Proposed Regulation on Exchange Eligibility (Part I)

On August 17, 2011, the Department of Health and Human Services (HHS) published a proposed regulation (the "Proposed Regulation") that clarifies the duties of Exchanges with respect to determining individual eligibility for qualified health plan (QHP) enrollment, federal premium tax credits and cost-sharing subsidies to help pay for QHP coverage, and certain government-sponsored health programs.
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As noted in previous columns, the PPACA employer mandate penalty depends in part on whether an employer’s employees receive a premium tax credit for QHP coverage through an Exchange.   

Below, and in next week’s column, we will answer recently received questions.    

How will an Exchange determine whether an individual is eligible for or enrolled in an employer-sponsored health plan for purposes of determining the individual’s eligibility for an advance payment of the premium tax credit?  

The Proposed Regulation provides that an Exchange generally must verify whether an individual who has applied for advance payments of the premium tax credit or cost-sharing subsidies is enrolled in an eligible employer-sponsored plan by accepting the individual’s attestation without further verification.  But if the information provided by the individual is not “reasonably compatible” with other information provided by the individual or otherwise in the Exchange’s records, the Exchange may utilize data from other sources or request additional supporting documentation from the individual.   

An Exchange also must require an individual to attest to his eligibility for employer-sponsored plan coverage, and must verify whether the individual is eligible for such coverage, for purposes of determining eligibility for advance payments of premium tax credits and cost-sharing subsidies.    

The preamble states that HHS, the Department of Labor (DOL) and Treasury/IRS (the “Agencies”) are considering how to utilize information already provided by employers for this verification.  It notes that employers will provide much, if not all, of the information needed by the Exchange to determine eligibility for advance payments of premium tax credits and cost-sharing subsidies through employer and health insurer reporting requirements enacted in PPACA.  The preamble also notes that the Agencies are considering providing a “template” for employers to provide necessary information to individuals to enroll in Exchange coverage or a “centralized database” to which employers could submit information as part of the verification process, and requests comments on whether these approaches would be helpful.

How will an Exchange determine an individual's household income and family size for purposes of determining the individual's eligibility for an advance payment of the premium tax credit?  

The Proposed Regulation provides that Exchanges generally must verify annual household income for purposes of the advance payment of premium tax credit and cost-sharing subsidies (as well as Medicaid and CHIP).  Exchanges must require individuals to attest to their household's family size, and must accept the attestation without further verification unless the attestation is not reasonably compatible with other information provided by the individual or otherwise in the Exchange's records.  In general, Exchanges are to verify annual household income for the family based on federal tax return data, and require the applicant to attest whether the information (which generally will be from a previous year) represents an accurate projection of the household's income for the current year.  If data is unavailable or the applicant attests the tax return data is not an accurate projection of income for the current year, the Exchange must require the applicant to attest to projected income.   

What happens if there are inconsistencies between the individual's attestation and other information received by the Exchange?    

The Proposed Regulation generally requires an Exchange to provide an applicant with 90 days to resolve any inconsistencies between an individual's attestation and other information (e.g., federal tax return information), but an Exchange may extend this period.  If an individual is otherwise eligible to enroll in a QHP or for advance payments of premium tax credits or cost-sharing subsidies, the Exchange generally must allow the individual to receive such coverage and advance payments during the 90-day period.  If an Exchange still cannot verify the attestation, the Exchange must make a final determination of eligibility based on the information available and notify the applicant of the determination.

Got a health-care reform question?  You can ask YOUR health-care reform legislation question online at http://www.surveymonkey.com/s/second_opinions    

You can find a handy list of Key Provisions of the Patient Protection and Affordable Care Act and their effective dates at http://www.groom.com/HCR-Chart.html     

Contributors:  

Christy Tinnes is a Principal in the Health & Welfare Group of Groom Law Group in Washington, D.C.  She is involved in all aspects of health and welfare plans, including ERISA, HIPAA portability, HIPAA privacy, COBRA, and Medicare.  She represents employers designing health plans as well as insurers designing new products.  Most recently, she has been extensively involved in the insurance market reform and employer mandate provisions of the health-care reform legislation.  

Brigen Winters is a Principal at Groom Law Group, Chartered, where he co-chairs the firm's Policy and Legislation group. He counsels plan sponsors, insurers, and other financial institutions regarding health and welfare, executive compensation, and tax-qualified arrangements, and advises clients on legislative and regulatory matters, with a particular focus on the recently enacted health-reform legislation.  

 

PLEASE NOTE:  This feature is intended to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice. 

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