Implementing Health Reform: The Risk Pool, Contraceptive Coverage Litigation, And Other Developments (Updated)
January 1st, 2014
Editor’s note: This post was updated on January 5 with information regarding how CMS will provide a special enrollment period for consumers whose applications were not processed by the December 27, 2013 deadline for coverage beginning January 1 because of exchange technical problems, and on January 6 with information regarding a hardship exemption to the individual mandate for those whose policies are cancelled and who find alternative coverage to be unaffordable.
New Year’s Eve festivities did not interrupt the steady flow of Affordable Care Act developments. First, Marilyn Tavenner, Centers for Medicare and Medicaid Services Administrator, announced on December 31, 2013, that 2.1 million Americans were now signed up for private health plan coverage through federal and state exchanges under the Affordable Care Act and that an additional 3.9 million had signed up for Medicaid in October and November, bringing the total covered under the ACA to 6 million. Second, Supreme Court Justice Sonia Sotomayor on New Year’s Eve temporarily blocked the implementation of regulations that would require coverage of contraceptive items and services by a group of nuns and other organizations covered by the Christian Brothers Employees Benefit Trust, a church benefits plan.
What We Know, And Don’t Know, About The Pool So Far
It is important to understand what the 6 million number means. First, it does not mean that 6 million Americans who were previously uninsured will be newly insured on January 1. Many, probably most, of the 2.1 million private plan enrollees are individuals who were previously insured in the individual market or through the federal and state high-risk pools who will now be covered through the exchanges. One telling statistic from the October and November enrollment reports is that only half those determined eligible for coverage through the exchange were also determined eligible for premium tax credits. Clearly these are people who can afford insurance and were presumably already insured prior to 2014.
Many of the 2.1 million are no doubt individuals who had policies or plans in the individual or small group market that were not renewed for 2014, either because the plans or policies were not grandfathered and did not comply with 2014 market reform requirements or because they were grandfathered but the insurers that offered them unilaterally decided not to extend coverage. Much has been made by opponents of the ACA and by the media of millions of these Americans whose policies have been “cancelled” for 2014. Some of that coverage has suggested that these “cancellations” have left millions of Americans uninsured. In fact, as I have noted earlier, insurers cannot under pre-existing federal law simply “cancel” insurance coverage leaving an individual uninsured. Insurers must, unless they are leaving the market altogether, offer alternative coverage.
Many of those whose coverage was not renewed took the alternative coverage offered by their insurer. Many others accepted offers from insurers to renew their coverage early in 2013 to ensure 2013 coverage for 2014. Yet others took advantage of the “administrative fix” offered by insurers in states that agreed to the administration’s offer to allow individuals to renew 2013 coverage in 2014. Still others may have purchased catastrophic coverage under the special hardship exemption recognized by the administration for individuals whose 2013 coverage was not renewed.
A report issued by the House Energy and Commerce Minority on December 31, 2013, concluded that the number of Americans whose coverage was not renewed and who lacked an opportunity to obtain coverage through one of these pathways was a few thousand, not many millions. The Minority Report also noted that end of the year changes in the individual health policies are normal, not an extraordinary event. Of course, some of those whose policies were not renewed ended up with coverage that cost more; some even ended up with coverage that had higher cost sharing, but very few ended up uninsured. Only 2,400 contacted a special hotline set up by HHS to help individuals whose coverage was not being renewed.
Some of those whose policies were not renewed found less expensive or better coverage in the exchanges. Many also found that they were eligible for premium tax credits that dramatically reduced the amount they have to pay for coverage for themselves and their families. They are undoubtedly among the 2.1 million. Others who were covered by state and federal high-risk pools have also moved to the exchanges, where they will often find less expensive coverage, particularly after premium tax credits are applied. But many of the 2.1 million are individuals who have been uninsured. And many of them are finding affordable coverage. Their stories need also to be heard.
Much has been made about the fact that we know little about the demographic mix of the 2.1 million. Although some states have released demographic data, the federal exchange has not. What the state data show is that in many (but not all) states, enrollees tend disproportionately to be in the 55-64 age range, while fewer are in the 18-34 range. This should not be surprising. Many individuals in the 18-34 age range will be covered by their parents’ plans or by Medicaid. Many individuals in the 55-64 age range, on the other hand, are early retirees or self-employed entrepreneurs, the prime participants in the prior individual insurance market.
It is a commonplace that insurers need young individuals to sign up to balance their risk pools. In fact, however, the most important goal of insurers is to sign up healthy individuals; a healthy 64 year-old is likely to pay three times the premium of a healthy 25 year old. The exchanges do not collect any information on health status, however, and so can provide no information as to the health status of the new enrollees. One can presume that individuals most highly motivated to get insurance are those who have health issues, and that these would be the individuals who persisted through the enrollment process to get coverage in October and November when it took a real effort to enroll. But there is no way to know the true composition of the risk pool at this point.
The 3.9 million Medicaid enrollee tally is less informative. First, it is based on October and November numbers, and on incomplete numbers from those months. Second, it is total enrollment, not additional enrollment due to the Affordable Care Act. According to CMS reports, Medicaid and CHIP enrollment was well above normal levels for October, but preliminary numbers showed below normal enrollment for November. It is true that many Americans will be covered by Medicaid in the Medicaid expansion states in 2014 that would not have been covered in 2013. It is too early, however, to tell how many.
One final important note on enrollment. Because of the difficulties with the website, the massive drives to enroll the uninsured planned at the state and federal level and by organizations like Enroll America have largely been on hold. The focus has been on making sure that the currently insured individuals do not lose coverage. With the exchanges now finally working, we should expect to see millions more enrolled over the final three months of the open enrollment period. We can also expect to see a risk pool that looks very different at the end of March than it looks now.
Contraceptive Coverage And Religious Freedom: Justice Sotomayor Weighs In, At Least Temporarily
In the second big New Year’s Eve development, Justice Sonia Sotomayor blocked for three days the requirement that the employees of the plaintiff religious organizations receive contraceptive coverage. Previous blog posts by myself and others have analyzed in detail the contraceptive regulations and litigation. To summarize briefly, the ACA requires insurers to cover preventive services without cost sharing. The Health Resources and Services Administration, based on recommendations from the Institute of Medicine, identified contraceptive items and services as essential women’s health preventive services.
Some religious groups, notably the Catholic Church, consider the use of contraceptives to be sinful. Other religious groups regard only specific contraceptives that operate post coitus to be sinful. HHS regulations exempted religious employers — basically churches and similar organizations — from having to cover contraceptives for their employees. Religious organizations — entities run by religious groups that provide health, education, charity, or other non-specifically religious services — are not required to provide or pay for contraceptive services themselves. Their employees, however, are entitled to contraceptive coverage through their insurers or self-insured plan administrators. For-profit employers were given no accommodation under the regulations.
Over 90 lawsuits involving over 300 plaintiffs have been filed challenging these regulations. About half of these cases have been brought by private, for-profit, employers, and about half by religious organizations. The cases are primarily being brought under the Religious Freedom Restoration Act, which prohibits a federal regulation from substantially burdening the free exercise of religion unless the regulation is the least restrictive means of achieving a compelling governmental interest. Most of the focus to date has been on the claims of for-profit employers, who, again, receive no accommodation under the ACA regulations. The cases currently before the Supreme Court involve the claims of for-profit employers, addressing the issues of whether for-profit corporations have protected free exercise rights or whether corporations can assert the religious rights of their owners.
A recent series of court decisions, however, have involved the question of whether the regulation providing an accommodation for religious organizations itself substantially burdens their free exercise rights. The organizations argue that the requirement that they self-certify that they are conscientiously opposed to contraceptive coverage and provide their insurer or third-party administrator with a list of their employees, who will then receive contraceptive coverage from the insurer or TPA, is a substantial burden on their free exercise rights and is not the least restrictive means of achieving a compelling governmental interest. To date, courts in 19 out of 20 cases that have considered this issue have granted preliminary relief to the religious organizations, holding that they are likely to succeed on the merits in the litigation.
Some of these have decisions have been supported by lengthy judicial opinions thoroughly analyzing the issues. Others have been, like Justice Sotomayor’s order, brief decisions staying enforcement of the regulation pending further litigation. Several lower courts have rejected the claims of the religious organizations, only to have their decisions stayed by the appellate courts.
The claims of the religious organizations will no doubt have to be sorted out by the Supreme Court. The Court will be asked to hold that religious organizations cannot be required to sign a statement certifying that they are conscientiously opposed to providing a particular health benefit to their workers, even when signing the certification would remove from the religious organization all responsibility for providing the benefit itself. If the Court accepts this position, it would seem to be a significant expansion of religious rights and limitation on workers’ rights.
Accessing care. Two other Affordable Care Act developments also accompanied the end of the year. First, Secretary Sebelius posted on the HHS blog directions for consumers to access care under the Affordable Care Act once their coverage is in effect. Much of this information was covered in my earlier post on accessing ACA care. HHS also announced that it is working with about 7000 individuals who may be eligible for coverage January 1 because problems with the exchange delayed their enrollment in coverage, qualifying them for a special enrollment period.
Tax-Exempt Hospitals and the ACA. Second, the Internal Revenue Service posted two notices regarding the obligations of tax exempt hospitals under the Affordable Care Act. Hospitals that claim tax exemptions under federal law have always had an obligation to be “charities.” The ACA added a new section 501(r) to the Internal Revenue Code clarifying the charitable obligations of tax exempt hospitals.
This section imposes on tax exempt hospitals an obligation to:
- perform a community needs assessment every three years and adopt an implementation strategy to meet the needs identified through that assessment,
- establish a financial assistance policy and a policy relating to emergency medical care,
- limit amounts charged for emergency and other medically necessary care to individuals eligible for financial assistance to not more than the amounts generally billed to insured individuals, and
- make reasonable efforts to determine whether an individual is eligible for financial assistance before engaging in extraordinary collection efforts against the individual.
These requirements have been in place since 2010, but regulations implementing them are not yet final. The first notice provides that, even though regulations proposed in 2012 and 2013 are not yet in effect, hospitals may rely on the proposed regulations pending the issuance of final regulations to establish compliance with the statutory requirements. The second notice provides that a hospital will not lose its tax exempt status for a breach of its obligations under 501(r) that is not willful or egregious if the hospital corrects and discloses the breach under procedures set forth in the notice. Correction includes restoring persons affected by the breach to the position that they would have been in had it not occurred.
The financial assistance obligations of hospitals under the tax laws may play an important role as implementation of the ACA proceeds in 2014. Many low-income Americans will be covered by qualified health plans through the exchange but will have very high deductibles and coinsurance obligations. Some of these individuals nay qualify for reduced-cost care from tax exempt hospitals. Eligibility for financial assistance from tax exempt hospitals is based on financial need, as defined in the hospital’s financial assistance program, not necessarily on insured status. Some individuals with high cost-sharing obligations under ACA plans may qualify, therefore, to have their financial burden moderated by these programs.
Special enrollment periods and hardship exemptions for those with cancelled policies. The Centers for Medicare and Medicaid Services has released a series of frequently asked questions (FAQs) on the REGTAP.info website. (The FAQs are mistakenly listed for January 3, 2013 rather than 2014, so search for them under that date until this gets fixed). Most of these FAQs address the special enrollment period currently being used to process applications for enrollment that were received by the exchanges before the December 27, 2013 deadline but not processed by that time because of exchange error. HHS had earlier said that there were 7000 cases in this status as of December 27.
If the exchange determines that an application has qualified for a special enrollment period due to exchange error, it will communicate this to the appropriate qualified health plan insurer. The 834 enrollment form sent to the insurer will have a February 1, 2014 enrollment date, but the insurer will be instructed to enroll the enrollee as of January 1. A systems limitation will not allow the exchange itself to backdate the enrollment. The enrollee must pay the January premium no later than the due date for the February 1 premium to maintain coverage. The insurer must bill the enrollee for the January premium.
The federal exchange currently does not have the capacity to add dependents to an enrollee’s coverage. Until that capacity is ready, insurers must add dependents themselves at the enrollee’s request. Insurers are not expected to determine if children are eligible for Medicaid or CHIP.
Other FAQs address more technical issues.
On January 3, 2014, CMS also issued two “Questions and Answers on Options Available for Consumers with Cancelled Policies.” This Q&A provides that persons who have received a notice that their individual health insurance policy has been cancelled and who “believe that individual market health plan options” available in their area are “unaffordable” are eligible for a hardship exemption from the individual responsibility requirement. Affected individuals must file a hardship exemption form with the exchange and submit documentation supporting their cancellation claim to an insurer offering catastrophic coverage.
The exemption is curious as it seems to require a belief that coverage is unaffordable, but “affordability” is clearly defined in the statute and regulations (as premiums costing more than 8 percent of modified adjusted gross income) and the affordability exemption is independent of the hardship exemption. The earlier guidance on the cancelled-policy hardship made eligibility for the hardship exemption turn on a policy being cancelled and alternative policies being more expensive.
On January 6, 2014, the IRS released a final rule on the ACA requirement that Blue Cross and Blue Shield plans and other qualifying companies must achieve an 85 percent medical loss ratio to qualify for certain tax privileges. This rule will not be discussed here.Email This Post Print This Post
Don't miss the insightful policy recommendations and thought-provoking research findings published in Health Affairs.