March 6 Update: Report Examines Identity Verification Procedures Of Exchanges
On February 28, 2017, the Treasury Inspector General for Tax Administration released yet another report examining individuals who received advance premium tax credits during 2014 but never filed taxes for that year. The TIGTA specifically reviewed information from the federally facilitated exchange and from the state-based exchanges of New York, California, and Vermont. Individuals who receive premium tax credits are required to file taxes and reconcile that amount of advance premium tax credits they received during a year with the amount they were actually due.
In 2014, about 3.2 million taxpayers received APTC. As of December 31, 2015, 283,738 of these had not filed their taxes or requested an extension. 261,872 of these (92 percent) received APTC through the four exchanges that were analyzed. The analysis concluded that the exchanges failed to verify the identity of 35,276 (13.5 percent) of the nonfilers, who collectively received $112 million in APTC. Of these, however, 32,666 were from California, which until August of 2014 accepted attestation of identity rather than using identity-proofing. The federal exchange used identity proofing and had only 2,604 nonfilers with no identity verification.
The report further found that the exchanges failed to verify exchange eligibility requirements—citizenship or lawful alien status, residency, and nonincarceration—for 11,388 individuals, 11,092 of whom were enrolled through the federal exchange. The exchanges terminated coverage for 6,128 (58 percent) of these individuals. New York and Vermont failed to identify or to establish eligibility for only trivial numbers of nonfilers.
The appendices examine the explanations offered by the exchanges for their failure to verify identity or to verify eligibility. Much has changed since 2014 as procedures have been tightened up and routinized, and the TIGTA made no recommendations for further action.
On March 1, 2017, the Centers for Medicare and Medicaid Services took steps to address another practice that the insurers believe is destabilizing the individual market. These measures, which include both a carrot and a stick, respond to the claims of insurers that individuals who could be receiving Medicare but remain enrolled in marketplace coverage are disproportionately using expensive medical care and driving up premiums for others. One of the measures that CMS is taking, however, appears inconsistent with its current rules.
In addition, a court awarded damages to an insurer seeking risk corridor payments it believes are due under the Affordable Care Act (ACA).
Insurers are prohibited from selling individual coverage to people who are enrolled in Medicare. But insurers cannot terminate or refuse to renew marketplace coverage for individuals with Medicare coverage, as long as the individual remains covered by the same insurance policy or contract. This position was affirmed by the final 2018 payment rule, which stated, “Medicare entitlement or enrollment is not a basis to nonrenew an individual’s health insurance coverage in the individual market under the same policy or contract of insurance.”
It is clear that persons who are eligible for or enrolled in Medicare are not eligible for premium tax credits as they have minimum essential coverage. But some Medicare Part A (hospital insurance) enrollees do nonetheless retain their marketplace coverage. They may do so because they do not realize they cannot get tax credits and have failed to cancel them, or perhaps because even unsubsidized marketplace coverage is less expensive than Medicare Part B (medical coverage) (or Part C, Medicare Advantage) coverage.
Beneficiaries under age 65 who qualify for Medicare because of disability or ESRD may also remain enrolled because they cannot qualify for Medigap coverage in some states. Some may also remain with marketplace coverage because they have passed the time when they could enroll in Part B without a penalty.
The Stick: Telling Medicare-Eligible Marketplace Enrollees To Drop Marketplace Coverage In Favor Of Medicare
On March 1, 2017, CMS announced that it is sending out a notice to contacts for households where there is a member of the household who is age 65 or over and enrolled in both the marketplace and Medicare. The notice states:
If you have Medicare Part A (Hospital Insurance) or are in Medicare Part C (Medicare Advantage), insurance companies are not supposed to enroll you in Marketplace coverage because it duplicates the benefits you already get through Medicare. Your Marketplace coverage doesn’t automatically end if you enroll in Medicare. You should return to the Marketplace to end your Marketplace coverage.
The notice tells marketplace enrollees who are enrolled in premium-free Medicare Part A, but not in part B:
You should enroll in Medicare Part B. Once you get notice of having Part B, you should return to the Marketplace to end your Marketplace coverage. Your Marketplace coverage duplicates your Medicare Part A coverage, and in most cases, your Medicare Part B premiums will be less than your Marketplace plan premium (without APTC). We encourage you to enroll in Medicare Part B as soon as possible.
It further advises marketplace enrollees enrolled in both Medicare Part A and B (or C—Medicare Advantage) to end marketplace coverage. It states that a person who has been enrolled in Medicare and has received premium tax credits may need to pay them back. On the other hand, people who have to pay a premium for Part A (because they did not have enough quarters to qualify for premium-free Part A) may be better off with marketplace coverage, and are advised to compare benefits and premiums under Medicare with that available through the marketplace, and to cancel Part A if they are better off under marketplace coverage.
Why The CMS Notice Seems To Be Misleading
These notices do not correctly reflect the current regulations. Similar notices sent out in 2016 also told Medicare beneficiaries with marketplace coverage that they had to terminate any premium tax credits they were receiving and might have to pay back any tax credits they had received while enrolled in Medicare. But the 2016 notices correctly told dual enrollees that they could keep their marketplace coverage if they wished in lieu of Medicare Part B coverage, as long as they did not receive premium tax credits. The 2016 notices were right, the 2017 notices are misleading.
The Carrot: Equitable Relief
CMS also announced on March 1 a program intended to provide an incentive for marketplace enrollees to leave the marketplace and enroll in Medicare Part B. Persons who become eligible for Medicare Part B must enroll during an initial enrollment period (IEP) that runs for 7 months before or after they turn 65 or a special enrollment period (SEP) that runs for 8 months after they lose employer-sponsored group coverage. Individuals who fail to do so may enroll during an annual three-month general enrollment period, but they face a permanent late enrollment penalty that adds 10 percent to the cost of Part B premiums for each year that the person remained unenrolled. A person who remained enrolled in marketplace coverage after turning age 65 and who failed to enroll in Part B would face this penalty, which might deter the enrollee from enrolling in Part B.
Recognizing that there has been some confusion as to the consequences of people enrolled in marketplace coverage not enrolling in Part B when they become eligible, CMS is offering “equitable relief.” A statute allows CMS to offer such relief to persons whose failure to enroll was inadvertent and due to an error or inaction on the part of the federal government.
For a limited time—between now and September 30, 2017—any person who is currently or was previously enrolled in the individual marketplace and in premium-free Medicare Part A, and who had an IEP that began after April 1, 2013 or was notified of a retroactive premium-free Part A award on October 1, 2013 or later, may enroll penalty-free in Part B. If a person was assessed a penalty on Part B enrollment for enrolling late in 2015, 2016, or 2017 after leaving marketplace coverage, the penalty will be reduced or eliminated. (Individuals enrolled in marketplace coverage through the SHOP have employer coverage and receive an SEP to enroll in Medicare Part B coverage penalty-free after losing their SHOP coverage; they thus do not need the equitable relief.)
The equitable relief is available to enrollees enrolled through either the federally facilitated marketplace or state-based marketplaces. Individuals must request the relief by September 30, 2017 to be eligible. Part B coverage will generally begin the month the individual enrolls, but for those who lose marketplace coverage because of failure to pay premiums, Part B coverage can be retroactive to cover the last two months of the grace period if the enrollee pays full Part B premiums for the retroactive coverage. Individuals who drop marketplace coverage and enroll in Part C (Medicare Advantage) or Part D (drug coverage) will have a special enrollment period that will begin the month the enrollee begins Part B coverage and last for two months. Marketplace prescription drug coverage may be creditable coverage, so a person transferring from marketplace to Part D coverage without a gap of 63 days or more will not face the Part D late enrollment penalty.
The carrot in the March 1 announcement may be more significant than the stick. Equitable relief will certainly be welcomed by individuals who have stuck with their marketplace coverage to avoid the Part B late-enrollment penalty. And it offers significant relief to individuals who are already paying the penalty because they delayed enrollment without understanding the consequences. But the notice may well mislead individuals who are in fact better off in the marketplace than in Part B as to their options going forward.
Court Awards Damages To Insurer Seeking Risk Corridor Payments
In other news, the court in Moda Health Plan v. United States entered a judgment against the United States on March 1 for $209.8 million. The court had awarded Moda—which is seeking the full amount of risk corridor payments it says it is owed under the ACA—a summary judgment on February 9, 2017, but did not determine the amount of the judgment at that time. The case will now presumably be appealed to the federal circuit.