Implementing Health Reform: Individual Mandate Deadline Extended; What’s Behind The Policy Cancellation Stories?
October 29th, 2013
Note: This post was updated on November 3 to include a concluding section on the interaction between the Marketplaces and the federal anti-kickback statute. On November 6, a further update was added to the concluding section discussing whether hospitals will be able to pay premiums and cost sharing for low-income enrollees in qualified health plans.
On October 28, 2013, the Department of Health and Human Services issued a “Question and Answer” that extends until March 31, 2014, the time during which individuals may enroll in coverage through the exchanges and still be in compliance with the individual shared responsibility requirement of the Affordable Care Act.
Under the ACA, individuals must, as of January 1, 2014, enroll in “minimum essential coverage” or pay a shared responsibility tax, unless they fit within one of the exemptions established by the ACA. This is the so-called “individual mandate.” One of the exemptions excuses from the penalty individuals who remain uncovered for “a continuous period of less than 3 months.” Under the short coverage gap exemption, a person would be in compliance with the individual responsibility requirement as long as that person had minimum essential coverage by March 31, 2014, as long as that individual remained continuously covered for the remainder of 2014.
March 31 is the last day of the 2014 open enrollment period. The initial open enrollment period is not established by the ACA, but the ACA required HHS to set the initial open enrollment period by July 2012. HHS established March 31, 2014, as the final day of the open enrollment period in the March 2012 final exchange rule. Since any coverage purchased through the exchanges after the 15th day of a month does not take effect until the first day of the second following month, however, it would be necessary to purchase coverage no later than February 15 of 2014 to ensure coverage by March 31.
HHS has broad authority under the ACA to grant an exemption from the shared responsibility provision to any person who has “suffered a hardship with respect to the capability to obtain coverage under a qualified health plan.” In the October 28 release, HHS recognizes a hardship exemption for individuals who purchase coverage through the exchange between February 15 and March 31, 2014, and extends until March 31 the last day of the open enrollment period, the date that individuals may purchase coverage through the exchanges and still avoid the individual responsibility provision. Although individuals must generally apply for hardship exemptions through the exchange, the October 28 guidance permits individuals who are covered by this exemption to claim it on their 2015 tax return. This is the solution suggested here in an earlier post.
This guidance effectively permits individuals to go for four months in 2014 without coverage and still not owe the penalty, since coverage purchased on March 31 would not be effective until May 1. In originally choosing March 31 as the end of the open enrollment period rather than a later date (open enrollment for the first enrollment period for the Part D prescription drug program lasted until May 15), HHS expressed concern about adverse selection if individuals could delay well into 2014 before enrolling in coverage. Until open enrollment closes, there is some chance that an individual may delay enrollment hoping to remain healthy and enroll only if he or she becomes ill or injured.
But enrollment is not immediate—a person waiting until March 31 to enroll will not be insured for another month. Thus, the concern about adverse selection is somewhat misplaced. And the confusion that would have been caused by enforcing the penalty a month and a half before open enrollment ended could have been substantial. Finally, this action may quiet calls for a more extended delay of the individual responsibility penalty, which should be completely unnecessary if healthcare.gov is operational by the end of November, the current target date.
Although HHS has now taken action to extend the individual responsibility enrollment deadline, a more real concern is the December 15, 2013 deadline by which individuals must enroll to ensure coverage as of January 1, 2014. Under the ACA, the federal preexisting condition insurance plan ends as of January 1. Over 100,000 individuals are currently enrolled through this program. Reportedly another 200,000 are enrolled in state high-risk pools, all but two of which (Florida and Colorado) close either on December 31, 2013 or January 1, 2014. All of these individuals will need to enroll through an exchange by December 15 to have continued coverage for 2014 if they need premium tax credits to afford coverage.
The facts behind the cancellation stories. Much has been made in recent days about other individuals whose coverage is being “terminated” or “cancelled” by insurers as of the end of 2013. As Sabrina Corlette and Kevin Lucia point out at Georgetown’s CHIR Blog, this is not an accurate description of what is happening. Individual health insurance is sold on a 12-month basis. At the end of a policy year, an insurer may cease offering a particular policy. It is quite common for insurers to change the terms of individual coverage from year to year and to discontinue certain policy forms. If an insurer discontinues a particular policy, however, the 1996 Health Insurance Portability and Accountability Act requires the insurer to give insureds 90 days notice and to offer the opportunity to purchase other coverage offered by the insurer.
Because of ACA provisions that go into effect in 2014 — such as those requiring coverage of the ten essential health benefits, capping out-of-pocket limits, eliminating annual dollar limits, and standardizing cost-sharing — most currently offered individual plans will no longer be valid for 2014. Many consumers are still covered by plans in which they were enrolled in March of 2010 when the ACA was adopted, so-called “grandfathered plans.” These policies were those referred to by the promise “if you like your health plan, you will be able to keep your health plan.” These consumers can in fact continue to be covered under these plans unless their insurers decide independently to stop offering the grandfathered plans.
Many insurers have also offered individuals early renewal so that 2013 coverage could be extended into 2013, although this practice poses real adverse-selection issues, in particular because individuals who renew early, who will likely be a healthier cohort than 2014 enrollees, will not be part of the risk-adjustment pool for 2014. Individuals who did not renew early, however, will have to purchase new coverage for 2014. They may accept a policy offered by their existing insurer, but if they are eligible for premium tax credits, they must apply through the exchange. And they must do so by December 15, 2013. It is essential, therefore, that healthcare.gov be fixed as soon as possible.
Immigrant Coverage. Finally, HHS and the Immigration and Customs Enforcement Agency have released guidance as to coverage of immigrants through the ACA. The ICE has clarified that it will not use information provided to the exchange — for the purpose of verifying immigration status in order to determine eligibility for premium tax credits, cost-sharing reduction payments, Medicaid, or CHIP — as a basis for pursuing civil immigration enforcement actions against individual applicants or members of their family.
The HHS guidance defines “lawfully present immigrants,” who are eligible for premium tax credits if their modified adjusted gross household income is less than 400 percent of the federal poverty level. The guidance also describes “qualified non-citizens” who are eligible for Medicaid or CHIP. The largest category of these, lawful permanent residents, are only eligible for Medicaid or CHIP after a five-year waiting period (which does not apply to premium tax credit and cost-sharing reduction payment eligibility); however, states may waive this period for pregnant women and children, and 25 states and the District of Columbia have done so.
State and federal exchanges and Medicaid and CHIP agencies cannot ask persons who apply for coverage for their family members but not themselves to disclose their immigration status, and cannot deny benefits to family members if the person applying for benefits for those family members does not provide a Social Security number. Thus, a parent who is not lawfully present in the United States and lacks a Social Security number can apply for coverage for children or other family members who are citizens or lawfully present in the United States, even though the parent himself or herself is not lawfully present.
The Marketplaces and the anti-kickback law. In a letter to Congressman Jim McDermott dated October 31. 2013, Health and Human Services Secretary Kathleen Sebelius stated that for purposes of the federal anti-kickback statute, HHS:
does not consider QHPs (qualified health plans), other programs related to the Federally-facilitated Marketplace, and other programs under Title I of the Affordable Care Act to be federal health care programs. This includes the State-based and Federally-facilitated Marketplaces; the cost-sharing reductions and advance payments of the premium tax credit; Navigators for the Federally-facilitated Marketplaces and other federally funded consumer assistance programs; consumer-oriented and operated health insurance plans; and the risk adjustment, reinsurance, and risk corridor programs.
The Secretary noted that HHS will oversee these programs under its program integrity regulations. The ACA also subjects the exchanges to oversight by HHS and the Office of Inspector General and provides, “Payments made by, through, or in connection with an Exchange are subject to the False Claims Act if those payments include any Federal funds.”
Under the anti-kickback law, it is a felony to knowingly and willfully solicit or receive any remuneration in exchange for referring an individual or ordering a service, or to pay remuneration in exchange for a referral or order of a service, if payment by a federal health care program is involved. For example, a hospital that compensates a doctor in some way for admitting patients or a doctor that accepts compensation from a hospital for admitting patients would violate the law, if the patient’s care was paid for by Medicare or Medicaid. Kickbacks also often form the basis for substantial civil false claims recoveries.
One of the obvious ramifications of the determination that qualified health plans are not federal health care programs, and thus not subject to the anti-kickback law, is that hospitals could pay premiums for low-income QHP enrollees to help them maintain their coverage. This would have been a felony if QHPs were federal health care programs.
On November 4, 2013, however, CMS issued a question and answer dashing (or at least diminishing) hopes that this will be possible. In this Q&A, HHS recognizes that some hospitals, healthcare providers, and other commercial entities are considering supporting premium payments and cost-sharing obligations for enrollees in qualified health plans through the exchanges. CMS states that it has “significant concerns” about this practice “because it could skew the insurance risk pool and create an unlevel plying field in the Marketplaces.” The Q&A states that HHS discourages this practice and urges issuers to reject such payments. CMS states it intends to monitor this practice and take appropriate action if necessary.
Of course, HHS’s concerns are understandable. Hospitals would likely subsidize premiums for individuals using their services, not for everybody in a community, and would be most likely to help those most in need of health care. But it is far from clear what authority CMS has to discourage this practice and what it could do if a hospital chose to subsidize an enrollee’s premiums, since the anti-kickback law does not apply. The regulations permit payment of premiums by third parties. What provisions in the law or regulations would suggest that hospitals should be treated differently from churches that offer assistance to uninsured people? Further clarification on this would be welcome.Email This Post Print This Post
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