Making Exchanges Affordable

On August 12, 2011, the Department of Health and Human Services (HHS) and U.S. Treasury Department (Treasury) jointly issued a series of new proposed rules intended to make state health insurance exchanges more affordable pursuant to the Patient Protection and Affordable Care Act (PPACA).  

What is the government trying to accomplish with these rules?
The proposed rules represent a continuing effort on the part of HHS and Treasury to create the groundwork leading to implementation of affordable state health insurance exchanges. Both government agencies share a vision – to provide a one-stop shop in which the following would be accomplished for Medicare and Medicaid eligibles to:

• Improve access to care by filling in coverage gaps for low-income populations;
• Decrease the complexity of and barriers to Medicaid and Children’s Health Insurance Programs (CHIP) eligibility and enrollment;
• Simplify and streamline Medicare and Medicaid eligibility determinations and redeterminations, increasing coverage and reducing administrative costs;
• Provide for coordination of Medicaid and CHIP eligibility procedures with the procedures that will apply to eligibility determinations for the premium tax credits and other insurance affordability programs;
• Implement eligibility parameters for advance payments of premium tax credits and cost-sharing reductions and enrollment in a qualified health plan through the exchanges;
• Establish the criteria (developed by the Treasury) regarding the health insurance premium assistance tax credits; and
• Promote a framework for states to implement changes to the Medicaid program that will take place in 2014 as a result of PPACA.

A copy of the rules is available here. 

How many different proposed rules have been issued by the federal government addressing PPACA’s exchanges?
HHS, Treasury and the U.S. Department of Labor have been working closely to release guidance related to exchanges in several phases, including:

• The first in this series was a Request for Comment relating to exchanges, published in the August 3, 2010, Federal Register (75 FR 45584).
• Second, Initial Guidance to States on Exchanges was issued on November 18, 2010.
• Third, a proposed rule for the application, review, and reporting process for waivers for state innovation was published in the March 14, 2011, Federal Register (76 FR 13553).
• Fourth, two proposed regulations were published in the July 15, 2011, Federal Register to implement components of the exchange and health insurance premium stabilization policies in the Affordable Care Act (76 FR 41866).
• Fifth, a proposed regulation establishing the Consumer Operated and Oriented Plan (CO-OP) Program was published in the July 20, 2011, Federal Register (76 FR 43237).

Click here to view a recent BenefitMall Legislative Alert regarding the background of state health insurance exchanges.

What do the most recent rules seek to accomplish?
The new rules are intended to:

• Create a seamless enrollment process for all individuals and small employer groups.
• Codify the process through which individuals who meet the eligibility requirements will receive premium tax credits to help defray insurance costs. The premium tax credits will assist millions of lower and middle class Americans to enable them to purchase affordable health insurance.
• Expand Medicaid eligibility to individuals with family incomes at or below 133 percent of the Federal Poverty Level (FPL) and eliminate categorical exclusions for all states.
• Simplify eligibility rules for most Medicaid and CHIP beneficiaries by implementing a simplified income standard for determining Medicaid eligibility known as the Medicaid Applicable Modified Adjusted Gross Income (MAGI) standard for most populations the Medicaid program will serve (including children and adults under age 65).
• Create a series of policies to ensure that individuals who do not meet the simplified income test are evaluated for Medicaid eligibility on other bases such as disability, and for potential eligibility for other insurance affordability programs including premium tax credits.
• Streamline the processes designed to create a seamless enrollment experience across Medicaid, CHIP and the state health insurance exchange, which may be accomplished through complete integration of all insurance affordability programs into one administrative entity or through the use of shared services and agreements to promptly and efficiently adjudicate placement for most individuals.
• Further simplify the administrative burden by making Medicaid enrollment renewal policies consistent with other insurance affordability programs by establishing a standard 12-month period of eligibility absent information indicating a change in circumstances.

How will these proposed rules accomplish these goals?
The most recent rules focus on the following: 

• The proposed rules detail the standards and process for enrolling in qualified health plans and insurance affordability programs. They also outline basic standards for the small group employer participation in a Small Business Health Options Program (SHOP).
• The electronic eligibility process will minimize the burden upon applicants and the states to provide and verify applicant information, which should result in near real-time eligibility confirmation and enrollment. The use of mandated, standardized forms and information will facilitate this process.

How do individuals qualify for tax credits for enrolling in a health plan?
Beginning in 2014, federal taxpayers with household incomes between 100 and 400 percent of the Federal Poverty Level will be eligible for premium tax credits for health insurance coverage purchased through a state health insurance exchange for themselves and members of their family. The premium tax credits are paid in advance to the health insurance provider. This advance payment will reduce the monthly premiums owed by families to purchase coverage. The Congressional Budget Office estimates that when PPACA is fully phased in, individuals receiving premium tax credits will get an average subsidy of over $5,000 per year.

In addition, the Treasury’s proposed rules provide the eligibility standards for the premium tax credit as well as guidance on how premium tax credits are to be calculated. The exchange will follow these standards in determining eligibility and calculating advance payments of the premium tax credit.

What will be the financial impact of these changes?
The Congressional Budget Office estimates that an additional 16 million people will be covered under the revised Medicare and Medicaid provisions. These changes in Medicaid will significantly increase the cost to states and the federal government. CMS further estimates that state expenditures on behalf of the additional individuals and families gaining Medicaid coverage as a result of the PPACA will total $2.7 billion in FY 2014, $4 billion in FY 2015, and $4.9 billion in FY 2016. The total increase in state coverage costs for FY 2012 through 2021 is estimated to be $80.3 billion. At the same time, the transitional Federal Medicaid Assistance Percentages for expansion in states is estimated to transfer $35.5 billion from the federal government to the states for 2012 through 2021. Thus, the net impact on the states is estimated to be $44.8 billion in additional coverage-related costs from 2012 through 2021. 

CMS estimates that the federal government will cover about 94 percent of total additional Medicaid expenditures in FYs 2012-2021, with states paying the balance of six percent. The anticipated impact on the federal budget is substantial. CMS estimates that as a result of PPACA, the Office of the Chief Actuary of CMS estimates an increase in net federal spending on Medicaid benefits for the period FY 2014 and later, with the increase estimated to be about $45.4 billion in 2014 and about $202 billion over the three-year period from FY 2014 through 2016. To see the full report please go here.

How is HHS dealing with the fact that only 10 states have passed legislation to establish a state health insurance exchange?
HHS Secretary Kathleen Sebelius has sent a letter to each of the governors of the fifty states. The letter solicits their comments on the proposed rules and provides the governors with her perspective on why each state should take the appropriate steps to establish a state health insurance exchange. In addition to soliciting public comment on these rules, HHS will hold town hall meetings in the following cities to allow people to ask their questions and voice their comments. Two meetings in Denver and Portland, OR already have taken place. Future meetings will take place at these locations and times:

Atlanta, GA – September 13
New York, NY – September 21
Sacramento, CA – September 22
Chicago, IL – September 26

According to Politico.com, “the meetings are invite-only for groups working on implementing exchanges in the states (insurers, consumer advocates, etc.).” If BenefitMall learns anything more about the meetings, we will be sure to notify you.

What are people saying about the proposed rules?
As with many aspects of PPACA, there are supporters and detractors. "Too many American families have been priced out or locked out of the health insurance market. Exchanges will give them control and could save them thousands of dollars a year," said Secretary Sebelius. "I am encouraged by the progress states have made to date and am excited to give them more resources to continue their work."

"Today, we're laying the foundation to provide tax incentives to help working families purchase health insurance," Treasury Secretary Tim Geithner said in a news release. "This new tax credit brings us a big step closer to achieving one of the signature goals of the Affordable Care Act – to provide tens of millions of Americans with access to affordable health insurance coverage.”

On the other side of the spectrum, critics believe "HHS keeps dipping into its ObamaCare slush funds even as states are sending the money back . . . and continues to claim that ObamaCare will save money, when every non-partisan expert attests that its taxes and mandates are already increasing premiums and will reduce jobs," said Michael F. Cannon, director of health policy studies at the Cato Institute in a recent article. "Have they learned nothing from the recession or the debt crisis?" added Cannon, who said that the "'streamlined’ ObamaCare rules . . . run more than 1,000 pages in length.”

How can I comment on these proposed rules?
You may submit comments in one of three ways:

1.  Electronically. You may submit electronic comments via this link.

2.  By regular mail. You may mail written comments to the following address ONLY:

Centers for Medicare & Medicaid Services,
Department of Health and Human Services,
Attention: CMS–0032–IFC, P.O. Box 8013,
Baltimore, MD 21244–8013.
  
Please allow sufficient time for mailed comments to be received before the close of the comment period.

3.  By express or overnight mail. You may send written comments to the following address ONLY:  

Centers for Medicare & Medicaid Services
Department of Health and Human Services,
Attention: CMS–0032–IFC, Mail Stop C4–26–05,
7500 Security Boulevard, Baltimore, MD 21244–1850.

Comments should reference the file code CMS–9974–P 

What is the deadline for public comments?
The deadline for public comments is October 31, 2011, at 11:59 PM ET.  Please remember that all public comments are available for public inspection.

Please visit www.BenefitMall.com to view past Legislative Alerts. Or, you may visit www.HealthcareExchange.com for blog posts, polls, surveys and numerous resources.

The views expressed in this Legislative Alert do not necessarily reflect the official policy, position, or opinions of BenefitMall.  This update is provided for informational purposes.  Please consult with a licensed accountant or attorney regarding any legal and tax matters discussed herein.