The New York Times: Federal Rule Limits Aid to Families Who Can’t Afford Employers’ Health Coverage

January 30, 2013

WASHINGTON — The Obama administration adopted a strict definition of affordable health insurance on Wednesday that will deny federal financial assistance to millions of Americans with modest incomes who cannot afford family coverage offered by employers.

In deciding whether an employer’s health plan is affordable, the Internal Revenue Service said it would look at the cost of coverage only for an individual employee, not for a family. Family coverage might be prohibitively expensive, but federal subsidies would not be available to help buy insurance for children in the family.

The policy decision came in a final regulation interpreting ambiguous language in the 2010 health care law.

Under the law, most Americans will be required to have health insurance starting next year. Low- and middle-income people can get tax credits to help them pay premiums, unless they have access to affordable coverage from an employer.

The law specifies that employer-sponsored insurance is not affordable if a worker’s share of the premium is more than 9.5 percent of the worker’s household income. The I.R.S. said this calculation should be based solely on the cost of individual coverage, what the worker would pay for “self-only coverage.”

“This is bad news for kids,” said Jocelyn A. Guyer, an executive director of the Center for Children and Families at Georgetown University. “We can see kids falling through the cracks. They will lack access to affordable employer-based family coverage and still be locked out of tax credits to help them buy coverage for their kids in the marketplaces, or exchanges, being established in every state.”

In 2012, according to an annual survey by the Kaiser Family Foundation, total premiums for employer-sponsored health insurance averaged $5,615 a year for single coverage and $15,745 for family coverage. The employee’s share of the premium averaged $951 for individual coverage and more than four times as much, $4,316, for family coverage.

Under the I.R.S. rule, such costs would be considered affordable for a family making $35,000 a year, even though the family would have to spend 12 percent of its income for full coverage under the employer’s plan.

The tax agency proposed this approach in August 2011 and made no change in the definition of “affordable coverage” despite protests from advocates for children and low-income people and many employers. Employers did not want to be required to pay for coverage of employees’ dependents. But they said that family members should have access to subsidies so they could buy insurance on their own.

However, that would have increased costs to the government, which would have been required to spend more on subsidies.

Paul W. Dennett, senior vice president of the American Benefits Council, which represents many Fortune 500 companies, said: “Individuals who do not have affordable family coverage should be eligible for premium tax credits in the exchange. The final rule does not provide that.”

Under the law, people who go without insurance will generally be subject to tax penalties. In a separate proposed regulation issued on Wednesday, the Internal Revenue Service said that the uninsured children and spouse of an employee would be exempt from the penalties if the cost of coverage for the entire family under an employer’s plan was more than 8 percent of household income.

Bruce Lesley, the president of First Focus, a child advocacy group, said: “The administration recognizes that the cost of family coverage will be unaffordable for many families. They will not have to pay the penalty. But that will not be much of a consolation to families who cannot get health insurance for their kids.”

The 2010 health care law extended Medicaid to many childless adults and others who were previously ineligible. The Supreme Court said the expansion of Medicaid was an option for states, not a requirement as Congress had intended.

Kathleen Sebelius, the secretary of health and human services, said Wednesday that she wanted to use her discretion to prevent the imposition of tax penalties on certain uninsured low-income people in states that choose not to expand Medicaid.

A rule proposed by her department would guarantee an exemption from the penalties for anyone found ineligible for Medicaid solely because of a state’s decision not to expand the program. The administration said this was “an appropriate use of the hardship exemption.”

About 20 states are expected to expand Medicaid; governors in other states are opposed or uncommitted. Many illegal immigrants, prisoners and members of certain religious groups opposed to the acceptance of insurance benefits will also be exempt from penalties if they forgo coverage, the administration said.

The Congressional Budget Office predicts that 30 million people will be uninsured in 2016 and that 6 million of them will pay penalties.

Kaiser Health News: A Guide To Health Insurance Exchanges

KHN Staff Writer
JAN 10, 2013

It seems like a simple idea: create new marketplaces, called exchanges, where consumers can comparison shop for health insurance, sort of like shopping online for a hotel room or airline ticket.

But, like almost everything else connected with the health law, state-based insurance exchanges are embroiled in politics. Some Republican governors have refused to set up any exchanges. Arizona Gov. Jan Brewer and New Jersey Gov. Chris Christie, both Republicans, say that the law gives states “little actual authority” over the exchanges even if they run them and they lack information about the alternatives.

If done well, proponents say, exchanges could make it easier to buy health insurance and possibly lead to lower prices because of increased competition. But, if designed poorly, experts warn, healthy people could avoid the exchanges, leaving them to sicker people with rising premiums.

Here are some answers to common questions about exchanges:

What is an exchange, as envisioned by the health law?
It’s a marketplace where individuals and small employers will be able to shop for insurance coverage. They must be set up by Oct. 1 of this year for policies that will go into effect on Jan. 1, 2014. The exchanges will also direct people to Medicaid, the government health insurance program for the poor, if they’re eligible.

Will all states have exchanges?
Yes. States have the option of setting up their own exchanges, partnering with the federal government to run an exchange, or opting out. In that case, the federal government will run the exchanges for their residents.

The Obama administration has approved applications for state-run exchanges in 17 states and the District of Columbia. The application deadline was Dec. 14. Those states are California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Massachusetts, Maryland, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington.

States that did not apply to set up their own exchange have until Feb. 15 to apply for a partnership with the federal government to run a local exchange. Two states, Arkansas and Delaware, have already been approved for a state-federal partnership. An application by Mississippi to start its own exchange is also pending.

Will anyone be allowed to buy from the exchanges?
No. Initially, exchanges will be open to individuals buying their own coverage and employees of firms with 100 or fewer workers (50 or fewer in some states). Most Americans will continue to get insurance through their jobs, not via the exchanges. Most will be people who are eligible for subsidies, which will average an estimated $4,600 per person in 2014. Undocumented immigrants will be barred from buying insurance on the exchanges.

Will exchanges be like travel websites or some existing health insurance sites?
In some ways, but they will be more complex. People will be able to compare policies sold by different companies. Purchasing insurance can be confusing, so information on the plan benefits will be standardized in an effort to make it easier to compare cost and quality. Plans will be divided into four different types, based on the level of benefits: bronze, silver, gold and platinum. The exchanges are also required to operate toll-free hotlines to help consumers choose a plan, determine eligibility for federal subsidies or Medicaid, rate plans based on quality and price and conduct outreach and education.

What will the coverage sold on the exchanges look like?
Plans will have to offer a set of “essential benefits.” Those details, still being developed by the Obama administration and states, will include hospital, emergency, maternity, pediatric, drug, lab services and other care. Annual cost-sharing, or the amount consumers must fork over before insurance payments kick in, will be capped at the amounts allowed for health savings accounts — currently, nearly $6,000 for individual policies and $12,000 for family plans.

How much will the policies cost?
The premiums will vary by type of plan and location. Insurers won’t be able to charge more based on gender or health status. They will be able to charge older people up to three times more than younger ones.

What if I can’t afford the premiums?
The health law expands Medicaid to all people who earn less than 138 percent of the federal poverty level, $14,856 in 2012. However, the Supreme Court ruled in June 2012 that states have the ability to opt out of that Medicaid expansion, and it is not yet clear how many states will do that. Above the 138 percent level, sliding scale subsidies for private insurance on the exchanges will be available for residents who earn up to 400 percent of the poverty level, about $44,680. Most people will be required to have coverage of some sort beginning in 2014.

Will all insurers have to offer policies through the exchange?
No. Insurers won’t be required to sell through the exchanges.

Will all state exchanges be the same?
No. States can design their exchanges differently, an issue that’s sparking debate nationwide. Another important issue: The makeup and power of the governing boards overseeing the exchanges.

What will be the difference to consumers between a state and federal exchange?
In broad details, they should work the same way. Consumers shopping in either type of exchange will choose among insurer offerings that are standardized into four coverage levels: bronze, silver, gold and platinum. There will also be a young adults’ plan. Rules on how much insurers can vary premiums based on age or geography are set in the federal law, although states could adopt rules making them stricter.

Differences between federal and state exchanges are likely to be subtle, but important to some consumers.

States that establish their own exchanges, for example, can decide which insurers participate and whether to require benefits beyond those set under federal law. They can accept all insurers whose policies meet the law’s requirements, for instance, or limit participation by requiring that insurers meet specific quality or pricing guidelines.

California, for example, has chosen to limit the number of insurers, which they say allows them to choose the highest value plans, while Colorado’s model will accept all plans that meet the requirements. The federal exchanges will accept all qualifying plans.

States that build their own exchanges can also decide whether to be more proactive in selecting insurers that offer benefits targeted to a state’s particular needs. For example, a state with a high rate of diabetes might select insurers with special programs to combat diabetes.

Some exchanges and state insurance commissioners will be able to recommend whether specific insurers should be allowed to sell in the exchange, partly based on their patterns of rate increases.

What about federal workers?
Members of Congress and their staffs will be required to buy through exchanges if they want coverage from the federal government. Other federal employees will continue to be covered by the Federal Employees Health Benefits Plan (FEHBP).

This is an update of a story originally published on March 30, 2011.

Los Angeles Times: More states cleared to operate health insurance exchanges,0,4957751.story

The Obama administration has given conditional approval to D.C. and 17 states, including California, to run exchanges where consumers can shop for coverage.

By Noam N. Levey, Washington Bureau
January 4, 2013

WASHINGTON — The Obama administration has cleared what could be the final group of states to open their own health insurance exchanges this fall, advancing a key goal of the 2010 healthcare law to provide Americans with new options to shop for coverage.

The conditional approvals announced for California, Hawaii, Idaho, Nevada, New Mexico, Vermont and Utah mean 17 states and the District of Columbia are on track to operate their own insurance exchanges this year.

Exchanges in the remaining states will be run by the federal government or by state-federal partnerships.

“It’s encouraging to see so many states moving forward,” Secretary of Health and Human Services Kathleen Sebelius said. “Finding the right health plan is going to be less costly and less complicated than ever before.”

Administration officials and many healthcare experts hoped each state would operate an exchange, a cornerstone of the Affordable Care Act designed to allow consumers who don’t get health benefits at work to comparison shop for health plans, much as they now buy airplane tickets.

Health plans in these exchanges will have to meet new minimum standards and guarantee coverage, even to those with preexisting medical conditions. Consumers who make less than four times the federal poverty level will be eligible for new government subsidies to offset their premiums.

Most states led by Democratic governors chose to set up an exchange. Colorado, Connecticut, Kentucky, Massachusetts, Maryland, Minnesota, New York, Oregon, Rhode Island, Washington, and the District of Columbia had already received preliminary clearance from the administration.

Delaware and Arkansas, which have Democratic governors, have received conditional approval to run a partnership exchange. Several other states, including Illinois, Iowa and North Carolina, have expressed interest in such an arrangement.

But most Republican state leaders, many of whom have vigorously fought implementation of the 2010 law, balked at setting up an insurance marketplace, with many complaining that it would saddle states with additional costs. States that defer to the federal government can reconsider in the future.

For now, only four GOP-led states — Idaho, Nevada, New Mexico and Utah — are moving ahead with their own exchanges.

Many healthcare experts have been closely watching Utah, which has been operating a limited exchange for small businesses for years.

Obama administration officials indicated that the state would have to considerably expand services to comply with the law, including adding resources to help consumers shop for health plans and developing a system to fund the exchange. If Utah does not meet these conditions, the administration could step in and run the state’s exchange.

The administration also is in discussions with state officials in Mississippi, who earlier indicated they wanted to run their own exchange.

Gary Cohen, who oversees the Obama administration’s exchange effort, said it was now unclear whether the state would move forward because of a dispute between the state’s Republican governor, who does not want to run an exchange, and the state’s Republican insurance commissioner, who does.

Cohen did not say when a final decision would be made on whether Mississippi would run its own marketplace.