Proposed Rule on Exchanges, Health Insurance & More
January 23, 2013
On January 14, 2013, the Department of Health and Human Services (HHS) and Centers for Medicare and Medicaid Services (CMS) released a proposed rule about implementing key Patient Protection and Affordable Care Act (PPACA) provisions relating to Medicaid and the Exchanges.
It sets out eligibility provisions, a structure and options for coordinating Medicaid, the Children’s Health Insurance Program (CHIP) and Exchange eligibility; describes notices from the Exchange to individuals and employers, recommends an employer appeal process, and modifies existing benchmark benefits regulations for low-income adults
It does NOT address the Employer Notice of Exchange that is effective March 1, 2013, for which guidance has not yet been issued.
Comments are due by February 13, 2013.
The following four proposals may be of interest to employers:
1. Certification Program
New language and IRS methodology are proposed to notify an employer that a penalty is due when the employer offers coverage to one or more full-time employees, and one of them obtains a premium tax credit or cost-sharing reduction and enrolls in a Qualified Health Plan (QHP) through the Exchange.
2. Verification of Employer-Sponsored Insurance: HHS Requests Comments
If an individual has access to employer-sponsored insurance that is “affordable” (coverage for the employee must be less than 9.5% of the employee’s W-2 wages with the employer) and provides “minimum value” (the plan pays at least 60% of all covered expenses), he/she is not eligible to receive a subsidy or reduction in cost sharing on the Exchange, even if he/she meets the federal poverty level criteria.
The rule proposes a way for the Exchange to verify whether an employee is enrolled in an eligible employer-sponsored plan, as well as a method to determine whether the employee is eligible to enroll in that plan.
- If the Exchange does not have access to information needed to make a determination, or if an applicant’s information is inconsistent, the Exchange must conduct a statistically significant random sampling of applicants (and their household members) to verify employment. This will also include “reasonable” outreach to employers.
- The Exchange must notify the applicant that it will be contacting any employer identified on the application to verify enrollment/determine eligibility.
- The Exchange must also ensure that individuals receiving advance premium tax payments or cost-sharing reductions are aware that any payments are subject to verification.
- The Exchange can also decide to rely on verification performed by HHS.
Employers may wish to communicate this information to employees once the final rule is issued.
3. Special Enrollment Periods
The proposed rule clarifies that the Exchange must allow a special Exchange enrollment period to an individual whose existing employer-sponsored eligible coverage will no longer be affordable or provide minimum value. This special enrollment period must be held before the end of the employer-sponsored coverage. However, the individual will not be eligible for advance payments of the premium tax credit until the coverage with the employer-sponsored plan ends.
4. Employer Appeal Process: HHS Requests Comments
If an employee applies for coverage through the Exchange and indicates that his/her employer does not offer a minimum value plan and/or that the coverage offered is not affordable, the rules propose that an employer may appeal to the Exchange for the following determinations:
- Its potential tax penalty liability
- A conclusion that it does not provide minimum value coverage and/or
- That the employer does provide such coverage but it is not affordable coverage for the employee referenced in the notice
If an Exchange has not implemented an employer appeal process, then HHS will provide an employer appeal process.
The appeal offers the opportunity for the employer to correct any information the Exchange received from an employee’s application about the employer’s coverage.
This employer appeal process is separate and distinct from the IRS process to determine whether an employer is liable for a tax penalty and any appeal rights regarding the penalty.
HHS' goal is to work closely with the IRS to educate and develop notices that help employers understand their potential tax liabilities and the consequences of a successful appeal.
Timing of Appeals: An Exchange must allow an employer to request an appeal within 90 days from the date notice is sent that the employee is eligible for a premium tax credit or cost sharing reduction. Then, it must allow an employer to submit relevant evidence to support its request for an appeal, such as whether coverage is offered by the employer, whether the employee has selected coverage, etc.
PPACA does not require employer appeals to be reviewed by a federal officer, therefore, an employer will not have the right to elevate an appeal decision made by a state-based Exchange to HHS.
Appeal Methodology: The proposed rule offers a variety of ways for employers to submit an appeal: by phone, mail, in person or via the Internet. The appeal entity will acknowledge the receipt of the appeal request to both the employer and employee.
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