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.
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