IRS Proposes Clarifications to Benchmark Calculations and Premium Tax Credit Eligibility

The IRS issued a notice of proposed rulemaking (NPRM) that would provide technical clarifications across a range of issues affecting individuals’ eligibility for and amount of ACA premium tax credits, including how benchmark plan premiums are calculated. Notably, the regulations would ensure that benchmark plan premiums, which help determine the amount of premium tax credit for which an individual is eligible, include the cost of pediatric dental benefits, which currently are sometimes not included in the benchmark plan. This would effectively increase the amount of premium tax credit for which an impacted consumer may be eligible. The proposed rules would also provide additional leeway for individuals transitioning from Marketplace coverage with tax credits to Medicaid or CHIP. If a Marketplace is delayed in terminating tax credits leading to an extra month of dual enrollment, enrollees would not owe back the tax credits for that month. The rule also addresses how to calculate the affordability of employer-sponsored insurance and how to conduct the reconciliation of advance premium tax credits in some special cases. If finalized, much of the rule would be effective for the 2017 tax year, though changes to benchmark plan premium calculations would generally take effect in the 2019 tax year and certain provisions that expand eligibility for premium tax credits would apply retroactively to the 2014 tax year.

Subsidies Make Marketplace Premiums Comparable to Employer-Sponsored Insurance

The availability of premium tax credits has made premium costs for Marketplace enrollees with low- and moderate-incomes comparable to premiums paid by individuals with employer-sponsored insurance (ESI), according to the results of a survey conducted by The Commonwealth Fund. The survey found that 66% of Marketplace enrollees earning below 250% of FPL spend less than $125 per month on premiums, compared to 60% of ESI enrollees. Lower-income enrollees in Marketplace and ESI coverage were similarly less likely to report having deductibles greater than $1,000. However, at higher incomes, Marketplace enrollees were significantly more likely than ESI enrollees to report having a high-deductible plan (68% versus 42%). The survey also found that 75% of ESI enrollees said it was somewhat easy or very easy to afford their premiums, compared to 49% of Marketplace enrollees.

Missouri: State to Begin Reviewing Health Plans’ Rates

Governor Jay Nixon (D) signed SB 865 into law authorizing the State Department of Insurance (DOI) to conduct rate reviews of health plans, offered both on and off the Marketplace, beginning in 2018. While the DOI may determine that a rate is “unreasonable” and make that determination public, health plans will be permitted to implement these rates. Texas, Wyoming, and Oklahoma are the three remaining states without State rate review authority; Alabamaestablished rate review authority earlier this year.

Oregon: CO-OP Announces Closure, 23,000 Policyholders Impacted

Oregon's Health CO-OP announced it will close due to financial difficulties, impacting 23,000 policyholders on Oregon's individual and small group markets. The CO-OP is working with the State to allow individual plan policyholders to keep their coverage and deductibles through the end of December 2016; all group plans will expire on July 31, 2016, requiring businesses to find new plans that take effect August 1, 2016. The State cited contributors to the CO-OP’s financial instability, including a federally mandated $900,000 risk adjustment program payment and an $18.4 million financial loss on the individual market in 2015.

Oregon: Department of Insurance Approves 2017 Rates

The Division of Financial Regulation has approved rate changes for 2017 plans that range from a 9.8% to 32% increase in the individual market and from an 8.9% reduction to a 17% increase in the group market. The average monthly premium for a 40-year-old consumer living in Portland enrolled in a standard silver plan will be between $312 and $442 on the individual market and between $255 and $362 on the small group market.

Washington: Auditor’s Report Recommends Steps to Ensure Exchange’s Sustainability

A State audit reviewing the costs and sustainability of the Washington Health Benefit Exchange found that the Exchange must establish a capital reserve and long-term financial plan and correct past and future reimbursement errors to ensure continued successful operations. According to the audit, the reimbursement agreement between the Exchange and Medicaid did not fully account for all operating costs associated with services provided to Medicaid enrollees, leading to an $89.2 million shortfall in Medicaid reimbursements between January 1, 2014 and June 30, 2016. The audit also deems the Exchange’s operating costs as reasonable and estimates that the Exchange’s decision to stop billing and collecting individual insurance premiums will save $9.1 million in bank fees, wages and call center costs through 2017. The report notes that the Exchange could save between $750,000 and $1.3 million annually by partnering with Covered California (California’s State-based Marketplace) on a shared call center vendor. The audit is a result of 2013 State legislation requiring the State auditor to review the Exchange’s operational costs.