In a first-of-its-kind decision, a federal court recently upheld the right of employees to sue their employer for allegedly cutting employee hours to less than 30 hours per week to avoid offering health insurance under the Affordable Care Act (ACA). Specifically, the District Court for the Southern District of New York denied a defense Motion to Dismiss in a case where a group of workers allege that Dave & Buster’s (a national restaurant and entertainment chain) “right-sized” its workforce for the purpose of avoiding healthcare costs.
Although this case is in the very early stages of litigation and is far from being decided, you should monitor this for developments to determine whether you need to take action to deter potential copycat lawsuits.
One of the initial concerns by ACA critics is that many employers would respond to the Employer Mandate by reducing full-time employee hours to avoid the coverage obligation and associated penalties, increasing the number of part-time workers in the national economy. This is because the ACA does not require an employer to offer affordable, minimum-value coverage to employees generally working less than 30 hours per week.
Although the initial economic data analyzing the national workforce suggests that the predictions of wide-scale reduction in employee hours have not materialized, some employers have increased their reliance on part-time employees as an ACA strategy to manage the costs of the Employer Mandate.
Section 510 of ERISA prohibits discrimination and retaliation against plan participants and beneficiaries with respect to their rights to benefits. More specifically, ERISA Section 510 prohibits employers from interfering “with the attainment of any right to which such participant may become entitled under the plan.” Because many employment decisions affect the right to present or future benefits, courts generally require that plaintiffs show specific employer intent to interfere with benefits if they want to successfully assert a cause of action under ERISA Section 510.
The court found that the class of plaintiffs showed sufficient evidence in support of their claim that their participation in the health insurance plan was discontinued because the employer acted with “unlawful purpose” in realigning its workforce to avoid ACA-related costs. In this regard, the employees claimed that the company held meetings during which managers explained that the ACA would cost millions of dollars, and that employee hours were being reduced to avoid that cost.
However, if you are considering reducing your employee hours, you should carefully consider how such reductions are communicated to your workforce. Employers often have varied reasons for reducing employee hours, and many of those reasons have legitimate business purposes. It is vital that any communications made to your employees about such reductions describe the underlying rationale with clarity.
Beginning in Spring 2016, the Affordable Care Act (ACA) Exchanges/Marketplaces will begin to send notices to employers whose employees have received government-subsidized health insurance through the Exchanges. The ACA created the “Employer Notice Program” to give employers the opportunity to contest a potential penalty for employees receiving subsidized health insurance via an Exchange.
The notices will identify any employees who received an advance premium tax credit (APTC). If a full-time employee of an applicable large employer (ALE) receives a premium tax credit for coverage through the Exchanges in 2016, the ALE will be liable for the employer shared responsibility payment. The penalty if an employer doesn’t offer full-time equivalent employees (FTEs) affordable minimum value essential coverage is $2,160 per FTE (minus the first 30) in 2016. If an employer offers coverage, but it is not considered affordable, the penalty is the lesser of $3,240 per subsidized FTE in 2016 or the above penalty. Penalties for future years will be indexed for inflation and posted on the IRS website. The Employer Notice Program does provide an opportunity for an ALE to file an appeal if employees claimed subsidies they were not entitled to.
The first batch of notices will be sent in Spring 2016 and additional notices will be sent throughout the year. For 2016, the notices are expected to be sent to employers if the employee received an APTC for at least one month in 2016 and the employee provided the Exchange with the complete employer address.
Last September, the Centers for Medicare and Medicaid Services (CMS) issued FAQs regarding the Employer Notice Program. The FAQs respond to several questions regarding how employers should respond if they receive a notice that an employee received premium tax credits and cost sharing reductions through the ACA’s Exchanges.
Employers will have an opportunity to appeal the employer notice by proving they offered the employee access to affordable minimum value employer-sponsored coverage, therefore making the employee ineligible for APTC. An employer has 90 days from the date of the notice to appeal. If the employer’s appeal is successful, the Exchange will send a notice to the employee suggesting the employee update their Exchange application to reflect that he or she has access or is enrolled in other coverage. The notice to the employee will further explain that failure to provide an update to their application may result in a tax liability.
An employer appeal request form is available on the Healthcare.gov website. For more details about the Employer Notice Program or the employer appeal request form visit www.healthcare.gov.
Although CMS has provided these guidelines to apply only to the Federal Exchange, it is likely that the state-based Exchanges will have similar notification programs.
Employers should prepare in advance by developing a process for handling the Exchange notices, including appealing any incorrect information that an employee may have provided to the Exchange. Advance preparation will enable you to respond to the notice promptly and help to avoid potential employer penalties.
Many employers offer affordable health coverage that meets or exceeds the minimum value requirements of the Affordable Care Act (ACA). However, if one or more of their full-time employees claims the coverage offered was not affordable, minimum value health coverage, the employee could (erroneously) get subsidized coverage on the public health exchange. This would cause problems for applicable large employers (ALEs), who potentially face employer shared responsibility penalties, and for employees, which may have to repay erroneous subsidies.
If an employee does receive subsidized coverage on the public exchange, most employers would want to know about it as soon as possible and appeal the subsidy decision if they believed they were offering affordable, minimum value coverage. There are two ways employers might be notified: (1) by the federally facilitated or state-based exchange or (2) by the Internal Revenue Service (IRS).
Employer notices from exchanges
The notices from the exchanges are intended to
be an early-warning system to employers. Ideally, the exchange would notify
employers when an employee receives an advance premium tax credit (APTC) subsidizing
coverage. The notice would occur shortly after the employee started receiving
subsidized coverage, and employers would have a chance to rectify the situation
before the tax year ends.
In a set of Frequently Asked Questions issued September 18, 2015, the Center for Consumer Information and Insurance Oversight (CCIIO) stated the federal exchanges will not notify employers about 2015 APTCs and will instead begin notifying some employers in 2016 about employees’ 2016 APTCs. The federal exchange employer notification program will not be fully implemented until sometime after 2016.
In 2016, the federal exchanges will only send APTC notices to some employers and will use the employer address given to the exchange by the employee at the time of application for insurance on the exchange. CCIIO realizes some employer notices will probably not reach their intended recipients. Going forward, the public exchanges will consider alternative ways of contacting employers.
Employers that do receive the notice have 90 days after receipt to send an appeal to the health insurance exchange.
Employers that do not receive early notice from the exchanges will not be able to address potential errors until after the tax year is over, when the IRS gets involved.
Employer notices from IRS
The IRS, which is responsible for assessing and
collecting shared responsibility payments from employers, will start notifying
employers in 2016 if they are potentially subject to shared responsibility
penalties for 2015. Likewise, the IRS will notify employers in 2017 of
potential penalties for 2016, after their employees’ individual tax returns
have been processed. Employers will have an opportunity to respond to the IRS
before the IRS actually assesses any ACA shared responsibility penalties.
Regarding assessment and collection of the employer shared responsibility payment, the IRS states on its website:
An employer will not be contacted by the IRS regarding an employer shared responsibility payment until after their employees’ individual income tax returns are due for that year—which would show any claims for the premium tax credit.
If, after the employer has had an opportunity to respond to the initial IRS contact, the IRS determines that an employer is liable for a payment, the IRS will send a notice and demand for payment to the employer. That notice will instruct the employer how to make the payment.
Bottom line
For 2015, and quite possibly for 2016 and future years, the
soonest an employer will hear it has an employee who received a subsidy on the
federal exchange will be when the IRS notifies the employer that the employer
is potentially liable for a shared responsibility payment for the prior year.
The employer will have an opportunity to respond to the IRS before any
assessment or notice and demand for payment is made. The “early-warning system”
of public exchanges notifying employers of employees’ APTCs in the year in
which they receive them is not yet fully operational.
In July 2015, President Obama signed into law the Trade Preferences Extension Act of 2015. Included in the bill was an important provision that affects welfare and retirement benefit plans. The Act sizably increases filing penalties for information return and statement failures under the Internal Revenue Code, effective for filings after December 31,2015. Employers now face significantly larger penalties for failing to correctly file and furnish the ACA forms 1094 and 1095 (shared responsibility reporting requirements) as well as Forms W-2 and 1099-R.
Background
Sections 6721 and 6722 of the IRC impose penalties associated with failures to file- or to file correct- information returns and statements. Section 6721 applies to the returns required to be filed with the IRS, and Section 6722 applies to statements required to be provided generally to employees.These penalty provisions apply to the ACA shared responsibility reporting Forms 1094-B, 1094-C, 1095-B, and 1095-C (Sections 6055 & 6056) failures as well as other information returns and statement failures, like those on Forms W-2 and 1099.
For ACA:
The Sections 6055 & 6056 reporting requirements are effective for medical coverage provided on or after January 1, 2015, with the first information returns to be filed with the IRS by February 29, 2016 (or March 31,2016 if filing electronically) and provided to individuals by February 1, 2016.
Increase in Penalties
The Trade Preferences Extension Act of 2015 (Act) contains several tax provisions in addition to the trade measures that were the focus of the bill. Provided as a revenue offset provision, the law significantly increases the penalty amounts under Sections 6721 and 6722. A failure includes failing to file or furnish information returns or statements by the due date, failing to provide all required information, as well as failing to provide correct information.
The law increases the penalty for:
Other penalty increase also apply, including those associated with timely filing a corrected return. Penalties could also provide a one-two punch under the ACA for employers and other responsible entities. For example, under Sec 6056, applicable large employers (ALE) must file information returns to the IRS (the 1094-B and 1094-C) as well as furnish statements to employees (the 1095-B and 1095-C). So incorrect information shared on those forms could result in a double penalty- one associated with the information return to the IRS and the other associated with individual statements to employees.
Final regulations on the ACA reporting requirements provide short-term relief from these penalties. For reports files in 2016 (for 2015 calendar year info), the IRS will not impose penalties on ALE members that can show they made a “good-faith effort” to comply with the information reporting requirements. Specifically, relief is provided for incorrect or incomplete info reported on the return or statement, including Social Security numbers, but not for failing to file timely.
In a 6-3 decision handed down June 25th by the U.S. Supreme Court, the IRS was authorized to issue regulations extending health insurance subsidies to coverage purchased through health insurance exchanges run by the federal government or a state (King v. Burwell, No. 14-114 ).
This means employers cannot avoid employer shared responsibility penalties under IRC section 4980H (“Code § 4980H”) with respect to an employee solely because the employee obtained subsidized exchange coverage in a state that has a health insurance exchange set up by the federal government instead of by the state. It also means that President Barack Obama’s 2010 health care reform law will not be unraveled by the Supreme Court’s decision in this case. The law’s requirements applicable to employers and group health plans continue to apply without change.
What Was the Case About?
IRC section 36B (“Code § 36B”), created by the Patient Protection and Affordable Care Act of 2010 (“ACA”), provides that an individual who buys health insurance “through an Exchange established by the State under section 1311 of the Patient Protection and Affordable Care Act” (emphasis added) generally is entitled to subsidies unless the individual’s income is too high. Thus, the words of the statute conditioned one’s right to an exchange subsidy on one’s purchase of ACA coverage in a state run exchange.
Since 2014, an individual who fails to maintain health insurance for any month generally is subject to a tax penalty unless the individual can show that no affordable coverage was available. The law defines affordability for this purpose in such a way that, without a subsidy, health insurance would be unaffordable for most people.
The plaintiffs in King, residents of one of the 34 states that did not establish a state run health insurance exchange argued that if subsidies were not available to them, no health insurance coverage would be affordable for them and they would not be required to pay a penalty for failing to maintain health insurance. The IRS, however, made subsidized federal exchange coverage available to them similar to coverage in a state run exchange.
It is ACA § 1311 that established the funding and other incentives for “the States” to each establish a state-run exchange through which residents of the state could buy health insurance. Section 1311 also provides that the Secretary of the Treasury will appropriate funds to “make available to each State” and that the “State shall use amounts awarded for activities (including planning activities) related to establishing an American Health Benefit Exchange.” Section 1311 describes an “American Health Benefit Exchange” as follows:
Each State shall, not later than January 1, 2014, establish an American Health Benefit Exchange (referred to in this title as an “Exchange”) for the State that (A) facilitates the purchase of qualified health plans; (B) provides for the establishment of a Small Business Health Options Program and © meets [specific requirements enumerated].
An entirely separate section of the ACA provides for the establishment of a federally-run exchange for individuals to buy health insurance if they reside in a state that does not establish a 1311 exchange. That section – ACA § 1321 – withholds funding from a state that has failed to establish a 1311 exchange.
Notwithstanding the statutory language Congress used in the ACA (i.e., literally conditioning an individual’s eligibility subsidized exchange coverage on the purchase of health insurance through a state’s 1311 exchange), the Supreme Court determined that the language is ambiguous. Having found that the text is ambiguous, the Court stated that it must determine what Congress really meant by considering the language in context and with a view to the placement of the words in the overall statutory scheme.
When viewed in this context, the Court concluded that the plain language could not be what Congress actually meant, as such interpretation would destabilize the individual insurance market in those states with a federal exchange and likely create the “death spirals” the ACA was designed to avoid. The Court reasoned that Congress could not have intended to delegate to the IRS the authority to determine whether subsidies would be available only on state run exchanges because the issue is of such deep economic and political significance. The Court further noted that “had Congress wished to assign that question to an agency, it surely would have done so expressly” and “[i]t is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort.”
What Now?
Regardless of whether one agrees with the Supreme Court’s King decision, the decision prevents any practical purpose for further discussion about whether the IRS had authority to extend taxpayer subsidies to individuals who buy health insurance coverage on federal exchanges.
The ACA’s next major compliance requirements for employers: Employers with fifty or more fulltime and fulltime equivalent employees need to ensure that they are tracking hours of service and are otherwise prepared to meet the large employer reporting requirements for 2015 (due in early 2016) ). Employers of any size that sponsor self-funded group health plans need to ensure that they are prepared to meet the health plan reporting requirements for 2015 (also due in early 2016). All employers that sponsor group health plans also should be considering whether and to what extent the so-called Cadillac tax could apply beginning in 2018.
According to recent news reports, nearly half of the 17 Exchanges run by states and the District of Columbia under the Affordable Care Act (ACA) are struggling financially:
Many of the online exchanges are wrestling with surging costs, especially for balky technology and expensive customer call centers — and tepid enrollment numbers. To ease the fiscal distress, officials are considering raising fees on insurers, sharing costs with other states and pressing state lawmakers for cash infusions. Some are weighing turning over part or all of their troubled marketplaces to the federal exchange, HealthCare.gov, which now works smoothly.
Of course, many states can’t solve their financial troubles easily. As independent entities, their income depends on fees imposed on insurers, which is then often passed on to the consumer signing up for health care. However, those fees are entirely contingent on how many people enroll in that particular Exchange; low enrollment invariably means higher costs.
Low enrollment is where the trouble thickens. The recently completed open enrollment period only rose 12 percent to 2.8 million sign-ups for state Exchanges, according to The Washington Post. Comparatively, the federal Exchange saw an increase of 61 percent to 8.8 million people.
According to the Post, state Exchanges have operating budgets between “$28 million and $32 million”. Most of the money tends to go to call centers, “Enrollment can be a lengthy process — and in several states, contractors are paid by the minute. An even bigger cost involves IT work to correct defective software that might, for example, make mistakes in calculating subsidies.”
However, The Fiscal Times contends that, “Some states may be misusing Obamacare grants in order to keep their state insurance exchanges operating—potentially flouting a provision in the law requiring them to cover the costs of the exchanges themselves starting this year.”
In fact, the ACA provided about $4.8 billion in grants to help states build and promote their Exchanges. As the article explains, before this year, states could use the grant money on overhead costs. However, a new provision that went into effect in January 2015 says that states can’t use the grants on maintenance and staffing costs; grant money must be spent on design, development and implementation costs.
The Fiscal Times spotlights California as a prime example of why state Exchanges are in troubled waters:
One of the worst examples comes from California, where the state’s exchange has been touted the most successful in the country for enrolling thousands of people. Covered California has already used up about $1.1 billion in federal funding to get its exchange up and running and is now expected to run a nearly $80 million deficit by the end of the year, according to the Orange County Register. The state has already set aside about $200 million to cover that, but the long-term sustainability of the program is very much in question.
In addition, state Exchanges like Hawaii might have to switch to the federal Exchange, Healthcare.gov, because of on-going financial solvency issues. “This is a contingency that is being imposed on any state-based exchange that doesn’t have a funded sustainability plan in play,” said Jeff Kissel, CEO of the Hawaii Health Connector.
According to the Post, states with the lowest enrollment are facing the biggest financial problems:
Turning operations over to the federal Exchange seems to be a popular alternative, but it doesn’t come without a cost: $10 million per Exchange, to be exact.
Although there are many options for state Exchanges to consider, it is likely that they will hold off on any final decisions until after the Supreme Court decides King v. Burwell. In this case, the Chief Justices will make a ruling in June that could either send a lifeline to ACA or remove a fundamental pillar of the law by under-cutting its ability to extend health insurance coverage to millions of Americans through its subsidy program.
The appellants in the King v. Burwell case say that IRS rule conflicts with the statutory language set forth in the ACA, which limits subsidy payments to individuals or families that enroll in the state-based Exchanges only. If the Court relies on a literal interpretation of the ACA’s language, millions of Americans who live in more than half of the states where the federal Exchange operates will not receive subsidies, thus undoing a fundamental pillar of the law. (Read more about the court case here.)
On November 7th, 2014, the U.S. Supreme Court agreed to hear King v. Burwell. The case will argue whether or not subsidies in the marketplace should be limited to states with state-run Exchanges. According to the New York Times, “If the challengers are right, millions of people receiving subsidies (through the federal Exchange) would become ineligible for them, destabilizing and perhaps dooming the law.” Arguments are due to begin in December, and a ruling will be issue by next June.
The key question in the case deals with the conflicting IRS ruling stating that “subsidies are allowed whether the exchange is run by a state or by the federal government.” Those challenging the law in this case say that this rule conflicts with the statutory language set forth in the Affordable Care Act (ACA).
Two lower courts, the U.S. Court of Appeals for the District of Columbia in Halbig v. Burwell and the U.S. Court of Appeals for the Fourth Circuit in King v. Burwell, have already issued conflicting opinions regarding the IRS’ authority to administer subsidies in federally facilitated Exchanges. In addition, two other cases are being litigated in the lower courts on the same issue. In Pruitt v. Burwell, a district court in Oklahoma ruled against the IRS in September, and a decision in a fourth court case, Indiana v. IRS, is expected shortly. Of course, the Supreme Court ruling could render the lower court decisions moot.
The Department of Labor has just published a series of FAQs regarding premium reimbursement arrangements. Specifically, the FAQs address the following arrangements:
Situation #1: An arrangement in which an employer offers an employee cash to reimburse the purchase of an individual market policy.
When an employer provides cash reimbursement to the employee to purchase an individual medical policy, the DOL takes the position that the employer’s payment arrangement is part of a plan, fund, or other arrangement established or maintained for the purpose of providing medical care to employees, regardless of whether the employer treats the money as pre or post tax to the employee. Therefore, the arrangement is considered a group health plan that is subject to the market reform provisions of the Affordable Care Act applicable to group health plans and because it does not comply (and cannot comply) with such provisions, it may be subject to penalties.
Situation #2: An arrangement in which an employer offers employees with high cost claims a choice between enrollment in its group health plan or cash.
The DOL takes the position that offering a choice between enrolling in the group health plan or cash only to employees with a high claims risk would be discriminatory based on one or more health factors. The DOL states that such arrangements will violate such nondiscrimination provisions regardless of whether (1) the cash payment is treated by the employer as pre-tax or post-tax to the employee, (2) the employer is involved in the selection or purchase of any individual medical policy, or (3) the employee obtains any individual health insurance. The DOL also notes that such an arrangement, depending on facts and circumstances, could result in discrimination under an employer’s cafeteria plan.
Situation #3: An arrangement where an employer cancels its group policy, sets up a reimbursement plan (like an HRA) that works with health insurance brokers or agents to help employees select individual insurance policies, and allows eligible employees to access the premium tax credits for Marketplace coverage.
The DOL takes the position that such an arrangement is a considered a group health plan and, therefore, employees participating in such arrangement are ineligible for premium tax credits (or cost-sharing reductions) for Marketplace coverage. The DOL also takes the position that such arrangements are subject to the market reform provisions of the ACA and cannot be integrated with individual market policies to satisfy the market reforms. Thus, such arrangements can trigger penalties.
Key Takeaway
There has been quite a bit of banter regarding whether any of the foregoing arrangements could be an effective way for employers to avoid complying with the market reforms and other provisions of the Affordable Care Act applicable to group health plans. These FAQs are a strong indication that the DOL will be forceful in its interpretation and enforcement of these provisions.
On November 4, 2014, the IRS released Notice 2014-69 which outlines that health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services (or both) referred to as Non-Hospital/Non-Physician Services Plan) are now not considered as providing the minimum value coverage as intended by the minimum value plan requirements for the employer mandate under ACA.
For employers who have already entered into a binding written commitment to adopt, or have begun enrolling employees in, a Non-Hospital/Non-Physician Services Plan prior to November 4, 2014, they will not be penalized for not meeting the employer mandate for the 2015 plan year if that plan year begins no later than March 1, 2015. This is based on the employer’s reliance on the results of the Minimum Value Calculator (a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) as outlined in previous guidance.
For employers who have not entered in to a written commitment to adopt, have not begun enrolling employees in a Non-Hospital/Non-Physician Services Plan on or after November 4, 2014, or have a plan year that begins after March 1,2015, no relief will be given under the employer mandate.
Pending final regulations, employees will not be required to treat a Non-Hospital/Non-Physician Services Plan as providing minimum value coverage for purposes of determining their eligibility for a premium tax credit “aka premium subsidy” in the Marketplace.
An employer that offers a Non-Hospital/Non-Physician Services Plan (including a Pre-November 4, 2014 Non-Hospital/Non-Physician Services Plan) to an employee:
(1) must not state or imply in any disclosure that the offer of coverage under the Non-Hospital/Non-Physician Services Plan prevents an employee from obtaining a premium tax credit, if otherwise eligible, and
(2) must timely correct any prior disclosures that stated or implied that the offer of the Non-Hospital/Non-Physician Services Plan would prevent an otherwise tax-credit-eligible employee from obtaining a premium tax credit.
Without such a corrective disclosure, a statement a Non-Hospital/Non-Physician Services Plan provides minimum value will be considered to imply that the offer of such a plan prevents employees from obtaining a premium tax credit/subsidy. However, an employer that also offers an employee another plan that is not a Non-Hospital/Non/-Physician Services Plan and that is affordable and provides minimum value is permitted to advise the employee that the offer of this other plan will or may preclude the employee from obtaining a premium tax credit.
With Congress in its summer recess, now is a good time to reflect on the top ACA issues worth monitoring as 2015 quickly approaches. Here are a handful of key issues to watch:
Dueling Court Cases on Federal Subsidies
One issue grabbing national headlines is the dueling decisions coming out of the U.S. Court of Appeals for the District of Columbia (Halbig v. Burwell) and the U.S. Court of Appeals for the Fourth Circuit (King v. Burwell) on missing language in the ACA that would have authorized the federal government to provide premium subsidies to individuals who sign up for health plans through the federal Exchanges. The legal issue in these court cases is whether the ACA premium tax credit (aka subsidy) is available to those individuals who enroll in qualified health plans (QHP) through state operated Exchanges or if it is available only to those to enroll in a QHP through a federally funded Exchange.
A primary concern is that a significant number of people in about two-thirds of the states (who did not set up a state-run Exchange) rely on the subsidy to purchase a plan in the federal Exchange. Specifically, the ACA’s employer mandate penalty of $3000 is based upon an employer having an employee seek coverage through an Exchange and receive the federal premium subsidy. In general, the employer mandate requires that “applicable large employers” offer their full-time employees minimum essential coverage or potentially pay a tax penalty. However, according to the statutory text of the ACA, the penalties under the employer mandate are triggered only if an employee receives a subsidy to purchase coverage through an Exchange established by the states. Both cases are being appealed to higher courts and will likely be consolidated into one case to be heard by the U.S. Supreme Court in the not so distant future.
In an interesting development, a video surfaced last week featuring one of the ACA’s chief architects (John Gruber) saying that health insurance subsidies should only be available in those states who opt to build and implement state-based Exchanges to gain participation. The idea was to create an incentive to have states actively involved in the hosting of an Exchange, rather than relying on the federal government to operate the Exchanges in each state. Whether this video will be used as evidence to uphold the argument that subsidies can only be offered by state-based Exchanges remains to be seen.
Lack of Back End Software for Federal Exchange
Of course, one of the big news stories in 2013 and early 2014 was the substandard launch of the federal Exchange, which led to many Americans having to wait to be enrolled in an ACA-compliant health plan. Although some technical snafus have been addressed, there are many that still remain. For example, a top White House official recently told Congress that the automated system that is supposed to send premium payments to insurance companies is still under development, and they did not have a completion date for it yet. The lack of an electronic verification process is only one part of the “backend” software that is still problematic five years after PPACA was passed.
Future of Navigators in Comparison with the Value of Brokers
Several recent studies have touted the benefits of using third parties, such as Brokers, to help consumers find coverage under the ACA. Some of these studies have focused on the usefulness of using Brokers/Agents over the benefits of using Navigators. A recent Urban Institute study found that health insurance Brokers were the most helpful in providing health insurance Exchange information when compared to other types of resources, including Navigators and website content. However, there are other published studies showcasing how Navigators have been useful to consumers. That being said, Brokers have assumed an integral role supporting millions of Americans in securing and maintaining coverage for many decades, and continue to be knowledgeable resources, as they are licensed in the states they operate in, whereas Navigators are not required to meet the same licensing standards as Brokers/Agents. It will be interesting to see what the future holds for Navigators, who are not as experienced and who are, in the end, dependent upon federal grants to provide their services.
Provider Access Issues & Emergency Room Over-Usage
A number of public policymakers have raised concerns recently about the fact that there are shortages of key physicians and other providers and as a result is causing a increase in non-emergent patient visits to expensive ER departments. A recent story in the New York Times highlighted similar concerns, saying the ACA cannot change the fact that visiting an emergency room may be easier than seeing a primary care physician in some instances or locations. Other stories and studies highlight how the ACA and health care reform initiatives can affect access to providers in many different ways, such as changing reimbursement levels, improving the availability of certain types of specialists, or re-educating the patient to move from visiting the ER department to either making an appointment ahead-of-time or visiting a less expensive Urgent Care center for care.
Premium Rate Increases
Another critical issue to monitor are premium increases that might be occurring in spite of the initial promises that the ACA would lower health care costs. Health plans have begun publishing proposed rates for 2015, resulting in a recent flurry of news articles and reports addressing the impact of the ACA on insurance premiums.
The Wall Street Journal published a front page report discussing the ACA’s impact on premium increases earlier this summer, saying, “Hundreds of thousands of consumers nationwide, who bought insurance plans under the Affordable Care Act, will face a choice this fall: swallow higher premiums to stay in their plans or save money by switching.”
The Journal goes on to say that a new picture is emerging in 10 states where 2015 premium insurance rates for individual plans have been filed, “In all but one (state), the largest health insurer is proposing to increase premiums between 8.5% to 22.8% next year.” Ironically, smaller health plans are reducing their 2015 rates in the same market in an attempt to gain market share.
The significance of this trend is underscored in a statement released earlier this summer by Karen Ignagni, president & CEO of America’s Health Insurance Plans (AHIP), in which she expressed concerns about keeping health insurance affordable for patients. “Affordability remains a top priority for consumers when it comes to their health care,” she said.
Bonus: Be Sure To Watch The Political Races
With the ACA’s continued challenges, the ups and downs of the U.S. economy, key world events in the Middle East, and other confounding variables, one has to wonder what will happen during the mid-year elections this fall. As reported by CNN and other news outlets, the ACA became an key issue in Obama’s 2012 re-election victory as well as Democrats picking up seats in the Senate and House in that election.
As November 3, 2015 approaches, many different messages could be sent back to the White House and Congress. If Republicans take over the Senate and retain control of the House, how will this impact the ACA over the next several years? If the congressional houses remain split, we may have less going on by either political party. How will the state-level elections impact the ACA and state-run Exchanges? Only time will tell.
