Written by: Gary Bacher and Joshua Booth
The Centers for Medicare & Medicaid Services Center for Consumer Information and Insurance Oversight (CCIIO) and the Internal Revenue Service (IRS) recently released four important documents related to the implementation of the Affordable Care Act (ACA) that address employer-provided health insurance plan reporting requirements and the availability of premium tax credits to individuals and families. The ACA makes tax credits available to help individuals pay insurance premiums, but these credits do not apply if the individual is eligible for employer-provided coverage that is both affordable (in terms of required employee contribution to premium payments) and provides “minimum value” (in terms of overall cost-sharing).
CCIIO issued a Bulletin that describes the procedures it intends to use to verify whether an employee is eligible for employer-provided coverage, and thus precluded from claiming premium tax credits. To help determine eligibility and availability of employer-provided coverage to an individual, the IRS issued a Notice and Request for Comment that solicits responses to how the IRS intends to determine whether coverage offered by an employer provides “minimum value,” as well as two Requests for Comment (RFC), Notice 2012-32 and Notice 2012-33, on how insurers, government agencies, and employers should be required to report insurance coverage data to implement sections 6055 and 6056 of the Internal Revenue Code, respectively. The IRS will accept comments related to the above three issuances until June 11, 2012.
Together, all four issuances provide the government’s initial proposals of how to determine an individual’s eligibility for premium tax credits and when employers will be subject to penalties for failing to offer health care coverage.
The CCIIO Bulletin on Verification of Employer Coverage
The CCIIO Bulletin describes the process by which Health Insurance Exchanges (HIEs) will verify whether an individual is eligible for coverage through an employer. The CCIIO Bulletin recognizes that demonstrating that employer-sponsored coverage is unavailable or unaffordable requires data and documents that may not be easily obtainable by employees. So, the CCIIO Bulletin suggests that the U.S. Department of Health and Human Services (HHS) will give applicants and employers guidance on what information will be needed, where it can be found, and the types of documentation required. The CCIIO Bulletin also suggests that, where verification might be difficult, an HIE could initially accept an employee’s attestation that he or she is not eligible for employer-provided coverage and require the employee to provide supporting documentation of his or her ineligibility within 90 days of the attestation. The CCIIO Bulletin anticipates that these strategies would be interim solutions to be used only until more reliable database systems can be implemented.
The IRS Notice on Calculating Minimum Value
The IRS Notice discusses approaches to determining whether employer-sponsored coverage provides minimum value. The ACA generally states that a plan provides minimum value if it pays at least 60 percent of the enrollee’s costs for allowed expenses, thus having an actuarial value (AV) of at least 60 percent. Minimum value is thus closely related to AV. The Notice builds upon a bulletin regarding AV issued by CCIIO on February 24, 2012, and explicitly adopts many of its core calculation methodologies, such as basing AV on a standard population (adjusted for state or regional differences) and the methodology for evaluating employer’s contributions to an Health Savings Account (HSA).
Because the Notice applies to all employer-sponsored coverage including large group or self-insured health plans, while the February Bulletin applies only to individual and small group market plans, these plans’ distinct features required the IRS to propose an AV calculation methodology in the Notice that differs in certain ways from that proposed in the February Bulletin. For instance, because self-insured and large group plans are not required to provide the essential health benefits (EHBs) upon which the calculations in the CCIIO Bulletin are based, the IRS has proposed that the AV for such plans would be calculated based on four core categories of benefits: “physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services.” In addition, the population set on which this calculation is based will the population for a “typical self-insured employer-sponsored plan,” rather than the general population that is described in the February Bulletin.
New requirements related to employer-provided health coverage are an integral component of health care reform, so industry responses to the above-described guidance will be important in shaping how the ACA’s changes will be implemented.