TABLE OF CONTENTS

EXCHANGE HEALTH INSURANCE SUBSIDIES

The Affordable Care Act (ACA) calls for the creation of state-based competitive marketplaces, known as Affordable Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health insurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct comparisons of private health insurance options on the basis of price, quality and other factors, and will coordinate eligibility for premium tax credits and other affordability programs.

The ACA created health insurance subsidies, in the form of premium tax credits and cost-sharing reductions, to help eligible individuals and families purchase health insurance through an Exchange. By reducing a taxpayer’s out-of-pocket premium costs, the subsidies are designed to make coverage through an Exchange more affordable.

Subsidies will be available beginning in 2014, at the same time the Exchanges are scheduled to become operational. Enrollment in Exchanges is expected to begin Oct. 1, 2013.

OVERVIEW OF THE EXCHANGE HEALTH INSURANCE SUBSIDIES

There are two federal health insurance subsidies available with respect to coverage through an Exchange – premium tax credits and cost-sharing reductions. Both of these subsidies vary in amount based on the taxpayer’s household income and reduce the out-of-pocket costs of health insurance for the insured.

  • Premium tax credits are available for people with somewhat higher incomes (up to 400% of FPL), and reduce out-of-pocket premium costs for the taxpayer.
  • Reduced cost-sharing is available for individuals with lower incomes (up to 250% of FPL). Through cost-sharing reductions, these individuals will be eligible to enroll in plans with higher actuarial values and have the plan, on average, pay a greater share of covered benefits. This means that coverage for these individuals will have lower out-of-pocket costs at the point of service (for example, lower deductibles and copayments).

For purposes of determining eligibility for these subsidies, and the amount of any subsidy available, household income is determined using the taxpayer’s federal income tax return for that year. However, because these subsidies are provided when the individual purchases insurance, the Exchanges will generally have to determine household income well before the individual files his or her tax return for that year.

To aid the Exchanges in making these determinations, HHS released a draft application for insurance that asks applicants to provide specific information about their current income. If the applicant’s current income is not steady or if they expect it to change, the application asks them to project their 2014 income. If the applicant provides no financial information, the Exchange will rely on the individual’s federal income tax return from the previous year.

At the end of the year, the subsidy amount will be recalculated using the taxpayer’s household income as reported on his or her tax return, and any difference in the amounts will be reconciled. If the taxpayer’s income has increased from the amount that he or she reported to the Exchange, and as a result received a larger subsidy than he or she was entitled to, that individual may have to repay part of their subsidy. This could result in a smaller tax refund or a tax payment due for that individual.

ELIGIBILITY FOR PREMIUM TAX CREDITS

ACA requires Exchanges to provide information to prospective enrollees about their eligibility for premium tax credits. To be eligible for the premium tax credit, a taxpayer:

  • Must have household income for the year between 100 percent and 400 percent of the federal poverty line (FPL) for the taxpayer’s family size;
  • May not be claimed as a tax dependent of another taxpayer; and
  • Must file a joint return, if married.

In addition, to receive the premium assistance, a taxpayer must enroll in one or more qualified health plans (QHPs) through an Exchange. The taxpayer cannot be eligible for minimum essential coverage (such as coverage under a government-sponsored program or an eligible employer-sponsored plan).

Employees who may enroll in an employer-sponsored plan, and individuals who may enroll in the plan because of a relationship with an employee, are generally considered eligible for minimum essential coverage if the plan is affordable and provides minimum value.

Employees who are eligible for minimum essential coverage (that is affordable and provides minimum value) through an employer-sponsored plan are not eligible for the premium tax credit. This is significant because ACA’s shared responsibility penalty for large employers is triggered when a full-time employee receives a premium tax credit for coverage under an Exchange. An employee who is not eligible for a tax credit may still be eligible to enroll in a QHP through an Exchange. However, this would not result in a shared responsibility penalty for the employer.

Also, for purposes of the premium assistance, the requirements of affordability and minimum value do not apply if an employee enrolls in any employer-sponsored minimum essential coverage, including coverage provided through a cafeteria plan, a health FSA or an HRA, but only if the coverage does not consist solely of excepted benefits. If an employee enrolls in any employer-sponsored minimum essential coverage, the employee is ineligible for the premium assistance.

Affordability Determination

To determine an individual’s eligibility for a tax credit, ACA provides that employer-sponsored coverage is not considered affordable if the employee’s cost for self-only coverage exceeds 9.5 percent of the employee’s household income for the tax year. The IRS confirmed that for purposes of the pay or play rules, the affordability determination for families is based on the cost of self-only coverage, not family coverage.

Although the ACA measures affordability based on household income, the proposed regulations include three safe harbor approaches for assessing whether an employer’s coverage is affordable. These safe harbors allow an employer to measure affordability based on the employee’s W-2 wages, the employee’s rate of pay or the federal poverty level for a single individual. Premium credit eligibility will still be based on household income, but the employer will not be subject to a penalty for that employee, even if he or she ultimately receives a premium credit.

Minimum Value Determination

ACA provides that a plan fails to provide minimum value if the plan’s share of total allowed costs of benefits provided under the plan is less than 60 percent of those costs. On Feb. 25, 2013, HHS issued a final rule that outlines the following approaches for determining whether an employer’s health coverage provides minimum value:

  • Approach One: Calculator – HHS has released an MV Calculator that permits an employer to enter information about its health plan’s benefits, coverage of services and cost-sharing terms to determine whether the plan provides minimum value.
  • Approach Two: Checklists – HHS and the IRS have indicated that they will provide an array of design-based safe harbors in the form of checklists that employers can use to compare to their plan’s coverage. If a plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan would be treated as providing minimum value. In May 2013, the IRS specified three safe harbor plan designs that satisfy minimum value and stated that they expect to release more in future guidance.
  • Approach Three: Actuarial Certification – An employer-sponsored plan may seek certification by an actuary to determine the plan’s minimum value if the plan contains nonstandard features that preclude the use of the MV Calculator and safe harbor checklists.

In addition, a plan in the small group market that meets any of the “metal levels” of coverage (that is, bronze, silver, gold or platinum) provides minimum value.

AMOUNT OF THE PREMIUM TAX CREDITS

The amount of the premium tax credit that an individual can receive generally is the difference between the cost of the premium for the “benchmark plan” and the amount the individual should be able to pay for premiums (expected contribution).

  • The “benchmark plan” is the second lowest cost silver plan in the Exchange and area where the individual is eligible to purchase coverage. A silver plan is a plan that provides the essential benefits and has an actuarial value of 70 percent (that is, the plan, on average, pays 70 percent of the cost of covered benefits).
  • The “expected contribution” is calculated as a specified percentage of the taxpayer’s household income for the year, based on the taxpayer’s FPL. The percentage increases as income increases, as follows:
INCOME LEVEL EXPECTED CONTRIBUTION
Up to 133% FPL 2% of income
133 – 150% FPL 3 – 4% of income
150 – 200% FPL 4 – 6.3% of income
200 – 250% FPL 6.3 – 8.05% of income
250 – 300% FPL 8.05 – 9.5% of income
300 – 400% FPL 9.5% of income

ACA also established new eligibility rules for Medicaid, giving states the option of extending Medicaid coverage to most people with incomes under 138 percent of federal poverty. In states that expand Medicaid, tax credits are available through the Exchange for individuals with incomes between 139 percent and 400 percent of federal poverty who do not have access to employer-sponsored or public coverage, as follows:

INCOME LEVEL TYPE OF COVERAGE EXPECTED CONTRIBUTION
Up to 138% FPL Medicaid No premiums
139 – 150% FPL Exchange 3 – 4% of income
150 – 200% FPL Exchange 4 – 6.3% of income
200 – 250% FPL Exchange 6.3 – 8.05% of income
250 – 300% FPL Exchange 8.05 – 9.5% of income
300 – 400% FPL Exchange 9.5% of income

If an individual enrolls in a QHP that is cheaper than the benchmark plan, the actual amount the individual will pay for coverage will be less than the expected contribution. However, an individual that wants to purchase a QHP that is more expensive would have to pay the full difference between the cost of the benchmark plan and the plan they wish to purchase. The credit is capped at the premium for the plan the individual chooses (so that no one receives a credit that is larger than the amount they actually pay for their plan).

PREMIUM TAX CREDIT PAYMENTS

The premium tax credits are both refundable and advanceable. A refundable tax credit is one that is available to an individual even if he or she has no tax liability. An advanceable tax credit allows an individual to receive assistance at the time that they purchase insurance, rather than paying their premium out of pocket and waiting to be reimbursed when filing their annual income tax return.

Advance payments would be made directly to the insurance company on the family’s behalf. At the end of the year, the advance payments are reconciled against the amount of the family’s actual premium tax credit, as calculated on the family’s federal income tax return. Any repayment due from the taxpayer is subject to a cap for taxpayers with incomes under 400 percent of FPL.

COST-SHARING REDUCTIONS

In addition, individuals with household incomes of up to 250 percent of FPL may also be eligible for reduced cost-sharing (that is, coverage with lower deductibles and copayments). These cost-sharing reductions are intended to protect lower income individuals from high out-of-pocket costs by ensuring that the plan, on average, pays a greater share of covered benefits. In order to receive the reductions, an individual must enroll through an Exchange in a QHP in the silver level of coverage.


THE BASIC HEALTH PROGRAM (BHP)

Under the Affordable Care Act (ACA), states have the option of creating a Basic Health Program (BHP), or a health benefits coverage program that uses federal tax money to subsidize health coverage for low-income individuals who would otherwise be eligible to purchase coverage through the state’s Exchange. The BHP is intended to give states the ability to provide more affordable coverage for these low-income residents and improve continuity of care for people whose income fluctuates above and below Medicaid levels.

On Sept. 20, 2013, the Department of Health and Human Services (HHS) released a proposed rule that would establish the BHP. In an effort to promote coordination between the BHP and other insurance affordability programs, the proposed rule generally aligns BHP standards with existing rules governing coverage through the Exchange, Medicaid or the Children’s Health Insurance Program (CHIP), rather than establish new and different rules for the BHP.

The BHP was scheduled to be operational by Jan. 1, 2014, but HHS delayed the program for one year. The proposed rule is intended to enable states to implement programs effective on or after Jan. 1, 2015.

OVERVIEW OF THE PROPOSED RULE

The proposed rule sets forth a framework for BHP functions, including:

  • The procedures for certification of a BHP Blueprint and standards for state administration of the BHP consistent with that Blueprint;
  • Eligibility and enrollment requirements for standard health plans offered through the BHP;
  • The benefits covered by standard health plans as well as requirements of the plans;
  • Federal funding of certified state BHP;
  • The purposes for which states can use federal funding;
  • The parameters for enrollee financial participation; and
  • Federal oversight of BHP funds.

State Establishment of a BHP

Under the proposed rule, states will use the “Basic Health Program Blueprint” to apply for certification to implement a BHP, consistent with the process for state Exchanges. The rule proposes fundamental elements of a BHP, including statewide operation, enrollment of all eligible individuals and a prohibition on enrollment caps and waiting lists.

Eligibility and Enrollment

The proposed rule would require eligibility determinations to be made by government agencies. The proposed rule also establishes the eligibility criteria for enrolling in coverage through the BHP, tying most standards to those used by the Internal Revenue Service (IRS) to determine advance premium tax credits and cost-sharing reductions under Exchange plans. In general, the BHP is an optional program that states can implement for individuals who:

  • Are citizens or lawfully present in the United States;
  • Do not qualify for Medicaid, CHIP or other minimum essential coverage; and
  • Have income between 133 percent and 200 percent of the federal poverty level (FPL).

Lawfully present non-U.S. citizens whose income falls below 133 percent of FPL but who are unable to qualify for Medicaid due to their non-citizen status are also eligible to enroll in coverage through the BHP.

Additionally, the proposed rule provides a state option to use the annual open enrollment model (as in the Exchange) or the continuous enrollment model (as in Medicaid and most CHIP programs). States are required to use the single streamlined application and to ensure coordination between other insurance affordability programs.

Standard Health Plan

The proposed rule outlines the competitive contracting process and other contracting requirements for states to provide standard health plans under the BHP. The rule also defines the types of entities that can contract with the state to provide a standard health plan to BHP enrollees.

In addition, the rule proposes the minimum benefit standard (the essential health benefits) and makes provisions for additional benefits. Generally, benefits provided under the BHP will include at least the 10 essential health benefits specified in the ACA.

Enrollee Financial Responsibilities

Under the proposed rule, the monthly premium and cost-sharing charged to eligible individuals will not exceed what an eligible individual would have paid if he or she were to receive coverage from a qualified health plan (QHP) through the Exchange.

Consistent with the ACA, the proposed rule provides that monthly premiums may not exceed the monthly premium the individual would have paid had he or she enrolled in the second-lowest-cost silver plan in the Exchange. In addition, the rule establishes cost-sharing standards consistent with those in the Exchange, including protections for American Indian and Alaskan Natives and the prohibition on cost-sharing for preventive health services.

Financing the BHP

The proposed rule:

  • Establishes state BHP trust funds for receipt of federal deposits;
  • Sets the parameters on the permitted uses of funding; and
  • Proposes the process through which HHS will annually develop and finalize the BHP funding methodology and state payment amounts.

A state that operates a BHP will receive federal funding equal to 95 percent of the amount of federal subsidies that would have otherwise been provided to (or on behalf of) eligible individuals if these individuals enrolled in QHPs through the Exchange.

In addition, HHS has stated that they intend to publish a payment notice that will propose the payment methodology for the BHP along with data specifications. States will have an opportunity to comment on the payment notice before the methodology is finalized and applied to state data to determine the state’s federal BHP funding amount.

State and Federal Oversight

The proposed rule promotes program integrity and establishes standards for both state and federal oversight of the BHP. Standards are proposed to allow a state to voluntarily terminate the program, as well as termination by HHS of BHP certification.


INDIVIDUAL MANDATE EXCEMPTIONS

Beginning in 2014, the Affordable Care Act (ACA) requires most individuals to obtain acceptable health insurance coverage for themselves and their family members or pay a penalty. This rule is often referred to as the “individual mandate.” Individuals may be eligible for an exemption from the penalty in certain circumstances.

OVERVIEW OF THE INDIVIDUAL MANDATE

Under the individual mandate, a penalty will be assessed against an individual for any month during which he or she does not maintain “minimum essential coverage” (MEC), beginning in 2014 (unless an exemption applies). A taxpayer is also liable for the penalty for any nonexempt individual whom the taxpayer may claim as a dependent.
MEC includes the following:

  • Employer‐sponsored coverage (including COBRA coverage and retiree coverage);
  • Coverage purchased in the individual market;
  • Medicare Part A coverage and Medicare Advantage;
  • Most Medicaid coverage;
  • Children’s Health Insurance Program (CHIP) coverage;
  • Certain types of veterans health coverage administered by the Veterans Administration;
  • TRICARE;
  • Coverage provided to Peace Corps volunteers; and
  • Coverage under the Nonappropriated Fund Health Benefit Program.

MEC does not include specialized coverage, such as coverage only for vision or dental care, workers’ compensation, disability policies, or coverage only for a specific disease or condition. Under the ACA, MEC also includes any additional types of coverage that are designated by HHS or when the sponsor of the coverage follows a process outlined in regulations to be recognized as MEC.

HHS final regulations also designate other types of coverage, not specifically listed by ACA, as MEC:

  • Self-funded student health coverage and state high risk pools for plan or policy years that begin on or before Dec. 31, 2014. For plan or policy years that begin after Dec. 31, 2014, sponsors of self-funded student health plans and state high risk pools may apply to be recognized as MEC through a process outlined in the final rule;
  • Refugee Medical Assistance supported by the Administration for Children and Families;
  • Medicare Advantage plans; and
  • Any additional coverage that HHS designates or recognizes as MEC.

IRS Notice 2013-42 provides transition relief from the individual mandate penalty for certain months in 2014 for individuals who are eligible to enroll in eligible employer-sponsored health plans with plan years other than the calendar year (non-calendar year plans).

EXEMPTIONS FROM THE INDIVIDUAL MANDATE

ACA provides nine categories of individuals who are exempt from the penalty. An individual who is eligible for an exemption for any one day of a month is treated as exempt for the entire month.

EXEMPTIONS FROM THE INDIVIDUAL MANDATE
Individuals who cannot afford coverage Taxpayers with income below the filing threshold Members of federally recognized Indian tribes
Individuals who experience a hardship Individuals who experience a short gap in coverage Religious conscience objectors
Members of a health care sharing ministry Incarcerated individuals Individuals not lawfully present in the U.S.

Exemption for Individuals Who Cannot Afford Coverage

Under the ACA, individuals who lack access to affordable MEC are exempt from the individual mandate. For purposes of this exemption, coverage is affordable for an employee if the required contribution for the lowest-cost, self-only coverage does not exceed 8 percent of household income. For family members, coverage is affordable if the required contribution for the lowest-cost family coverage does not exceed 8 percent of household income.

For purposes of this exemption, household income takes into account employer contributions or premium tax credits. In addition, IRS final regulations specify that household income will be increased for any amount of the premium paid for through a salary reduction agreement excluded from gross income.

If a taxpayer’s income is too low to afford health insurance early in a year, but increases later in the year so that insurance is affordable, the taxpayer may be liable for a penalty if no other exemption applies. However, the IRS final regulations allow a taxpayer to apply for a hardship exemption prospectively if it appears that health insurance is unaffordable. The hardship exemption will protect the taxpayer against subsequent penalties for months in which coverage was unaffordable, even if it turns out that coverage was affordable considering the entire year’s income.

Hardship Exemption

The hardship exemption is intended for individuals who have suffered a hardship with respect to the capability to obtain coverage under a qualified health plan. A hardship exemption is available for a month or months in which:

  • An applicant experienced financial or domestic circumstances, including an unexpected natural or human-caused event, that caused a significant, unexpected increase in essential expenses;
  • The expense of purchasing MEC would have caused the applicant to experience serious deprivation of food, shelter, clothing or other necessities; or
  • The applicant has experienced other factors similar to those described above that prevented him or her from obtaining MEC.

HHS final regulations enumerate several situations that will always be treated as constituting a hardship and therefore allow for an exemption. For example, hardship exemptions can be available for:

  • Individuals who an Exchange projects will have no offer of affordable coverage; and
  • Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility.

HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage. CMS’ additional guidance on the hardship exemption establishes criteria that federally facilitated Exchanges (FFEs) will use to determine eligibility for the hardship exemption. State-based Exchanges have the option of using these criteria.

Members of a Health Care Sharing Ministry

Under the ACA, members of health care sharing ministries are exempt from the individual mandate penalties. A health care sharing ministry is an organization:

  • Which is described in Internal Revenue Code (Code) section 501(c)(3) and exempt from tax under Code section 501(a);
  • Members of which share a common set of ethical or religious beliefs and share medical expenses among themselves in accordance with those beliefs, and regardless of the state in which a member resides or is employed;
  • Members of which retain membership even after they develop a medical condition;
  • Which has itself (or a predecessor of which has) been in existence at all times since Dec. 31, 1999;
  • Members of which have continuously and without interruption shared medical expenses since at least Dec. 31, 1999; and
  • Which conducts an annual audit performed by an independent certified public accounting firm in accordance with generally accepted accounting principles, the report of which is made available to members of the public upon request.

Eligibility for this exemption will be determined on a monthly basis. HHS has stated that it will develop a list of recognized health care sharing ministries, although it is possible for entities that have not yet been identified to be eligible for this exemption.

Taxpayers with Income Below the Filing Threshold

Under this exemption, taxpayers whose income falls below the applicable tax filing threshold will not be liable for an individual mandate penalty. This exemption covers individuals whose income is low enough that they are not required to file federal income taxes.

An individual will not be required to file an income tax return to claim this exemption. If a taxpayer who qualifies for this exemption does, in fact, file a tax return, it does not affect eligibility for the exemption. In this case, the taxpayer may claim the exemption on his or her tax return.

Short Gap in Coverage

This exemption covers individuals who lack MEC only for one continuous period in a given year of less than three full calendar months. If there is more than one period in which an individual goes without coverage in a single year, this exemption will apply only to the first period without coverage. However, if a taxpayer has multiple short coverage gaps due to extended waiting periods after switching employment or because of other circumstances that prevent the
taxpayer from obtaining coverage, the taxpayer may be eligible for a hardship or other exemption available through an Exchange.

Any month in which an individual is covered for one day will not count for purposes of calculating the period without coverage. Additionally, any month in which a taxpayer is otherwise exempt from the individual mandate will not be treated as a gap in coverage.

If a taxpayer’s gap in coverage straddles two separate tax years, the months in the second year will not be counted in determining eligibility for the exemption in the first year. As a result, the individual can claim the short coverage gap exception for the first year even if the period continues for more than three calendar months into the next year. However, months without coverage in the first year will be counted in determining whether the individual lacked coverage for more than three months in the second year.

Incarcerated Individuals

Under the ACA, individuals who are incarcerated after final disposition of charges are exempt from the individual mandate. The IRS’ final regulations clarify that an individual confined for at least one day in a jail, prison, or similar penal institution or correctional facility after the disposition of charges is exempt for the month that includes the day of confinement.

However, individuals who are incarcerated while awaiting the final disposition of charges will not be exempt.

Members of Federally-recognized Indian Tribes

For purposes of this exemption, the IRS defines what constitutes a federally recognized Indian tribe. Because this definition is very limited, the final rule creates a separate hardship exemption for Indians who do not meet the IRS’ definition but are eligible for services through the Indian Health Service or through Indian health care providers. If a member of a non-recognized Indian tribe does not obtain a hardship exemption, that individual may not claim an exemption to the individual mandate on their tax return.

Religious Conscience Objectors

Applicants are eligible for the religious conscience exemption if they are members of, and subscribe to the tenets of, religious groups that object to having insurance coverage (including Medicare and Social Security) on religious grounds. Qualification for the religious conscience exception can be established by proof of Social Security and Medicare tax exemption or by attestation of membership in a group recognized by the Social Security Administration (SSA) as exempt.

Parents can apply for this exemption for their families as well as themselves. An HHS proposed rule required children of families with an exemption certificate to apply on their own behalf at age 18. However, HHS’ final rule recognizes that most groups covered by this exemption (mainly Mennonite and Amish groups) recognize the age of adulthood as age 21. As a result, the final rule raises the age to reapply on one’s own behalf to age 21. Once an eligible family member reaches age 21, the Exchange will send notice of their need to apply on their own behalf.

Individuals Not Lawfully Present in the United States

An individual who is not a citizen or national of the United States will be exempt from the individual mandate for a month if the individual is not lawfully present in the United States in that month. The IRS regulations provide that, for purposes of this exemption, an individual who is not a citizen or national of the United States is treated as not lawfully present in the United States for a month in a taxable year if the individual is either:

  • A nonresident alien for that taxable year; or
  • Does not have lawful immigration status in the United States.

Because all exemptions from the individual mandate are applied on an individual basis, the exemption for individuals not lawfully present in the United States will not apply to all members of a taxpayer’s family if the taxpayer qualifies for the exemption.

CLAIMING AN EXEMPTION

Four categories of exemptions will be available exclusively through the tax filing process – those for individuals who are not lawfully present, individuals with household income below the filing threshold, individuals who cannot afford coverage and individuals who experience a short coverage gap. In addition, certain subcategories of the hardship exemption will be available exclusively through the tax filing process.

Three exemptions – those for members of a health care sharing ministry, individuals who are incarcerated and members of federally recognized Indian tribes – could be provided either through an Exchange or through the tax filing process.

The religious conscience exemption and most categories of the hardship exemption are available exclusively through an Exchange. Individuals must apply for these exemptions by filing an application with the Exchange. The final rule allows an individual to apply for multiple exemptions simultaneously. However, individuals will generally be required to submit a new application for exemptions each year. The Exchanges will not send applicants notice of their obligation to reapply.

Once an application is received, the Exchange will determine eligibility and will issue certificates of exemption for each eligible applicant. Exchanges will grant certificates of exemption regardless of whether the applicant seeks coverage through the Exchange or not.

Exemption certificates for membership in a health care sharing ministry and for incarceration can only be granted retrospectively, since the Exchange cannot know prospectively how long the applicant will remain incarcerated or with the sharing ministry. Certificates for the religious conscience exemption and for members of Indian tribes can be applied for prospectively and retrospectively and can last indefinitely, since qualification for these exemptions persists from year to year.

The Exchanges must report exemption certifications to the IRS. Individuals who have been denied an exemption will have the right to appeal. In addition, an applicant who is no longer qualified for an exemption but is otherwise eligible to enroll in a QHP will be eligible for a special enrollment period.

Further guidance on claiming exemptions is expected to be provided in forms, instructions, publications or other guidance published by the IRS.

TRANSITION RELIEF FOR COVERAGE UNDER NON-CALENDAR YEAR PLANS

Many employer-sponsored plans have a non-calendar plan year. In general, most employer-sponsored plans do not permit employees to enroll after the beginning of a plan year unless certain triggering events occur, such as a change in employment status. According to the IRS in Notice 2013-42, without transition relief, many individuals eligible to enroll in non-calendar year plans would need to enroll in 2013 (before the individual mandate becomes effective) in order to maintain MEC for months in 2014.

Under the transition relief in IRS Notice 2013-42, an employee (or an individual having a relationship to the employee) who is eligible to enroll in a non-calendar year eligible employer-sponsored plan with a plan year beginning in 2013 and ending in 2014 (the 2013-2014 plan year) will not be liable for the individual mandate penalty for certain months in 2014. The transition relief begins in January 2014 and continues through the month in which the 2013-2014 plan year ends.

Also, any month in 2014 for which an individual is eligible for this transition relief will not be counted in determining a continuous period of less than three months for purposes of the short coverage gap exemption.


FAQS ON EXCHANGES, MARKET REFORMS AND MEDICAID

The Affordable Care Act (ACA), which was enacted on March 23, 2010, includes significant changes related to health care coverage. Among other things, the ACA calls for the creation of state-based Affordable Health Insurance Exchanges (Exchanges) to facilitate the purchase of insurance, requires insurers to comply with a new set of market reforms and expands the Medicaid program.

On Dec. 10, 2012, the Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) issued Frequently Asked Questions (FAQs) to answer questions regarding the implementation of the Exchanges and the Medicaid expansion.

MEDICAID EXPANSION

The ACA calls for a nationwide expansion of Medicaid eligibility, set to begin in 2014. Under the expansion, nearly all adults under 65 with family incomes of up to 133 percent of the federal poverty level (FPL) would qualify for Medicaid.

Originally, the ACA required states to comply with the new Medicaid eligibility requirements, or risk losing their federal funding. The Supreme Court’s ruling in the ACA case, however, limited the federal government’s ability to penalize states that don’t comply, effectively making the expansion optional. Even if they choose not to expand their Medicaid program, states will continue to receive their standard federal contributions for individuals who were already eligible for Medicaid coverage in their state.

States are not under a deadline for deciding to expand Medicaid and can drop out of the expansion program later if they participate initially.

Federal Matching Funds

For states that implement the Medicaid expansion, the federal government will cover 100 percent of the cost of the first three years of the expansion (2014-2016), gradually phasing down to a 90 percent share. The FAQs clarify that states must fully expand Medicaid eligibility up to 133 percent of the FPL to receive the 100 percent federal matching funds. This means that states that implement partial Medicaid expansions (that is, expansions to less than 133 percent of the FPL) will not receive the full federal funding.

The FAQs note that states do have the option of implementing a partial Medicaid expansion. However, any partial expansion would be subject to the regular federal matching rate (that is, the federal match that states received before the expansion). Additionally, HHS intends to allow states significant discretion as to the “benchmark” benefit plans they will offer the Medicaid expansion population, as long as they cover the 10 categories of essential health benefits. States will also have some control over the cost sharing they will impose, particularly for recipients with incomes above 100 percent of the FPL.

Effect of the Supreme Court Ruling

The FAQs further clarify that the Supreme Court ruling releases the states only from the Medicaid expansion requirement. States must still coordinate Medicaid eligibility with the exchanges if they wish to stay in the Medicaid program. They must also convert their income eligibility standards for most groups to the modified adjusted gross income (MAGI) standard used for premium tax credit eligibility.

HEALTH INSURANCE EXCHANGES

The ACA also requires each state to have an Exchange to provide a competitive marketplace where individuals and small businesses will be able to purchase private health insurance coverage. The Exchanges are scheduled to be operational by Jan. 1, 2014, with enrollment expected to begin on Oct. 1, 2013.

States have three options with respect to their Exchanges. A state may:

  • Establish its own state-based Exchange;
  • Have HHS operate a federally facilitated Exchange (FFE) for its residents; or
  • Partner with HHS so that some FFE Exchange functions can be performed by the state.

State-based and State Partnership Exchanges

States that intend to pursue a state-based Exchange or a state partnership Exchange must submit a short declaration letter and an Exchange blueprint to HHS for approval. In November 2012, HHS extended the deadline for states to submit this notification and blueprint to:

  • Dec. 14, 2012, for states that intend to establish their own Exchange; or
  • Feb. 15, 2013, for states that would like to partner with HHS to establish an Exchange.

The FAQs clarify that HHS will not further extend the deadline beyond the current date. Additionally, the FAQs outline federal funding that is available to states that establish a state-based or state partnership exchange, and describe a federal data hub that states will be permitted to use, free of charge for exchange, Medicaid and Children’s Health Insurance Program (CHIP) activity.

Federally Facilitated Exchanges

HHS will operate federally facilitated Exchanges in each state that does not move forward with implementing its own Exchange or select the partnership model. The FAQs state that HHS intends to work with these states to preserve the traditional responsibilities of state insurance departments when establishing FFEs. HHS plans to coordinate with the states to take advantage of regulatory efficiencies, such as relying on states with effective rate review programs for rate review of qualified health plans.

The FAQs also reiterate that the FFEs will be funded through monthly user fees. Although HHS previously proposed that the rate for these fees will be 3.5 percent of the premium, the FAQs note that this rate may be adjusted to take into account state-based Exchange rates.

OTHER TOPICS

The FAQs address a number of other topics that states have expressed concern about, including, but not limited to:

  • Bridge Plans – The FAQs endorse a “Medicaid bridge plan” that states could use to ease the transition for consumers out of Medicaid or CHIP coverage. A bridge plan would be certified as a Medicaid managed care plan, but could continue to offer coverage through a single insurer and provider network to households transitioning out of Medicaid, or that have children in Medicaid or CHIP and adults in the Exchange.
  • The Navigator Program – The FAQs also describe in greater detail how the navigator program will work. Navigators are organizations, or in some instances individuals, that will receive grants from the Exchanges to educate and assist consumers to better understand their insurance options.

Morris & Reynolds Insurance will continue to monitor health care reform developments and will provide updated information as it becomes available.


HEALTHCARE REFORM: PAY OR PLAY CALCULATOR

Beginning in 2014, new rules go into effect that may have a significant effect on employer-sponsored health plans, and employers are confused by how these changes will impact them. Compounding the uncertainty is the fact that the rules will have dramatically different effects on different employers based on factors such as the employer size, employee demographics, and current plan designs.

Now there is a tool to help employers analyze how various health reform changes will affect their unique situation.

Morris & Reynolds Insurance Health Reform Impact Analysis Tool uses the employer’s unique employee and plan information to estimate the financial impact of various health reform rules including:

  • The employer shared responsibility rules (also referred to as the employer mandate), and possible employer penalties
  • The potential cost of expanded eligibility requirements
  • The effect of expanded Medicaid eligibility rules
  • The real cost of choosing to drop health benefits and pay applicable penalties

How it Works

We first analyze the employee census data, current plan and employer contribution information. Then data from the U.S. Census related to household size and income are applied to calculate the range of costs an employer can expect to experience related to each health reform provision.


What-if Scenarios

Once employers understand how the rules affect their current plans, their next question will be “so what happens if I change _________?” The tool takes the analysis one step further, and allows the employer to consider the impact of various changes to plan design, employer contributions and eligibility rules.

Will you be hit with penalties due to health care reform in 2014?

In 2014, some employers may have to pay a penalty if their health plan doesn’t meet certain criteria. We can determine if your health plan will be considered affordable, if it provides minimum value, and if you could be affected by Health Care Reform’s penalties.

How much will you pay in penalties for your plan?

Using our Health Care Reform Pay or Play Calculator, we can determine how much you could be required to pay in penalty taxes with your current health plan, as well as model changes that may protect you from being assessed fines.

Do you have a plan for the upcoming regulations?

By comparing the amount of penalties for your existing health plan, the cost of upgrading to a compliant plan and the penalties associated with dropping coverage, we can tailor a strategic benefit plan to fit your organization’s unique needs moving forward.

Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


DEFINED CONTRIBUTION HEALTH PLANS

Under a defined contribution health plan, an employer gives its employees a fixed contribution to purchase health insurance coverage. Employees use that money to buy or help pay for a health insurance plan they select for themselves. The concept of a defined contribution employee benefit is not new; most employees are familiar with the defined contribution approach through their retirement benefits. However, recently there has been an increased interest in the defined contribution approach to health benefits.

The heightened interest in defined contribution health plans is mainly due to the increasing costs of health coverage and changes made by the health care reform law, or the Affordable Care Act (ACA). Also, in addition to the public health insurance Exchanges created by the ACA, private exchanges have emerged as marketplaces for employees to select a health plan from an array of available options.

Because defined contribution health plans are a relatively new trend, it is not yet clear whether employees will find this arrangement acceptable and whether it will be a competitive advantage or disadvantage in the employer’s labor market.

Also, employers considering a defined contribution health plan should keep in mind that all employer arrangements that pay or reimburse employees for individual health insurance premiums violate the ACA’s market reforms, regardless of whether the employer treats the money as pre-tax or post-tax for the employee.

This Legislative Brief summarizes the defined contribution approach to employer-sponsored health coverage and includes information on the ACA’s impact on defined contribution health plans.

OVERVIEW OF DEFINED CONTRIBUTION APPROACH

The following is a conceptual overview of the defined contribution health plan model:

The defined contribution approach gives employees more choice and responsibility when choosing health coverage. It also allows the employer to limit its financial contribution for employees’ health coverage to a fixed amount, which moves the risk of premium increases to its employees. However, some employees may be skeptical about the defined contribution approach and may prefer the traditional model of health coverage. This could put an employer at a disadvantage in the marketplace if its competitors continue to offer traditional health coverage for their employees.

EMPLOYER CONTRIBUTIONS

HRAs

To maximize tax savings under a defined contribution health plan, employers have typically established health reimbursement accounts (HRAs) for making their contributions. Unlike health flexible spending accounts (FSAs) and health savings accounts (HSAs), HRAs can be used to reimburse health insurance premiums. Also, unlike an HSA, an individual does not need to be covered under a high-deductible health plan (HDHP) to participate in an HRA. This has made HRAs particularly compatible with defined contribution health plans.

Effective for 2014, the ACA prohibits all annual limits on essential health benefits. Whether an HRA will be permitted under the ACA’s annual limit rules mainly depends on whether the HRA is an “integrated HRA” or a “stand-alone HRA.”

Integrated HRAs

An HRA integrated with other group health coverage is not required to satisfy the ACA’s annual limit restrictions if the other coverage alone satisfies the annual limit restrictions.

On Sept. 13, 2013, the DOL issued Notice 2013-54, which provides guidance on when an HRA may be integrated with other group health coverage. This guidance is effective for plan years beginning on or after Jan. 1, 2014, although it may be applied for all prior periods.

The Notice includes two ways for an HRA to be considered integrated with a group health plan for purposes of the annual dollar limit prohibition. In general, an HRA is considered integrated with an employer’s group health coverage if, under the terms of the HRA, the HRA is available only to employees who are enrolled in non-HRA group health plan coverage and some additional requirements are met. Under either integration method, the HRA and the other group coverage are not required to have the same plan sponsor, the same plan document or file a single Form 5500 (if applicable).

The Notice also confirms that an HRA used to purchase coverage on the individual market cannot be integrated with that individual market coverage for purposes of the ACA’s annual dollar limitation. Thus, an HRA cannot be integrated with individual coverage purchased inside or outside of an Exchange for purposes of satisfying the ACA’s annual limit requirements.

Stand-alone HRAs

Some stand-alone HRAs are not subject to the ACA’s annual limit restrictions because they fall under an exception, such as retiree-only HRAs. However, beginning in 2014, stand-alone HRAs that do not fall under an exception will not be permitted due to the ACA’s prohibition on annual limits.

Cafeteria Plans

Another way for employers to maximize tax savings is to make their employee health insurance contributions through a Section 125 Plan, or a cafeteria plan. Employers can offer the employees “credits,” or employer money, under a cafeteria plan that can be used to purchase qualified benefits, such as major medical insurance.

Under the ACA, individual health coverage offered through an Exchange generally cannot be reimbursed or paid for under a cafeteria plan. The Notice provided a transition rule for certain cafeteria plans for plan years beginning before Jan. 1, 2014. For cafeteria plans that, as of Sept. 13, 2013, operated on a plan year other than a calendar year, this restriction on purchasing individual Exchange coverage through a cafeteria plan did not apply before the first plan year that began after Dec. 31, 2013.

Exchange coverage may be funded through a cafeteria plan if the employee’s employer is eligible to participate in the Exchange and elects to make group coverage available.

Also, the Notice indicates that, effective for 2014, cafeteria plans may not be used to pay premiums for individual health insurance policies purchased in the private market that provide major medical coverage. Thus, the tax exclusion provided through a cafeteria plan is only available when group coverage is purchased.

Additional Guidance Prohibiting the Payment of Individual Premiums

On Nov. 6, 2014, the Departments of Labor, Health and Human Services and the Treasury (Departments) issued FAQs prohibiting all employer arrangements that reimburse employees for individual premiums, whether employers treat the money as pre-tax or post-tax for employees. According to the Departments, these arrangements violate the ACA’s market reforms and may trigger an excise tax of $100 per day for each applicable employee.

MARKETPLACES FOR COVERAGE

Public Exchanges

Effective Jan. 1, 2014, the ACA requires each state to have an Exchange to provide a competitive marketplace where individuals and small businesses will be able to purchase affordable private health insurance coverage. The Department of Health and Human Services (HHS) operates a federally-facilitated Exchange (FFE) in any state that did not establish its own Exchange.

Individuals and small employers with up to 100 employees will be eligible to participate in the Exchanges. However, states may limit employers’ participation in the Exchanges to businesses with up to 50 employees until 2016. Beginning in 2017, states may allow businesses with more than 100 employees to participate in the Exchanges.

Each Exchange has a Small Business Health Options Program (SHOP) to allow eligible small employers to provide health insurance for their employees. A SHOP must allow employers the option to offer employees all qualified health plans (QHPs) at a level of coverage selected by the employer—bronze, silver, gold or platinum. This is called the employee choice model. In addition, SHOPs may allow an eligible employer to choose one QHP for its employees.

On May, 31, 2013, HHS issued a final rule that delayed implementation of the employee choice model as a requirement for all SHOPs for one year, until 2015. According to HHS, this approach provided all SHOPs (both state and federal) with additional time to prepare for the employee choice model. Under the transition approach:

  • State-based Exchanges: A state-based Exchange’s SHOP may provide the employee choice model for small employers in 2014, but is not required to provide this model until 2015. Many state-run SHOPs began offering employee choice to small employers in 2014, including California, Colorado and New York.
  • FFE: The federally-facilitated SHOP (FF-SHOP) will not provide the employee choice model for small employers until 2015.

In addition, to smooth the transition to employee choice, HHS allowed state insurance commissioners to request that the SHOP in their state not implement employee choice for 2015. On June 10, 2014, HHS released a list of FF-SHOP states where the employee choice model will be further delayed. In total, 18 states with an FF-SHOP will not be providing the employee choice model in 2015. Employers in these states will be able to offer employees a single QHP through the SHOP Exchange. Most state-based Exchanges will have employee choice available to small businesses in 2015.

Private Exchanges

Private health insurance exchanges are emerging as an alternative to the ACA’s public Exchanges. When using a private exchange, employers contract with the exchange, set a defined contribution and select the health insurance products to be offered to employees. Employees then go to the exchange’s online marketplace and, using the employer contribution, select a plan from the available options.

Private exchanges can provide more flexibility than the ACA’s Exchanges.

  • Private exchanges can offer a broader range of insurance products, such as life insurance, and their products can be tailored for different employer segments.
  • Although the ACA prohibits large employers from using the Exchanges until at least 2017, there is no similar restriction for private exchanges. Thus, small and large employers can use private exchanges to provide group health insurance benefits to their employees.
  • Private exchanges are currently operating to provide employees with a choice of health insurance products, while the SHOP’s employee choice model will likely be delayed until 2015.

Private health insurance exchanges are a relatively new model for providing group health insurance benefits. The availability and success of private exchanges most likely depends on employers’ willingness to move from a traditional health plan to a defined contribution health plan.

Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


PAY OR PLAY PENALTY ‘TRANSITION RELIEF FOR FISCAL YEAR PLANS’

Effective Jan. 1, 2014, the Affordable Care Act (ACA) imposes a shared responsibility penalty on large employers that do not offer minimum essential coverage to substantially all full-time employees and their dependents. Large employers that offer coverage may still be liable for a penalty if the coverage is unaffordable or does not provide minimum value.

On Jan. 2, 2013, the Internal Revenue Service (IRS) released long-awaited proposed regulations on ACA’s employer shared responsibility provisions. Although the proposed regulations are not final, employers may rely on them until further guidance is issued. The proposed regulations contain important transition relief for plans that do not operate on a calendar year basis (fiscal year plans).

Plan Year Selection

The proposed rules state that the plan year must be 12 consecutive months, unless a short plan year of less than 12 months is permitted for a valid business purpose. A plan year may begin on any day of a year and must end on the preceding day in the immediately following year (for example, a plan year that begins on Nov. 1, 2014, must end on Oct. 31, 2015). A calendar year plan year is a period of 12 consecutive months beginning on Jan. 1 and ending on Dec. 31 of the same calendar year.

Once established, a plan year is effective for the first plan year and for all subsequent plan years, unless changed, provided that such change will only be recognized if made for a valid business purpose. Note that a change in the plan year is not permitted if a principal purpose of the change in plan year is to avoid the employer shared responsibility requirements.

Concerns for Fiscal Year Plans (non-calendar year plans)

ACA’s pay or play penalty goes into effect on Jan. 1, 2014, for both employers with calendar year plans and employers with fiscal year plans. Because it may be difficult to make mid-year changes to a plan’s terms, employers with fiscal year plans should evaluate whether they need to make plan changes for the 2013 plan year to avoid an ACA penalty.

To minimize the impact of ACA’s shared responsibility provisions on 2013 plan years, the proposed regulations include transition relief for employers that, as of Dec. 27, 2012, offered coverage under fiscal year plans. Transition relief is provided for:

  • Individuals who would be eligible for coverage as of the first day of the 2014 plan year under the plan’s eligibility terms in effect on Dec. 27, 2012; and
  • Other employees if a significant percentage of the employer’s workforce was eligible for coverage under one or more fiscal year plans.

Transition Relief

Eligible Individuals

The proposed regulations provide transition relief with respect to employees who would be eligible for coverage as of the first day of the 2014 plan year (that is, the plan year starting in 2014) under the plan’s eligibility terms in effect on Dec. 27, 2012. If these employees are offered affordable, minimum value coverage no later than the first day of the 2014 plan year, the large employer will not be liable for a penalty with respect to these employees for the period prior to the 2014 plan year. This relief gives employers with fiscal year plans additional time to make sure their plan’s coverage is affordable and provides minimum value.

Other Employees

The proposed regulations also provide transition relief for employers that have a significant percentage of their employees eligible for or covered under one or more fiscal years plans that have the same plan year as of Dec. 27, 2012. This relief gives employers with fiscal year plans additional time to expand their plans’ eligibility rules. To qualify for this relief:

  • The fiscal year plan (including any other fiscal year plans that have the same plan year) must cover at least one-quarter of the large employer’s employees as of Dec. 27, 2012; OR
  • At least one-third of the large employer’s employees must have been offered coverage under the fiscal year plan or plans during the most recent open enrollment period before Dec. 27, 2012.

If the transition relief applies, the employer will not be liable for a penalty for any period prior to the 2014 plan year with respect to employees who are offered affordable, minimum value coverage no later than the first day of the 2014 plan year and who would not have been eligible for coverage under any calendar year group health plan maintained by the employer as of Dec. 27, 2012.

For example, if during the most recent open enrollment period before Dec. 27, 2012, an employer offered coverage under a fiscal year plan with a plan year starting on July 1, 2013, to at least one-third of its employees, the employer could avoid liability for a shared responsibility payment if, by July 1, 2014, it expanded the plan to offer coverage satisfying ACA’s shared responsibility provisions to the full-time employees who had not been offered coverage.

For purposes of this transition relief, a large employer may determine the percentage of its employees covered under the fiscal year plan or plans as of the end of the most recent enrollment period or any date between Oct. 31, 2012, and Dec. 27, 2012. Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


HEALTHCARE REFORM:
HHS RELEASES FINAL MINIMUM VALUE GUIDANCE & CALCULATOR

Beginning in 2014, to avoid penalties under the Affordable Care Act (ACA), large employers must provide health coverage to their full-time employees (and dependents) that is affordable and provides minimum value. An employer-sponsored plan provides minimum value under ACA if the percentage of the total allowed costs of benefits provided under the plan is no less than 60 percent.

On Feb. 25, 2013, the Department of Health and Human Services (HHS) issued a final rule on essential health benefits. The final rule outlines three approaches for determining whether an employer’s health coverage provides minimum value under ACA. In connection with the final rule, HHS also released its Minimum Value Calculator, or MV Calculator.

This Legislative Brief summarizes the available methods for determining minimum value and provides information on the MV Calculator.

Determining Minimum Value

An employer may use one of the following methods to determine whether its health plan provides minimum value.

MV Calculator HHS has released an MV Calculator that permits an employer to enter information about its health plan’s benefits, coverage of services and cost-sharing terms to determine whether the plan provides minimum value.
Safe Harbor Checklists HHS and the IRS have indicated that they will provide an array of design-based safe harbors in the form of checklists that employers can use to compare to their plans’ coverage. If a plan’s terms are consistent with or more generous than any one of the safe harbor checklists, the plan would be treated as providing minimum value. This method would not involve calculations, and could be completed without an actuary. Each safe harbor checklist would describe the cost-sharing attributes of the four core categories of benefits and services: physician and mid-level practitioner care, hospital and emergency room services, pharmacy benefits, and laboratory and imaging services. HHS and the IRS have not yet issued these checklists.
Actuarial Certification An employer-sponsored plan may seek certification by an actuary to determine the plan’s minimum value if the plan contains nonstandard features that preclude the use of the MV Calculator and safe harbor checklists. Nonstandard features would include quantitative limits (for example, limits on covered hospital days or physician visits) on any of the four core categories of benefits and services.

If a plan uses the MV Calculator and offers an essential health benefit (EHB) outside of the parameters of the MV Calculator, the plan may ask an actuary to determine the value of the benefit and add it to the result derived from the MV Calculator to reflect that value.

Also, to determine minimum value, employer-sponsored health plans may account for any benefits covered by the employer that are also covered in any one of the EHB-benchmark plan options in any state.

HSA & HRA Contributions

The final rule allows employer contributions to a health savings account (HSA) to be taken into account when determining a health plan’s minimum value. Also, amounts newly made available under an integrated health reimbursement arrangement (HRA) that may be used only for cost-sharing are also taken into account in determining minimum value. HHS is still considering whether or not other types of integrated HRAs should be included in the minimum value calculation, and may issue additional guidance on this issue. HHS did not provide guidance on the definition of “integrated” or the phrase “used only for cost-sharing,” although more information on these terms would be helpful.

MV Calculator

HHS’ MV Calculator is now available to determine whether an employer-sponsored plan satisfies ACA’s minimum value requirement. Along with the calculator, HHS also released an MV Calculator Methodology, which provides a detailed description of the data underlying the MV Calculator and its methodology.

According to HHS, the calculator is available for “informal external testing.” Users of the MV Calculator are encouraged to submit any technical issues or operational concerns to HHS and, if necessary, HHS will release a revised version of the MV calculator.

Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


EARLY RENEWALS BEING OFFERED TO SMALL EMPLOYERS

To help mitigate the impact of the Affordable Care Act (ACA) on health insurance premiums, some health insurance issuers in the small group market have been encouraging small employers to renew their coverage early for 2014. The early renewal option offers small employers the option to renew their coverage in late 2013 instead of waiting to renew until their 2014 policy anniversary dates. This Legislative Brief describes the options offered by certain issuers and outlines legal concerns that employers should keep in mind when considering these options.

As with past renewals, small employers that renew early will likely see a premium increase due in part to rising medical costs. However, according to various issuers, renewing early will allow small employers to postpone additional costs that are due to ACA’s premium rating and other reforms. For example, the following ACA reforms are expected to impact premiums in the small group market:

  • Premium Rating – Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers in the small group market will be generally prohibited from determining premium rates based on health status, gender or other factors. Issuers will be able to vary premium rates based only on age, rating area, family coverage and tobacco use. This reform, which is often referred to as “community rating,” does not apply to grandfathered plans.
  • Essential Health Benefits – Effective for plan years beginning on or after Jan. 1, 2014, health insurance issuers that offer health coverage in the small group market will be required to provide the essential health benefits package required of plans sold in the ACA Exchanges. This requirement does not apply to grandfathered plans.
  • Pre-existing Condition Exclusions – Group health plans and health insurance issuers may not impose pre-existing condition exclusions on coverage for any enrollees, effective for plan years beginning on or after Jan. 1, 2014.
  • Cost-sharing Restrictions – Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered plans will be subject to limits on cost-sharing and out-of-pocket costs. Plans in the small group market will need to comply with ACA’s out-of-pocket maximum limit and ACA’s annual deductible limit.

According to health insurance issuers, by renewing before the end of 2013, small employer plans will not be subject to ACA’s reforms, such as the new community rating requirements, until the 2014 renewal.

Legal Concerns

When considering an early renewal, it is important to keep in mind that the federal agencies in charge of implementing ACA and other employee benefit laws have not addressed whether these early renewals are permissible. Because federal agencies have not addressed these early renewals, small employers should proceed with caution and consult their benefit advisors if they are considering an early renewal.

When an employer renews early, it is essentially changing the health coverage’s policy or plan year. The Internal Revenue Service (IRS) has limited plan year changes in the following contexts:

  • The IRS’s proposed rule on ACA’s employer shared responsibility penalty provides that once a plan year is established it can only be changed for a valid business purpose. Large employers (50 or more full-time employees) are prohibited from changing plan years to avoid the employer penalty under the proposed rule.
  • The IRS’s proposed cafeteria plan regulations provide that employers can only change a cafeteria plan’s year based on a valid business purpose. Examples provided by the IRS of changes based on a valid business purpose include switching insurance carriers or experiencing a corporate merger, acquisition or other change in business operations.
  • In Notice 2012-40, consistent with the proposed cafeteria plan regulations, the IRS states that a plan year is permitted to be changed only for a valid business purpose. If a principal purpose of changing the plan year of a health flexible spending account (FSA) is to delay the application of ACA’s $2,500 limit, the change is not for a valid business purpose.

In these contexts, the IRS has indicated that a plan year change that is not made for a valid business purpose will be disregarded and considered ineffective.

Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


2014 COMPLIANCE CHECKLIST

The Affordable Care Act (ACA), which was signed into law in March 2010, put in place comprehensive health coverage reforms with effective dates spread out over a period of four years and beyond. Some of ACA’s reforms are already in effect for employers and their group health plans, such as the Form W-2 reporting requirement for large employers and the requirement for non-grandfathered health plans to cover certain preventive care services without cost-sharing.

Many of ACA’s key reforms will become effective in 2014. Key ACA reforms that will affect employers in 2014 include health plan design changes, increased wellness program incentives, a new reinsurance fee, the employer “pay or play” mandate and additional reporting requirements. To prepare for this next phase of ACA reforms, employers should review upcoming requirements and make sure they have a compliance strategy in place.

This Legislative Brief provides a health care reform compliance checklist for 2014. Please contact The Horton Group, Inc. for assistance or if you have questions about changes that were required in previous years.

Plan Design Changes

Grandfathered Plan Status

A grandfathered plan is one that was in existence when health care reform was enacted on March 23, 2010. If you make certain changes to your plan that go beyond permitted guidelines, your plan is no longer grandfathered. Contact The Horton Group, Inc. if you have questions about changes you have made, or are considering making, to your plan.

  • If you have a grandfathered plan, determine whether it will maintain its grandfathered status for the 2014 plan year. Grandfathered plans are exempt from some of ACA’s mandates. A grandfathered plan’s status will affect its compliance obligations from year to year.
  • If you move to a non-grandfathered plan, confirm that the plan has all of the additional patient rights and benefits required by ACA. This includes, for example, coverage of preventive care without cost-sharing requirements.

Annual Limits

Effective for plan years beginning on or after Jan. 1, 2014, health plans are prohibited from placing annual limits on essential health benefits. (ACA’s prohibition on annual limits was phased in over a three-year period; restricted annual limits were permitted for plan years beginning before Jan. 1, 2014.)

  • Confirm that no annual limit will be placed on essential health benefits for the 2014 plan year and beyond.

Pre-existing Condition Exclusions

Effective for plan years beginning on or after Jan. 1, 2014, ACA prohibits health plans from imposing pre-existing condition exclusions (PCEs) on any enrollees. PCEs for enrollees under 19 years of age were eliminated by ACA for plan years beginning on or after Sept. 23, 2010.

  • Confirm that PCEs will not be imposed on any enrollees for the 2014 plan year and beyond.

Dependent Coverage to Age 26

Effective for plan years beginning on or after Sept. 23, 2010, ACA requires health plans that provide dependent coverage of children to make coverage available for adult children up to age 26. However, for plan years beginning before Jan. 1, 2014, grandfathered plans were not required to cover adult children under age 26 if they were eligible for other employer-sponsored group health coverage.

  • If your plan is grandfathered, confirm that it will make coverage available to adult children up to age 26 regardless of whether they are eligible for other employer-sponsored group health coverage, effective for the 2014 plan year and beyond.

Excessive Waiting Periods

Effective for plan years beginning on or after Jan. 1, 2014, a health plan may not impose a waiting period that exceeds 90 days. A waiting period is the period of time that must pass before coverage for an employee or dependent who is otherwise eligible to enroll in the plan becomes effective. Other conditions for eligibility are permissible, as long as they are not designed to avoid compliance with the 90-day waiting period limit.

  • If your plan has a waiting period for coverage, confirm that the waiting period is 90 days or less for the 2014 plan year and beyond.

Coverage for Clinical Trial Participants

Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans cannot terminate coverage because an individual chooses to participate in a clinical trial for cancer or other life-threatening diseases or deny coverage for routine care that would otherwise be provided just because an individual is enrolled in a clinical trial.

  • For the 2014 plan year and beyond, confirm that plan terms and operations will not discriminate against participants who participate in clinical trials.

Limits on Cost-sharing

Effective for plan years beginning on or after Jan. 1, 2014, non-grandfathered health plans are subject to limits on cost-sharing or out-of-pocket costs. Out-of-pocket expenses may not exceed the amount applicable to coverage related to HSAs. Deductibles may not exceed $2,000 (single coverage) or $4,000 (family coverage). These amounts are indexed for subsequent years.

Final guidance on this requirement provides that the deductible requirement will apply only to plans in the insured small group market, while the out-of-pocket cost limit will apply to all non-grandfathered health plans (including self-insured plans and plans and issuers in the large group market).

  • Review your plan’s limits on cost-sharing to make sure they comply with ACA’s limits on cost-sharing, effective for the 2014 plan year.

Comprehensive Benefits Package

Starting in 2014, insured plans in the individual and small group market must cover each of the essential benefits categories listed under ACA. This requirement does not apply to grandfathered plans, self-funded plans or insured plans in the large group market.

  • If you have an insured plan subject to ACA’s comprehensive benefits package mandate, confirm with the health insurance issuer that the plan will cover the essential health benefits package, effective for the 2014 plan year.

Wellness Program Incentives

Under current law, the reward under a health-contingent wellness program is limited to 20 percent of the cost coverage. Health-contingent wellness programs require individuals to satisfy a standard related to a health factor in order to obtain a reward (for example, not smoking, attaining certain results on biometric screenings or meeting exercise targets).

For 2014 plan years, the maximum permissible reward increases to 30 percent of the cost of coverage. In addition, proposed regulations would increase the maximum permissible reward to 50 percent of the cost of health coverage for programs designed to prevent or reduce tobacco use. More guidance is expected on the reforms for wellness programs.

  • For a health-contingent wellness program, confirm the program complies with current law and consider whether to increase the reward in 2014.

Reinsurance Fees

Health insurance issuers and self-funded group health plans must pay fees to a transitional reinsurance program for the first three years of health insurance exchange operation (2014-2016). The fees will be used to help stabilize premiums for coverage in the individual market. Fully insured plan sponsors do not have to pay the fee directly.

Certain types of coverage are excluded from the reinsurance fees, including HRAs that are integrated with major medical coverage, HSAs, health FSAs and coverage that consists solely of excepted benefits under HIPAA (such as stand-alone vision and dental coverage).

The reinsurance program’s fees will be based on a national contribution rate, which HHS will announce annually. For 2014, HHS has proposed a national contribution rate of $5.25 per month ($63 per year). The reinsurance fee is calculated by multiplying the average number of covered lives by the national contribution rate. Additional guidance is expected to be issued on this fee requirement.

  • Review the health coverage you provide to your employees to determine the plan(s) subject to the reinsurance fees.

Employer “Pay or Play” Mandate

Effective Jan. 1, 2014, employers with 50 or more employees (including full-time and full-time equivalent employees) that do not offer health coverage to their full-time employees (and dependents) that is affordable and provides minimum value will be subject to penalties if any full-time employee receives a government subsidy for health coverage through an Exchange. The sections of the health care reform law that contain the employer penalty requirements are known as the “shared responsibility” provisions.

  • The penalty amount for not offering health coverage is up to $2,000 annually for each full-time employee, excluding the first 30 employees. Under proposed IRS regulations, an employer would not be liable for this penalty if it offers coverage to all but 5 percent (or, if greater, five) of its full-time employees and dependents.
  • Employers who offer health coverage, but whose employees receive tax credits because the coverage is unaffordable or does not provide minimum value, will be subject to a fine of up to $3,000 annually for each full-time employee receiving a tax credit, with a maximum annual fine of $2,000 per full-time employee (excluding the first 30 employees).

The IRS provided safe harbor guidance for employers on determining who is considered a full-time employee (and must be offered coverage), along with how to measure a plan’s affordability and how penalties will apply when there is a waiting period for coverage. Guidance has also been issued on ways to determine a plan’s minimum value, including a minimum value calculator. The IRS also proposed transition relief for non-calendar year plans, or fiscal year plans.

• Count the number of your employees to determine if you are a large employer subject to ACA’s shared responsibility
provisions.

• If you are a large employer, take the following additional steps:

  • Determine whether health coverage is offered to substantially all full-time employees and dependents;
  • Assess the affordability of the health coverage under one of the IRS’ affordability safe harbors (Form W-2, rate of pay or federal poverty line);
  • Review whether the plan provides minimum value by using one of the three available methods (minimum value calculator, safe harbor checklists or actuarial certification); and
  • If you have a fiscal year plan, determine if you qualify for the transition relief for plan years beginning in 2013.

Reporting of Coverage

Effective for 2014, ACA requires health insurance issuers and sponsors of self-insured plans that provide “minimum essential coverage” to report certain health coverage information to the IRS. A separate IRS reporting requirement will apply to large employers subject to ACA’s shared responsibility rules. Large employers will have to report information on the design and cost of their plans, applicable waiting periods and employees covered by the plan.

It is expected that the IRS will use this information to verify data related to ACA’s individual and employer mandates. The first information returns under these new reporting provisions will be due in 2015. Further guidance on these new reporting requirements is anticipated. Please contact the agents, advocates and underwriters at Morris & Reynolds Insurance with your questions on this or any other topic as we are happy to help. 305.238.1000.


HEALTH INSURANCE EXCHANGES

The Affordable Care Act (ACA) requires each state to have a competitive marketplace, known as an Affordable Health Insurance Exchange (Exchange), for individuals and small businesses to purchase private health insurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct comparisons of
private health insurance options on the basis of price, quality and other factors and will coordinate eligibility for premium tax credits and other affordability programs.

All Exchanges will launch open enrollment in October 2013 with coverage becoming effective as early as Jan. 1, 2014.

In addition to ACA’s Exchanges, private health insurance exchanges are emerging to provide another way for employers to provide health insurance coverage for employees. Private health insurance exchanges may offer employers more flexibility than ACA’s Exchanges.

EXCHANGE OPTIONS FOR STATES

States have a few options available to them with respect to the establishment of their Exchanges.

• Create and operate its own Exchange (state-based Exchange)
• Have HHS operate the federally-facilitated Exchange (FFE) for its residents
• Partner with HHS so that the state is involved with the operation of the FFE

As a default, HHS will operate the FFE in any state that does not establish a state-based Exchange or elect a partnership Exchange.

Also, each Exchange will have an individual market component and a component for small employers, which is called the Small Business Health Options Program (SHOP). A state that has received conditional approval from HHS on its state-based Exchange may elect to operate its own SHOP for small employers and let HHS run the individual market
Exchange in the state.

To operate a state-based Exchange for 2014, a state was required to submit a blueprint application and declaration letter to HHS by Dec. 14, 2012 for approval. States establishing a partnership Exchange had until Feb. 15, 2013 to submit a blueprint application and declaration letter for 2014. A state may transition between Exchange models each year.

The following figure summarizes the different Exchange models available to states under ACA:

HHS has conditionally approved numerous states’ requests to operate their own Exchanges, and it has also conditionally approved a number of partnership Exchange applications. For 2014, the following 17 states and the District of Columbia have been conditionally approved to operate state-based Exchanges:

• California • Idaho • Nevada • Utah
• Colorado • Kentucky • New Mexico • Vermont
• Connecticut • Maryland • New York • Washington
• District of Columbia • Massachusetts • Oregon
• Hawaii • Minnesota • Rhode Island

The state of Utah will operate its own SHOP Exchange to serve small employers in the state, while HHS will operate the FFE in the individual market. This SHOP-only option is only available to states that have received HHS’ conditional approval for their state-based Exchange for 2014. For the 2015 and later, HHS will consider new applications from states proposing to operate a SHOP-only Exchange.

For 2014, the following seven states have been conditionally approved for partnership Exchanges:

• Arkansas • Illinois • Michigan • West Virginia
• Delaware • Iowa • New Hampshire

HHS will run the FFE for the remaining 26 states, including Arizona, Texas, Louisiana, Wisconsin, Florida, Georgia, Ohio and Pennsylvania.

EXCHANGE FUNCTIONS AND ROLES

The Exchanges will perform a variety of functions, including:

  • Certifying health plans as qualified health plans (QHPs) to be offered in the Exchange;
  • Operating a website to facilitate comparisons among QHPs for consumers;
  • Operating a toll-free hotline for consumer support, providing grant funding to entities called “Navigators” for consumer assistance and conducting consumer outreach and education;
  • Determining exemptions from ACA’s individual mandate and granting approvals related to hardship or other exemptions;
  • Determining eligibility of consumers for enrollment in QHPs and for insurance affordability programs (such as premium tax credits, Medicaid and CHIP state-established basic health plans); and
  • Facilitating the enrollment of consumers in QHPs.

States have flexibility in determining the design of their Exchanges. For example, states may decide whether their Exchanges will be operated by a non-profit organization or a public agency. States may also select the number and type of health plans available in their Exchanges and may determine some of the standards for QHPs, including the
definition of required essential health benefits. In addition, states have flexibility to determine a role for agents and brokers in connection with the Exchanges.

Navigator Program

The Navigator program is an essential component of an Exchange. Navigators will help consumers learn about and choose health coverage through the Exchanges. For example, a Navigator will provide information regarding various health programs and will provide information in a manner that is culturally and linguistically appropriate to the needs
of the populations being served by the Exchange.

States have flexibility to design their Navigator programs, including selecting the entities that will serve as Navigators, within the framework contained in HHS’s final regulations. The final regulations provide the following guidance for the Navigator program:

  • Exchanges must have at least two entities serve as Navigators, and one of the entities must be a community and consumer-focused nonprofit group.
  • Exchanges must have conflict of interest standards for Navigators. These standards must prohibit a Navigator from receiving any kind of compensation from a health insurance or stop loss insurance issuer for enrolling individuals in health insurance plans. This prohibition applies to both plans offered through an Exchange, and
    plans offered outside of an Exchange. However, Navigators who sell lines of insurance that are not health or stop loss insurance would not be prohibited from receiving consideration from the sale of those other lines of insurance while serving as Navigators, so long as they disclose this to consumers.
  • Exchanges must have a set of training standards for Navigators to ensure expertise in the needs of underserved and vulnerable populations, eligibility and enrollment procedures, the range of QHPs and public programs and the Exchange’s privacy and security standards.

Exchanges will award grants to Navigators in the FFE and state partnership Exchanges. On April 9, 2013, HHS announced the availability of this funding. Applications were due by June 7, 2013.

Agents and Brokers

States have flexibility to determine what role brokers and agents will serve in their Exchanges. Also, states will continue to set standards for the broker and agent industry and play their traditional role in licensing and overseeing insurance producers.

Licensed brokers and agents are eligible to serve as Navigators under the final regulations. However, the responsibilities of a Navigator differ from the traditional activities of a broker or agent. Also, the conflict of interest standards would preclude brokers and agents who are serving as Navigators from receiving compensation from an
issuer for selling health or stop loss insurance.

The final regulations give states the option of permitting brokers and agents to enroll individuals and employers in QHPs offered through the Exchanges. In addition, if permitted by state law, the regulations permit brokers to assist individuals in applying for advance premium tax credits and cost-sharing reductions for QHPs.

Agents and brokers intending to work with consumers in the individual market FFE and state partnership Exchanges will be able to assist consumers in two ways:

(1) An issuer-based pathway, where an agent or broker uses an issuer’s website to assist the consumer; or

(2) An Exchange pathway, where an agent or broker assists the consumer using the Exchange website.

In the FF-SHOPs, agents and brokers will work with consumers using the FFE website to complete the employer and employee applications. Both pathways will transmit an agent’s or broker’s identifying information to the appropriate issuer to facilitate payment, and will allow an agent or broker to assist qualified individuals and/or employers and employees with initial enrollment and changes during the coverage year, including changes that impact eligibility.

There is no overall prohibition on agents or brokers receiving commissions through an Exchange. How brokers and agents will be compensated for coverage sold through an Exchange will depend on the type of Exchange.

  • In state-based Exchanges, states have the flexibility to determine what role brokers and agents will serve, including how compensation will be structured.
  • In the FFE and federally-facilitated SHOPs (FF-SHOPs), the Exchange will not establish a commission schedule or pay commissions directly to agents or brokers. Instead, agents and brokers will be compensated by insurers or consumers, consistent with state law. However, HHS has established a standard for broker compensation. In order for a plan to be certified as a QHP, issuers must pay the same broker compensation for QHPs in the FFE or FF-SHOP that the issuer pays for similar plans in the outside market.

To participate in the FFE or FF-SHOP, agents and brokers must adhere to all state requirements for licensure, appointment and market conduct and complete applicable Exchange agreements. Additionally, agents and brokers serving in the individual market FFE must complete online training and security authorization for FFE registration.
Training is strongly encouraged, but not required, for agents and brokers working exclusively in FF-SHOPs. Statebased Exchanges can either adopt the federal standards or develop their own training and certification requirements.

SMALL BUSINESS HEALTH OPTIONS PROGRAM (SHOP)

According to HHS, SHOPs will allow small employers to provide their employees with a choice of health plan options and will give small businesses the same purchasing power as large businesses. Each Exchange will decide how a SHOP is structured.

Eligible Small Employers

States have flexibility with regard to the size of small businesses that can participate in SHOP. Until 2016, states can set the size of the small group market at either 1 to 50 or 1 to 100 employees. In 2016, employers with between 1 and 100 employees will be allowed to participate in a SHOP. Starting in 2017, states have the option to let businesses with more than 100 employees buy large group coverage through the SHOP.

Employer Choice Model and Transition Policy

A SHOP must allow employers the option to offer employees all QHPs at a level of coverage chosen by the employer — bronze, silver, gold or platinum. This is called the “employee choice model.” Under the employee choice model, the employer chooses a level of coverage and a contribution amount and employees then select any QHP at that level.

In addition, SHOPs may allow a qualified employer to choose one QHP for its employees. HHS has indicated that the FF-SHOP will give employers the option of offering only a single QHP, as many employers do today, in addition to the employee choice model.

On May, 31, 2013, HHS issued a final rule that will delay implementation of the employee choice model as a requirement for all SHOPs for one year, until 2015. According to HHS, this approach provides all SHOPs (both state and FF-SHOPs) with additional time to prepare for the employee choice model. Under the transition approach:

  • State-based Exchanges: A state-based Exchange’s SHOP may provide the employee choice model for small employers in 2014, but is not required to provide this model until 2015.
  • FE: The FF-SHOP will not provide the employee choice model for small employers until 2015. For 2014 plan years, the FF-SHOP will assist employers in choosing a single QHP to offer their qualified employees.

Tax Credit

Starting in 2014, small employers purchasing coverage through SHOP may be eligible for a tax credit of up to 50 percent of their premium payments if they have 25 or fewer employees, pay employees an average annual wage of less than $50,000, offer all full-time employees coverage and pay at least 50 percent of the premium.

PRIVATE EXCHANGES

While ACA’s state-based Exchanges are scheduled to be effective in 2014, some private health insurance exchanges targeted at employers are already operational. As a growing trend, these private exchanges create a marketplace for employees to compare options and shop for coverage. At the same time, they allow private health care companies to
market their products at a single location to clients throughout the country.

Some employers may use the private exchanges to offer a defined contribution model of purchasing health coverage. Under this model, employers provide employees with a defined amount of money and direct them to an exchange where they can select a health plan from an array of options.

Private exchanges have the potential to provide more flexibility than ACA’s Exchanges.

  • Private exchanges can offer a broader range of insurance products, such as life insurance, and their products can be tailored for different employer segments.
  • Although ACA prohibits large employers from using the Exchanges until at least 2017, there is no similar restriction for private exchanges. Thus, small and large employers can use private exchanges to provide group health insurance benefits to their employees.
  • Private exchanges are currently operating to provide employees with a choice of health insurance products, while the SHOP’s employee choice model will likely be delayed until 2015.

Private health insurance exchanges are a relatively new model for providing group health insurance benefits. The availability and success of private exchanges most likely depends on employers’ willingness to move from a traditional health plan to a defined contribution health plan.

ADDITIONAL RESOURCES
More information on the Exchanges is available through www.healthcare.gov and http://cciio.cms.gov/index.html.


ENROLLMENT IN HEALTH INSURANCE EXCHANGES

The Affordable Care Act (ACA) calls for the creation of state-based competitive marketplaces, known as Affordable Health Insurance Exchanges (Exchanges), for individuals and small businesses to purchase private health insurance. According to the Department of Health and Human Services (HHS), the Exchanges will allow for direct comparisons of private health insurance options based on price, quality and other factors and will coordinate eligibility for premium tax credits and other affordability programs.

ACA requires the Exchanges to become operational in 2014. Enrollment in the Exchanges for eligible individuals and small businesses is expected to begin on Oct. 1, 2013. This Legislative Brief describes the periods during which eligible individuals can enroll in a health plan through an Exchange.

INDIVIDUAL ELIGIBILITY

An individual will be eligible for enrollment in a “qualified health plan” (QHP) through an Exchange if he or she:

  • Is a citizen, national or non-citizen lawfully present in the U.S., and is reasonably expected to remain so for the entire period for which enrollment is sought;
  • Is not incarcerated; and
  • Resides in the state covered by the Exchange.

Each Exchange will determine whether an individual meets the eligibility standards for enrollment. After the Exchange determines eligibility, the Exchange will provide the individual with a timely, written notice of his or her eligibility determination.

ENROLLMENT PERIODS

The ACA requires Exchanges to have an initial open enrollment period, an annual open enrollment period and certain special enrollment periods. Individuals will only be able to enroll in a QHP through an Exchange during one of the permitted enrollment periods.

Initial Enrollment Period

The initial open enrollment period is expected to run from Oct. 1, 2013, through March 31, 2014. Coverage must be offered effective Jan. 1, 2014, for qualified individuals whose QHP selections are received by the Exchange on or before Dec. 15, 2013. For selections received between the first and 15th day of January, February or March 2014, coverage must be provided effective the first day of the following month. For those received between the 16th day and the last day of any month between December 2013 and March 31, 2014, the Exchange must ensure coverage is effective the first day of the second following month.

Special Enrollment Periods

Qualified individuals and enrollees may be allowed a “special enrollment period” under certain circumstances (such as marriage or birth of a child), during which they could enroll in QHPs or change enrollment from one QHP to another. Each special enrollment period will be 60 days from the date of the triggering event. The effective date of any
coverage elected during a special enrollment period follows rules similar to those applicable during initial enrollment.
This means that coverage would be effective as of the first day of the month for elections made by the 15th of the preceding month, and on the first day of the second following month for elections made between the 16th and the last day of a given month. However, coverage would be effective on the date of birth, adoption or placement for adoption, when that is the special enrollment triggering event.

Annual Enrollment Periods

The annual enrollment period for 2015 and subsequent years will begin October 15 and extend through December 7 of the preceding calendar year. Starting in 2014, the Exchange must provide advance written notice to each enrollee about annual open enrollment no earlier than September 1, and no later than September 30.


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