IRS releases draft instructions for ACA reporting forms
Forms 1094-B and 1095-B are used by organizations that are not reporting to the IRS as large employers – insurers and sponsors of multiemployer plans, for example. Forms 1094-C and 1095-C, meanwhile, are used by organizations that are subject to the employer mandate.
“The instructions are voluminous and reflect the complexity behind the information, particularly that employers are going to have to provide,” says Amy Bergner, managing director, human resource solutions at PricewaterhouseCoopers in Washington, DC.
The IRS released the draft forms a few weeks ago but without draft instructions, “it was difficult to tell exactly what employers and insurers were going to have to do,” she notes. “Now we have these draft instructions that really walk through what’s behind all of the reporting.
Bergner says employers should review the draft instructions as soon as possible with all third-party providers who help them with tax reporting. “Even though these reports are not filed with the IRS or sent to employees until early in 2016, employers have to be capturing the information on a monthly basis starting in January 2015,” she says.
The purpose of the forms is three-fold:
1. When individuals file their individual tax returns, they’re going to have to report whether or not they have health insurance as required by the ACA’s individual mandate. The IRS can compare what the individual is reporting with what the employer is reporting.
2. The IRS can double check whether people who have received federal government subsidies to buy insurance on the exchanges were actually entitled to it. People who are offered employer-sponsored coverage are not entitled to the subsidy.
3. The IRS can enforce the employer mandate, which requires employers with 50 or more full-time employees to offer health insurance.
“The instructions include many of the complicated and detailed rules about the employer mandate, details usually reserved for regulations or other technical guidance,” says Bergner. “We expect that many employers and insurers will need assistance decoding the instructions and the underlying rules to be able to ultimately provide timely and accurate reports.”
Millennials under insured compared to other age groups
“A lot has been made of the so-called ‘young invincibles’ who are choosing to forgo health insurance,” said Laura Adams, senior analyst, insuranceQuotes.com. “This could be a costly mistake, especially because this group has easy access to health insurance. Young people typically pay much lower prices to obtain coverage via the health insurance exchanges and can receive subsidies depending on their income. Plus, they can stay on their parents’ health insurance policies until age 26.”
Millennials also are less likely than other age groups to own health, auto, life, homeowner’s, renter’s and disability insurance, according to the report. Some of the disparity can be attributed to living with their parents or having fewer assets to protect, insuranceQuotes.com said, but millennials appear to be under insured across all insurance lines.
“Fewer Gen Yers are buying houses and more are living at home with their parents,” said Kile Lewis, co-CEO and co-founder of oXYGen Financial, a financial planning firm serving generations X and Y. “But only 12 percent of 18- to 29-year-olds have renters insurance despite the fact that almost four out of five adults under 25 live on their own, and two-thirds of adults ages 25 to 29, rent their homes, according to a report from the Joint Center for Housing Studies of Harvard University.”
Highlights from the report:
- 95 percent of millennials said their overall financial security is very or somewhat important, almost the same number as consumers aged 30 to 64.
- 12 percent of millennials have renter’s insurance.
- 64 percent of millennials lack life insurance. The most common objection is that it costs too much.
- 36 percent of millennials do not have auto insurance, which could be attributed to declining numbers of young adult drivers.
- 10 percent of millennials have homeowners insurance, compared to half of consumers ages 30 to 49, and 75 percent of those 65 and older.
- 13 percent of millennials have disability insurance, compared with 37 percent of those 30 to 49.
“Despite all of this evidence that millennials do not have a lot of insurance, most millennials are confident they are prepared for the financial consequences of car accidents, having their belongings stolen, incurring substantial medical bills or becoming disabled,” InsuranceQuotes said. “Sixty percent of 18-29 year-olds are either very or somewhat confident that they are prepared for those risks; older adults are equally confident in their own preparations.”
The survey was conducted by Princeton Survey Research Associates International, and findings are based on responses from 1,003 adults in the continental United States. Statistical results were weighted to correct known demographic discrepancies; the margin of sampling error for the complete set of weighted data is plus or minus 3.5 percentage points,
Are pharmacy discount cards still relevant?
Originally posted August 15, 2014 by Michael Giardina on https://ebn.benefitnews.com
Providers of prescription drug discount cards are increasing their efforts to reach out to employers, even as the Affordable Care Act is expected to decrease the ranks of those most likely to use the cards – those without health insurance.
The FamilyWize Community Service Partnership, which seeks to reduce the cost of prescription medicine for children, families and individuals by $1 billion by the end of 2015, is one provider looking to educate more employers about its discount card program.
“One of the areas we have really focused is with employers with lower waged workers because many of them do not work full-time, or they may not opt for the plan the company is providing because of costs,” says Lori Overstreet, vice president of marketing for FamilyWize. “Obviously, if they were part-time, then the company wouldn’t need to cover them, but this would give them a benefit, or if they opt out of the company plan this will also give them a benefit because the card is free to the consumer and free to the company.”
FamilyWize works with Envision Pharmaceutical Services, a pharmacy benefit management company, to negotiate prices at more than 60,000 brand name pharmacies such as Walmart, Kmart, CVS and Target. These negotiated prices are realized when FamilyWize discount drug card are used by consumers.
“The price depends obviously on the chain, the prescription itself, and even where they are,” says Steve Tremitiere, vice president of strategic partnerships at FamilyWize. He adds that most of the discounts appear with generics, but some can be for brand name drugs.
FamilyWize recently cemented 10-year national partnership with United Way Worldwide in an effort to address needs for the uninsured and underinsured. The average savings for FamilyWize discount card holders is 40% and can reach up to 75%, Tremitiere says.
Tremitiere, wants to be clear that all types of employees and employers can use the benefit, which easily be registered for online and printed out directly from a user’s home or work computer. “Employers are a good conduit because they are a trusted resource,” Tremitiere explains.
But not everyone agrees that these types of prescription drug discount cards still offer value in the post-ACA world.
“With the advent now of the Affordable Care Act and what’s involved, you probably have fewer and fewer people that would need it [prescription discount cards] because they can probably get the negotiated discount off their prescription drugs through their employers or exchanges,” says Michael J Staab, president and co-founder of Innovative Rx Strategies, a pharmacy consulting firm.
Gregory I. Madsen, a registered pharmacist and principal and co-CEO of Innovative Rx Strategies, adds that these discount cards are for “people who don’t have prescription drug coverage, which is very few people anymore.”
A virtual game changer of the prescription drug discount program was the introduction of Medicare Part D, also called the Medicare prescription drug benefit. The Medicare Prescription Drug Modernization Act was first signed into law by President George W. Bush in December 2003, and was seen as a safety net for seniors who were paying out-of-pocket for their prescription drugs.
“They were the cash-paying customer, they were the cash cows of the pharmacy world,” says Madsen. “They were paying cash for all their stuff and these cards were really targeting those people. And then Medicare Part-D came in and they got in under contracted rates and the cash-paying customer sort of went away, except for this small group of part-time employees that were employed.”
Even though the number of uninsured is shrinking because of the ACA, small employers may find value in discount prescription drug cards.
“If they [these employers] have less than 50 employees, they [employees] are part-time, this card will still be a better deal than them paying cash,” Madsen explains.
Other examples of prescription drug discount cards or prescription discount programs, in general, are surviving the ACA’s implementation. For instance, the National Association of Counties, the only national organization that represents county governments on Capitol Hill, offers the NACo Prescription Discount Card Program. The free program, operated by CVS Caremark, has been in place since 2005.
Andrew Goldschmidt, NACo director of membership marketing, says that the program is one of the “oldest and most mature” offered by the association, which dates back to administration of President Franklin Delano Roosevelt.
“You have a lot of folks that have a lot of prescriptions that are off formulary, depending on what kind of plan they have, or if they even have a plan,” says Goldschmidt. The NACo prescription discount card program has saved $570 million on 45 million prescriptions for employees in over 1,400 counties.
“The prescription drug program [usage] has gone down a bit, and rightly so if people are getting coverage through the ACA that didn’t have it before,” explains Goldschmidt, while noting that now it can be used as a good complementary program for employers.
Jackie Chin, executive vice president of New York State Restaurant Services, a division that handles all insurance programs for the New York State Restaurant Association, says the ACA “should not slow down registration” for its WellCard program. In addition to its prescription discounts, its WellCard offers discounts on dental, medical and vision coverage for uncovered employees and their families.
“Since there is no cost to participate in this discount card program, an employee can still register with WellCard because with regular health insurance through ACA or public health exchanges, your co-pays for prescription may be more expensive,” Chin explains. The New York State Restaurant Association includes a diverse group of approximately 10,000 members that range from small mom-and-pop restaurant owners to large restaurant groups.
“It differs from other prescription drug discount card because there is no membership fee and there is no cost to the employee and the employee's family member to avail themselves of any savings they can receive by using this discount card,” Chin says.
90% will qualify for individual mandate exemption
Originally posted August 7, 2014 by Dan Cook on https://www.benefitspro.com
There are now so many exemptions to PPACA’s individual mandate that the CBO says the number who would face fines for lack of coverage has dropped from seven million to four million.
That means that almost 90 percent of the nation’s uninsured population would not have to pay a penalty under PPACA in 2016, according to a report from the Congressional Budget Office and the Joint Committee on Taxation.
Though it’s good news for those who decide not to seek health insurance coverage as required by the law, it’s bad news for the insurance industry, which was to receive revenue from the fines. Instead of collecting $7 billion, the CBO now estimates $4 billion will be assessed.
The new numbers are posted on the CBO website.
As PPACA has been tossed back and forth between the legal and the political arenas, the number of exemptions has grown rapidly. The CBO lists the following major categories:
- Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
- People with income low enough that they are not required to file an income tax return;
- People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in PPACA;
- People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time);
- People who are incarcerated or are members of Indian tribes. (CBO doesn’t explain why these two constitute a single bullet point).
According to the Wall Street Journal, the Obama administration in December 2013 expanded the number of exemptions to include 14 ways residents can file for an exemption based on hardships, including domestic violence or a recent death of a family member.
The upshot is that about nine in 10 of those who will choose not to purchase insurance won’t have to pay the fine, which is $95 for an adult or 1 percent of an individual’s taxable income, whichever is higher. Currently, penalties are set to increase to $325, or 2 percent, in 2015, and $695, or 2.5 percent, in 2016.
Based on these latest numbers, CBO said, “An estimated $4 billion will be collected from those who are uninsured in 2016, and, on average, an estimated $5 billion will be collected per year over the 2017–2024 period. Those estimates differ from projections … made in September 2012, when the agencies last published such estimates. About 2 million fewer people are now projected to pay the penalty for being uninsured in 2016, and collections are now expected to be about $3 billion less for that year.”
The fallout from these increasing exemptions will probably fall on those who actually have coverage. Carriers had based projected premium rates in part on the revenue from the fines assessed against those who shunned coverage. With that money dwindling, carriers have said they’ll have to raise premiums for those with coverage.
Play or Pay in 2015 — so many requirements, so little time
Originally posted August 6, 2014 by Dorothy Summers on https://ebn.benefitnews.com
2015 is getting close and the Employer Shared Responsibility Mandate (“Play or Pay”) under the Affordable Care Act (ACA) is almost here. So what does this mean for your organization? Play or Pay requires certain employers to offer affordable and adequate health insurance to full-time employees and their dependents, or they may be liable for a penalty for any month coverage is not offered.
Play or Pay goes into effect in the calendar year of 2015 for large employers only. However, mid-size employers aren’t entirely off the hook. They’ll have to report on insurance coverage even though they won’t be liable for penalties in 2015. By January 1, 2015, businesses with 100 or more full-time or full-time-equivalent employees must ensure they are offering health benefits to all of those working an average of 30 hours per week, or 130 hours per month. If an employer has a non-calendar year plan and can meet certain transitional rules, they can delay offering employee health benefits until the start date of their non-calendar year plan in 2015. Mid-sized employers will have to comply beginning in 2016.
Here are important questions that employers need to answer today:
- Do you know which category your business fits into?
- How do you classify who is a full-time employee?
- What do you need to do to comply with Play or Pay requirements?
Let’s take an in-depth look at each of these questions.
Which category do you fit into?
Whether you are a small, mid-sized, or large employer is determined by the number of full-time and full-time equivalent employees (FTEs). It sounds simple on the surface:
- Small employers have 1-49 full-time or FTE employees
- Mid-sized employers have 50-99 full-time or FTE employees
- Large employers have 100+ full-time or FTE employees
However, it’s important to remember that these numbers can be affected by several factors, including whether the employer is a part of a control group, seasonal employees and variable-hour employees. That brings us to our next question:
Who is a full-time employee?
The law defines a “full-time employee” for penalty purposes as an employee who, for any month, works an average of at least 30 hours per week, or 130 hours. This includes any of the following paid hours: vacation, holiday, sick time, paid layoff, jury duty, military duty and paid leave of absence under the Family and Medical Leave Act.
Employees who aren’t considered full-time include non W-2 leased workers, sole proprietors, partners in partnerships, real estate agents, and direct sellers.
Variable-hour employees—those who don’t work a set amount of hours each week—fall into a gray area. That is, they don’t need to be counted as full-time employees until and unless it becomes an established practice for them to work more than 30 hours per week.
To assist employers in determining whether variable hour workers will meet the definition of full-time employees (and therefore need to be offered health insurance), employers may use various “look back” and “look forward” periods. Here is a summary of terms used for measuring variable-hour employees:
- Measurement Period: A period from three to 12 months in which the employer would track hours to determine whether the employee worked an average of more than 30 hours per week.
- Stability Period: A period from six to 12 consecutive months in which the employer must provide health insurance coverage to employees who worked more than 30 hours per week in the Measurement Period. Note: must be at least six months and cannot be shorter than the Measurement Period.
- Administrative Period: A period not to exceed 90 days, which falls between the Measurement Period and Stability Period, and/or a short period after a new employee’s date of hire. Using this waiting period allows employers to analyze eligibility of full-time employees and provide enrollment information to enroll them in a plan before penalties could be assessed.
Does your plan meet the Play or Pay requirements?
To avoid penalties, you’ll need to make sure your plan meets certain requirements. First, coverage must be offered to full-time employees and their dependents. Under the ACA, dependents are defined as children under age 26. Spouses are not considered dependents.
What Americans think about health insurance & hiring practices
Originally posted July 25, 2014 by Lynette Gil on https://www.lifehealthpro.com
In a recent survey from Gallup, the majority (58 percent) of Americans said that they would justify charging higher health insurance rates to smokers. And about 39 percent said that they would justify raising health insurance rates to those significantly overweight.
Both percentages have gone down slightly since 2003, when Gallup asked these questions for the first time: from 65 percent for smokers having to pay higher rates and 43 percent for those significantly overweight.
The results are part of Gallup's July 7-10 2014 Consumption Habits survey, in which telephone interviews were conducted with a random sample of 1,013 adults, aged 18 and older, living in all 50 U.S. states and D.C.
The survey also asked participants if companies should be allowed to refuse to hire smokers or those significantly overweight. Most Americans agreed that there should not be discrimination against both. Only 12 percent said that companies should be allowed to refuse to hire people because they are significantly overweight (down from 16 percent in 2003); 14 percent said the same about smokers (up one percentage point from 13% in 2003).
Even though most Americans oppose “hiring policies that would allow companies to refuse to hire smokers or those who are significantly overweight,” it is unclear if those views are because they do not think smoking and obesity negatively affect workplace performance or they “simply reject discrimination of any kind in hiring,” the report says.
According to the report, smoking and being overweight are associated with higher health care costs, and even the Patient Protection and Affordable Care Act (PPACA) allows for higher insurance premiums for smokers. Some would argue that allowing companies to refuse to hire smokers and people who are overweight, or charging them higher health insurance rates, might help encourage healthier lifestyles.
Revisiting Medical Loss Ratio Rebates
Originally posted July 5, 2012 by Bob Marcantonio on https://www.shrm.org
The Patient Protection and Affordable Care Act (PPACA or ACA) requires insurers to report their Medical Loss Ratios (MLRs) to regulators and to meet certain MLR targets. If an insurer exceeds the minimum MLR, the insurer must issue a rebate to the policyholder. The first of these annual rebates is due in August 2012. How are rebates determined?
Rebates are determined according to the prior year’s MLR. Rebates issued in August 2012 will depend on 2011 performance and are not group or individual specific. They are calculated at the carrier and market segment (i.e., individual, small group and large group) level. In some instances the individual and small group markets may be merged.
The ACA defines a small employer as an employer having at least one but no more than 100 employees. However, it provides states the option of defining small employers as having at least one but not more than 50 employees in plan years beginning before Jan. 1, 2016.
Generally, if you have fewer than 100 employees (using the definition for full-time equivalents) you will be purchasing coverage in the small group market.
The MLR is calculated by dividing the medical expenses of the carriers’ segment by the net earned premiums. Medical expenses include claims and activities to improve health care quality as defined in the rules. Net earned premiums include premiums paid by the policyholder minus taxes, licensing and regulatory fees. The MLR threshold for large groups (51+ benefits eligible) is 85 percent and the threshold for small groups (50 or fewer benefit eligible employees) is 80 percent. Certain states have received exemptions until 2014 that allow the MLR to be lower than those levels. In the case of states having more stringent MLR requirements, those requirements supersede the lower federal requirements.
Below are answers to common questions about MLR rebates.
My plan’s paid loss ratio is less than the target. Do I get a rebate?
Not necessarily. Rebates are not issued based on a single plan’s performance. Rebates depend on the insurer’s performance in a given market segment as outlined above.
How will insurers issue rebates?
For group health plans, insurers must issue the rebates to the plan. The plan must then pay out the rebates to the plan’s participants. If a group health plan terminates after the plan year but before the insurer issues rebates and the insurer cannot locate the plan, the insurer must attempt to issue the rebates directly to participants.
Who may receive a rebate?
Only fully insured policyholders are eligible. A policyholder can be an individual or an employer-sponsored group health plan. In the case of a group health plan receiving a rebate, Employee Retirement Income Security Act (ERISA) regulations regarding fiduciary duty apply. If the rebate is small—$20 or less for a group health plan—the insurer does not need to issue the rebate to the plan.
What should you do if your group receives a rebate?
The Department of Labor (DOL) issued Technical Release No. 2011-04 outlining the proper handling of rebates. The release states that:
"If the participants and the employer each paid a fixed percentage of the cost, a percentage of the rebate equal to the percentage of the cost paid by participants would be attributable to participant contributions. Decisions on how to apply or expend the plan’s portion of a rebate are subject to ERISA’s general standards of fiduciary conduct. Under section 404(a)(1) of ERISA, the responsible plan fiduciaries must act prudently, solely in the interest of the plan participants and beneficiaries, and in accordance with the terms of the plan to the extent consistent with the provisions of ERISA.
"With respect to these duties, the Department notes that a fiduciary also has a duty of impartiality to the plan’s participants. A selection of an allocation method that benefits the fiduciary, as a participant in the plan, at the expense of other participants in the plan, would be inconsistent with this duty. In deciding on an allocation method, the plan fiduciary may properly weigh the costs to the plan, the ultimate plan benefit, and the competing interests of participants or classes of participants provided such method is reasonable, fair and objective. For example, if a fiduciary finds that the cost of distributing shares of a rebate to former participants approximates the amount of the proceeds, the fiduciary may decide to allocate the proceeds to current participants based upon a reasonable, fair and objective allocation method.
"Similarly, if distributing payments to any participants is not cost-effective (e.g., payments to participants are of de minimis amounts, or would give rise to tax consequences to participants or the plan), the fiduciary may utilize the rebate for other permissible plan purposes including applying the rebate toward future participant premium payments or toward benefit enhancements."
When will insurers issue the rebates?
Under the regulations, the first rebates are due Aug. 1, 2012, although the precise dates of receipt may be before the deadline, depending on the insurer. Insurers will send written notices to subscribers informing them that a rebate has been issued. Plan administrators should be prepared to field questions from employees who receive such notices.
Additionally, insurers not issuing a rebate must send letters to subscribers explaining the MLR rule notifying their health insurer had a medical loss ratio that met or exceeded the requirements.
How much might the rebates be worth?
The not-for-profit Kaiser Family Foundation released statistics garnered from insurers’ filings to the National Association of Insurance Commissioners. In the large-group segment, total reported rebates are $541 million nationwide. Among the insurers, 125 reported they expect to issue rebates to large groups covering 7.5 million enrollees. Insurers in 14 states do not expect to issue rebates in 2012. The largest average per-enrollee rebates projected are in Vermont ($386), Nebraska ($248), Minnesota ($146), New York ($142) and North Carolina ($121).
Among large group enrollees, 19 percent are projected to receive rebates nationwide. Taken in total, the average annual rebate in the entire large group segment per year will be $14 per enrollee, according to rebate estimates based on insurer filings to the National Association of Insurance Commissioners (NAIC).
IRS releases draft of employer reporting form for health reform law compliance
Originally post July 25, 2014 by Matt Dunning on www.businessinsurance.com.
The Internal Revenue Service has issued draft versions of the reporting forms most employers will begin using next year to show that their group health insurance plans comply with the health care reform law.
The long-awaited draft forms, posted late Thursday afternoon to the IRS' website, are the first practical application of employers' health care coverage and enrollment reporting obligations under the Patient Protection and Affordable Care Act since the regulations were finalized in March.
The forms are the primary mechanism through which the government intends to enforce the health care reform law's minimum essential coverage and shared responsibility requirements for employers.
Beginning in 2015, employers with at least 100 full-time employees will be required to certify that benefits-eligible employees and their dependents have been offered minimum essential coverage and that their employees' contributions to their premiums comply with cost-sharing limits established under the reform law. Smaller employers with 50-99 full-time employees are required to begin reporting in 2016.
Additionally, self-insured employers will be required to submit documentation to ensure compliance with minimum essential coverage requirements under the reform law's individual coverage mandate.
“In accordance with the IRS' normal process, these draft forms are being provided to help stakeholders, including employers, tax professionals and software providers, prepare for these new reporting provisions and to invite comments from them,” the IRS said in a statement released Thursday.
The IRS said it expects to publish draft instructions for completing the reporting forms by late August and that both the forms and the instructions would be finalized later this year.
Last year, the Obama administration announced it would postpone implementation of employers' minimum essential coverage and shared responsibility obligations under the reform law for one year, largely due to widespread complaints about the complexity of the reporting requirements.
Though several months have passed since the administration issued a simplified set of information reporting rules, many employers have delayed preparations for meeting the requirements until the forms and instructions are available for review, said Richard Stover, a principal with Buck Consultants at Xerox in Secaucus, New Jersey.
“A lot of employers really haven't been doing anything about reporting requirements, even with the final regulations in place, because they were waiting for these forms,” Mr. Stover said. “This is something they've been anxious to see.”
Undercover investigators score PPACA subsidies
Originally posted July 23, 2014 by Kathryn Mayer on www.benefitspro.com.
Undercover investigators using fake identities were able to get health insurance and tax subsidies through the federal exchange under the Patient Protection and Affordable Care Act, underscoring ongoing problems and security issues plaguing the health care law, officials said Wednesday.
The nonpartisan Government Accountability Office said they created 12 identities with fake citizenship and immigration statuses and phony income documents to test how easy (or difficult) it would be to get coverage and subsidies under the law.
The agency said 11 of the fake applicants were accepted, and the HHS-run exchanges rejected just one applicant because it lacked a Social Security number.
Though HealthCare.gov flagged some attempts as problematic, the fake applicants found more success on phone calls to call centers handling applications.
“For its 11 approved applications, GAO was directed to submit supporting documents, such as proof of income or citizenship; but, GAO found the document submission and review process to be inconsistent among these applications,” the agency said. “As of July 2014, GAO had received notification that portions of the fake documentation sent for two enrollees had been verified.”
Republicans jumped on the latest news, saying it was yet one more flaw in the faulty law.
“Ironically, the GAO has found Obamacare is working really well — for those who don’t exist,” said Senate Finance Committee Ranking Member Orrin Hatch, R-Utah.
The Obama administration said it was taking the report seriously and would work to strengthen the law’s verification process.
The GAO remarked that findings were “preliminary” and they weren’t jumping to any conclusions yet. The agency said it would release a more detailed report in the coming months.
Eight million people signed up for health plans using the exchanges under PPACA.
The GAO report follows PPACA’s latest hurdle: two conflicting court rulings out Tuesday regarding the legality of PPACA subsidies issued to enrollees in the federal exchange.
Appeals court nixes subsidies for HHS exchange users
Originally posted July 22, 2014 by Allison Bell on https://www.lifehealthpro.com
A three-judge panel at the D.C. Circuit Court of Appeals has issued a decision that could block efforts to expand access to private health coverage in states that decline to set up state-based insurance exchanges.
The judges ruled 2-1 in Jacqueline Halbig et al. vs. Sylvia Mathews Burwell et al. (Case Number 14-5018) that the Internal Revenue Service (IRS) has no authority under the Patient Protection and Affordable Care Act (PPACA) to provide premium tax credit subsidies for users of the PPACA public exchanges run by the U.S. Department of Health and Human Services (HHS).
The subsidies have helped cut the amount QHP buyers pay out-of-pocket for premiums to an average of less than $50 per month.
PPACA created a premium tax credit subsidy for people who buy qualified health plan (QHP) coverage through the exchanges by adding Section 36B to the Internal Revenue Code (IRC).
PPACA lets HHS set up public exchanges in states that decline to set up their own exchanges. IRC Section 36B talks about providing credits to users of state-based exchanges and makes no mention of any credits to be provided for people who buy QHP coverage through the HHS-run exchanges, Circuit Judge Thomas Griffith writes in an opinion for the majority.
"The fact is that the legislative record provides little indication one way or the other of congressional intent, but the statutory text does," Griffith writes. "Section 36B plainly makes subsidies available only on exchanges established by states. And in the absence of any contrary indications, that text is conclusive evidence of Congress’s intent."
Griffith notes that Congress explicitly imposed some key PPACA commercial health insurance provisions, such as guaranteed issue and community rating requirements, on federal territories without providing full exchange subsidy funding for the territories.
PPACA implements some health insurance requirements, such as the community rating requirements, by making changes to the federal Public Health Services Act. HHS last week decided that, because the territories are not going to receive full PPACA expansion funding, the Public Health Services Act excludes territories from its definition of "state," and the PPACA insurance requirements seem to be destabilizing the territories' health insurance markets, the territories can be exempt from the PPACA rules that were set by changing the Public Health Services Act.