Analysis questions value of ACA deductible cap

Originally posted February 14, 2014 by Bruce Shutan on

In a sign of just how difficult it is to rein in out-of-pocket costs, 35% of 2014 bronze-level plans in the Small Business Health Options Program exchange had deductibles that exceeded suggested annual caps under the Affordable Care Act. The conclusion was based on a HealthPocket analysis of government data from small group health plans in 32 states.

Another key finding was that the lowest level of coverage generated the highest possible costs. A whopping 96% of 2014 bronze-metal SHOP plans, for example, had deductibles of more than the ACA’s $2,000 individual and $4,000 family limits. That same result wasn’t nearly as prevalent for silver or gold plans (28% and 6%, respectively, for individuals and 88% and 6%, respectively, for families), nor was it an issue at the platinum level.

At the bronze level, the medical deductible for an individual enrollee averaged more than twice the amount of the original deductible limit at $4,216 and $8,667 for family coverage, while the annual cap on out-of-pocket costs averaged $6,224 for an individual and $12,518 for a family.

Any strict enforcement of the deductible caps could have substantially narrowed the inventory of health plans in the SHOP exchange, according to the study, which found that fewer than 4% of bronze-tier plans would have satisfied the ACA limits for individual and family enrollees. Small group plans are able to exceed the deductible caps only under the condition of necessity.

“The government effectively abandoned the deductible cap since it would prevent a significant minority of plans from meeting their actuarial value requirements,” explains Kev Coleman, head of research and data at HealthPocket, Inc. and a co-author of the study. He says the U.S. Department of Health and Human Services indicated in February 2013 that these deductible limits must be “applied so as to not affect the actuarial value of any health plan.”

But if the first few months of the HIX marketplace are any indication, there could be changes made that force plans to be re-designed. The study noted that if the deductible cap waivers are removed from future regulations, “then almost all qualified bronze plans would have to decrease their deductibles to satisfy the limits. Decreased deductibles could, in turn, require increases in other categories of enrollee cost-sharing such as co-payments in order for the plans to maintain their actuarial values.”

Last August, U.S. Rep. Tom Reed (R-NY) introduced H.R. 2995, which would eliminate the deductible caps for SHOP marketplace plans. The bill, which was referred to the House Committee on Energy and Commerce, has five co-sponsors.

Another PPACA deadline delayed

Originally posted December 12, 2013 by Allison Bell on

The Obama administration has issued new regs that public exchanges – and participating carriers – can use to cope with startup problems. Most importantly, it pushes the selection and payment deadline for Jan.1 plan coverage to Dec. 23.

The Centers for Medicare & Medicaid Services has given the batch of “interim final regulations” the title “Maximizing January 1, 2014, Coverage Opportunities” and is preparing to publish the regs in the Federal Register next week.

The Dec. 23 deadline applies to all sorts of exchange plans, including Small Business Health Options Program QHPs, multi-state plans and standalone dental pans, officials said. The original deadline was Dec. 15.

Insurers selling commercial plans through the exchanges with coverage dates starting Jan. 1 now must accept premium payments as late as Dec. 31.

State-based exchanges can set later deadlines for either individual or SHOP coverage.

Managers of state-based exchanges who want to offer more flexibility can push the payment deadline for coverage that starts Jan. 1 back to Jan. 31, “if a QHP issuer is willing to accept such enrollments,” officials said.

Officials also included rules for provider directories.

If a QHP issuer has trouble keeping its provider directory up to date, it should add consumer safeguards, such as using the version of a provider directory available to consumers in a given month to determine whether care from a provider will be classified as in-network care, officials said.

It was the second PPACA-related delay a day after HHS Secretary Kathleen Sebelius testified before Congress.

Small-group employers skip SHOP, move to individual exchanges

Originally posted October 03, 2013 by Elizabeth Galentine, additional reporting by Brian Kalish on

While President Barack Obama has frequently told Americans, “if you like your plan, you can keep it,” that is not ringing true for some small groups across the country. A number of small-group employers are already planning to send their employees to the Affordable Care Act’s exchanges. It’s an outcome predicted by many in the industry, but one surprise to some is the choice of exchange.

Rather than utilize the Small Business Health Options Program (SHOP exchanges) that the ACA has set up for employer groups of 50 or fewer full-time employees, some brokers are finding their clients are more interested in sending their employees to the individual exchanges instead.

Kelly Fristoe, owner of Financial Partners in Wichita Falls, Texas, is wary of the fact that his state’s SHOP exchange only has one insurance company participating at this point. Rather than deal with potential consequences of that, he is steering his small-group clients interested in the exchange market toward the individual plans. “We’ve had some small-group customers — not a lot — telling us that they’re going to dump their plan and send their employees to the individual market,” says Fristoe, president of the Texas Association of Health Underwriters.

“So we’ve made some arrangements with those employers to be able to be the agent that sits with those employees. They’re going to let us have time with their employees to educate them on purchasing insurance through the marketplace and qualifying for a subsidy.”

Because he wants to keep those individuals as clients no matter what, Fristoe was particularly “frustrated” Tuesday when technical glitches kept him from checking out the plans on “I’m needing to salvage that business and I need to know what those individual rates are so that I can go back to those people and show them how to qualify for a subsidy, if they qualify, and get them enrolled,” he says. “… We’re going to be the agent that’s going to try to salvage that business instead of it going to one of our competitors.”

David Smith, vice president at Ebenconcepts in Morrisville, N.C., agrees that accessing the information on exchange rates is of the utmost importance right now. “You have to recognize that we’re going to have some percentage of very small groups that have already decided they’re not going to offer a group health insurance plan next year,” he says. “So if you have four or five employees a lot of them have made a business decision to not do it, and they just want to get a feel for what it’s going to cost their employees when they make that decision.”

As an administrator for the testing process for agents to be certified with Covered California, Neil Crosby, director of sales at Warner Pacific Insurance Services in Westlake Village, Calif., is surprised that the majority of people attending his classes so far have been serving the individual market. “I’m shocked at how many … are coming to primarily do it individually. There’s so many of them,” he says. “Some of the ones that do individual they also do small group, of course, but a lot of them are representing the individual. I’d say maybe 65% of people in the room.”

A lot of agency owners “want to get a feel for” for the individual market exchanges, says Ebenconcepts’ Smith, because it is very appealing for micro groups, those with nine, 10 employees, to “go to the marketplace for subsidized coverage and maybe pay less for that than they would for their group insurance today.” An employer who is looking at saving $3,500 to $5,000 in premiums by making the switch, “they’re not walking that border, they’re running to that border,” says Smith.

A common sentiment among several brokerages contacted by EBAEBN’ssister publication, in the days following the opening of the exchanges was that they have yet to take a look at the individual or SHOP exchanges. While online enrollment in SHOP exchanges run by the federal government is delayed until Nov. 1, applicants still have the option of submitting over the phone or through the mail.

Some are using the delay as a reason not to take a look at SHOP exchanges yet, but Michael Wolff, chief operations and financial officer at Dickerson Employee Benefits in Los Angeles, cautions against such an approach. “I don’t think that’s a good idea. … I think you want to have all the tools in your tool box. In California at least they have been successful in negotiating with the carriers to come to the table and give their best offers … there’s a chance they are giving a very good rate,” he says.

Wolff references the SHOP exchange tax credit for small businesses with low-wage earners that is available for 2014. “Of course we don’t know how long that will be upheld, but it’s a real tax advantage for next year at least,” he says. “… Why not have it in your portfolio to show? Everybody’s talking about it. You don’t want to say, ‘Well, I don’t know about it, but it’s probably bad because [it’s] the government [offering it].’ Well, maybe some clients will believe you, but it’s a better story if you say, ‘Yeah, I have that, and this is what they offer.’ Why would you not?

“Our model is … to bring a representation of the market to the agent and to the client,” adds Wolff, whose agency is one of only four in the state of California authorized to be a wholesaler for Covered California’s SHOP exchange, which did open on time Oct. 1. “This is a market phenomenon right now that we want to offer and explain. That is our role. We are ready.”

Meanwhile, like millions of others in the last few days, Don Garlitz, executive director of exchange technology provider bswift Exchange Solutions, logged on to a couple of SHOP exchanges to do a little window shopping. However, he could not get past the registration screen. If people are going to purchase such plans, the window shopping experience needs to improve, he says.

“People will look until they [get] what they want. [On Tuesday] I wasn’t able to find any kind of window shopping experience, which will be important for consumers,” he said. “They will not want to go through a 35-45 minute application process just to look at a rate. The call center I spoke with was not sure if there would be window shopping available. That will be an important thing for the federal government to consider.”

HHS delays SHOP Web enrollment launch

Originally posted September 26, 2013 by Allison Bell on

The U.S. Department of Health Human Services (HHS) is pushing the launch of the federal small-group public exchange Web enrollment system back to November.

The delay in the Small Business Health Options Program (SHOP) online enrollment system start affects only the states in which HHS will be running federally facilitated exchanges (FFEs).

States that are running their own state-based exchanges can still get their Web-based SHOP enrollment systems going Oct. 1, the official launch date for the new Patient Protection and Affordable Care Act (PPACA) public health insurance exchange system.

The delay will also have no direct effect on the FFE individual exchange program.

Reuters is reporting that Obama administration officials told it that small employers in FFE states will still be able to enroll in SHOP plans Oct. 1 by filling out paper forms or calling an FFE call center.

John Greene, a vice president at the National Association of Health Underwriters, said his group has learned that agents and brokers will be able to sell SHOP plans Oct. 1.

“It won’t be an electronic train,” Greene said. “It will be a little horse and buggy. But they can still get it done.”

Having the ability to start the SHOP enrollment process before the federal exchange Web enrollment system could help brokers get an edge over that system in the SHOP market.

The initial exchange enrollment rules call for employers to make payments by Dec. 15 to have coverage take effect Jan. 1.

The SHOP will be open to employers with 50 or fewer full-time employees. Some small employers that sign up for coverage through the SHOP and have relatively modestly paid employees can qualify for temporary small-group health insurance tax credits. The Congressional Budget Office has predicted that the SHOP program will be much smaller than the individual exchange program and may attract employers with only a few million employees.

The initial exchange enrollment rules call for employers to make payments by Dec. 15 to have coverage take effect Jan. 1.

The SHOP will be open to employers with 50 or fewer full-time employees. Some small employers that sign up for coverage through the SHOP and have relatively modestly paid employees can qualify for temporary small-group health insurance tax credits.

HHS is saying that it will open a call center aimed specifically at small employers Oct. 1. Employers can call the center at (800) 706-7893 from 9 a.m. to 7 p.m. EST.

HHS also is working with the Small Business Administration to organize SHOP webinars.

About 40,000 agents and brokers have been trained to sell SHOP coverage, HHS says.

What You Need to Know about the Small Business Health Care Tax Credit

Originally posted on

How will the credit make a difference for you?

For tax years 2010 through 2013, the maximum credit is 35 percent of premiums paid for small business employers and 25 percent of premiums paid for small tax-exempt employers such as charities.

For tax years beginning in 2014 or later, there will be changes to the credit:

  • The maximum credit will increase to 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers.
  • To be eligible for the credit, a small employer must pay premiums on behalf of employees enrolled in a qualified health plan offered through a Small Business Health Options Program (SHOP) Marketplace.
  • The credit will be available to eligible employers for two consecutive taxable years.

Here’s what this means for you. If you pay $50,000 a year toward workers’ health care premiums — and if you qualify for a 15 percent credit, you save... $7,500. If you save $7,500 a year from tax year 2010 through 2013, that’s total savings of $30,000. If, in 2014, you qualify for a slightly larger credit, say 20 percent, your savings go from $7,500 a year to $10,000 a year.

Even if you are a small business employer who did not owe tax during the year, you can carry the credit back or forward to other tax years. Also, since the amount of the health insurance premium payments is more than the total credit, eligible small businesses can still claim a business expense deduction for the premiums in excess of the credit. That’s both a credit and a deduction for employee premium payments.

There is good news for small tax-exempt employers too. The credit is refundable, so even if you have no taxable income, you may be eligible to receive the credit as a refund so long as it does not exceed your income tax withholding and Medicare tax liability.

And finally, if you can benefit from the credit this year but forgot to claim it on your tax return, there’s still time to file an amended return.

Click here if you want more examples of how the credit applies in different circumstances.

Can you claim the credit?

Now that you know how the credit can make a difference for your business, let’s determine if you can claim it.

To be eligible, you must cover at least 50 percent of the cost of single (not family) health care coverage for each of your employees. You must also have fewer than 25 full-time equivalent employees (FTEs). Those employees must have average wages of less than $50,000 (as adjusted for inflation beginning in 2014) per year. Remember, you will have to purchase insurance through the SHOP Marketplace to be eligible for the credit for tax years 2014 and beyond.

Let us break it down for you even more.

You are probably wondering: what IS an FTE. Basically, two half-time workers count as one FTE. That means 20 half-time employees are equivalent to 10 FTEs, which makes the number of FTEs 10, not 20.

Now let’s talk about average annual wages. Say you pay total wages of $200,000 and have 10 FTEs. To figure average annual wages you divide $200,000 by 10 — the number of FTEs — and the result is your average annual wage. The average annual wage would be $20,000.

Also, the amount of the credit you receive works on a sliding scale. The smaller the business or charity, the bigger the credit. So if you have more than 10 FTEs or if the average wage is more than $25,000 (as adjusted for inflation beginning in 2014), the amount of the credit you receive will be less.

How do you claim the credit?

You must use Form 8941, Credit for Small Employer Health Insurance Premiums, to calculate the credit. For detailed information on filling out this form, see the Instructions for Form 8941.

If you are a small business, include the amount as part of the general business credit on your income tax return.

If you are a tax-exempt organization, include the amount on line 44f of theForm 990-T, Exempt Organization Business Income Tax Return. You must file the Form 990-T in order to claim the credit, even if you don't ordinarily do so.

Don’t forget... if you are a small business employer, you may be able to carry the credit back or forward. And if you are a tax-exempt employer, you may be eligible for a refundable credit.



Feds add exchange employer site

Originally posted August 2, 2013 by Allison Bell on

Three federal agencies have joined to set up a Patient Protection and Affordable Care Act website for small businesses. offers a "wizard," or interactive tool, that offers to help business owners understand what they need to know about the new PPACA insurance options in a few quick steps.

The Small Business Administration worked with the U.S. Department of Health and Human Services and the U.S. Treasury Department to set up the site.

The wizard starts by asking visitors about their companies' location and size.

On the size menu, for example, the wizard asks whether the user is self-employed with no employees, has fewer than 25 employees, has up to 50 employees, or has 50 or more employees.

The site includes an explanation of how an employer can determine whether it has 50 or more full-time or full-time equivalent employees.

Users who, say, might want to set up group health plans will see information about the new PPACA Small Business Health Options Program small-group exchange program.

In most states, in the pages of information for employers interested in setting up health plans, the SBA gives an answer to the question, "Can I use an agent or broker to buy health insurance in the marketplace?"

"You will be able to use a licensed agent or broker to provide help or handle your SHOP business," the SBA says. "You won't pay more if you use a SHOP agent or broker."

For users in Vermont, a state that is trying to eliminate small-group market broker commissions, the SBA makes no mention of agents and brokers.


HHS Issues Final Rule on SHOP Exchange Program

This content was originally published on the website.

The Department of Health and Human Services (HHS) released a final rule implementing Affordable Care Act provisions relating to the Small Business Health Options Program (SHOP). This rule finalizes the amendments in the proposed rule of March 11, 2013, regarding triggering events and special enrollment periods. It implements a transitional policy regarding employees' choice of qualified health plans (QHPs) in the SHOP.

  • The final rule changes the special enrollment period from 60 days to 30 days in most instances.
  • If an employee or dependent becomes eligible for premium assistance under CHIP or loses eligibility for Medicaid or CHIP, the employee or dependent would have a 60-day special enrollment period to select a Qualified Health Plan.
  • There is a transitional rule regarding what QHPs an employer may choose to offer.

The regulations are effective July 1, 2013.

HHS also published a

What’s Ahead this Year as Health Insurance Exchanges are Rolled-out Nationwide

Original article

By Cindy Gillespie

Exchanges are a key component of the Affordable Care Act (ACA). Here’s a snapshot of exchange developments across the country, potential regulations to watch for, and where exchanges might be by October 2013 for open enrollment and by January 1, 2014, when they are slated to “go live” nationwide.

Health Insurances Exchanges: The Vision

The ACA directed each state to establish two types of exchanges or have the federal government do so on its behalf — the American Health Benefits Exchange (AHBE) for individuals and the Small Business Health Options Program (SHOP) for small employers. Under the statute, individuals are eligible to buy insurance on the AHBE if they are:

  • a U.S. citizen or legal alien
  • not incarcerated
  • a resident of the state in which the exchange is based


The ACA includes robust premium and cost-sharing subsidies for individuals who purchase insurance through the individual exchange who are living at levels between 100 and 400 percent of the federal poverty level — between approximately $12,000 and $46,000 a year — and who are not eligible for other public insurance programs (i.e. Medicaid, Medicare, Tricare) and who do not receive “affordable” insurance coverage through their employers (that meets minimum value standards).

Employers which have more than 50 employees whom are eligible for tax credit subsidies, either because the employer does not offer coverage or because the coverage offered is unaffordable to the employee according to ACA standards, or not of minimum value, will be subject to a penalty.


Meanwhile, the ACA allows employers with up to 100 full-time employees to purchase insurance through SHOP, although the state has the option to limit access to employers with 50 employees or less for the first two years. Most states have taken advantage of this option in order to maintain consistency with the outside market’s definition of “small employer.” States also maintain the option to allow employers with more than 100 employees to purchase insurance through the SHOP beginning in 2017, with approval of the U.S. Department of Health and Human Services (HHS).

Tax credit subsidies are also available to employers who purchase coverage on SHOP for employers with less than 25 employees who have an average taxable wage under $50,000 per year. Employers cannot claim the tax credit for more than two consecutive years.

Health Insurances Exchanges: 3 Primary Models

Although the ACA envisioned 50 different exchanges championed by individual states, the reality of ACA implementation has been far different. Indeed, political, logistical, and operational challenges faced by both HHS and the states have led only a subset of states to embrace exchanges. The update below provides a snapshot of how exchanges are developing across the country.


Seventeen states and the District of Columbia are developing State-based Exchanges as envisioned under the ACA. These states have received “conditional approval” from HHS to operate them for the 2014 plan year. Under these exchanges, states execute all functions but may turn to the federal government for issues such as tax-credit eligibility determination, risk adjustment, and reinsurance.

While several of these states have been making great strides toward October 1, 2013 open enrollment, others are relatively behind in the planning process and may struggle to meet the impending deadlines. For example, some states still lack legal authority to operate a State-based Exchange, while others have yet to procure any IT-related services necessary to make the exchange function.


Seven states have received conditional approval from HHS to operate State Partnership Exchanges. This exchange model, not envisioned under the ACA, is an option created by HHS for states that may want to play a small role in exchange operations either permanently or as they move toward a State-based Exchange. States have two primary options for pursuing State Partnership Exchanges: a plan management partnership or a consumer partnership. States also have the choice to participate in both partnership models.

States participating in a plan management partnership assume responsibility for issuer account management and issuer oversight as well as monitoring, quality reporting, and data collection. In addition, these states also play a key role in determining qualified health plan (QHP) certification. Plan management partnerships will recommend which plans should be certified as QHPs to HHS, which has the legal authority to make QHP certifications.

States also have the option to pursue a consumer partnership exchange. States choosing this approach control the day-to-day management of Navigators and in-person consumer assistors, and will have the option to engage in outreach, education, and branding activities. Navigators and in-person consumer assistors will be the “boots on the ground” in states to help educate consumers about plan choices and coverage options. For states choosing a Federally-facilitated Exchange (FFE), consumer partnership states oversee and provide technical assistance to Navigators, but HHS retains authority over the Navigator programs.


Twenty-six states have decided not to pursue a State-based or Partnership Exchange. In these states, the federal government is establishing a Federally-facilitated Exchange (FFE). Under an FFE, the federal government performs all exchange functions with states, maintaining the option to make final Medicaid determination and operate its reinsurance program. Although the option to operate reinsurance programs has yet to gain traction, many FFE states have expressed interest in maintaining the responsibility to make final Medicaid determination for individuals assessed as eligible for Medicaid.

Marketplace Plan Management

Several federal requirements necessary for health insurance plans to be qualified in order to be offered on the exchange are already criteria commonly examined as part of routine, state insurance regulatory activities. HHS has indicated that its preference is to integrate states’ existing regulatory activities into its decision-making for qualified health plan (QHP) certification, even in states with an operating FFE.

To further facilitate this relationship, HHS has indicated it will offer states a marketplace plan management option, essentially allowing states to perform activities associated with a plan management partnership but without requiring them to submit a formal exchange blueprint. HHS guidance dated February 20, 2013 also indicates that states can apply for federal funds to support these activities, similarly as it did for the State-based and State Partnership models.

3 Issues to Watch in 2013

As the clock ticks on the path to open enrollment, there are several issues still under consideration that are worth tracking, particularly for the small and large employer communities.

Recent guidance from HHS indicates that employee choice and premium aggregation will not be required of SHOP exchanges in the 2014 plan year. In the same set of proposed rules, HHS also indicates that federally-facilitated SHOPs (FF-SHOPs) will not offer these services in their first year of operation.

As you may recall, employee choice and premium aggregation (the process of collecting premiums from qualified employers and delivering a single streamlined payment to insurers) are two tools at the disposal of SHOP exchanges to help drive enrollment. This recently proposed approach could potentially undermine the viability of SHOP exchanges and the small business market nationwide.

Additional rules from HHS surrounding 10 essential health benefits indicate that to meet these requirements outside the exchange, health insurance plans will need to either embed pediatric oral services, the tenth category of essential health benefits coverage, or be “reasonably assured” that the individual has obtained dental coverage from an exchange- certified, stand-alone dental plan. This is a new proposal from HHS and is therefore receiving significant scrutiny from several stakeholder groups, as the requirements could cause operational challenges in the market. Stay tuned.

HHS released additional details regarding employers’ interface with the exchange in January. Most interestingly, the rules verify that there is no central databank containing details on employer-sponsored health insurance plans. As a result, until that information is available, exchange applicants must attest to the details surrounding their employer-sponsored health insurance plans when seeking health insurance on the exchange. The exchange will then use available data sources to attempt to verify individuals’ claims. Absent inconsistencies in available information, the exchange will be permitted to proceed to enroll the applicant in a health insurance plan along with the applicable subsidies. Employers will be notified of employees who claim a tax credit on the exchange. However, exchanges must select a valid sample of people for whom employer coverage details could not be verified and verbally call employers for additional information. If the exchange cannot obtain information within 90 days, eligibility will remain unchanged.

Looking Toward 2014

The issues described above are only a select set of developments that have emerged in recent months. Indeed, there are a host of unanswered questions and operational challenges that stand between today and open enrollment. ACA implementation process has passed the window for planned delay. Employers and the health benefits industry should expect for exchanges to “go live” and for tax credits to be available beginning January 1, 2014. The Stakeholders should prepare for implementation, albeit with hiccups along the way, as scheduled.