Thursday, December 22, 2016

ACA Round-Up: Robust Marketplace Enrollment, CBO On Defining Health Insurance, And More

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As of December 19, 2016, the extended deadline for enrolling in coverage for January 1, 2017, 6,356,488 consumers were covered by plans selected on HealthCare.gov, the Department of Health and Human Services announced on December 21. This was over 400,000 more than last year when applications closed for January 1, 2016 coverage on December 17, 2015. This included 2,049,127 new consumers and 4,307,361 returning consumers. Over 2.3 million signed up between December 11 and 19.

These numbers include neither state marketplace enrollees nor 2016 enrollees who will be batch auto-enrolled for 2017 over the next few days. In 2016, state marketplace enrollees accounted for 24 percent of the total enrollees, while auto-enrollments accounted for 18 percent.

The states with the highest enrollment numbers were Florida with 1.3 million, Texas with 776,000, and North Carolina with 369,000. Miami alone accounted for 490,000 and Atlanta for 271,000. Although no demographic data was released with the report, HHS stated that there was a 36 percent increase in enrollment using mobile devices, which could indicate strong enrollment by younger enrollees.

This latest enrollment snapshot was only one of several recent developments regarding the Affordable Care Act and health reform. On December 20, the Congressional Budget Office (CBO) released two blog posts, the first discussing how it intends to estimate insurance coverage under proposals to replace the ACA using refundable tax credits, and the second explaining how the CBO defines and estimates the extent of insurance coverage for people under age 65.

Although the December 16, 2016 posting of the payment notice and letter to issuers marks the end of major ACA regulatory activity for 2016, new guidance from various federal agencies continues to appear. On December 20, the Departments of Health and Human Services, Labor, and Treasury released a new ACA-related frequently asked question (FAQ) guidance. This post also covers FAQs released by HHS on December 16 on identifying second-lowest-cost silver plans and a December 15 Government Accountability Office (GAO) report describing the GAO's ability to enroll fictitious applicants in the marketplaces.

CBO On Defining And Estimating Health Insurance

The Affordable Care Act established nationwide standards for coverage in the individual (nongroup) health insurance market both in terms of extent (actuarial value) and breadth (comprehensiveness) of insurance coverage. Premium tax credits are available under the ACA only for coverage meeting these standards.

Some of the ACA replacement plans currently being considered by Congress would offer tax credits for the purchase of health insurance but do not specify the benefits that this insurance would have to cover or how extensive that coverage would have to be. The task of defining qualifying health insurance coverage would be left to the states.

In evaluating health reform proposals, the CBO has traditionally projected how many people will be insured under the proposals. But if reform plans offer no single definition of coverage, the CBO cannot evaluate how extensive coverage will be under the reform plan's terms. To make any meaningful estimate for comparing alternative proposals, the CBO must have a single definition of coverage. Otherwise, a proposal offering a small tax credit that might allow individuals to purchase coverage with very high deductibles or very low annual and lifetime limits, or that covered very few services, could be counted as covering just as many or more people than the ACA, which only permits comprehensive coverage in the nongroup market.

The CBO describes how it defines health insurance:

CBO broadly defines private health insurance coverage as a comprehensive major medical policy that, at a minimum, covers high-cost medical events and various services, including those provided by physicians and hospitals. The agency grounds its coverage estimates on that widely accepted definition, which encompasses most private health insurance plans offered in the group and nongroup markets. The definition excludes policies with limited insurance benefits (known as "mini-med" plans); "dread disease" policies that cover only specific diseases; supplemental plans that pay for medical expenses that another policy does not cover; fixed-dollar indemnity plans that pay a certain amount per day for illness or hospitalization; and single-service plans, such as dental-only or vision-only policies.

Currently, the CBO uses ACA definitions and requirements for defining coverage. If the ACA were repealed, however, the CBO would revert to this broad definition, which looks more like the minimum value definition the ACA uses for applying the employer mandate than the ACA's essential health benefit requirement, which applies in the small group and individual mandate.

The CBO notes that if a replacement plan offers tax credits for coverage that does not meet this definition, it will estimate the number of people who receive tax credits; if policymakers are interested, it will separately estimate the number of people who will actually have coverage under the tax credits, which would probably be a smaller number.

Marketplace Eligibility, Women's Health, And Small-Employer Health Reimbursement Arrangements

The December 20 FAQs address three topics. The first FAQ states that individuals who are otherwise eligible for group health plans who previously declined coverage during an open enrollment period are eligible for a special enrollment period if they lose eligibility for individual market coverage, including marketplace coverage, in which they have been enrolled. This will be true even if the individuals would be eligible for other individual market coverage. A special enrollment period is not available to individuals who lose coverage for failure to pay premiums or because coverage is rescinded for fraud or intentional misrepresentation of a material fact.

This FAQ is puzzling because there are essentially no eligibility requirements for enrolling in the individual market and anyone can enroll through the marketplace except for people who are incarcerated or unlawful aliens (although there are additional eligibility requirements if an individual seeks tax credits to pay for coverage). The FAQ apparently refers, however, to people who lose coverage in a particular plan. This could happen because the insurer leaves the marketplace, or perhaps leaves the individual market altogether. Given the current instability of the individual market, this is a real possibility. The FAQ could also refer to loss of eligibility under a health plan's internal rules—for example, a plan that will not cover adult children who age off of their parents' policies, or children who were covered under a parent's policy but will no longer be covered if the parent drops coverage—or situations where a grandfathered or transitional plan terminates coverage.

The second FAQ notes that on December 20, the Health Resources and Services Administration updated its Women's Preventive Services Guidelines based on recommendations developed by the Women's Preventive Services Initiative (WPSI), a coalition of national health professional organizations and consumer groups. Health plans and insurers must cover these services without cost sharing for plan or policy years beginning on or after December 20, 2017, one year from the issuance of the guideline. The new guidelines both expand and clarify coverage for existing services, like well-woman screening and contraception, and add a new HRSA guideline for breast cancer screening for average-risk women. Descriptions of the new guidelines can be found here and here.

Finally, a third FAQ provides a long and complicated discussion of the provisions of the 21st Century Cures Act providing for small-employer health reimbursement arrangements (HRAs) to pay individual market health insurance premiums. In earlier guidance, the agencies had concluded that employers who used HRAs or employer payment plans (EPPs) to pay for their employee's premiums for individual health insurance coverage had effectively created a group health plan that did not comply with the ACA's dollar limit prohibition and preventive services coverage requirements and were thus subject to penalties. The Cures Act permits small employers not subject to the large employer mandate to establish qualified small employer health reimbursement arrangements (QSEHRAs) through which they can pay individual market premiums for their employees if they meet certain conditions.

The Cures Act provision applies to QSEHRAs for plan years beginning after December 31, 2016. In earlier guidance, however, the Internal Revenue Service (IRS) had stated that it would not enforce the requirements of the ACA against small employers who used HRAs to pay for individual market premiums for periods before July 1, 2015. The Cures Act extends this protection to all plans that would have qualified for this relief for all plan years prior to December 31, 2016.

The FAQ clarifies that this relief does not extend to HRAs that are not integrated with ACA compliant group health plans and that are used to reimburse employees for medical expenses other than individual market premiums, which are subject to sanctions. Such non-compliant HRAs are nevertheless group health plans and would thus constitute minimum essential coverage for individuals enrolled in them, disqualifying them for premium tax credits in the marketplaces. The FAQ further clarifies that special provisions in the earlier guidance for treatment of HRAs for 2-percent shareholder employees of S-corporations continue to apply, but that otherwise earlier guidance prohibiting the use of EPPs and HRAs to pay for individual market premiums by employers that do not qualify for offering QSEHRAs remain in force

Determining The Second-Lowest-Cost Silver Plan

Earlier, on December 16, 2016, the Centers for Medicare and Medicaid Services (CMS) released a set of technical FAQs regarding second-lowest cost silver plans. The second-lowest cost silver plan (SLCSP) is generally the benchmark for determining the level of advance premium tax credit (APTC) to which marketplace enrollees are entitled. The premium tax credit equals the cost of the SLCSP premium minus the share of the premium that the enrollee must pay (which depends on the enrollee's income), or, if it is less, the amount actually paid by the enrollee.

But that raises the question: what is the SLCSP for a particular enrollee? The first FAQ addresses the question of how to identify the SLCSP when a family must be covered by multiple policies, such as a family consisting of several minor children but no parents. The answer given by the FAQ is that the SLCSP is the second-lowest cost premium for either a single plan covering all family members or the sum of premiums for the multiple policies needed to cover the entire family. This seems to me to be a different rule than that finalized by the IRS on December 14, 2016, which would seem to only turn to multiple policies if single policies were unavailable.

The second FAQ asks who the subscriber is for purposes of finding the SLCSP for states using HealthCare.gov. The FAQ answers that ordinarily it would be the person who fills out the application for coverage, but when that person is not eligible for APTC (for example, a parent who is offered sole-employee coverage by an employer that does not offer family coverage), the subscriber is the oldest APTC eligible applicant if at least one family member is over 20 or the youngest if all are 0-20. Thus, if a family applies for coverage and the parents are ineligible for APTC, one of the children would be the subscriber and the other children would be related as siblings, which might mean they could not be covered on the same policy.

The third FAQ clarifies that if only individuals under age 21 are on a policy and none is a dependent of another as a spouse, child, parent, or domestic partner relationship, only child-only policies are relevant in determining the SLCSP. If any individual on a policy is over 21 or is a dependent of another as a spouse, child, parent, or domestic partner, only adult-only policies will be considered in determining the SLCSP.

The fourth FAQ clarifies that only SLCSPs in a subscriber's zip code and county are considered in determining the SLCSP for that subscriber. The fifth clarifies that not all individuals with incomes under 400 percent of the federal poverty level are eligible for APTC — it depends on the relationship between an individual's expected contribution amount and the SLCSP premiums.

The sixth FAQ clarifies that only the premium of a plan allocable to essential health benefits is considered in determining the SLCSP. The cost of non-EHB services is excluded before the SLCSP is determined.

The seventh FAQ clarifies that the SLCSP is determined at the point of enrollment; plans that are subject to an enrollment freeze or that are suppressed are not considered for families to whom the plan is not available. If the SLCSP for a tax household is decertified or closed after a family enrolls, the SLCSP for that tax household is not re-determined unless the family reenrolls, as during a special enrollment period.

The premium of the SLCSP determined at point of enrollment appears on the 1095-A provided to the taxpayer. If the taxpayer has not reported a mid-year life change such as the birth of a child, a marriage, or a move, the SLCSP may be incorrect and the enrollee will have to use the marketplace tax tool to find the correct SLCSP premium.

GAO Again Successful In Enrolling Fictitious Applicants In Marketplaces

Finally, on December 15, 2016, the GAO released another report on the ACA marketplaces that concluded once again that it is pretty easy to cheat the United States government. It is particularly easy, one should note, if one can lie under penalty of perjury with impunity and can readily forge documents.

More specifically, the GAO was able to enroll nine out of 12 fictitious applicants in Healthcare.gov and two state exchanges (California and the District of Columbia) through special enrollment periods (SEPs). Six applied through Healthcare.gov in Virginia and Florida and three each in California and D.C. Six applications were made online and six by telephone. For all 12 fictitious documents were submitted to establish identity and income.

Applications claimed eligibility under one of six SEPs — loss of minimum essential coverage, permanent move, marriage, misinformation or misrepresentation of enrollment information by a non-marketplace entity, Medicaid application during open enrollment denied, and open enrollment application prevented by serious medical condition. In all cases, the application self-attested to eligibility. In six cases additional documentation was requested. In six cases falsified documentation was provided (although only in four where it was requested). Three applications were denied but the other nine were approved, including cases where documentation was requested but not provided.

No specific law or regulation requires federal or state marketplaces to verify SEP eligibility. As of June 17, 2016, CMS requires documentation of certain events that trigger SEPs to confirm eligibility. The GAO testing was done after that date, but only three of their six HealthCare.gov applications were covered by the confirmation process. Two applicants failed to submit documents and one submitted falsified documents, but all remain enrolled. Two of the state applicants were asked to submit documents but the other four were not. The D.C. and California marketplaces rely primarily on self-attestation and on review of applications for verification.

The GAO's testing of marketplace eligibility processes through the use of fictitious applicants continues to cause embarrassment to the marketplaces and fodder for the foes of the ACA. In its response to this report, CMS stated again that it is continuing to try to improve its program integrity efforts. CMS has also announced since the GAO report was finalized that it is implementing a pilot project for pre-enrollment verification of SEP eligibility.

Mila Kofman, executive director of the D.C. Exchange, however, pushed back against the report, expressing her "profound disappointment with the utility of the report." She noted that the report lacked actionable information and that the GAO itself admitted that: "Our applicant experiences are not generalizable to the population of applicants or marketplaces." She observed that the uniquely young (over half under 35) and higher income (only 7 percent receive tax credits and 2 percent cost-sharing reductions) profile of D.C. exchange enrollees make SEP abuse less likely.

She also noted that self-attestation is widely used throughout federal programs. The IRS, for example, does not require verification of most itemized deductions and many income sources. The Department of Education relies on self-attestation for many student loan applications. Verification of eligibility for all SEP applications, including authentication of documents, would be costly, discourage enrollment, and be contrary to the GAO's own guiding cost-benefit principles for fraud control.

If the ACA survives the new administration, the GAO will likely continue its secret shopper program. Although the new HealthCare.gov pre-enrollment verification program may make it harder for fictitious applicants to slip through, some likely will. If Congress and the GAO are really concerned about the money the federal government is losing through tax fraud, a bigger target would be the hundreds of billions lost to the federal government through nonfiling, underreporting, and underpayment of taxes by individuals and businesses. Much of this loss is attributable to self-attested information provided to the government which is not subject to verification in any way. SEP verification may be important to help stabilize health insurance markets (although if it discourages healthy and young people from applying it may have the opposite effect), but it is certainly not the most fruitful approach to deterring tax fraud.



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