Exchange Functions in the Individual Market: Eligibility Determinations; Exchange Standards for Employers

August 16, 2011

On Friday, August 12, 2011, the Department of Health and Human Services (HHS) released proposed regulations implementing the Affordable Care Act (ACA). Here is a brief summary and highlights of the “Exchange Functions in the Individual Market: Eligibility Determinations; Exchange Standards for Employers.”

SUMMARY:

(HHS) proposes the process for exchanges to make eligibility determinations for enrollment in QHPs, premium tax credits and cost-sharing reductions, qualified employer-sponsored coverage, Medicaid, CHIP and other insurance affordability programs. Significant effort is made to align the standards and processes for Medicaid/CHIP and premium tax credit eligibility determinations. HHS suggests alternatives for data reporting of employer-sponsored coverage and proposes policy for SHOP exchanges not addressed in a previously released NPRM.

HIGHLIGHTS:

Eligibility for Enrollment in QHPs and Premium Tax Credits
The ACA requires that individuals eligible for exchange enrollment be lawfully present, not incarcerated, and reside in the state in which the exchange is established. HHS proposes to align exchange requirements for lawful presence and residency with that of Medicaid. An individual must reside in the state that established the exchange he seeks enrollment in; a dependent of the primary tax filer who lives in a different state can enroll either where he resides or where the primary taxpayer resides.

Exchanges will make eligibility determinations for the exchange, as well as Medicaid and CHIP.

Premium tax credit eligibility is based on modified adjusted gross income and is determined by the filing of the primary taxpayer—either for himself or for his entire family. The determination is made based on expected individual or family income for the upcoming year, not based on income at a current point in time (as for Medicaid). All individuals enrolled in QHPs must file a tax return, regardless of income, or become ineligible for tax credits in subsequent years. A year-end reconciliation adjusts for over or underpayments.

HHS proposes various methods for employers to submit information regarding qualified employer-sponsored insurance (ESI) to the exchange, including creation of a template for plan- and employee-level information, or a centralized database that employers could voluntarily populate as a resource for the verification process. Individuals without access to affordable, qualified ESI are eligible for premium tax credits; employers are assessed a penalty for employees who access premium tax credits.

Process for Eligibility Determinations
In general, HHS is proposing policies that aim to minimize the administrative burden for individuals and exchanges.

  • Exchanges should first seek to verify eligibility information through electronic data sources, including state data and communication with HHS. Documentation should be sought from individuals only if information (e.g. regarding enrollment in an employer-sponsored plan, citizenship, incarceration, etc.) provided by an applicant is not “reasonably compatible” with the electronic data source. Applicants have 90 days to resolve inconsistencies.
  • Notably, while the ACA requires an applicant to provide his income (modified adjusted gross income) to the exchange, HHS believes this is unduly burdensome and is requiring submission instead of name, Social Security number and relationship to tax filer. Income information would be supplied in real-time through Treasury and an individual could either affirm it or provide alternate information.
  • The exchange would conduct annual redeterminations of eligibility, but HHS proposes that mid-year redeterminations occur only when an individual proactively supplies information regarding changes in tax status or coverage, with limited exceptions. This is intended to relieve exchange’s administrative burdens, but the NPRM includes a provision for state flexibility with regard to this proposal (i.e. allowing states to initiate data matching mid-year).
  • If state Medicaid agencies enter into agreements with exchanges, eligible individuals could apply for and enroll in Medicaid coverage through the exchange. This integration would reduce the two-step process of application and enrollment. Individuals not referred by the exchange to the state Medicaid agency for enrollment can request a full Medicaid eligibility determination directly from the state and that the exchange transmit any relevant information.

Proposed policies also seek to give individuals flexibility in how they interact with the exchange.

  • Exchanges must permit an individual to decline an eligibility determination, or accept less than the full premium tax credit for which he is eligible (if, for instance, he expects his annual income to decline and wants to avoid a year-end tax liability).
  • Exchanges must accept applications and make eligibility determinations at any point during the year, even if the individual isn’t eligible to enroll in a QHP at that point in time.

Exchanges must provide a single written notice with all eligibility determination information as well as an annual redetermination notice.

Administration of Premium Tax Credit & Cost-sharing Reductions
HHS will be a single point of contact for exchanges within the Federal government, coordinating data transmittals with other relevant Federal agencies (e.g. Treasury, Labor, Homeland Security, Social Security, etc.).

When an exchange determines that an individual is eligible for premium tax credits, HHS notifies Treasury of such eligibility, and Treasury makes advance payments directly to the QHP selected by the individual. The exchange simultaneously provides information to the QHP and employer, if relevant.

A reconciliation process will be held annually after tax filings are submitted. See below for detail.

SHOP Exchanges
HHS proposed various policies regarding SHOP exchanges in its previous NPRM and includes additional information at this time.

Here, HHS clarifies that if a qualified employer has employees enrolling in SHOP exchanges across multiple states, it is still the total number of employees—regardless of how many states they reside in—that qualifies an employer for participation in a SHOP exchange.

An employer participating in a SHOP exchange must provide its employees with information about the methods for selecting and enrolling in a QHP. The SHOP exchange will provide a uniform application and enrollment timeline, a website and toll-free hotline, but will not initially have contact information for employees to disseminate this information.

Employers participating in a SHOP exchange are also responsible for providing information to the exchange about changes to an employee’s eligibility to purchase coverage through the employer.

Visit Extend Health — the nation’s largest private Medicare exchange.

2 Responses to “Exchange Functions in the Individual Market: Eligibility Determinations; Exchange Standards for Employers”

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