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This week the IRS issued Revenue Procedure 2022-34, which significantly decreases the affordability threshold for ACA employer mandate purposes to 9.12% for plan years beginning in 2023. The new 9.12% level marks by far the lowest affordability percentage to date, as well as the first time the threshold has dropped below the initial 9.5% standard set by the ACA.

The affordability percentage decrease is based on the ACA’s index inflation metric, which is the rate of premium growth for the preceding year over the rate of CPI growth for the preceding year. The affordability percentages apply for plan years beginning in the listed year. A calendar plan year will therefore have the 9.12% affordability threshold for the plan year beginning January 1, 2023.

The ACA employer mandate rules apply to employers that are “Applicable Large Employers,” or “ALEs.” In general, an employer is an ALE if it (along with any members in its controlled group) employed an average of at least 50 full-time employees, including full-time equivalent employees, on business days during the preceding calendar year.

There are two potential ACA employer mandate penalties that can impact ALEs:

a) IRC §4980H(a)—The “A Penalty”

The first is the §4980H(a) penalty—frequently referred to as the “A Penalty” or the “Sledge Hammer Penalty.” This penalty applies where the ALE fails to offer minimum essential coverage to at least 95% of its full-time employees in any given calendar month.

The 2022 A Penalty is $229.17/month ($2,750 annualized) multiplied by all full-time employees (reduced by the first 30). It is triggered by at least one full-time employee who was not offered minimum essential coverage enrolling in subsidized coverage on the Exchange. Note: The IRS has not yet released the 2023 A Penalty increase.

The “A Penalty” liability is focused on whether the employer offered a major medical plan to a sufficient percentage of full-time employees—not whether that offer was affordable (or provided minimum value).

b) IRC §4980H(b)—The “B Penalty”

The second is the §4980H(b) penalty—frequently referred to as the “B Penalty or the “Tack Hammer Penalty.” This penalty applies where the ALE is not subject to the A Penalty (i.e., the ALE offers coverage to at least 95% of full-time employees).

The B Penalty applies for each full-time employee who was:

  1. not offered minimum essential coverage,
  2. offered unaffordable coverage, or
  3. offered coverage that did not provide minimum value.

Only those full-time employees who enroll in subsidized coverage on the Exchange will trigger the B Penalty. Unlike the A Penalty, the B Penalty is not multiplied by all full-time employees.

In other words, an ALE who offers minimum essential coverage to a full-time employee will be subject to the B Penalty if:

  1. the coverage does not provide minimum value or is not affordable (more below); and
  2. the full-time employee declines the offer of coverage and instead enrolls in subsidized coverage on the Exchange.

The 2022 B Penalty is $343.33/month ($4,120 annualized) per full-time employee receiving subsidized coverage on the Exchange.  Note: The IRS has not yet released the 2023 B Penalty increase.

Do Employers Now Have to Offer Affordable Family Coverage?

April 11 - Posted at 2:08 PM Tagged: , , , , , ,

In furtherance of the Biden Administration’s January 28, 2021, Executive Order 14009 and April 5, 2022, Executive Order 14070 to protect and strengthen the ACA, the Treasury Department and IRS published a proposed rule on April 7, 2022, advancing an alternative interpretation of Internal Revenue Code Section 36B.  Employers can breathe a sigh of relief as the proposed changes do not alter the Employer Shared Responsibility Payment (ACA penalty) construct.  Employers can continue to offer affordable employee-only coverage and spousal or dependent coverage that is unaffordable.  However, the potential indirect effects of the proposed regulations on employers are noteworthy.

At its core, the proposed regulation eliminates the current regulatory concept that the cost of coverage for a spouse and dependent children is deemed affordable if the lowest-cost silver plan for employee-only coverage is affordable.  Citing studies addressing the “family glitch” that disqualifies employees from subsidized Marketplace coverage if the employee-only coverage is affordable and finding this inconsistent with the purpose of the ACA of expanding access to affordable care, the Treasury Department and IRS have reinterpreted Section 36B as permitting a Premium Tax Credit to individuals if the only coverage available to them is unaffordable spousal or dependent coverage.

In an attempt to calm employers’ concerns that this proposed rule will affect their cost-sharing schedules, the Preamble to the proposed rule notes:

The proposed regulations would make changes only to the affordability rule for related individuals; they would make no changes to the affordability rule for employees.  As required by statute, employees continue to have an offer of affordable employer coverage if the employee’s required contribution for self-only coverage of the employee does not exceed the required contribution percentage of household income.  Accordingly, under the proposed regulations, a spouse or dependent of an employee may have an offer of employer coverage that is unaffordable even though the employee has an affordable offer of self-only coverage.

The proposed rule also modifies the minimum value regulations to include the entire family and addresses multiple offers of coverage.

Although not directly affecting employer-sponsored plans, employers may experience indirect effects of the changes if the proposed rule is finalized.  For example, in order for the Internal Revenue Service to make Premium Tax Credit determinations involving family coverage, they may require further information reporting from employers.  The IRS Forms 1094 and 1095 might be modified to require separate affordability reporting regarding both employee-only coverage and other coverage offers.

Further, employer-sponsored plans may see an uptick in enrollment if the Premium Tax Credit becomes available to families when employer-sponsored coverage is unaffordable for spouses and dependent children.  The Premium Tax Credit would help offset the high cost of coverage in employer-sponsored plans.

With the protection and strengthening of the Affordable Care Act being a focus of the current Administration, employers should prepare for further changes.

Affordable Percentage Will Shrink for Employer Health Coverage in 2022

September 03 - Posted at 3:47 PM Tagged: , , , ,

The Affordable Care Act (ACA) benchmark for determining the affordability of employer-sponsored health coverage will shrink to 9.61% of an employee’s household income for the 2022 plan year — a decrease from the 2021 plan-year level of 9.83%, according to IRS Rev. Proc. 2021-36. This affordability percentage can affect individuals’ eligibility for federally subsidized coverage from a public exchange, as well as employers’ potential liability for shared-responsibility (or “play or pay”) assessments.

Affordability standards

Under the ACA, employer-sponsored minimum essential coverage (MEC) is affordable if an employee’s required contribution for the lowest-cost, self-only option with minimum value does not exceed an annually indexed percentage of the employee’s household income. Employees and their family members eligible for minimum-value employer-sponsored MEC that meets the affordability standard cannot receive premium tax credits or cost-sharing reductions for public exchange coverage.
 

To determine liability for play-or-pay assessments, three employer safe harbors allow replacing household income in the affordability calculation with one of these figures:
 

  • Form W-2 wages
  • Rate of pay
  • Federal poverty line (FPL)

 

Indexing formula

As explained in IRS Rev. Proc. 2014-37, the original 9.5% affordability percentage is annually adjusted after 2014. Before 2020, this adjustment reflected the ratio of the premium growth rate for employer-sponsored health coverage to the national income growth rate in the previous year. For calendar years 2020 and 2021, the method of calculating the “premium adjustment percentage” changed to capture premium increases for both individual-market policies and employer-sponsored health coverage. For calendar years 2022 and beyond, the Notice of Benefit and Payment Parameters for 2022 reverts back to the pre-2020 method of calculating the premium adjustment percentage.

Because premiums for employer-sponsored health coverage increased at a lower rate than the national income growth during 2021, the 2022 affordability percentage will drop below the 2021 level.
 

Employer considerations

Employers should review the required employee contribution for 2022 coverage if they plan to meet the ACA’s affordability limit under the applicable safe harbor. For the many 2022 calendar-year plans using the FPL affordability safe harbor, the required employee contribution cannot exceed 9.61% of the FPL for a particular area — $12,880 for mainland US — or $103.15 per month, calculated as (9.61% x $12,880 FPL for 2021) ÷ 12, rounded to the nearest penny.
 

This will mark the first time that the FPL safe-harbor dollar amount has decreased for calendar-year plans (down from $104.53 in 2021). As a result, employers that use this safe harbor will need to reduce the employee contribution for the lowest-cost, self-only option for the 2022 plan year. The same is possible for noncalendar-year plans beginning in 2022, depending on the 2022 FPL amounts issued in January or February 2022.
 

The adjusted percentage applies on a plan-year — not calendar-year — basis. This means noncalendar-year plans will continue to use 9.83% to determine affordability in 2022 until their new plan year starts. Noncalendar-year plans won’t be able to calculate the FPL safe harbor contribution limit for plan years beginning after Jan. 1, 2022, until the Department of Health and Human Services issues the 2022 FPL guidelines in January or February 2022. As a reminder, for 2021 noncalendar-year plans using the mainland US FPL affordability safe harbor, the required employee contribution cannot exceed $105.51 per month, calculated as (9.83% x $12,880 FPL for 2021) ÷ 12, rounded to the nearest penny.

Affordability Threshold Set to Rise Slightly in 2021

July 23 - Posted at 1:01 PM Tagged: , , , , , , , , , , ,

The 2021 open enrollment season is quickly approaching. This week the IRS released Rev. Proc. 2020-36 which, among other items, set the affordability threshold for employers in 2021. In order to avoid a potential section 4980H(b) penalty, an employer must make sure one of its plans provides minimum value and is offered at an affordable price. 

A plan is considered affordable under the ACA if the employee’s contribution level for self-only coverage does not exceed 9.5 percent of the employee’s household income. This 9.5 percent threshold is indexed for years after 2014. In 2021 the affordability threshold will be 9.83 percent which is up slightly from the 2020 affordability threshold of 9.78 percent.

An employer wishing to use one of the affordability safe harbors will use the 2021 affordability threshold of 9.83 percent when determining if the safe harbor has been satisfied. The first affordability safe harbor an employer may utilize is referred to as the form w-2 safe harbor. Under the form w-2 safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of that employee’s form w-2 wages (box 1 of the form w-2) from the employer for the calendar year.

The second affordability safe harbor is the rate of pay safe harbor. The rate of pay safe harbor can be broken into two tests, one test for hourly employees and another test for salaried employees. For hourly employees an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the product of the employee’s hourly rate of pay and 130 hours. For salaried employees an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the employee’s monthly salary.

The final affordability safe harbor is the federal poverty line safe harbor. Under the federal poverty line safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.83 percent of the monthly Federal Poverty Line (FPL) for a single individual. The annual federal poverty line amount to use for the United States mainland in 2021 is $12,760. Therefore, an employee’s monthly cost for self-only coverage cannot exceed $104.52 in order to satisfy the federal poverty line safe harbor.

Obviously employers are dealing with a lot of issues as the COVID-19 crisis continues to impact almost every employer in the country. However, it is important for employers to remain compliant with the always evolving ACA rules and regulations. When planning for the 2021 plan year, every employer should check to make sure at least one of its plans that provides minimum value meets one of the affordability safe harbors discussed above for each of its full-time employees. It would not be surprising if individuals were more scrupulous with their healthcare choices in 2021 which could leave noncompliant employers exposed to section 4980H(b) penalties. 

On July 22, 2019, the IRS announced that the ACA affordability percentage for the 2020 calendar year will decrease to 9.78%. The current rate for the 2019 calendar year is 9.86%.

As a reminder, under the Affordable Care Act’s employer mandate, an applicable large employer is generally required to offer at least one health plan that provides affordable, minimum value coverage to its full-time employees (and minimum essential coverage to their dependents) or pay a penalty. For this purpose, “affordable” means the premium for self-only coverage cannot be greater than a specified percentage of the employee’s household income. Based on this recent guidance, that percentage will be 9.78% for the 2020 calendar year.

Employers now have the tools to evaluate the affordability of their plans for 2020. Unfortunately, for some employers, a reduction in the affordability percentage will mean that they will have to reduce what employees pay for employee only coverage, if they want their plans to be affordable in 2020.

For example, in 2019 an employer using the hourly rate of pay safe harbor to determine affordability can charge an employee earning $12 per hour up to $153.81 ($12 X 130= 1560 X 9.86%) per month for employee-only coverage. However in 2020, that same employer can only charge an employee earning $12 per hour $152.56 ($12 X 130= 1560 X 9.78%) per month for employee-only coverage, and still use that safe harbor. A reduction in the affordability percentage presents challenges especially for plans with non-calendar year renewals, as those employers that are subject to the ACA employer mandate may need to change their contribution percentage in the middle of their benefit plan year to meet the new affordability percentage. For this reason, we recommend that employers re-evaluate what changes, if any, they should make to their employee contributions to ensure their plans remain affordable under the ACA.

As we have written about previously, employers will sometimes use the Federal Poverty Level (FPL) safe harbor to determine affordability. While we won’t know the 2020 FPL until sometime in early 2020, employers are allowed to use the FPL in effect at least six months before the beginning of their plan year. This means employers can use the 2019 FPL number as a benchmark for determining affordability for 2020 now that they know what the affordability percentage is for 2020.

Late last week, the IRS released Rev. Proc. 2018-34 which, among other items, set the affordability threshold for employers in 2019. In order to avoid a potential section 4980H(b) penalty (aka Pay or Play penalty), an employer must make sure one of its plans provides minimum value and is offered at an affordable price. An actuary will determine whether the minimum value threshold has been satisfied and this is generally not an issue for employers. However, an employer is in control as to whether the plan it is offering meets the affordability threshold.

A plan is considered affordable under the ACA if the employee’s contribution level for self-only coverage does not exceed 9.5 percent of the employee’s household income. This 9.5 percent threshold is indexed for years after 2014. In 2018 the affordability threshold decreased from 9.69 percent to 9.56 percent. However, similar to every other year, the affordability threshold is scheduled to increase in 2019. In 2019 the affordability threshold will be 9.86 percent. The significant increase compared to 2018 provides an employer who is toeing the line of the affordability threshold an opportunity to increase the price of its health insurance while continuing to provide affordable coverage.

An employer wishing to use one of the affordability safe harbors will use the 2019 affordability threshold of 9.86 percent when determining if the safe harbor has been satisfied. The first affordability safe harbor an employer may utilize is referred to as the form w-2 safe harbor. Under the form w-2 safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of that employee’s form w-2 wages (box 1 of the form w-2) from the employer for the calendar year.

The second affordability safe harbor is the rate of pay safe harbor. The rate of pay safe harbor can be broken into two tests, one test for hourly employees and another test for salaried employees. For hourly employee, an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the product of the employee’s hourly rate of pay and 130 hours. For salaried employees, an employer’s offer will be deemed affordable if the employee’s required contribution for the month for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the employee’s monthly salary.

The final affordability safe harbor is the federal poverty line safe harbor. Under the federal poverty line safe harbor, an employer’s offer will be deemed affordable if the employee’s required contribution for the employer’s lowest cost self-only coverage that provides minimum value does not exceed 9.86 percent of the monthly Federal Poverty Line (FPL) for a single individual. The annual federal poverty line amount to use for the United States mainland in 2019 is $12,140. Therefore, an employee’s monthly cost for self-only coverage cannot exceed $99.75 in order to satisfy the federal poverty line safe harbor.

When planning for the 2019 plan year, every employer should check to make sure at least one of its plans that provides minimum value meets one of the affordability safe harbors discussed above for each of its full-time employees. Should you have any questions on determining the affordability of a plan or any other questions related to the Forms 1094-C and 1095-C, please don’t hesitate to contact us.

 

IRS has begun notifying employers of their potential liability for an ACA employer shared responsibility payment in connection with the 2015 calendar year. It recently released Forms 14764 and 14765, which employers can use to dispute the assessment.

Background

The Affordable Care Act (ACA) imposes employer shared responsibility requirements that are commonly referred to as the “employer mandate.” Beginning in 2015, applicable large employers (ALEs) – generally, employers with at least 50 full-time employees – are required to offer minimum essential coverage to substantially all full-time employees and their dependents, or pay a penalty if at least one full-time employee enrolls in marketplace coverage and receives a premium tax credit. Even if they offer employees coverage, ALEs may still be subject to an employer shared responsibility payment if the coverage they offer to full-time employees does not meet affordability standards or fails to provide minimum value. 

The IRS announced their plans in Fall of 2017 to notify employers of their potential liability for an employer penalty for the 2015 calendar year. It released FAQs explaining that Letter 226J will note the employees by month who received a premium tax credit, and provide the proposed employer penalty. Additionally, the IRS promised to release forms for an employer’s penalty response and the employee premium tax credit (PTC) list respectively. 

Employer Penalty Response & Employee Premium Tax Credit Forms Now Available

IRS subsequently issued Form 14764, the employer penalty Response, and Form 14765, the Employee PTC Listing. Together, these forms are the vehicle for employers to respond to a Letter 226J.

On Form 14764, employers indicate full or partial agreement or disagreement with the proposed employer penalty, as well as the preferred employer penalty payment option. An employer that disagrees with the assessment must include a signed statement explaining the disagreement, including any supporting documentation. This form also allows employers to authorize a representative, such as an attorney, to contact the IRS about the proposed employer penalty.

On Form 14765, the IRS lists the name and last four digits of the social security number of any full-time employee who received a premium tax credit for one or more months during 2015 and where the employer did not qualify for an affordability safe harbor or other relief via Form 1095-C. Each monthly box has a row reflecting any codes entered on line 14 and line 16 of the employee’s Form 1095-C. If a given month is not highlighted, the employee is an assessable full-time employee for that month – resulting in a potential employer assessment for that month.

If information reported on an employee’s Form 1095-C was not accurate or was incomplete, an employer wishing to make changes must use the applicable indicator codes for lines 14 and 16 described in the Form 1094-C and 1095-C instructions. The employer should enter the new codes in the second row of each monthly box by using the indicator codes for lines 14 and 16. The employer can provide additional information about the changes for an employee by checking the “Additional Information Attached” column. As mentioned:

Employers: Carefully Consider 226J Letter Responses
Miscoding can happen for different reasons, including vendor errors and inaccurate data. To minimize risk of additional IRS exposure, employers should carefully consider how best to respond to a 226J letter given circumstances surrounding the disputed assessments. For example, changing the coding on the 1095-C of an employee from full-time to part-time could trigger further review or questions by the IRS on the process for determining who is a full-time employee – and may increase the likelihood of IRS penalties for reporting errors on an employer’s Form 1095-Cs.

If No IRS Notice in 2017, Is an Employer Home Free in Connection with 2015 Employer Penalty?

In its October FAQs, the IRS stated that it “plans to issue Letter 226J informing ALEs of their potential liability for an employer shared responsibility payment, if any, in late 2017.” If the IRS sticks to that timing, all notices should be sent out by the end of this calendar year. However, because the IRS has not indicated that it will inform employers that they have no employer penalty due, it is impossible to say that an employer not receiving a Letter 226J in 2017 is home free for 2015 employer penalties.

In Closing

Employers should review the newly released forms so they are prepared to respond within 30 days of the date on the Letter 226J. They should also ensure processes are in place to make these payments, as necessary. Even employers who are not expecting any assessments will need to prepare to respond to the IRS within the limited timeframe to dispute any incorrect assessments.

ACA Affordability Standard for 2018 Released

July 26 - Posted at 1:05 PM Tagged: , , , , , ,
Since the inception of the employer mandate under the Affordable Care Act (ACA) in 2015, the affordability percentage for 2018 has been reduced and is now back to 9.56% per a recently released IRS publication.

Groups will need to carefully consider if a reduction in employee premium contributions is necessary in 2018 in order to ensure their medical coverage continues to meet affordability standards per ACA requirements.

Congress and the IRS were busy changing laws governing employee benefit plans and issuing new guidance under the ACA in late 2015. Some of the results of that year-end governmental activity include the following:


Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”)

The PATH Act, enacted by Congress and signed into law on December 18, 2015, made some the following changes to federal statutory laws governing employee benefit plans:

  • The ACA’s 40% excise tax (aka “Cadillac Tax”) on excess benefits under applicable employer sponsored coverage — so called “Cadillac Plans,” due to the perceived richness of such coverage — is  delayed from 2018 to 2020.


  • Formerly a nondeductible excise tax, any Cadillac Tax  paid by employers will now be deductible as a business expense.


  • Beginning with plan years after November 2, 2015,  employers with 200+ employees will not be required to automatically enroll new or current     employees in group health plan coverage, as originally required under the ACA.


  • After December 31, 2015, individual taxpayers who purchase private health insurance via the Healthcare Exchange will not be eligible to claim a Health Care Tax Credit on their tax returns.

IRS Notice 2015-87

On December 16, 2015, the IRS issued Notice 2015-87, providing guidance on employee accident and health plans and employer shared-responsibility obligations under the ACA. Guidance provided under Notice 2015-87 applies to plan years that begin after the Notice’s publication date (December 16th), but employers may rely upon the guidance provided by the Notice for periods prior to that date.


Notice 2015-87 covers a wide-range of topics from employer reporting obligations under the ACA to the application of Health Savings Account rules to rules for identifying individuals who are eligible for benefits under plans administered by the Department of Veterans Affairs. Following are some of the highlights from Notice 2015-87, with a focus on provisions that are most likely to impact non-governmental employers.


  • Under the ACA, an HRA may only reimburse medical expenses of those individuals (employee, spouse, and/or dependents) who are also covered by the employer’s group health plan providing minimum      essential coverage (“MEC”) that is integrated with the HRA.
  • Employer opt-out payments (i.e., wages paid to an employee solely for waiving employer-provided coverage) may, in the view of Treasury and the IRS, effectively raise the contribution cost for employees who desire to participate in a MEC plan. Treasury and the IRS intend to issue      regulations on these arrangements and the impact of the opt-out payment on the employee’s cost of coverage. Employers are put on notice that if an opt-out payment plan is adopted after December 16, 2015, the amount of the offered opt-out payment will likely be included in the employee’s cost of coverage for purposes of determining ACA affordability.
  • Treasury and the IRS will begin to adjust the affordability safe harbors to conform with the annual adjustments for inflation applicable to the “9.5% of household income” analysis under the ACA. For plan years beginning in 2015, employers may rely upon 9.56% for one or more of the affordability safe harbors identified in regulations under the ACA, and 9.66% for plan years beginning in 2016. For example, in a plan year beginning in 2016, an employer’s MEC plan will meet affordability standards if the employee’s contribution for lowest cost, self-only coverage does not exceed 9.66% of the employee’s W-2 wages (Box      1).
  • To determine which employees are “full-time” under the ACA, “hours of service” are intended to include those hours an employee works and is entitled to be paid, and those hours for which the employee is entitled to be paid but has not worked, such as sick leave, paid vacation, or periods of legally protected leaves of absence, such as FMLA  or USERRA leave.
  • The Treasury and IRS remind applicable large employers that they will provide relief from penalties for failing to properly complete and submit Forms 1094-C and 1095-C if the employers are able to show that they made good faith efforts to comply with their reporting obligations.

With Congress in its summer recess, now is a good time to reflect on the top ACA issues worth monitoring as 2015 quickly approaches.  Here are a handful of key issues to watch:

 

Dueling Court Cases on Federal Subsidies

 

One issue grabbing national headlines is the dueling decisions coming out of the U.S. Court of Appeals for the District of Columbia (Halbig v. Burwell) and the U.S. Court of Appeals for the Fourth Circuit (King v. Burwell) on missing language in the ACA that would have authorized the federal government to provide premium subsidies to individuals who sign up for health plans through the federal Exchanges. The legal issue in these court cases is whether the ACA premium tax credit (aka subsidy) is available to those individuals who enroll in qualified health plans (QHP) through state operated Exchanges or if it is available only to those to enroll in a QHP through a federally funded Exchange. 

 

A primary concern is that a significant number of people in about two-thirds of the states (who did not set up a state-run Exchange) rely on the subsidy to purchase a plan in the federal Exchange. Specifically, the ACA’s employer mandate penalty of $3000 is based upon an employer having an employee seek coverage through an Exchange and receive the federal premium subsidy. In general, the employer mandate requires that “applicable large employers” offer their full-time employees minimum essential coverage or potentially pay a tax penalty.  However, according to the statutory text of the ACA, the penalties under the employer mandate are triggered only if an employee receives a subsidy to purchase coverage through an Exchange established by the states. Both cases are being appealed to higher courts and will likely be consolidated into one case to be heard by the U.S. Supreme Court in the not so distant future.  

 

In an interesting development, a video surfaced last week featuring one of the ACA’s chief architects (John Gruber) saying that health insurance subsidies should only be available in those states who opt to build and implement state-based Exchanges to gain participation. The idea was to create an incentive to have states actively involved in the hosting of an Exchange, rather than relying on the federal government to operate the Exchanges in each state.  Whether this video will be used as evidence to uphold the argument that subsidies can only be offered by state-based Exchanges remains to be seen.   

 

Lack of Back End Software for Federal Exchange

 

Of course, one of the big news stories in 2013 and early 2014 was the substandard launch of the federal Exchange, which led to many Americans having to wait to be enrolled in an ACA-compliant health plan.  Although some technical snafus have been addressed, there are many that still remain.  For example, a top White House official recently told Congress that the automated system that is supposed to send premium payments to insurance companies is still under development, and they did not have a completion date for it yet. The lack of an electronic verification process is only one part of the “backend” software that is still problematic five years after PPACA was passed.

 

Future of Navigators in Comparison with the Value of Brokers 

 

Several recent studies have touted the benefits of using third parties, such as Brokers, to help consumers find coverage under the ACA. Some of these studies have focused on the usefulness of using Brokers/Agents over the benefits of using Navigators.  A recent Urban Institute study found that health insurance Brokers were the most helpful in providing health insurance Exchange information when compared to other types of resources, including Navigators and website content. However, there are other published studies showcasing how Navigators have been useful to consumers.  That being said, Brokers have assumed an integral role supporting millions of Americans in securing and maintaining coverage for many decades, and continue to be knowledgeable resources, as they are licensed in the states they operate in, whereas Navigators are not required to meet the same licensing standards as Brokers/Agents.  It will be interesting to see what the future holds for Navigators, who are not as experienced and who are, in the end, dependent upon federal grants to provide their services.  

 

Provider Access Issues & Emergency Room Over-Usage

 

A number of public policymakers have raised concerns recently about the fact that there are shortages of key physicians and other providers and as a result is causing a increase in non-emergent patient visits to expensive ER departments. A recent story in the New York Times highlighted similar concerns, saying the ACA cannot change the fact that visiting an emergency room may be easier than seeing a primary care physician in some instances or locations. Other stories and studies highlight how the ACA and health care reform initiatives can affect access to providers in many different ways, such as changing reimbursement levels, improving the availability of certain types of specialists, or re-educating the patient to move from visiting the ER department to either making an appointment ahead-of-time or visiting a less expensive Urgent Care center for care.

 

Premium Rate Increases

 

Another critical issue to monitor are premium increases that might be occurring in spite of the initial promises that the ACA would lower health care costs. Health plans have begun publishing proposed rates for 2015, resulting in a recent flurry of news articles and reports addressing the impact of the ACA on insurance premiums. 

 

The Wall Street Journal published a front page report discussing the ACA’s impact on premium increases earlier this summer, saying, “Hundreds of thousands of consumers nationwide, who bought insurance plans under the Affordable Care Act, will face a choice this fall: swallow higher premiums to stay in their plans or save money by switching.”  

 

The Journal goes on to say that a new picture is emerging in 10 states where 2015 premium insurance rates for individual plans have been filed, “In all but one (state), the largest health insurer is proposing to increase premiums between 8.5% to 22.8% next year.”  Ironically, smaller health plans are reducing their 2015 rates in the same market in an attempt to gain market share.  

 

The significance of this trend is underscored in a statement released earlier this summer by Karen Ignagni, president & CEO of America’s Health Insurance Plans (AHIP), in which she expressed concerns about keeping health insurance affordable for patients. “Affordability remains a top priority for consumers when it comes to their health care,” she said.

 

Bonus:  Be Sure To Watch The Political Races

 

With the ACA’s continued challenges, the ups and downs of the U.S. economy, key world events in the Middle East, and other confounding variables, one has to wonder what will happen during the mid-year elections this fall. As reported by CNN and other news outlets, the ACA became an key issue in Obama’s 2012 re-election victory as well as Democrats picking up seats in the Senate and House in that election.  

 

As November 3, 2015 approaches, many different messages could be sent back to the White House and Congress. If Republicans take over the Senate and retain control of the House, how will this impact the ACA over the next several years?  If the congressional houses remain split, we may have less going on by either political party. How will the state-level elections impact the ACA and state-run Exchanges? Only time will tell.

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