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The departments of Health and Human Services and Treasury Aug. 12 issued three proposed rules regarding implementation of new state-based health insurance exchanges, online marketplaces mandated by the health reform law where the uninsured and small business employees will be able to purchase insurance beginning in 2014.
Two new rules proposed by HHS cover how the exchanges will determine eligibility for uninsured individuals and employees of small businesses seeking to buy insurance on the exchanges, as well as how the exchanges will handle eligibility determinations for low-income individuals applying for newly expanded Medicaid benefits.
A rule proposed by Treasury outlines eligibility standards for premium tax credits that will be available to subsidize the purchase of exchange-based insurance by taxpayers with household incomes between 100 percent and 400 percent of the federal poverty level (FPL).
The three rules are scheduled to be published in the Federal Register Aug. 17, according to HHS. There will be a 75-day public comment period.
The goal of the new rules is to make obtaining and paying for health insurance easy and affordable, HHS Secretary Kathleen Sebelius told reporters in a conference call. “If you look at this from a consumer lens, we don't anticipate that individuals, small businesses, and families will have to figure out which door to go through,” she said. “The system will direct them to the right program or plan.”
In a separate statement, Treasury Secretary Timothy Geithner said, “This new tax credit brings us a big step closer to achieving one of the signature goals of the [Patient Protection and] Affordable Care Act—to provide tens of millions of Americans with access to affordable health insurance coverage.”
A proposed HHS rule on Eligibility and Employer Standards outlines standards and procedures for enrolling individuals in the online insurance exchanges through a simplified, coordinated system that verifies income and eligibility in “near real-time.”
The rule also outlines procedures for the Small Business Health Options Program (SHOP), which permits employees of qualified small businesses to buy health insurance on the exchange.
The proposed rule establishes the state health insurance exchange as a central entry point where individuals and employees of small businesses can purchase health insurance from qualified health plans, as well as where low-income individuals can apply for premium tax credits to purchase insurance or apply for Medicaid or the Children's Health Insurance Program (CHIP).
“The eligibility and enrollment function should be consumer-oriented, minimizing administrative hurdles and unnecessary paperwork for applicants,” according to the proposed rule.
The rule explains how, beginning in 2014, income eligibility for both Medicaid and the premium tax credits will be determined on the exchange using a new, simplified calculation based on the applicant's modified adjusted gross income, as defined under the Internal Revenue Code.
To reduce paperwork and red tape in determining income eligibility, the proposed rule notes that the exchanges will be able to access a single online “data services hub” to verify consumer-provided information against federal data sources.
Covering some of the same ground as the Treasury rule, the HHS rule states that a taxpayer may receive advance payment of a premium tax credit if the exchange determines that the taxpayer is expected to have a household income of at least 100 percent but not more than 400 percent of the FPL in the current tax year. In 2011, that amount was between $22,350 and $89,400 for a family of four.
Low-income individuals earning 133 percent of the FPL or less will be eligible for newly expanded Medicaid benefits under the health reform law, also beginning in 2014. HHS estimates that about 16 million previously uninsured individuals will be able to obtain health coverage through this Medicaid expansion.
While eligibility for Medicaid and CHIP is based on current income , eligibility for advance payments of the premium tax credit will be based on annual income. If it turns out the taxpayer earns more than expected during the year, the taxpayer will be liable to repay a certain amount of the advance payments, according to HHS.
HHS acknowledged concerns that this repayment obligation could deter enrollment for the premium credits. To address these concerns, the proposed rule says that states should set up a procedure whereby individuals could report changes in their income as they occur. On average, eligible individuals could expect to receive $5,000 in premium tax credits each year, the Congressional Budget Office has estimated.
The same proposed rule also sets out standards for employer participation in the SHOP exchanges, which permit employees of qualified small businesses to purchase health insurance on the exchange.
The SHOP exchanges will provide information about available insurance options to employers who, in turn, are expected to inform their employees how to obtain insurance coverage on the exchange, according to the proposed rule. After employees have selected and enrolled in a qualified health plan on the SHOP exchange, the employer will submit premium payments directly to the exchange.
The SHOP exchange, which until 2017 will be limited initially to businesses with 100 employees or fewer, may be a separate exchange or combined with the exchange for uninsured individuals.
SHOP exchanges should be available to employees of small companies with more than one location, including in different states, according to the proposed rule, so long as the company does not have more than 100 employees in total.
Commenting on the proposed rule on Eligibility and Employer Standards, Timothy Jost, a health law expert at Washington & Lee University, told BNA, “It looks like it's heading in the right direction in trying to simplify eligibility determinations and make it possible for people who need assistance to get it without too much hassle.”
A second proposed rule from HHS covers how the exchanges will handle eligibility determinations for low-income individuals applying for newly expanded Medicaid benefits.
Under new guidelines in the health reform law, most adults under 65 with incomes up to 133 percent of the FPL will be eligible for Medicaid. Children will be eligible for either Medicaid or CHIP at higher income levels based on income eligibility standards already in effect in their state, according to an HHS fact sheet on the proposed rule.
Income determinations for the newly eligible Medicaid population, as well as Medicaid applicants eligible under the old guidelines, will be handled on the exchanges, according to HHS.
The proposed rule provides specific guidelines for states to use in determining Medicaid eligibility under the new modified adjusted gross income formula. In particular, it clarifies that states do not need to first screen for eligibility using previously used categories other than income, such as disability.
Eligibility verification will be conducted using electronic data when available and states will have flexibility in deciding what data sources they rely on, the proposed rule states.
The proposed rule also sets out new federal matching rates for Medicaid (federal medical assistance percentages, or FMAP) that will provide 100 percent federal funding for newly eligible Medicaid enrollees through 2016 and gradually decline to a 90 percent matching rate by 2020.
In addition, the rule proposes new federal matching rates for so-called expansion states that expanded Medicaid coverage for adults before enactment of PPACA.
The third proposed rule released Aug. 12 covers premium tax credits available to individuals and families with incomes between 100 percent and 400 percent of the FPL. The CBO has estimated the credit will help about 20 million Americans to purchase health insurance on the exchanges.
The amount of the tax credit will be tied to the amount of the insurance premium, according to the rule, allowing older Americans who face higher premiums to receive a greater credit.
The amount of the credit is generally fixed, based on a so-called benchmark plan which may be age-adjusted, thereby allowing families that choose a less-expansive insurance plan to pay less, according to a Treasury fact sheet.
The tax credits will not be available to employees who receive a “minimum” level of insurance coverage through their employer, although the IRS has not yet issued any rules or guidance on what constitutes a minimum level of coverage.
The IRS said it is contemplating whether to provide “appropriate transition relief with respect to the minimum value requirement for employers currently offering health care coverage.”
In addition, “solely for purposes of applying the employer responsibility provisions, we anticipate that future guidance will provide a safe harbor permitting employers to base the affordability calculation on the wages they pay their employees instead of employees' household income,” IRS said.
Businesses employing more than an average of 50 full-time workers over the course of a year are required to report to the government the value of their health care plans and face tax penalties of up to $3,000 per employee, per year, if they fail to offer affordable coverage.
PPACA will also require employers to report to the government which employees are not covered by insurance and are eligible to participate in health insurance exchanges, Treasury Department officials said during a conference call.
IRS said the proposed rule would not require a taxpayer to repay any portion of an advance premium credit payment if a family ends the year with household income of less than 100 percent of the FPL.
The proposed rule—reflecting changes made by Congress in the 1099 Taxpayer Protection and Repayment of Exchange Subsidy Overpayments Act of 2011 (Pub. L. No. 112–9)—also states that any repayments of the advance credit are capped.
Repayments are capped at $300 for single taxpayers ($600 for married couples) with income below 200 percent of poverty level and $1,250 for single taxpayers ($2,500 for married) with household incomes of 300 percent to 400 percent of poverty level. Under the original health care overhaul legislation, the repayment amount was set at a maximum of $400.
By Ralph Lindeman and Brett Ferguson
The proposed HHS rule on Enrollment and SHOP Exchanges is available at http://op.bna.com/hl.nsf/r?Open=jcon-8knrjf . The proposed HHS rule on Medicaid Eligibility is available at http://op.bna.com/hl.nsf/r?Open=jcon-8knrkr . The proposed Treasury rule on Premium Tax Credits is available at http://op.bna.com/hl.nsf/r?Open=jcon-8knrlc . More information about the rules, including fact sheets, can be found at http://www.healthcare.gov/news/factsheets/exchanges08122011a.html .
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