Monthly Archive: December 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 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 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 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 or call 530-295-1473. 

%d bloggers like this: