On July 5, 2013, the Department of Health and Human Services released a final rule  to implement and coordinate certain Affordable Care Act’s provisions governing Medicaid and Children’s Health Insurance Program and the health insurance exchanges.  The Medicaid and CHIP provisions finalize changes related to Medicaid and  CHIP electronic eligibility notices and delegation of appeals;  streamline existing Medicaid eligibility rules and expand presumptive eligibility determinations; revise CHIP coverage waiting period and lock-out rules to improve the coordination of CHIP coverage with other coverage; establish the requirements for “alternative benefit plans” to ensure that these benefit packages include essential health benefits and meet certain other minimum standards; and update and simplify complex Medicaid premium and cost-sharing requirements.

The final rule also implements specific Exchange provisions including those related to authorized representatives, notices, and verification of income eligibility and eligibility for qualifying coverage in an eligible employer-sponsored plan. HHS provided a fact sheet summarizing some of the provisions of the final rule.

The rule finalizes a proposed rule that was covered by posts here  and here.  The final rule does not, however, address many of the issues raised by the proposed rule.  Specifically, it does not finalize proposed provisions regarding exchange eligibility appeals and coordination of exchange appeals with Medicaid and CHIP; simplification of Medicaid eligibility categories; certified application counselors in the exchange; and SHOP coordination with the individual exchange.  It also does not finalized provisions implementing various provisions of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).

To my disappointment, the rule fails to finalize provisions with respect to accessibility for the disabled and persons with limited English proficiency, although it notes that the Americans with Disabilities Act and Civil Rights Act require accessibility.  Final regulations will be released on these provisions later, perhaps after implementation begins.  The final rule also delays the effective date of various proposed requirements and gives notice that HHS is considering delaying other provisions.  HHS is in triage mode and is attempting to get the rules out that are absolutely needed to get the ACA implemented; delaying others that can wait.

At over 600 pages, this rule is very long and very technical. Much of the rule’s preface, which fills 509 of its 606 pages, responds in numbing and repetitive detail to the 741 comments HHS received on the proposed rule.  I would not recommend anyone trying to read it through.  Most of the rule’s provisions amend current rules, thus the printed text consists of snippets of additions or modifications which can only be understood by locating the existing rule and putting the change in context.  While a few of its provisions represent major policy initiatives for the ACA, on the whole the rule addresses administrative issues well below the radar screen of most of those who follow ACA developments. I intend to post two summaries of the rule, this one addressing its exchange provisions and a second addressing the changes it makes in Medicaid and CHIP.  These posts will offer an overview of the rule, but cannot begin to capture its full complexity.

Verifying Premium Tax Credit Eligibility

Employer coverage.  The provisions of the July 5 rule that drew the most media attention (indeed one of the few provisions that drew any attention on a day no one was reading the news) address verification of eligibility for premium tax credits.  The Administration had shocked ACA observers by announcing on July 2 that it was delaying until 2015 the enforcement of the ACA’s employer and insurer reporting requirements and employer mandate.  This raised the question of how the exchanges would verify whether or not an applicant for advance premium tax credits had employer coverage and whether or not employer coverage was adequate and affordable.  The final rule answers that question.

It had never been intended that the exchanges would rely on employer and insurer reporting to determine the existence and scope of an applicant’s employer coverage.  Indeed, the premium tax credit eligibility provisions of the ACA itself require that applicants, not employers, provide information on employer coverage. Under the final rule, an applicant for premium tax credits will be required to attest whether or not he or she has employer coverage, and if so its cost and extent.  The application form includes an appendix for this information.   The applicant can, but is not required to, ask the employer to provide information to fill out this form.  The employer is not required to help, but it is hoped that employers will help their employees fill out these forms and make pre-populated forms available to employees.

Once the exchange receives this information, it will check available databases to verify the information, including Office of Personnel Management data for federal employees and the state’s SHOP exchange data.  If the exchange finds information incompatible with the applicant’s attestation, it will ask the applicant to provide evidence to resolve the inconsistency.  In most instances, however, there will be no electronic data available to confirm the attestation.  In these cases, the exchange will select a statistically significant random sample of cases in which it only has the attestation and, after notice to the applicant, contact the employer to verify the information.  If the employer provides information incompatible with the applicant’s claims, the exchange will ask for further proof.  In cases where the employer does not respond, however, or that are not part of the random sample, the exchange will rely on the applicant’s attestation.

HHS will offer to perform this verification procedure for the states, but will not be able to do so technically until 2015.  Because some states were relying on HHS being able to do this for them, the states are excused from conducting the sampling procedure until 2015 as well.

Some commentators have claimed disparagingly that this approach effectively creates an honor system for applicants.  In many respects, however, our income tax system relies on the honor system.  Another provision of the ACA that would have required businesses to file 1099s reporting purchases of goods in excess of $600, which was expected to produce $22 billion in revenue over 10 years, was repealed in 2011, apparently because Congress believed businesses could be trusted to self-report their income

There are, moreover, serious consequences for applicants who misrepresent their employer-coverage.  The exchange must still notify employers every time one of their employees receives premium tax credits.  The IRS will do so as well.  Applicants who receive tax credits for which they are ineligible will have to pay them back when they file their taxes, and the exchange will inform applicants of this fact if it provides the applicant with tax credits pending verification of information provided by the applicant.  Negligent misrepresentation of eligibility information can result in a $25,000 fine, while knowing and willful violations are punishable by a $250,000 penalty.

Income.  The final rule also addresses verification of other premium tax credit eligibility information.  An applicant’s claimed income must be checked against tax and Social Security records.  If an applicant claims that his or her income is greater than that shown by this data, and thus tax credits will be smaller than they otherwise would have been, the applicant’s attestation will be accepted.  If available data indicates that the applicant’s income is in excess of his or her claimed income by a “significant amount” the attestation must be verified, for example by requesting documentation.

If an applicant claims that his or her income has decreased by 10 percent or more below amounts found in available data sources, the exchange must verify the decrease, requesting documentary evidence.  For 2014 only, in cases where electronic data is not available to verify claims of decreased income, the exchanges can limit the documentary verification requirement to a statistically valid sample of applicants and accept attestation from the rest, recognizing that more and better data will be available in future years.  Finally, if electronic data is unavailable for more than 24 hours after an application, an exchange can determine eligibility based on information provided by the applicant subject to further verification.

If Social Security records show that an applicant is dead, the applicant must be given 90 days to prove otherwise. If data matching indicates that an enrollee has died, the exchange must send notice and modify enrollee status after 30 days if no response is received.  Coverage is terminated retroactively as of the date of death.

Authorized Representatives

The final regulation makes other additions and changes to earlier exchange rules as well.  The exchange rule permits an applicant or enrollee (including employees in the SHOP exchange) to designate an “authorized representative” to act on his or her behalf in applying for an eligibility determination or redetermination and for communicating with the exchange and with qualified health plan (QHP) issuers.  An authorized representative can be designated by the applicant or enrollee in writing or appointed under state law, as by a court in a guardianship proceeding.  It is expected that authorized representatives will normally represent individuals who are incapable of or seriously limited in their ability to represent themselves, but they are not limited to this situation.

The representative must protect the confidentiality and security of information regarding the applicant and comply with laws respecting conflicts of interest.  The rule sets out requirements regarding the designation and duties of representatives and provision for the termination of their authority.  The rule does not establish any training standards for representatives, and, although authorized representatives may be necessary in some situations, it seems that there is serious potential here for abuse where the interests of the representative do not align with those of the applicant or enrollee.

The rule finalizes requirements as to notices from the exchange, including a requirement that notices be provided in writing unless an individual or employer elects to receive electronic notices.  An election to receive electronic notices must be confirmed by a letter sent by mail to the individual or employer, except that exchanges can delay compliance with this requirement until 2015.

Coordinating Premium Tax Credit Eligibility With Medicaid And CHIP Eligibility

The exchange regulation provides for the coordination of premium tax credit and Medicaid and CHIP determinations.  A state can either delegate to the exchange responsibility for making Medicaid or CHIP eligibility determinations based on modified adjusted gross income (MAGI) or only permit the exchange to assess eligibility subject to a state determination.  The exchange can only be delegated authority for Medicaid or CHIP eligibility determinations if it is a governmental entity, as these determinations are an inherently governmental function, which cannot be delegated to a private entity.

An exchange that assesses Medicaid eligibility will do so using federal Medicaid and CHIP, rather than state-specific, verification rules and procedures.  An eligibility assessment must be transferred to the state electronically and promptly.  If an exchange evaluates an applicant and determines that the applicant may be eligible for Medicaid on some basis other than MAGI (such as disability), the exchange must provide the applicant with the opportunity to seek an eligibility determination from the state Medicaid agency.

If the exchange assesses an individual to be ineligible for premium tax credits because the individual is eligible for Medicaid or CHIP and the applicant appeals the premium tax credit eligibility determination, the applicant is considered to have withdrawn his or her Medicaid or CHIP application pending the premium tax credit appeal (since he or she would be ineligible for premium tax credits if eligible for Medicaid or CHIP).  If the individual loses the appeal, the Medicaid or CHIP application is reinstated retroactively to determine the effective date for eligibility.  If the exchange assesses an individual as not eligible for Medicaid or CHIP, it must notify the individual of the opportunity to request a full determination by the state, but treat the individual as ineligible for Medicaid or CHIP for purposes of determining eligibility for premium tax credits until the state determines otherwise.  The exchange must adhere to a state appeal decision on Medicaid or CHIP eligibility.

Applicants and enrollees retain residency in an exchange service area when they are temporarily absent.  This does not mean that QHP issuers are required to maintain networks outside of the exchange area, and enrollees absent for a period of time should move their enrollment.  Under the final rule, exchanges need only determine eligibility for catastrophic QHPs within the exchange.  Under the proposed minimum essential coverage rule, however, exchanges will grant individuals who cannot afford health insurance a certificate of exemption that they can use to purchase catastrophic coverage outside of the exchange.

Eligibility for premium tax credits and cost-sharing reduction payments can be redetermined within a benefit year, for example because the enrollee becomes eligible for Medicare or Medicaid or experiences a change in income or family size.  If the exchange receives information that the enrollee’s eligibility has changed because of a factor other than income, family size, or family composition, it must give 30 days notice and then make a redetermination.  If the change is based on one of those three factors, on the other hand, the exchange sends a notice to the enrollee, but if the enrollee does not respond within 30 days, it must maintain current enrollment status.  If a redetermination results in a change in cost-sharing reduction payment eligibility, the exchange must alert the enrollee to the consequences.

The final rule provides effective dates for various kinds of redeterminations and appeal decisions.  It also makes technical changes in the redetermination process, including adding a requirement that if an individual is determined eligible for premium tax credits but does not enroll in a QHP, the individual’s eligibility need only be redetermined once thereafter.  The proposed rule had required combined notices of exchange, Medicaid, and CHIP eligibility by 2015, but the final rule does not finalize this requirement.  It does note, however, that the federal exchange will begin coordinating exchange and Medicaid and CHIP eligibility determinations as of October, 2013.

The rule makes a number of technical changes and a few more substantive changes in the special enrollment period rule.  It clarifies that if an individual or his or her dependent qualifies for a special enrollment period to permit enrollment in or change in a QHP, the entire family qualifies as well.  The special enrollment period for birth, adoption, and placement for adoption is expanded to include foster care placement.  The rule also creates a new special enrollment period for insured employees about to lose qualifying employer-sponsored coverage, who can enroll in a QHP up to 60 days in advance, although they will not qualify for premium tax credits until they actually lose qualifying coverage.  It also clarifies that the special enrollment period for individuals who (or whose dependents) gain eligibility for new or increased premium tax credits or cost-sharing reduction payments only applies to individuals already enrolled in coverage.

Finally, the regulation clarifies that persons enrolled in a QHP may terminate coverage at any time, but it will not be terminated retroactively.  Persons who become eligible for Medicaid or CHIP remain enrolled in the QHP until they are determined eligible (even if eligibility would otherwise be retroactive) and may remain in a QHP and decline Medicaid or CHIP coverage if they choose to do so (but without premium tax credits).  .