Editor’s note: This post was updated on May 7 to include material at the end of the post on standalone dental plans and updates on the Centers for Medicare and Medicaid Services’ REGTAP website.
With the 2014 open enrollment period having finally drawn to a close, the implementing agencies have turned their attention to a number of ongoing ACA issues. On May 2, 2014, the Employee Benefits Services Administration (EBSA) of the Department of Labor issued a notice of proposed rulemaking proposing revisions to notices regarding continuation coverage that employers must provide to their employees under the Consolidated Omnibus Reconciliation Act (COBRA) of 1985. EBSA also released two model notice forms for employers to use for providing COBRA notices to their employees, as well as a series of frequently asked questions (FAQs) addressing the relationship between COBRA and the Affordable Care Act and other ACA issues.
Also on May 2, the Department of Health and Human Services published an identical set of FAQs on its website and released a bulletin on new special enrollment periods (SEPs) and hardship exemptions. Finally, late in the day on May 2, 2014, the Internal Revenue Service released a final rule governing information reporting by exchanges.
The Consolidated Omnibus Reconciliation Act of 1985 was, like the ACA, a massive piece of legislation covering a wide variety of topics. Among other things, it contained the original Emergency Medical Treatment and Active Labor Act, requiring hospitals that participate in Medicare and that have emergency departments to screen and stabilize individuals who come to the hospital in an emergency. COBRA has come to be associated most closely, however, with its employer coverage continuation provisions; these allow an individual with employer-sponsored coverage to continue that coverage for a period of time after it would otherwise have been lost — for example, because the individual was laid off or ceased to be a dependent because of divorce or aging out of dependent coverage — by paying 102 percent of the cost of the coverage.
COBRA continuation coverage has for nearly three decades provided a vital protection for individuals who lost coverage within our largely employment-based health insurance system. It has been particularly important for individuals who have lost employer-sponsored coverage but were unable because of age or a pre-existing condition to find affordable coverage in the individual market. With the coming of the ACA, however, coverage in the individual market may often be preferable to COBRA coverage because of premium tax credits and cost-sharing reduction payments, which are available to pay for individual market coverage through the exchanges but cannot be used to pay for COBRA coverage.
COBRA was adopted as an amendment to the Employee Retirement Income Security Act (ERISA) and is enforced by the Departments of Labor, Treasury, and HHS, but the notice and disclosure requirements are the responsibility of Labor, which published the proposed rule. Under COBRA, group health plans must give employees and their spouses (if the employee has a spouse covered by the plan) a “general notice” of their COBRA rights within 90 days of the time the employee or spouse becomes covered. Group health plans must also give an “election notice” to qualified beneficiaries informing them of their right to continuation coverage within 14 days of the plan administrator receiving notice of a qualified event through which the beneficiary is losing coverage.
EBSA proposed rule and model notices. General and election model notices are currently found in an appendix to the regulation. The proposed rule would eliminate these model notices from the regulation and instead provide model notices through guidance to make it easier to update the model notices. On May 2, the DOL published such model general and election notices on the EBSA website. The election model notice specifically states that COBRA coverage does not limit eligibility for marketplace coverage, which may be more affordable. Group health plans are not required to use the model notices, which must in any event be modified if the plan is not a single employer plan, but plans that do use the model notice are presumed to meet COBRA notice requirements.
EBSA/HHS FAQ. The May 2 FAQ sets out the requirements for the COBRA general and election notices, as well as the link to the newest model notices. EBSA also released on May 2 a model notice for employers that maintain group health plans to use to inform their employees that assistance is available under their state’s Children’s Health Insurance Program (CHIP) to pay for employer coverage for eligible children. Employees who reside in states where their children qualify for CHIP premium assistance and who are not already enrolled in employee coverage qualify for a special enrollment period to sign up for employer-sponsored coverage.
The FAQ next addresses a number of questions concerning cost-sharing limits. Large employers and self-insured plans are not required to cover any particular set of benefits, but to avoid the employer responsibility tax they must cover preventive services and cannot impose annual dollar limits or out-of-pocket limits greater than $6,370 for self-only coverage and $12,700 for other than self-only coverage for 2014, and $6600 and $13,200 for 2015. The FAQ answers several questions regarding how to calculate out-of-pocket expenses for determining whether the limit has been exceeded.
First, the FAQ clarifies that if a network-based health plan covers out-of-network providers, the plan may use any reasonable method for counting out-of-pocket spending for out-of-network providers toward the out-of-pocket limit. For example, if a plan pays 75 percent of usual, customary, and reasonable charges for out-of-network providers, the plan could count the enrollee’s 25 percent toward the out-of-pocket limit but not charges above the UCR limit.
Second, the FAQ states that a large group or self-insured plan that covers only generic drugs when generics are available and medically appropriate could provide that some or all of the amount of out-of-pocket expenditures by an enrollee for brand name drugs are not counted against out-of-pocket limits, as long as the plan defers to the enrollee’s physician on the question of whether generic drugs are appropriate or provides some other reasonable exceptions process.
Third, a large group or self-insured plan that imposes reference-based pricing may for the time being refuse to count out-of-pocket expenditures for providers who charge more than the reference price toward the out-of-pocket limit as long as the plan uses a reasonable method to ensure adequate access to quality providers who will accept the reference price. The Departments expressly ask for comments on this approach, recognizing the serious concern that such a pricing structure could become a subterfuge for essentially re-imposing dollar limits on coverage. With respect both to reference pricing and generic-only coverage, the FAQ notes that more stringent requirements may apply for non-grandfathered individual and small group plans, which must cover the essential health benefits.
The FAQ also provides further details as to required tobacco cessation coverage. Group health plans and health insurers will be considered in compliance with the requirement that they provide tobacco cessation coverage if they provide screening for tobacco use and offer tobacco users two cessation attempts a year, each of which would include coverage for four tobacco cessation sessions of at least 10 minutes each and access to all FDA-approved tobacco cessation medication for a 90-day treatment regimen without prior authorization.
Health flexible spending accounts are treated as excepted benefits, not subject to ACA requirements as long as an employer also offers a group health plan not limited to excepted benefits and does not make employer contributions exceeding certain limits. Traditionally, FSAs had to be offered on a “use-it-or-lose-it” basis, but as of 2013, up to $500 in unused amounts may be carried over to the next year. The FAQ clarifies that carry-over amounts should not be taken into account in computing an employer’s maximum contribution.
The FAQ concludes with a couple of questions regarding the summary of benefits and coverage (SBC). Congress adopted the SBC requirement, which applies both to group health plans and insurers, to provide a single, uniform, easily comparable summary of health coverage to facilitate consumer choice and understanding and competition among plans. The SBC requirement was supposed to have gone into effect in 2012. Employers and insurers, however, strenuously resisted the imposition of SBC requirements. In response, the implementing agencies granted, despite the protests of consumer advocates, a considerable number of concessions, which were supposed to last only through 2014. The FAQ extends indefinitely “until further guidance” these concessions, and states that the agencies will continue to emphasize assisting rather than penalizing insurers and others that are making a good faith effort at compliance. The mandate of a uniform, informative, and comparable SBC continues to recede beyond the horizon.
HHS bulletin on special enrollment periods and hardship exemptions. The HHS bulletin issued on May 2, 2014, recognizes three new “exceptional circumstances” special enrollment periods and two new hardship exemptions from the individual responsibility requirement. First, the hardship exemptions that were previously granted for those who enrolled in marketplace coverage by the end of the open enrollment period (March 31, 2014), and for those who were “in line” when the open enrollment period ended on March 31, are extended to all individuals who obtained minimum essential coverage effective on or before May 1, 2014, whether or not they purchased it through the marketplaces. This hardship exemption makes sense from an equity standpoint, but effectively means that anyone subject to the individual responsibility penalty can be exempted from that penalty for up to one third of 2014 as long as he or she had coverage by May 1.
The bulletin next provides a special enrollment period for individuals enrolled in or eligible for COBRA. Persons eligible for COBRA already qualify for a special enrollment period when they become eligible for COBRA because of loss of employer coverage or when their COBRA coverage is exhausted. COBRA beneficiaries can also enroll for qualified health plan coverage during the annual open enrollment period or if they qualify for another special enrollment period, but not otherwise.
Until May 2, however, the COBRA election model notice did not inform COBRA beneficiaries of their right to exchange coverage. Because some potential beneficiaries were not therefore aware of their enrollment rights, HHS establishes a special enrollment period, allowing COBRA beneficiaries in states covered by the FFM until July 1, 2014 to drop COBRA coverage and enroll through the exchange by calling the marketplace call center.
While these provisions will be helpful to individuals who qualify for marketplace coverage, they arguably do not go far enough. COBRA was an earlier attempt by Congress to help individuals who did not qualify for employer coverage, and it should be largely obsolete now that coverage is available to all without health status underwriting and often with premium assistance. But temporary COBRA coverage may still be advisable in some circumstances, for example when marketplace coverage cannot become immediately effective. Moreover, the adverse selection justification for open enrollment periods does not obviously apply when an individual has COBRA coverage already, and individuals who chose COBRA coverage because they did not qualify for premium tax credits could find marketplace coverage much more affordable if their income drops. Individuals should be allowed to move from COBRA coverage to marketplace coverage at any time, and not have to wait for an open enrollment period.
The bulletin next creates a special enrollment period in the FFM for individuals who are insured under 2013 plans that expire during 2014. Such individuals can apply for coverage in the FFM up to 60 days before their plans terminate and may also apply up to 60 days after the plan’s renewal date.
Finally, the bulletin creates a third special enrollment period and second hardship exemption for members of Americorps, VISTA, or the National Civilian Community Corps. These federal programs do not provide coverage to their participants because participants are not program employees. They are often covered by short-term, limited duration coverage through program grantees or thorough self-funded coverage through an entity that contracts with the program, but neither of these forms of coverage qualify as minimum essential coverage. Program participants are thus subject to the individual responsibility tax unless they have other coverage.
The bulletin allows participants in these programs a special enrollment period in the FFM to enroll in marketplace coverage both when they begin service and when their term of service ends. For 2014, program participants are also granted a hardship exemption from the individual responsibility requirement if they have short-term limited duration or self-funded coverage under the program.
IRS exchange information-reporting final rule. The final document released on May 2, 2014, was the Internal Revenue Service’s final rule on information reporting by insurance exchanges (which the IRS calls by their old-fashioned legal name “exchanges,” rather than the contemporary but confusing “marketplaces.”) Exchanges will report information under this rule both to the IRS and to individuals who are enrolled in qualified health plans (QHPs) through the exchange.
The primary purpose of the reporting of this information is to facilitate the computation the amount of advance premium tax credits due to individuals, and to assist in reconciling the amount of advance payments of premium tax credits made with the final amount of the premium tax credit actually due at tax filing time once the enrollee’s actual annual modified adjusted gross household income is known.
Both the federal and state exchanges are responsible for reporting under the rule. The reporting only pertains to individuals who enroll through the individual exchange, not the SHOP (small business) exchange, as individual premium tax credits are not available through the SHOP exchange.
Under the final rule, exchanges must report information both on “tax-filers” — individuals who apply to enroll one or more family members in a qualified health plan with advance tax credits — and “responsible adults” — individuals who enroll family members but do not request advance tax credits. Information must be reported on responsible adults who do not claim advance premium tax credits because they may subsequently claim tax credits when they file their returns, at which time the IRS will need to know tax credit eligibility information.
A tax-filer or responsible adult is the individual to whom tax credits will paid for individuals enrolled through the exchange, and need not be enrolled himself or herself. If more than one tax family enrolls in the same qualified health plan, there will be a tax filer or responsible adult for each family.
Exchanges must report annually to the IRS by January 31 of the year following the calendar year of coverage with respect to every tax filer or responsible adult:
- the individual’s name, address, and taxpayer identification number (TIN), or date of birth if the TIN is unavailable;
- the name and TIN (or date of birth if the TIN is not available) of the individual’s spouse;
- the amount of advance tax credits paid under the plan each month;
- the premium amount for coverage of essential health benefits under the applicable benchmark plan used for calculating advance premium tax credits for individuals who received advance premium tax credits;
- the premium amount for coverage of essential health benefits under the applicable benchmark plan that would have applied for individuals who were enrolled in a QHP but did not receive advance premium tax credits, or, alternatively, a reasonable method that a responsible adult could use to calculate those premium tax credits at tax filing time;
- the name and TIN (or date of birth if a TIN is not available) and dates of coverage for each individual covered by the plan;
- the start and end dates of QHP coverage;
- the full monthly premium for the plan in which the individual enrolled, excluding the premium allocated to benefits that are not essential health benefits and stand-alone dental coverage that is not pediatric dental coverage but including advance premium tax credit amounts;
- the name of the QHP insurer;
- the exchange-assigned policy identification number (which is not the insurer’s QHP policy number, which the exchange might not necessarily know);
- the exchange’s unique identifier; and
- any other information required by the IRS.
Exchanges must also file monthly reports, due on the 15th of each month for the previous month, which must include for QHPs for which advance premium tax credits are made, in addition to the information listed above:
- the names and TINs (or dates of birth when TINs are not available) of the individuals enrolled in the QHP who are expected to be claimed as a tax filer’s dependents;
- employment information available to the exchange (but which the exchange is not obligated to verify), including
- the name, address, and employer identification number of each employer of the tax filer and spouse and each individual covered by the plan, and
- an indication as to whether the employer offered affordable minimum essential coverage that afforded minimum value, and, if so, the amount of the employee’s minimum contribution for self-only coverage;
- the unique identification number used by the exchange to report data that allows the IRS to associate data with the proper account from month to month;
- the insurer’s employer identification number; and
- any other information required by the IRS.
For 2014, monthly reporting will begin on a date to be set by the IRS Commissioner, which may not be earlier than June 15, but must include cumulative data for all months since January 1, 2014.
Exchanges must also report for each calendar month the name and TIN (or date of birth if the TIN is not available) for each individual to whom the exchange has granted an exemption from the individual responsibility requirement, the months for which the exemption is in effect, and the exemption certificate number.
If multiple tax families are included in a single QHP, the exchange must report both annual and monthly information as to each tax family. If family members are enrolled in coverage or receive exemptions through multiple exchanges, an exchange is only responsible for information pertaining to its enrollments or exemptions. The IRS will associate reports from multiple exchanges with the appropriate tax return.
If monthly or annual reports contain erroneous or out-dated information, they must be corrected according to a schedule set out in the rule. Information will be submitted electronically to the IRS. Monthly data will be submitted to the IRS through HHS.
In addition to the information submitted to the IRS, exchanges must provide by January 31 of each year reports to all tax filers and responsible persons containing the name and address of the recipient and all information that must be included in the annual report to the IRS regarding the tax filer or responsible person for the preceding coverage year. The exchange can either send the annual report filed with the IRS or a substitute statement containing the same information. The report can be mailed to the recipient’s last known permanent or temporary address, or can, with proper consent, be sent electronically.
Standalone dental plans. On May 6, 2014, the Centers for Medicare and Medicaid Services published a table showing the number of insurers that intend to offer standalone dental plans in the states that participate in the federally facilitated marketplace (exchange). Qualified health plans are required to offer pediatric dental benefits as an essential health benefit, but can be certified for participating in an exchange without offering pediatric dental coverage as long as the exchange offers at least one standalone dental plan. All states with federal exchanges offer at least one standalone dental plan in both the individual and small group markets except for Mississippi, which only offers standalone plans in the small group market. Texas offers 7 standalone plans in both the small group and individual market; Pennsylvania, 6; Arizona, Florida, Utah, and Virginia 5. New Hampshire and West Virginia offer only one plan in both markets, although they also each offer an additional standalone plan in the small group market. 1.13 million individuals enrolled in a standalone dental plan through the federal and state exchanges during the 2014 open enrollment period.
REGTAP. Several recent posts on the REGTAP website may also be of interest. Under existing regulations, insurers may not offer a product in the individual federal exchange unless they also offer gold and silver metal coverage in the federal SHOP if the insurer 1) has a greater than 20 percent market share in the state’s small group market, or 2) is part of an insurer group that cumulatively has a greater than 20 percent share of a state’s small group market. However, an insurer that does not itself offer small group coverage that is a member of an insurer group that cumulatively has a 20 percent share of the small group market would not have to offer coverage in the SHOP exchange, as presumably another insurer member would offer such coverage. An April 2 REGTAP post lists insurers required to participate in the FF-SHOP in each state.
On April 29, 2014, CMS also posted at REGTAP a lengthy series of slides discussing qualified health plan certification. The materials covered by these slides is quite technical, and much of it has been discussed in my earlier posts concerning the CMS casework process and the SHOP exchanges. A few points are worth noting, however:
- The slides that cover the network adequacy section of the QHP certification process seem to require QHP applicants to fill out a template listing the name, address, provider number, and specialty or type of provider for participating physicians and providers. It had seemed earlier that CMS would not be collecting this information from QHPs as opposed to relying on compliance with state department of insurance and accreditation requirements and attestation. It is not clear whether all insurers must complete this template.
- CMS intends to have a federal SHOP that will allow employee choice and premium aggregation in place by November 15, 2014. It is leveraging a vendor-based solution and off-the shelf product used in several states to set up its SHOP. It will soft launch the SHOP in 3 to 5 states in late October and early November, and go live on November 15 in all FF-SHOP states.
- CMS will terminate the direct enrollment process currently in use for the FF-SHOP in November, but will allow current directly enrolled employers to reenroll through the online portal, which will allow employers to directly enroll or to be enrolled by agents and brokers.
- As of November 15, 2014, the FF-SHOP will not support functionality for providing:
- Consolidated Omnibus Budget Reconciliation Act (COBRA) transactions,
- Stand-alone dental plans coverage with estimated rates,
- Composite premiums,
- Use of agent or broker internet sites, or
- Ability for employers to contribute different amounts for part-time and full-time employees and their dependents.
CMS hopes, however, to provide these features in the future.
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