Blog Home

«
»

Implementing Health Reform: A Summer Lull



August 31st, 2012
by Timothy Jost

Note: This post was edited on September 2 to include descriptions of two Internal Revenue Service (IRS) notices issued on Friday, August 31.

The late summer doldrums and the impending election seem to have dampened federal Affordable Care Act regulatory activities.   In late August, HHS announced additional funding for consumer assistance, exchange establishment, and COOP grants.  HHS has also been holding regional teleconferences with stakeholders to discuss ACA implementation.  Despite the fact that major rules are needed very soon to address numerous 2014 implementation issues (notably the essential health benefits and the 2014 market reforms), the issuance of regulations, and even guidance, has slowed to a crawl.

HHS did, however, release a rule and an interim final rule addressing fairly technical health reform issues in late August. And the Internal Revenue Service (IRS) issued two notices addressing how employers should determine whether employees are full-time or part-time — and consequently whether the employer will owe a penalty if the employee is not offered affordable coverage and obtains subsidized coverage through an exchange — and how employers should comply with the 90-day limit on the waiting period before full-time employers are offered coverage.

Non-Citizen Enrollment In High-Risk Pools

HHS’ interim final rule, released August 30, addresses the question of when a non-citizen may qualify for enrollment in the preexisting condition high risk pool.  Under the Affordable Care Act, citizens or nationals of the United States or persons “lawfully present in the United States” can enroll in the preexisting condition high risk pool if otherwise qualified.

On June 15, 2012, the Department of Homeland Security (DHS) announced that it will consider providing temporary relief from deportation by exercising deferred action on a case-by-case basis with respect to certain individuals under age 31 who meet its guidelines, including persons who came to the United States as children and do not present a risk to national security or public safety.  This policy was adopted by the administration to ensure efficient allocation of Homeland Security resources, and not to confer public benefits on this population.  The interim final rule clarifies that the definition of “lawfully present” for determining PCIP eligibility does not include persons in this “Deferred Action for Childhood Arrivals” category.   These persons are also not eligible for Medicaid or CHIP.

Employment Status And Waiting Periods

On August 31, 2012, the IRS released Notice 2012-58 addressing the question of how full-time employment status is to be determined for deciding whether an employer owes a tax penalty for under section 4980H for failing to provide health insurance (or adequate or affordable health insurance) to full-time employees who consequently receive premium tax credits.  On the same day, the IRS, Department of Labor, and Department of Health and Human Services jointly released notice 2012-59 addressing the question of how the ninety-day waiting period limit for employment-based health insurance enacted by the Affordable Care Act as section 2708 of the Public Health Services Act would be applied.

The application of both the penalty and waiting period is quite straightforward for employees hired on a full-time basis.  An employer that offers health insurance must cover a new full-time employee no later than 90 days after employment.  A large employer (with more than 50 full-time-equivalent employees) must offer adequate and affordable coverage to employees hired as full-time employees or risk owing a tax penalty if an employee goes to the exchange to obtain a premium tax credit.

The problem is how to handle employees who work variable hours and seasonal employees.   Full-time employment is defined as 30 hours a week (or 130 hours a month), but many employees work 20 hours one week and 45 hours the next, or may work 40 hours a week but only for two months a year during the growing or holiday seasons.  The notices address how this situation should be handled.

Notice 2012-58  defines three time periods—measurement periods, stability periods, and administrative periods.  New employees who are not expected to work full time (variable hour or seasonal employees) can be employed without health insurance for an “initial measurement period” of between 3 and 12 months, as determined by the employer, during which the employees hours are tracked.  If at the end of that period it becomes clear that the employee has been working an average of 30 hours a week or more, the employer must offer health insurance to the employee for a “stability period” of at least 6 months or for the length of the initial measurement period, whichever is longer.

Alternatively, if the employee worked on average less than 30 hours a week, the employer can treat the employee as a part-time employee for a subsequent stability period and not offer insurance. The employer can take up to 90 days for an “administrative period” before the stability period begins during which the employer can determine eligibility and add the employee to its health insurance program.  In no event, however, can the combined measurement period and administrative period extend beyond the last day of the first calendar month beginning on or after the one-year anniversary of the employee’s start date.

Ongoing employees with variable hours can also be made subject to measurement periods and stability periods, with the measurement periods lasting 3 to 12 months and the stability periods lasting for the same period of time but in no event less than 6 months, If an ongoing employee is determined to be part-time during any measurement period, the employer can deny coverage to that employee without risking a penalty for the next stability period.  If the employee is determined to be full-time during the measurement period, the employer must insure the employee for the following stability period or risk paying a tax penalty.

In sum, variable-hour employees may be insured one year, not insured the next, depending on their hours of work during the prior “measurement period.”  An employer can take up to 90 days following the measurement period for an administrative period before coverage begins, but if an employee is already covered under a stability period, the employer must make the continuing eligibility determination before the stability period ends to avoid gaps in coverage.

Under notice 2012-59, new employees reasonably expected to work full-time cannot be required to wait more than 90 days to be enrolled in coverage offered by an employer.  An employer may, however, impose a measurement period on variable-hour employees of up to 12 months, consistent with the scheme described in Notice 2012-58, before determining that an employee is in fact a full-time employee.  An employer may also impose other conditions before enrolling the employee, such as requiring an employee to complete enrollment forms or work a reasonable number of hours (not exceeding 1200) before coverage begins, as long as the condition is not designed to avoid compliance with the 90 day waiting period.

Finally, Notice 2012-58 continues the expressed IRS policy of allowing an employer to avoid penalties as long as the employee’s contribution for premiums does not exceed 9.5 percent of the employee’s W-2 wages, regardless of the employee’s actual household income.  The Notice does not address the important question, currently open, of whether affordability is to be calculated based on the employee’s premium share for self-only or family coverage.  Employers can rely on the safe harbors provided by both notices through 2014.

Some method is necessary for determining when employees who are hired without an expectation that they will be full-time employees in fact become full-time employees.  But giving employers more than a year to figure out whether an employee is working full-time seems excessive.  Under previous proposed guidance, a maximum of 6 months was allowed for this determination.  This approach will end up increasing the number of the uninsured, or at least those insured through the exchanges without employer assistance, and is to that extent a disappointment to consumers.

Standard Identification Numbers For Plans And Providers

The other HHS rule, released on August 24, adopts a standard unique health plan identifier (HPID) and requires certain health plans to obtain this identifier.  The rule also expands the coverage of National Provider Identifier (NPI) requirements. Finally, this rule delays the compliance date for the ICD-10-CM and ICD-10-PCS medical data code sets from October 1, 2013 to October 1, 2014.

As a lay person, I find it astonishing that it is still necessary at this late date to promulgate such a rule.  The Health Insurance Portability and Accountability Act of 1996 included a number of provisions intended to simplify, standardize, and secure electronic transactions in health care.  Yet here we are, sixteen years later, attempting to standardize billing numbers.  Health plans still use a variety of nonstandardized numbers for billing and many health care providers still lack a national provider identifier number.  Is any other industry so primitive?

The new rule requires all health plans (including self-insured plans) to obtain a unique ten digit health plan identifier through an enumeration system established by HHS and to use that identifier whenever they engage in HIPAA covered transactions, such as billing or payment.  Recognizing that health plans have a variety of business arrangements, the rule requires all “controlling health plans”—that is plans that control their own business activities, actions, or policies—to obtain a HPID, but allows “subhealth plans,”—plans whose business activities, actions, or policies are controlled by a controlling health plan– to either obtain their own HPID or use that of their controlling health plans.

The rule also allows “other entities” that are not covered entities under HIPAA but may engage in HIPAA-covered transactions–such as third-party administrators, auto medical pay plans, or workers compensation plans–to obtain an “other entity identifier” or OEID. Small health plans (plans with annual receipts of $5 million or less) must obtain an HPID by November 5, 2015.  Health plans that are not small health plans must obtain an HPID by November 5, 2014. Covered entities must use HPIDs in the standard transactions on or after November 7, 2016.

HIPAA-covered health care providers have been required to use a national provider identifier (NPD) since 2004.  Problems have arisen, however, when providers who are not independently covered by the NPD rule (for example, employed nurse practitioners, interns, or residents) prescribe drugs paid for under Medicare Part D and the pharmacy cannot enter an NPD.  The final rule requires organizations that are HIPAA covered health care providers and that employ, contract with, or have as members individual health care providers who are not independently covered by HIPAA and who prescribe to require such individuals to obtain their own NPI from the National Plan and Provider Enumeration System (NPPES.

The individual must disclose the NPI to a pharmacy or other entity upon request in a HIPAA standard transaction when the prescriber writes a prescription while acting within the scope of the prescriber’s relationship with the  provider organization.  The effective date of this rule is May 6, 2013.

A Delayed Start for ICD-10

Finally, the final rule changes the compliance date for providers and plans to begin using the International Classification of Diseases, 10th Revision, Clinical Modification (ICD-10-CM) for diagnosis coding (including the Official ICD–10–CM Guidelines for Coding and Reporting, and the International Classification of Diseases, 10th Revision, Procedure Coding System (ICD–10–PCS) for inpatient hospital procedures) from October 1, 2013 to October 1, 2014.  ICD-10 is the world standard claims coding system and has been for two decades.  Federal law mandates conversion to ICD-10 from the currently used ICD-9 system, which is antiquated and has not kept pace with medical progress.

The purported benefits of the use of ICD-10 coding include standardized medical data for research; accessing and interpolating global health data in any language; drug discovery for complex diseases; individualized medicine (both predictive and preventive); clinical decision support; improved patient outcomes; better monitoring of patients with chronic conditions such as asthma, diabetes, and sickle cell disease; better tracking of injuries that can lead to improved preventive and safety measures;  more accurate payment for services; fewer improper claims; reduction of fraud and abuse; better monitoring of utilization; and support for value-based purchasing.  Nevertheless, HHS found that a quarter of providers will not be ready for ICD-10 compliance by October 1, 2013, and accordingly put off the compliance date.

HHS considered sticking with ICD-9 billing until ICD-11 becomes available, but concluded that that was not feasible.  It will require, therefore, implementation of ICD-10, but with a delayed compliance date.  The delay will save plans and providers $3.6 billion to $7.9 billion dollars, but will impose costs of $1 billion to $6.6 billion dollars on plans, providers, Medicare, and state Medicaid agencies that are in fact prepared for the transition but will now need to delay it.  Presumably we will soon enter the twenty-first century.

Email This Post Email This Post Print This Post Print This Post

Don't miss the insightful policy recommendations and thought-provoking research findings published in Health Affairs.

No Trackbacks for “Implementing Health Reform: A Summer Lull”

1 Response to “Implementing Health Reform: A Summer Lull”

  1. othmano Says:

    Great summary. For additional information on HHS grants related to the Exchange, consumer assistance, etc I would highly recommend the KidswellCampaign health reform tracking tool (http://www.kidswellcampaign.org/tracking ) or statereforum.org. There’s actually been quite of bit of activity on the state level with regard to ACA and other general health reform implementation.

Leave a Reply

Comment moderation is in use. Please do not submit your comment twice -- it will appear shortly.

Authors: Click here to submit a post.