can keep it, I think — and I’ve said in interviews — that there is no doubt that the way I put that forward unequivocally ended up not being accurate. It was not because of my intention not to deliver on that commitment and that promise. We put a grandfather clause into the law, but it was insufficient.

What is the “insufficient” ACA grandfather clause referred to by the president? It’s at Section 1251(a)(2) of the law:

 (2) CONTINUATION OF COVERAGE.—As revised by section 10103(d)(1). Except as provided in paragraph (3), with respect to a group health plan or health insurance coverage in which an individual was enrolled on the date of enactment of this Act, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage after such date of enactment.

That means those enrolled in individual and small group plans as of the March 23, 2010 ACA enactment date can remain in them. But that’s’ where the insufficiency comes in. It doesn’t apply to plans that came about after the March 23, 2010 ACA enactment date. Those plans aren’t grandfathered and become legally obsolete for plan years starting January 1, 2014 and later. Rather than letting them fall through the cracks and to tamp down outrage over the cancellation notices, the administration is asking plan issuers and state regulators to take it up on a voluntary waiver offer to extend these plans out as far as September 30, 2015.

Congress is also acting to amend Section 1251(a)(2) to bring the orphan plans within the scope of the grandfather clause.

H. R. 3406 and S. 1617 would retroactively extend the clause to state:

(2) CONTINUATION OF COVERAGE- With respect to a group health plan or health insurance coverage in which an individual was enrolled during any part of the period beginning on the date of enactment of this Act and ending on December 31, 2013, this subtitle and subtitle A (and the amendments made by such subtitles) shall not apply to such plan or coverage, regardless of whether the individual renews such coverage. (New text shown in italics).

Passed this week by the House, H.R. 3350 does not amend the ACA but rather enacts new law that allows health plan issuers with individual plans in effect as of January 1, 2013 to continue to sell the plans outside of the state health benefit exchange marketplace in 2014 and deems these plans grandfathered for the purposes of meeting minimum plan benefit standards effective that year.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Health plan issuers could keep pre-ACA plans in place through September 2015 under Obama administration guidance

President Obama this week offered an administrative fix to quell the uproar over the imminent cancellation of health plans in the individual and small group markets that will not be compliant with coverage standards for plans effective after January 1, 2014 under the Patient Protection and Affordable Care Act.

According to a fact sheet posted at whitehouse.gov, it would allow insurers to renew their current policies for current enrollees without adopting the 2014 market rule changes. State health plan regulators would have the final say as to whether plan issuers can leave in place plans based on the pre-1/1/14 standards, which prescribe minimum essential benefits and plan actuarial value.

Plan issuers however already had the option to keep their 2013 plans in place though 2014 before this week’s presidential announcement, courtesy of what has been termed a “loophole” in existing federal regulations. I blogged about the loophole back in April. Plan issuers can use it to issue a one-year policy covering all of 2014 under the pre-1/1/14 rules as late as December 31 of this year and simply call it a 2013 plan, exempting it from Affordable Care Act standards.

With this week’s action, the administration gave plan issuers even more leeway to keep using pre-ACA plans. If the plans were in effect as of October 1, 2013, they could remain in effect through September 30, 2015 — and possibly even later — per this November 14, 2013 letter (.pdf) to state insurance regulators:

Under this transitional policy, health insurance coverage in the individual or small group market that is renewed for a policy year starting between January 1, 2014, and October 1, 2014, and associated group health plans of small businesses, will not be considered to be out of compliance with the market reforms specified below under the conditions specified below. We will consider the impact of this transitional policy in assessing whether to extend it beyond the specified timeframe.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Insurers nervous about Obamacare ‘fix,’ say it could upset markets – Health Exchange – MarketWatch

Insurers nervous about Obamacare ‘fix,’ say it could upset markets – Health Exchange – MarketWatch.

Some health plan issuers didn’t like grandfathering of pre-3/23/10 plans, concerned about the actuarial and risk pool impact of splitting the individual market into two segments: the “old” and the “new” markets as termed by President Obama at today’s briefing.  The old market can operate under pre-Affordable Care Act standards, which mandate specific benefits and minimum actuarial value for all plans sold after January 1, 2014.

Now that states will have the option of temporarily extending post- 3/23/10 plans as Obama announced today, plan issuers complain actuarial projections upon which they based their new offerings on are being thrown out of kilter. They also worry those buying new plans subject to the ACA standards for benefits will be those more likely to use them, threatening the actuarial stability of the risk pool for those covered under the new plans.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Potentially problematic issues in ACA 2014 rollout for exchanges, employers

There are a couple of potentially problematic issues as major components of the Patient Protection and Affordable Care Act roll out now and into 2014 for state health benefit exchanges and large employers.

For the exchanges, it’s verification of household income of applicants for individual coverage. Eligibility for both advance tax credits used to subsidize the purchase of qualified health plans (QHPs) and for Medicaid benefits are means tested based on family size and household income. The rub here is like that standard investment caveat: past performance does not necessary predict future performance. The same principle applies to household incomes, particularly in a sketchy economy still trying to regain solid footing five years after the 2008 economic downturn. What households earned in 2013 does not necessarily mean that’s what they will earn in 2014, the time frame that determines their eligibility for Medicaid and QHP premium subsidies. Timothy Jost describes the problem in this post at the HealthAffairs Blog:

[V]erification in advance of how much lower-income American families will earn over a year is a fantasy. Lower-income Americans often work in part-time, intermittent, or seasonal jobs and are paid hourly wages, making predicting income exactly a year in advance simply not possible.

The agreement to end last month’s federal government shutdown requires state health benefit exchanges pre-verify the eligibility of individuals applying for premium tax credits and cost sharing reductions. By January 1, 2014, the federal Department of Health and Human Services must describe to Congress the procedures used by the exchanges verify eligibility for premium tax credits and cost-sharing reductions. This summer, HHS issued guidance informing exchanges to attempt to verify income using Internal Revenue Service and Social Security income data provided state exchanges via the federal data services hub.

The income verification issue could end up further complicating an already difficult first year rollout of the exchange marketplace. It may also be overblown in terms of concern that those seeking premium and cost sharing assistance and Medicaid will get more than they are entitled. There are well established income tax planning practices enrollees can keep in mind when they sign up for coverage through the exchange marketplace. Employees know if they claim too many withholding exemptions, they could get stuck owing taxes when they file. Most err on the side of caution and declare too few in order to get a refund of what amounts to an interest free loan to the government. Self employeds pay quarterly estimated taxes and know if they pay too little, they face a big tax bill the following year and possible penalty for underpayment of quarterly amounts due. Enrollees can be counseled to keep these comparative examples in mind to avoid a big tax bill as well as potential penalties if they fraudulently misrepresented their incomes in order to qualify for subsidies or Medicaid.

Employers face potential legal hazard in 2014 as they prepare for the large employer mandate that takes effect in 2015. Those that reduce employees’ average weekly hours to less than 30 in order to avoid having them counted as full time employees for the purposes of the Affordable Care Act’s requirement that employers of 50 or more full time employees provide them health coverage could find themselves in court. Employment law firms warn these employers could face legal exposure under Section 510 of the Employee Retirement Income Security Act of 1974 (ERISA), which bars employers from firing, disciplining or discriminating against employees for the purpose of interfering with their access to employee benefit plans. Adam C. Solander and Elizabeth B. Bradley of the law firm Epstein Becker Green explain at Law360:

In the context of the employer mandate, plaintiffs are likely to argue that an employer’s workforce management efforts interfered with an employee’s right to health coverage. The most likely ERISA 510 claim would seem to involve an employee who averaged 30 hours a week previously. If such an employee’s hours were capped below 30 hours a week, arguments could be made that such a change was made with the intent to deny that individual a right to which he or she would have been entitled. While this scenario seems to be the most likely Section 510 claim, arguments could be made that an employer’s workforce management practices could violate Section 510, regardless of the number of hours the employee worked previously.

Provider networks. For health plan issuers, maintaining networks that offer access to a sufficient number of medical providers to people in their communities could prove challenging, particularly as plan issuers narrow their networks in order to hold down premium rates. Exchanges will also be put to the test to ensure revamped provider listings for Qualified Health Plans are accurately listed on the exchanges.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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