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Implementing Health Reform: State Opt-Outs From Employee Choice In SHOP And Other Developments



June 4th, 2014

If any further evidence were needed that the release of Affordable Care Act regulations has largely ceased for the immediate future, the Office of Management and Budget Spring Unified Agenda of Regulatory and Deregulatory Actions provides it.  The Regulatory Agenda reveals that the Department of Health and Human Services (HHS) is currently working on final rules governing third party payments of qualified health plan (QHP) premiums and fair hearing and appeal procedures for Medicaid and exchange enrollment, as well as proposed rules for excepted benefit plans and, eventually, the 2016 notice of benefit and payment parameters; however, nothing seems likely to be released very soon.

The Internal Revenue Services (IRS) is drafting proposed rules on reporting of minimum essential coverage and final regulations on reporting of information for health insurance exchanges, defining minimum value for employer coverage, and determining whether employment-related health insurance is affordable for the family of an employee (the family glitch). It is also working on further regulations addressing the small employer premium tax credit, minimum essential coverage and other individual responsibility requirement issues.  Most of these are topics on which the IRS has already provided partial rules, interim final rules, or other guidance, and no major new developments are anticipated imminently.

State opt-outs from employee choice in the 2015 SHOP exchange. Despite the lull in rulemaking, HHS continues to be very active at the subregulatory level as it prepares for 2015.  In particular, Centers for Medicare & Medicaid Services (CMS) has been very focused on getting the SHOP exchange operational. CMS failed to implement many elements of the SHOP exchange program for the 2014 open enrollment period, including employee plan choice and aggregation of premiums.  These elements were to be implemented for 2015.

Under the 2015 Exchange Rule, however, state insurance commissioners were allowed to ask that their states be excused from employee choice in the SHOP exchanges by submitting to CMS a written recommendation “adequately explaining that it is the State Insurance Commissioner’s expert judgment, based on a documented assessment of the full landscape of the small group market in his or her State, that not implementing employee choice would be in the best interests of small employers and their employees and dependents.”

State departments of insurance had until June 2, 2014 to ask that their states be excluded from employee choice in the FF-SHOP.  At least fifteen states — Michigan, Alaska, New Hampshire, Maine, Montana, Arizona, Pennsylvania, Alabama, Idaho, Louisiana, Kansas, Oklahoma, South Dakota, and North and South Carolina — have done so. CMS has until June 10 to determine whether to grant the states’ requests.

The insurance commissioner letters are short—some only a page—and basically say that the commissioner has consulted with the small group insurers in his or her state and been told that the insurers believe that employee choice will cause adverse selection and increase premiums.  Assuming that CMS grants all or most of these requests, employee choice will have to wait another year in many of the federal exchange states.

This will contribute further to the red state/blue state divide in health reform. Most of the opting out states have Republican leadership while virtually all of the states operating their own exchanges, which tend to have Democratic leadership, have already moved to employee choice in their SHOP exchanges. It is ironic that employee choice should become a blue state option, as Republicans have traditionally championed consumer choice in health care.

SHOP implementation on CMS’ REGTAP site. There has been a flurry of SHOP implementation activity at CMS’s REGTAP website. REGTAP recently published, for example, a manual on federally facilitated exchange and federally facilitated SHOP transactions. REGTAP has also recently published slides from webinars on SHOP enrollment and operations, as well as an appendix describing SHOP transactions. CMS continues to release FAQs on the FF-SHOP. For example, FAQ 1726 (login required) describes the manner in which premium information will be displayed at the FF-SHOP:

Premium amounts displayed to employers while establishing their offer of coverage will be based on an average of per-member rates for all employees on an employer’s employee roster (assuming all employees enroll in coverage). Employers will be able to establish different percentage contribution amounts for employees and dependents. In addition, employers will be able to establish different percentage contribution amounts for medical and dental plans. Whatever percentage employers establish for these categories will apply to all plans within a metal/coverage level.

A number of other recently released FAQs address FF-SHOP agent and broker issues.

Additional CMS Developments. CMS continues to release a steady stream of guidance on other issues at REGTAP as well. Another REGTAP manual contains business rules for functioning of the edge server, from which the data required for the operating of the reinsurance and risk adjustment programs will be assembled. The manual describes the processing of enrollment, pharmacy, and medical information files. CMS has also released at REGTAP a set of slides providing an overview of the edge server process, as well as a number of frequently asked questions (FAQs) on the risk corridor program.

The FAQs clarify again that insurers must pool all allowable costs and target amounts from all ACA compliant plans, and then allocate the pooled costs and target amounts to QHPs by volume of premiums to determine their risk corridor charges or payments. Still other FAQs address continuing developments with the casework system.

CMS is also improving the Healthcare.gov website. On May 30, 2014, the Centers for Medicare and Medicaid Services released a screening tool to allow individuals to determine whether they qualified for a special enrollment period (and begin the special enrollment process) and to help individuals enroll in Medicaid and CHIP. The screening tool is described in a CMS blog post.

CMS is also implementing other ACA requirements. On May 29, 2014, CMS announced the availability of $40,000,000 to the states for Cycle IV rate review grants. The grants are to be used by the states for establishing or enhancing insurance rate review programs or to establish or enhance data centers to compile and make available medical pricing data.  States that are interested in Cycle IV funding must submit a letter of intent by June 13 and a final application by July 21, 2014.  HHS will announce funding awards prior to September 30, 2014.

Finally, CMS clarified in an FAQ released on June 3, 2014, that although insurers cannot, because of the guaranteed availability requirement, refuse to sell a QHP plan marketed on the exchange outside of the exchange, insurers do not have to market such plans off the exchange; they can direct individuals who want to purchase the QHP to the exchange and work out an ad hoc process for enrolling individuals in the QHP who refuse to purchase it on the exchange.

Court decisions to watch for.  It is likely that the biggest implementation news of this summer will be the Supreme Court’s opinions on the contraceptive cases, due this month, and decisions from the D.C. and Fourth Circuit on the legality of federal exchange premium tax credits, which will likely be released sometime this summer.

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1 Trackback for “Implementing Health Reform: State Opt-Outs From Employee Choice In SHOP And Other Developments”

  1. These states want another Obamacare delay
    June 5th, 2014 at 12:12 pm

2 Responses to “Implementing Health Reform: State Opt-Outs From Employee Choice In SHOP And Other Developments”

  1. timothy jost Says:

    The IRS lists this the subject of a final rule under consideration. http://www.reginfo.gov/public/do/eAgendaViewRule?pubId=201404&RIN=1545-BL49 But a final rule has already been issued on the family glitch, so I don’t know what further action they are considering.

  2. LeAnn Says:

    Professor Jost,
    Love your work. I found this part of your post very interesting: “The Internal Revenue Services (IRS) is drafting … final regulations on … determining whether employment-related health insurance is affordable for the family of an employee (the family glitch).”

    Do you think this means the IRS is working on fixing the “family glitch”?

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