On August 27, the Internal Revenue Service (IRS) issued a final rule for the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA).
As a reminder, the individual mandate requires most individuals to have minimum essential coverage in 2014 or pay a penalty. The penalty is called a shared responsibility payment. Some individuals may qualify for an exemption from the mandate so they will not be required to have coverage or pay a penalty. An individual seeking an exemption may do so in advance through an application submitted to the Exchange/Marketplace or after the fact with the IRS through the tax filing process. An applicant can apply for multiple exemptions simultaneously.
The final rule, which is largely consistent with the proposed regulations, confirms the following:
1. What qualifies as minimum essential coverage
2. What wasn’t addressed in regard to minimum essential coverage
3. Who is exempt from paying the penalty
4. How penalties will be determined and paid
1. What Qualifies as Minimum Essential Coverage
An individual is considered to have minimum essential coverage for any month in which he or she is enrolled in one of the following types of coverage for at least one day. Changes from the proposed rule are noted in italics.
• An employer-sponsored group health plan offered in a state, which is defined as the 50 states plus the District of Columbia. This includes plans offered by, or on behalf of, an employer to an employee, e.g. multiemployer plans, single employer collectively bargained plans, plans sponsored by third parties such as professional employer organizations, temporary staffing agency, etc.
• An individual health insurance policy offered in the individual market in a state or through an Exchange/Marketplace in a territory.
• A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE (a U.S. Department of Defense Military Health System) or veterans coverage
• Insured student health coverage
• Self-insured student health coverage*
• Medicare Advantage plan
• State high risk pool coverage*
• Coverage for non-U.S. citizens provided by another country**
• Refugee medical assistance provided by the Administration for Children and Families
• Coverage for AmeriCorp volunteers**
*Designated as minimum essential coverage for plan/policy years beginning on or before December 31, 2014. For coverage beginning after December 31, 2014, sponsors of high risk pool or self-funded student health coverage may apply to be recognized as providing minimum essential coverage.
**Coverage provided by another country and coverage for AmeriCorps volunteers are no longer automatically deemed minimum essential coverage. However, individuals may apply to have their coverage recognized as minimum essential coverage.
2. What Wasn’t Addressed in Regard to Minimum Essential Coverage
The final rule does not specifically address arrangements in which an employer provides subsidies or funds a pre-tax arrangement (e.g., a stand-alone Health Reimbursement Account) for employees to purchase a plan in the individual market. The final rule also doesn’t address wellness incentives. These issues will be addressed in future guidance.
3. Who is Exempt from Paying the Penalty
The final rule confirmed the broad exemption categories, including a few changes in italics.
• Individuals who cannot afford coverage
• Taxpayers with income below the tax filing threshold. A taxpayer is not required to file a federal income tax return solely to claim the exemption, and may apply for exemption via the Exchange/Marketplace.
• Individuals who qualify for a hardship exemption
• Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year, with the continuous period beginning no earlier than January 1, 2014
• Members of religious groups that object to coverage on religious principles
• Members of health care sharing ministries
• Individuals in prison
• Individuals who are not U.S. citizens and not lawfully present in the United States as defined by Health and Human Services
• U.S. citizens residing in a foreign country who meet certain IRS tests
• Individuals who are not members of a federally recognized Native American tribe, but who are eligible for services from the federal Indian Health Service
4. How Penalties will be Determined and Paid
The first penalties will be due when individuals file their 2014 tax returns in 2015. A penalty is the greater of either a specified dollar amount or percentage of income. The annual penalties for 2014 through 2016 are noted below. Beginning in 2017, penalties will increase based on the cost of living.
• 2014: Greater of $95 per adult and $47.50 per child under age 18, maximum of $285 per family, or 1% of income over the tax-filing threshold
• 2015: Greater of $325 per adult and $162.50 per child under age 18, maximum of $975 per family, or 2% over the tax-filing threshold
• 2016: Greater of $695 per adult and $347.50 per child under age 18, maximum of $2,085 per family, or 2.5% over the tax-filing threshold
If the penalty applies for less than a full calendar year, the penalty will be 1/12 of the annual amount per month without coverage.
Limited Coverage health insurance plans have been around for a long time. According to a recent article by Kate Pickert in Time Magazine experts warn that the debut of the health care exchanges could create a prime moneymaking opportunity for these questionable products as well other, more illegal scammers.
There are two main types of potential snares for consumers: outright cons and insurance-like plans that give the impression of offering more coverage than they actually provide. Regulatory agencies are already on high alert for fraud. Both the Federal Trade Commission and the Better Business Bureau have posted warnings about Obamacare-related identity theft.
Some quasi-insurance products expected to proliferate come October are “discount medical plans,” which promise lower health care costs in exchange for a recurring fee. Many of these plans lure customers with language that implies comprehensive coverage, but the reality is far more limited.
Obamacare bans some forms of skimpy coverage, but with enforcement left to the states–some of which are less than enthusiastic about the law–don’t count on those misleading plans disappearing overnight. And, for those states not enforcing the Affordable Car Act at all?”
Let the buyer beware.
As you probably know by now, your health insurance premium will probably go up substantially next year when you are required to switch to an Affordable Care Act compliant policy or pay a fine to the IRS.
The younger you are the greater the negative impact will be on you.
There are ways to buy a plan this year that will be good through all of 2014. This will allow you to avoid the high cost Affordable Care Act policy premiums until 2015 and who know what changes might happen before then.
If you’d like to know more about these options, give me a call at 303-541-9533.
Here is an article published recently in the Wall Street Journal that cites areas of concern for those of us who support the Affordable Care Act.
By LOUISE RADNOFSKY and SARAH E. NEEDLEMAN
Government officials have missed several deadlines in setting up new health-insurance exchanges for small businesses and consumers—a key part of the federal health overhaul—and there is a risk they won’t be ready to open on time in October, Congress’s watchdog arm said.
The Government Accountability Office said federal and state health officials still have major work to complete, offering its most cautious comments to date about the Obama administration’s ability to bring the centerpiece of its signature law to fruition.
“Whether [the government’s] contingency planning will assure the timely and smooth implementation of the exchanges by October 2013 cannot yet be determined,” said the GAO in twin reports to be released Wednesday.
The 2010 Affordable Care Act created two exchanges, seeking to provide coverage for many Americans who now go without health insurance. President Barack Obama has said the exchanges will be ready on schedule in October, offering coverage to take effect Jan. 1, 2014, but he has cautioned that “glitches and bumps” are likely.
Around two million people are projected to receive insurance through the small business exchanges and seven million people will be enrolling in the individual insurance exchanges in 2014, according to the Congressional Budget Office.
The small-business exchanges in particular have had some early setbacks. The federal government said in April that contrary to initial plans, it wouldn’t allow workers in the first year to choose between a range of insurance options offered through employers. For the first year, companies will select one plan to offer to workers.
In some states, only one insurance carrier has expressed interest in the small-business exchange. In Washington state, officials have had to postpone the exchange altogether because they couldn’t find a carrier willing to offer small-business plans for all parts of the state.
Seventeen states are running their own small-business exchanges, with the federal Centers for Medicare and Medicaid Services carrying out the task on behalf of the remaining 33 states.
The GAO report on the small-business exchanges said officials still have big tasks to complete including reviewing plans that will be sold and training and certifying consumer aides who can help companies and individuals find plans.
It said that the 17 states running their own exchanges were late on an average of 44% of key activities that were originally scheduled to be completed by the end of March. “While interim deadlines missed thus far may not impact the establishment of exchanges, any additional missed deadlines closer to the start of enrollment could do so,” the report said.
The Obama administration has long said that it expects to be ready on Oct. 1. “We have already met key milestones and are on track to open the marketplace on time,” said Joanne Peters, a spokeswoman for the Department of Health and Human Services.
“This GAO report confirms our suspicions about the implementation of the health care law,” said Rep. Sam Graves (R., Mo.), chairman of the House Committee on Small Business. “With each passing day it appears the creation of the exchanges are very much in doubt.”
The administration has welcomed signs that the growth of health-care costs has tempered recently. Some economists believe that may be partly due to the new health law encouraging more cost-effective care. The Labor Department said Tuesday that its price index for medical care fell a seasonally adjusted 0.1% in May, the first monthly drop in almost four decades.
The administration and liberal groups are stepping up efforts to prepare people to enroll for coverage. For the economics of the exchanges to work, they must attract healthy people to balance the risk of those who have chronic diseases.
Enroll America, an administration-backed nonprofit group, opened its “Get Covered America” campaign Tuesday. “We are at a place where…78% of the uninsured aren’t even aware of what’s coming their way,” said Anne Filipic, the group’s president.
Republicans who oppose the health-care law are poised to highlight any glitches in the rollout, and many believe implementation of the law could be a key issue in 2014 elections.
Regulators in New Hampshire have said they received applications from only one carrier, Anthem Blue Cross and Blue Shield, a unit of WellPoint Inc., WLP +0.36% to sell small group plans or individual policies through the exchange next year.
Small-business owner Nancy Clark of North Conway, N.H., said she was disappointed more carriers didn’t apply because Anthem is already one of just two carriers that doctors in her area accept.
“I was hoping more [insurance] providers would step up to the table,” said Ms. Clark, whose firm, advertising agency Glen Group Inc., has 10 employees and has offered benefits to full-time staff since 1997 to attract and retain talented workers. “I had these rose-colored glasses on, thinking that doctors in our area would then accept more insurance plans, truly giving everyone a choice.”
Ms. Clark said she also worried that without more carriers in the exchange, the cost of a group health plan wouldn’t stabilize or go down as she had anticipated. She said her premiums have increased every year by double digits despite her work force’s good health.
Some Democratic members of Congress also are beginning to express concerns about particular aspects of the law relating to employers. Sen. Joe Donnelly of Indiana, who voted for the law as a member of the House, on Wednesday is expected to become the first Democrat who backed the law to support changing a requirement that larger firms must provide coverage to employees working 30 hours a week or more, his staff said.
Joe Trauger, vice president of human resources policy for the National Association of Manufacturers in Washington, D.C., said the trade group’s 12,000 members are “deeply concerned” about the lack of information available about the state exchanges. “It comes up in every meeting I’m in,” he said.
Backers of the law say that over time, competition between carriers and new restrictions barring insurers from setting small group premiums based on members’ medical history will keep costs in check for business owners and enable them to keep offering coverage.
Michael Brey, president of Brey Corp., a toy retailer in Laurel, Md., that does business as Hobby Works, said he was looking forward to being able to shop for a small-group plan from a variety of carriers through his state’s exchange. Currently he can choose from just three carriers. “I have some degree of confidence that it will be a good move for us,” he said.
Mr. Brey also said he expected to get a better deal through the exchanges. He covered 100% of the cost of premiums for his staff when he bought the business in 1992, but he said he can only afford to contribute 50% now, and only for full-time employees.
—Jennifer Corbett Dooren contributed to this article.
Write to Louise Radnofsky at firstname.lastname@example.org and Sarah E. Needleman at email@example.com
Connect for Health Colorado has published the preliminary filings to the Colorado Division of Insurance showing that 10 carriers requested approval to provide about 150 health plans for individuals and families through Connect for Health Colorado. They include:
All Savers Insurance Company (part of UnitedHealthcare)
Anthem Blue Cross and Blue Shield
New Health Ventures
Rocky Mountain Health Plans
Additionally, six carriers – Anthem, Colorado Choice, Colorado HealthOP, Kaiser Permanente, Rocky Mountain Health Plans and See Change – requested approval to provide nearly 100 health plans to small employers through our marketplace. The health plans are new and include a comprehensive set of Essential Health Benefits, including doctor visits, hospitalizations, maternity care, emergency room care, and prescriptions.
This is the beginning of a review process by the Division of Insurance, which regulates insurance companies in the state. Final details about the types and number of health plans and about premiums will be known in August, after the Division of Insurance completes its review process. Actual health plan costs should be available soon.
Because everyone likes to have options, they will provide Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) plans. We also will offer Health Savings Account (HSA) plans, Colorado Young Adult Plans that provide minimum coverage for those under the age of 30, and dental plans.
Beginning in 2014, many individuals and families will be eligible to receive subsidized coverage through Connect for Health Colorado if they are not eligible for Medicare, Medicaid or the Children’s Health Insurance Program and are not offered affordable coverage through their employer.
Here is Connect for Health Colorado’s Cost Calculator for Individuals and Families.
Notes: This calculator shows expected spending for families and individuals eligible to purchase coverage in the Exchange under the Affordable Care Act. Under the law, maximum contributions to premiums will be based on modified adjusted gross income, while estimates in this calculator are based on the annual income entered by the user. Actual premiums in the Exchange are not yet known. The premiums in this calculator reflect national estimates from the Congressional Budget Office for silver plans, adjusted for premium inflation and age rating.
Writing in the Colorado Statesman on March 8, 2013, Miller Hudson has done the best work I have seen so far in explaining why we are in the fix we are in with the high cost of healthcare, what affect the Affordable Care Act is likely to have and what some ideas about how it might all become workable in the future. I highly recommend you invest a few minutes in reading this article.