Implementing Health Reform (December 31 update). On December 30, 2015, the Centers for Medicare and Medicaid Services (CMS) released an enrollment snapshot for week eight of the 2016 open enrollment period (December 20 to 26, 2015).
During week eight, 274,659 consumers selected or were reenrolled in plans, bringing the total of plan selections for the 2016 open enrollment period in the federal exchange to over 8.5 million. About 3.6 million individuals (60 percent of the total) actively reenrolled for 2016 while 2.4 million who were automatically reenrolled. During the 2015 open enrollment period, 2.6 million individuals (54 percent of the total) actively reenrolled while 2.2 million were automatically reenrolled. Open enrollment continues through January 31, 2016.
Minimum Essential Coverage Reporting Requirement Delayed
The Affordable Care Act imposes certain reporting requirements on large employers and providers of minimum essential coverage. Insurers, self-insured employers, and government programs must provide 1095-B statements to individuals and file copies with the Internal Revenue Service (IRS) to verify that individuals have minimum essential coverage that complies with the individual responsibility requirement. Form 1095-C statements must be provided to employees and filed with the IRS by employers with 50 or more full-time or full-time-equivalent employees to verify the employer’s compliance with the employer responsibility requirement and the employee’s compliance with the individual responsibility requirement.
Form 1095-Cs are also important for establishing employee eligibility for premium tax credits when individuals are eligible because their employers did not offer affordable minimum value coverage. Employers, insurers, and other providers of minimum essential coverage must also file transmittal forms 1094-B and 1095-B to transmit the individual 1095-Bs and 1095-Cs to the IRS.
These reports were originally to have been filed in early 2015 for the 2014 reporting year, but were delayed for a year. On December 28, 2015, the IRS issued a notice delaying the reporting requirement once again, although this time only for a couple of months. The due date for providing the 1095-B and 1095-C statements to individuals were delayed from February 1, 2015 to March 31, 2015, and the due date for filing the forms, plus the 1094-B and 1094-C transmittal forms with the IRS was delayed from February 29, 2016 to May 31, 2016 (or from March 31, 2016 to June 30, 2016 for electronic filings).
The Department of the Treasury has concluded that some employers, insurers, and other providers of coverage need additional time to adapt and implement systems and gather, analyze, and report the information. Employers and coverage providers are encouraged to provide returns and statements as soon as they are able to do so.
The IRS had already provided that for 2015; it would not impose penalties on reporting entities that attempted to comply with requirements in good faith but that had furnished or filed incomplete or incorrect information. Also under general IRS rules, penalties may be waived if failure to file on a timely basis is due to reasonable cause. The Notice states that employers and other coverage providers that miss the extended due date are subject to penalties, but that the IRS will consider whether they had made reasonable efforts to comply and were taking steps to ensure compliance for 2016. It is not necessary for a reporting entity to request this delay, and the IRS will not formally grant requests for extensions that have already been made.
The notice recognizes that some individual taxpayers may be affected by the delay. Individuals are not eligible for premium tax credits for any month when they were offered affordable, minimum value coverage by an employee or were enrolled in employer coverage. The 1095-C includes information as to whether an employee was offered affordable, minimum value coverage and could assist an employee in determining eligibility for premium tax credits.
The notice points out, however, that if an individual enrolls in marketplace coverage and determined to be eligible for advance premium tax credits because employer coverage is unaffordable, but is later determined to have been eligible for employer coverage, the employer coverage will continue to be deemed to have been unaffordable. The eligibility of employees who have already received advance premium tax credits will remain unaffected by the delay. Also, individuals who in fact enrolled in employer coverage or other coverage outside the marketplace, did not enroll in any coverage, or were otherwise ineligible for premium tax credits will not be affected by the delay.
Some employees, however, who enrolled in coverage through the marketplace but did not receive a determination that employer-sponsored coverage was not affordable could be affected by the extension if they do not receive a 1095-C before they file their tax returns. The IRS notice provides, therefore, that for 2015 only individuals may rely on other information they receive from their employers for purposes of determining eligibility for premium tax credits when they file their returns, and will not need to file amended returns if the information they rely on turns out to be incorrect.
Similarly, individuals who do not receive a 1095-B before filing their income tax returns may for 2015 only rely on other information they have received from their coverage provider as to whether or not they have minimum essential coverage in filing their income tax returns. They do not need to file amended returns if the information they relied on turns out to be incorrect.
The 1095-Cs play an important role in documenting compliance with the employer responsibility requirement. Presumably a three-month delay should not seriously undermine enforcement of this provision. The 1095-Bs and 1095-Cs also, however, play an important role in enforcing the individual responsibility requirement. The delay will likely mean that the IRS will not receive information needed to verify compliance until long after returns are filed and refunds are returned, and in any event will have difficulty determining whether claims that taxpayers make as to compliance with the requirement were made in good faith. Full enforcement of this requirement may, therefore, be weakened by the delay.
IRS Issues Q&A Regarding Information Forms
The IRS also on December 28 issued a series of questions and answers about the health care information forms (1095-A, 1095-B, and 1095-C). The Q&As are intended to educate individual taxpayers and describe the forms, who will provides them, and the purposes they serve. The Q&As also provide information as to when taxpayers can expect the forms and what taxpayers need to do with the forms once they are received.
The Q&A clarifies that taxpayers do not need to wait until they receive 1095-B or 1095-C forms before they file their taxes. These forms provide evidence that a taxpayer has met the individual responsibility requirement for a year and can establish whether a taxpayer lacked affordable minimum value coverage for purposes of qualifying for premium tax credits, but other forms of documentation might also provide evidence of coverage. These include insurance cards, explanation of benefit forms, W-2 or payroll statements, or other statements from insurers. In any event, taxpayers comply with minimum essential coverage filing requirements if they simply check a box on their 1040 that they had coverage for the year — they do not need to file any evidence of coverage with their tax forms.
It is important, however, that taxpayers who had marketplace coverage during the year and received advance premium tax credits wait until they receive their 1095-A form from the marketplace before they file their 2015 tax returns. These forms are supposed to be sent to taxpayers by the marketplaces by February 1, 2016. Taxpayers with coverage through the FFM may also be able to find a copy of the 1095-A at their healthcare.gov account. The information on the 1095-A is necessary for taxpayers to be able to complete the 8962 form to reconcile the tax credits they received with those to which they were entitled.
The Q&As explain that not everyone will receive a form 1095-A, 1095-B, or 1095-C. Individuals who were not insured at all for the entire year, for example, will not receive one of these forms. Only individuals who worked for large self-insured employers will receive a 1095-C. It is also possible that a taxpayer might receive more than one of the forms; for example a person who changed employers or changed from employer to marketplace coverage over the course of the year might receive multiple or different forms.
The fact that an individual receives a 1095-B or 1095-C does not necessarily mean that the individual must file a tax return. An individual who received a 1095-A, however, will in most instances have to file a tax return to reconcile advance premium tax credits received with premium tax credits actually owed. None of the information forms are filed with the tax return. But taxpayers should hold onto all of them for their records as is true with any important tax document.
2014 Issuer Compliance Summary Report
CMS also recently released its 2014 Plan Year Issuer Compliance Summary Report, dated December 16, 2015. This document in fact includes two reports. The first report consists of a compliance review focused on policies and procedures and operational testing for 23 insurers in 15 federally facilitated states. The second report summarizes reviews of 1,147 notices regarding the renewal or discontinuance of a product (including qualified health plans) sent out by 42 insurers in the federally facilitated marketplace (FFM).
The compliance review examined compliance with regulatory requirements in 13 areas: casework review policies, issuer oversight of affiliated agent and broker compliance, delegated and downstream entities, enrollment periods for qualified individuals, enrollment process for qualified individuals, marketing and benefit design, health plan applications and notices, record retention, network adequacy standards, qualified health plan issuer participation standards, rating variations, termination of coverage for qualified individuals, and compliance plans.
The review classified results with respect to each subject area for each insurer into four categories: no policy or procedure; policy not in effect; incomplete policy; and failure of operational testing, which is to say processes or documentation did not fully reflect policies in effect. The review also classified results into “findings,” where non-compliance with specific standards was identified that needed to be corrected and “observations” where potential noncompliance was identified but no correction plan was necessary at this time. During 2014 and 2015 insurers in the FFM were subject to a good faith enforcement policy, focused on education rather than enforcement so there is no indication that enforcement actions were taken against any of the insurers.
The compliance reviews were began in April of 2014 and included nine on-site reviews and 14 desk reviews. They are thus more than a year old and were conducted at a time when insurers were still struggling with a multitude of new requirements. They are unlikely to reflect the current state of compliance.
The reviews were very focused on documentation and data. The results of the reviews will be used for insurer education and technical assistance, updating regulations and guidances, updating compliance protocols, and policy and operations. They will also help insurers achieve better regulatory compliance.
What The Compliance Reviews Revealed
The most widespread problems were identified with respect to oversight of agents and brokers, where 19 of the 23 insurers did not have policies or procedures in effect to identify that affiliated agents and brokers had completed all FFM registration requirements prior to being compensated for enrollments. Thirty-nine percent of insurers had incomplete (still in draft form) policies with respect to some agent and broker issues, 17 percent had policies that were not in effect, and 78 percent had operational issues identified by testing or review of insurer procedures.
By contrast, only two of 23 insurers had incomplete marketing non-discrimination policies or policies not yet in effect. (Under the separate “QHP issuer participating standard,” 30 percent of insurers were identified as not having non-discrimination policies in effect for the entire year). All insurers had policies in place with respect to taglines for people with disabilities or language access problems, but 16 of 23 insurers had operational issues, that is they had not actually included the taglines in their notices.
CMS found multiple problems with respect to lack of policies and procedures, incomplete policies and procedures, and policies not in effect with respect to FFM-specific enrollment policies, policies for processing and reconciling premium tax credit and cost-sharing reduction payments, and policies for accepting payments from third-party organizations. CMS found only one instance where an insurer had failed to report a security breach.
Network adequacy review focused on provider directories and on policies for access to out-of-network providers. Here 48 percent did not have policies in effect for the entire year, 39 percent had incomplete policies, 13 percent lacked out-of-network policies, and 30 percent had operational findings, including findings of provider directory deficiencies.
Insurers Handling Of Discontinuation Notices
The separate notice review report examined the notices that insurers must send out when they renew or discontinue coverage. It focused on the general format and content of notices, the timeliness of notices, the accuracy of identification of the notice of recipient, and evaluation of the deductible, maximum out-of-pocket, and cost-sharing changes for eight benefit types communicated in notices. Notices in most instances complied with format and content requirements. Ninety-seven percent included premium amounts and 98 percent advance premium tax credit amounts. Only 19 percent of notices, however, identified metal level changes that matched CMS records.
Ninety-five percent of notices were sent on a timely basis and 99 percent correctly identified the recipient. On the other hand, only about half of notices included information on deductibles and out-of-pocket limits that matched CMS records. The review also found that in many instances notices did not include correct information as to changes in cost-sharing structure (for example, changes in whether or not a service was subject to a deductible or copayment) or cost-sharing amount.
The report concludes with recommendations for insurers on best practices. The report addressed policies and practices from 2014, the first year in which qualified health plans were offered. During 2014 and 2015, CMS applied a good-faith compliance standard. As of 2016, however, the good faith standard ends and full compliance is expected. Health insurers should, therefore, review carefully the 2014 compliance review and recommendations to ensure that their own policies and practices are in full compliance going forward.