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Implementing Health Reform: Medicaid And Premium Tax Credit Eligibility And Appeals (Part II)



January 16th, 2013

Editor’s note: This post discusses the second half of a January 14 proposed rule addressing Medicaid and premium tax credit eligibility and appeals, as well as other subjects, under the Affordable Care Act. The first half of the rule was analyzed in a post yesterday.

CHIP And Medicaid Coordination With The Exchanges For 2013

Open enrollment will begin in the exchanges on October 1, 2013, for coverage beginning January 1, 2014.  To ensure seamless streamlined eligibility, state Medicaid and CHIP agencies must also be ready to accept Medicaid and CHIP applications and electronic accounts from the exchanges as of that date.  They must also begin accepting Medicaid determinations made by the exchange as of that date, to be effective on January 1, 2014, or be capable of making their own determinations based on information received from the exchanges by that date.

Medicaid agencies must be capable of making MAGI-based determinations by October 1, whether or not they expand adult Medicaid coverage. (MAGI stands for “modified adjusted gross income.”)  State Medicaid agencies must also begin transferring to the exchange electronic accounts of applicants who are not eligible for Medicaid but may be for premium tax credits as of October 1, 2013.  States are encouraged, but not required, to determine 2013 eligibility based on the single streamlined application submitted after October 1, 2013. HHS is still considering to what extent states will have to implement 2014 changes for the 2013 open enrollment period, and may consider 1115 waiver requests to allow states to apply MAGI-based standards beginning on October 1, 2013.

CHIP Waiting And Lock-Out Periods

The CHIP program currently allows states to require periods of uninsurance between the termination of private group coverage and CHIP coverage to discourage “crowd out” of employer coverage.   Thirty-eight states currently impose waiting periods, lasting from one to 12 months.  A required period of uninsurance is incompatible with the ACA’s goal of universal coverage, and in particular with the minimum essential coverage mandate.

The proposed rule would limit waiting periods to 90 days, the maximum allowable for private coverage under the ACA, with permitted exceptions for certain circumstances like a change of employment or death of the insured parent, unaffordability of employer coverage, or the employer discontinuing coverage.  Children cannot be subjected to a waiting period if they lose coverage under other insurance affordability programs.  Because of the complexity of the issue, federally facilitated exchanges will not be able to make CHIP eligibility determinations in states with waiting periods.

About 29 states charge premiums for CHIP coverage.  About half of these impose a “lock out” period of 1 to 6 months when coverage is terminated for non-payment of premiums.  A number of states also require payment of unpaid premiums before coverage can be reestablished.  The proposed rule would limit lock out periods to 90 days and would not allow states that impose a lock out period to collect past-due premiums.

Premium Assistance

A number of states use Medicaid and CHIP funds to provide assistance to beneficiaries to purchase private insurance.  The NPRM encourages states to use Medicaid or CHIP premium assistance to offer coordinated coverage through qualified health plans to families where some family members (the parents) are covered in the exchange through premium tax credits and others (the children) are eligible for Medicaid or CHIP.  This would both ensure better coordination of access to providers and ease transitions where income fluctuations change eligibility for insurance affordability programs.

States would still need to provide wrap-around benefits for Medicaid beneficiaries, but the private insurer would be primary to Medicaid for services it covered.  A state would need to show that the cost of purchasing coverage through the exchange was comparable to providing it directly through the state’s Medicaid program.

Changes To Medicaid Eligibility Standards

The proposed rule applies several technical rules to determinations of eligibility using MAGI.  First, it clarifies that stepparents, step-children, and step-siblings are treated the same as natural parents, children, and siblings for determining household composition and income.  Second, it clarifies that the 5 percent income disregard is only applied to determine income eligibility for the highest-income category for which a person is eligible for Medicaid.  This interpretation is necessary to allow states to obtain the full federal match available for new eligibles in situations where the 5 percent disregard could have made an individual eligible for an existing category, reimbursed at the lower federal match for non-new eligibles.  Third the rule clarifies that MAGI can be used for determining eligibility for persons who may need long-term care if they were not applying for Medicaid for a category where need for long-term care is a requirement of eligibility.

Fourth, the rule clarifies that some elderly individuals or Medicare enrollees may be eligible for Medicaid as pregnant women or as parents or caretaker relatives based on state MAGI-based Medicaid standards. Fifth, the rule prohibits states from delaying eligibility determinations pending applicant cooperation in seeking medical support.  An applicant who attests to willingness to seek support must be determined eligible, subject to a subsequent termination of eligibility if cooperation in seeking support is not forthcoming.  Finally, the proposed rule would require conversion of the federal minimum income standard for parents (the AFDC standard in effect on May 1, 1988) into a MAGI standard.

Essential Health Benefits In Medicaid

Beginning in 2014, all non-grandfathered health plans in the individual and small group markets must cover the essential health benefits (EHBs).  HHS has allowed the states to define the EHBs in terms of a “benchmark” plan chosen by the state from a list of alternatives provided by HHS, as long as the ten categories of EHBs listed in the ACA are covered. Section 1937 of the Medicaid statute, added by the Deficit Reduction Act of 2005, allows states to provide benefit packages for certain categories of Medicaid recipients defined by “benchmark plans” or actuarially equivalent “benchmark equivalent” plans.

Section 1937 lists four plans that can be used as benchmarks: the FEHBP Blue Cross/Blue Shield preferred option, a state employees plan, the HMO with the largest commercial coverage in the state, or a plan approved by the Secretary of HHS.  The NPRM refers to these 1937 plans as alternative benefit plans.  The ACA amended this provision to require that 1937 plans cover the EHBs as of 2014 and comply with the mental health parity law.  The adult expansion coverage group must receive alternative benefit plan coverage.

All of this is a bit confusing, as the benchmarks chosen by the states for essential health benefit coverage in the individual and small-group market (referred to in the NPRM as “base-benchmark” plans) are not the same as the benchmarks that states can use under 1937.  The NPRM sorts this out by proposing a two step process.  First, states may choose one of the 1937 benchmark plans for defining alternative benefit coverage.  If the option a state picks is also one of the base-benchmark plans available in the private market for defining the EHBs, the standard is met as long as all EHBs are covered.  If not, the state must select one of the base-benchmark plans and compare it to the 1937 plan it picked, and then supplement the alternative benefit coverage as necessary to ensure all EHBs are covered.  HHS solicits comments on how to treat habilitative services, which must be covered under the ACA but are not by many current plans.

The NPRM also notes differences between private market EHB requirements and Medicaid alternative benefit plans.  First, pediatric oral and vision care are covered by Medicaid EPSDT requirements (which apply as a wraparound to alternative benefit plans), thus private market limits on these benefits would not apply.  Second, pharmaceutical availability is determined by the requirements of the Medicaid drug discount program, not by EHB plan formularies.  Several other technical changes are proposed, which will not be discussed here.

Exchange Eligibility And Enrollment

The NPRM deals not only with Medicaid and CHIP, but also with the exchanges, supplementing and in a few respects amending the 2012 exchange final rule.  The exchange part of the NPRM begins with a discussion of “application counselors.”  These were discussed earlier in the Medicaid section.  They are also expected to provide information to individuals and employees on insurance affordability programs, assist individuals and employees in applying for exchange coverage and affordability programs, and facilitate enrollment in exchange coverage and affordability programs.

Their roles, that is, are largely indistinguishable from that of navigators, recognized by the ACA itself, and of consumer assisters, recognized by earlier HHS rules (and may overlap somewhat with that of traditional agents and brokers).  The only distinction that the NPRM offers between application counselors and navigators is that counselors will not be funded by the exchanges.  It is suggested that they might work for health care providers or community-based organizations.  The rule sets out requirements they must meet to be certified, including compliance with security and privacy requirements.  Why they are redundant with navigators and assisters, however, is a mystery the rule does not solve.

The exchange rule also recognizes authorized representatives who can deal with the exchange on behalf of individuals and employees with proper legal authorization, filing applications and responding to redeterminations and other notices.  The proposed rule here is similar to the earlier Medicaid rule and to established practice in Medicaid and other public programs.

The proposed rule includes a number of provisions governing exchange notices, including a requirement that notices may either be sent by mail or, if an individual or employer elects, electronically.  SHOP exchanges may be given additional flexibility to provide notices electronically.

The NPRM proposes a host of technical changes in exchange eligibility standards and determination processes that will not be reviewed in detail here.  One of the more important is that an exchange cannot terminate an enrollee’s eligibility for QHP enrollment if the enrollee is absent temporarily from the exchange service area intending to return.  Provisions are added governing eligibility for catastrophic coverage and specifying that catastrophic plan enrollees are not eligible for premium tax credits.

The ACA requires exchanges to provide notices to employers when their employees receive premium tax credits.  The NPRM adds an additional requirement that the IRS also certify to employers that their employees have received premium tax credits to cover the situation where employees claim the credit on their returns rather than in advance.  Additional procedures are proposed for verifying enrollee attestations as to household income and increases in household income.

Verification Of Employer Coverage

One of the most difficult issues posed by exchange implementation is verification of employer coverage.  Individuals are not eligible for premium tax credits if they are eligible for adequate and affordable employer coverage.  Yet there is no easily accessible database that identifies whether an individual is eligible for employer coverage, how much the employee must pay for it, and whether it provides minimum value.  Beginning in 2015, employers and insurers will need to report information that will assist in making these determinations, but this kind of information will not be available by the fall of 2013 except in a few situations, such as coverage under the FEHBP program or through the SHOP exchange.

The NPRM proposes procedures to be pursued in the interim.  The exchange can verify coverage or delegate the task to HHS.  First, an applicant must attest to the existence, cost, and scope of employer coverage.  Second, the exchange (or HHS) must use all available electronic data sources (including the Office of Personnel Management for federal employees and the SHOP exchange) to verify the existence of or enrollment in employer-sponsored coverage.  Absent inconsistencies in available information, the exchange can proceed on the attestation of the applicant.

Additionally, the exchange must select a statistically valid sample of applicants for whom employer coverage cannot be verified and, after notice to the enrollee, contact the enrollee’s employer to request coverage information.  An eligibility determination cannot be held up pending this verification, but eligibility can be redetermined once information from the employer is obtained.  If the exchange cannot obtain information within 90 days, eligibility will remain unchanged.  The exchange will only provide information to the employer on the enrollee to the extent necessary to identify the employee.

Employers will, of course, be notified that their employees have applied for coverage claiming lack of affordable, adequate employer coverage and can appeal a determination of eligibility.  The exchange will also make available to applicants (and their employers) a voluntary pre-enrollment template that the applicant or the applicant’s employer can fill out to provide information on employer-based coverage.  This will, it is hoped, provide accurate information at minimal cost to the exchange.

Changes In Eligibility

The NPRM contains a number of technical changes regarding exchange redeterminations and changes in eligibility.  Changes in eligibility due to exchange redeterminations and appeals are effective generally on the first day of the month following the date of the redetermination or of notice of the appeal decision, but exchanges can set a date no earlier than the 15th of the month after which changes will not be effective until the first day of the next following month.  Determinations resulting in reductions in premium tax credits or in reductions or increases of cost-sharing reduction payments that are made after the 15th of a month may not be implemented until the first day of the next following month.  Changes in eligibility for premium tax credits or cost-sharing reduction payments due to birth, adoption, placement of adoption, marriage, or loss of minimum essential coverage must be made effective for the first day of the month following the event unless the event falls on the first day of the month.  In some circumstances, such as the birth or adoption of a child, coverage may be effective immediately even though premium tax credit eligibility does not change until the first day of the next month.

The NPRM urges exchanges to join with Medicaid and CHIP agencies to offer combined eligibility determinations, discussed earlier with respect to Medicaid.  It does not require combined determinations prior to January 1, 2015, and specifically notes that in states where the federal exchange is assessing rather than determining Medicaid eligibility, it will only be able to provide a notice attributable to its own determinations prior to that date.

Special Enrollment Periods

The NPRM includes a number of changes in the special enrollment periods included in the current exchange rule, most of which are quite technical.  One change permits an entire family to enroll in or change to a new QHP when one member of the family, including a dependent, qualifies for a special enrollment period.  One triggering event for a special enrollment period is a change in cost-sharing reduction payments. HHS seeks comments on whether a notice of a change in cost sharing should describe specifically how an enrollee’s deductibles, copays, coinsurance or other forms of cost-sharing may change if the enrollee stays with the same QHP.

A qualified individual may apply to the exchange under a special enrollment period if employment-related coverage of the individual or a dependent will cease to be affordable or to offer minimum value within the following 60 days to avoid gaps in coverage, but premium tax credit eligibility will not begin until the employer coverage actually ends.

Appeals Of Exchange Eligibility Determinations

The NPRM contains a new section on appeals of exchange eligibility determinations.  Applicants and enrollees can appeal exchange determinations regarding QHP, Medicaid, CHIP, basic health plan, advance premium tax credit, cost-sharing reduction payments, redeterminations, eligibility for enrollment in a catastrophic plan, and determinations of exemptions from the individual mandate.  Appeals can be made through the exchange appeal process, if the exchange establishes such a process, or to HHS.  Exchange appeal decisions can be appealed to HHS.  Medicaid or CHIP determinations made by the exchange may be appealed to the exchange if the state has delegated appeal authority to the exchange, but can also be appealed to the state Medicaid or CHIP agency. Appeals must be accessible to people with limited English proficiency or disabilities.  Appellants “may seek judicial review to the extent allowable by law,” presumably through the federal Administrative Review Act.

Exchanges must provide applicants notice of appeal rights at the time of application and again at the time of a determination.  Appellants can be represented by legal counsel or by any authorized representative.  Appeal requests can be made by phone, mail, over the internet, or, where possible, in person.  Appeals must be made within 90 days of determinations and further appeals to HHS within 30 days after the exchange appeal decision.  Expedited appeals will be permitted in situations where the appellant’s life or health is at stake.

Eligibility will be maintained at pre-determination levels for enrollees while the appeal is pending, although the appellant may need to pay back premium tax credits at the time of reconciliation if an overpayment results.  Applicants who are denied eligibility will not be considered eligible pending their appeal, but HHS requests comments on the feasibility of providing retroactive coverage where the appeal succeeds.  Appellants will be offered the option of informal resolution as an alternative to adjudication, but the appellant can pursue the appeal if an informal resolution is not satisfactory.  Appellants will receive 15 days notice of the date and time of the appeal, which will be conducted by telephone or video conference.  New evidence can be offered during the hearing process and decisions will be made de novo without giving deference to the initial determination.

Employers may also appeal to the exchange a determination by the exchange that one of their employees is eligible for premium tax credits because coverage is unaffordable, inadequate, or unavailable.  The employer has no right to appeal an exchange decision to HHS, but may appeal to HHS if a state exchange does not offer an appeal process.

Alternatively, the employer may wait until a tax is assessed by the IRS and appeal that determination through IRS processes.  The exchange or HHS must notify the employee if an employer appeals and the employee may participate in the appeal process.  The employer may review information on which the employee’s eligibility was based, but may not have access to the employee’s tax data.  HHS requests comments on whether an employee should be able to appeal an exchange redetermination of eligibility based on a successful employer appeal.  Provision is also made for employer and employee appeals of SHOP determinations.

Medicaid Premiums And Cost Sharing

At its conclusion, the NPRM turns back to Medicaid, and specifically to Medicaid cost sharing and premiums.  The Medicaid statute permits states to impose only “nominal” cost sharing on Medicaid recipients, although an amendment adopted in the Deficit Reduction Act of 2005 allows somewhat higher cost sharing  as well as premiums for recipients with incomes above 100 percent of the poverty level.  Premiums and cost sharing in total cannot exceed 5 percent of family income.

The proposed rule would define nominal cost sharing to permit copayments of up to $4 for outpatient services.  Current rules permit cost sharing for institutional care of up to 50 percent of the cost of the first day of care, which would, of course, be unaffordable to Medicaid recipients.  HHS proposes to replace this with a $4, $50, or $100 maximum.  Comments are also sought as to how to handle cost sharing for community-based long-term care services, which could add up quickly at $4 per encounter.  States may impose cost sharing at up to 10 percent of the cost of services to the state for people between 100 and 150 percent of poverty.

The proposed rule permits differential cost sharing for preferred and non-preferred drugs, with copayments of up to $4 for preferred and $8 for non-preferred drugs for beneficiaries with incomes below 150 percent of poverty.  States may also impose copays of up to $8 for nonemergency use of emergency departments for beneficiaries with incomes below 150 percent of poverty.  Premiums may be imposed on beneficiaries with incomes above 150 percent of poverty subject to certain limits.

Finally, the regulation recognizes that certain individuals are exempt from cost sharing, including pregnant women, Native Americans for services provided through the Indian Health Service, individuals living in institutions, and persons eligible through the breast and cervical cancer program.

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