On Jan. 24, 2019, the Department of Health and Human Services (HHS) published its proposed Notice of Benefit and Payment Parameters for 2020. This proposed rule describes benefit and payment parameters under the Affordable Care Act (ACA) that would be applicable for the 2020 benefit year. Proposed standards included in the rule relate to:
Annual limitations on cost-sharing;
The individual mandate’s affordability exemption;
Direct enrollment in the Exchanges; and
Special enrollment periods in the Exchanges.
The proposed rule is also seeking comments on issues to address in the future, such as the practice of “silver loading,” where insurers increase premiums in silver-level Exchange plans to compensate for the loss of federal cost-sharing reduction reimbursements.
Comments are also requested on the automatic re-enrollment process through the Exchanges and any additional measures that would reduce eligibility errors and potential government misspending. Comments must be submitted by Feb. 19, 2019.
Annual Limitations on Cost-Sharing
The ACA requires non-grandfathered plans to comply with an overall annual limit—or an out-of-pocket maximum—on EHB. The ACA requires the out-of-pocket maximum to be updated annually based on the percent increase in average premiums per person for health insurance coverage.
2017: $7,150 for self-only coverage & $14,300 for family coverage
2018: $7,350 for self-only coverage & $14,700 for family coverage
2019: $7,900 for self-only coverage & $15,800 for family coverage
2020: $8,200 for self-only coverage & $16,400 for family coverage
Under the proposed rule, the required contribution percentage used to determine eligibility for an exemption from the individual mandate would increase to 8.39 percent in 2020.
Individual Mandate's Affordability Exemption
Under the ACA, individuals who lack access to affordable minimum essential coverage (MEC) are exempt from the individual mandate penalty. For purposes of this exemption, coverage is considered affordable for an employee if the required contribution for the lowest-cost, self-only coverage does not exceed 8 percent of household income, adjusted annually, as follows:
2017: the required contribution was 8.16% of household income
2018: the required contribution decreased to 8.05% of household income
2019: the required contribution increased to 8.3% of household income
2020: the required contribution should increase to 8.39% of household income
The 2018 tax reform bill, called the Tax Cuts and Jobs Act, reduced the ACA’s individual mandate penalty to zero, effective beginning in 2019. As a result, beginning in 2019, individuals will no longer be penalized for failing to obtain acceptable health insurance coverage. However, despite this repeal, the proposed rule notes that individuals may still need to seek this exemption for 2019 and future years.
Direct Enrollment in the Exchanges
In an effort to provide greater flexibility in how consumers shop for health insurance coverage, the 2020 proposed rule would enhance direct enrollment through the Exchanges. Specifically, the proposed rule would expand opportunities for individuals to directly enroll in Exchange coverage by enrolling through the websites of certain third parties—called direct enrollment entities—rather than through HealthCare.gov. The proposed rule would implement several changes intended to streamline the regulatory requirements applicable to these direct enrollment entities.
Direct enrollment is a mechanism for issuers and web brokers to enroll applicants in Exchange coverage through a non-Exchange website in a manner that would be considered to be through the Exchange. Initially implemented for the 2019 plan year, the proposed rule would enhance the direct enrollment pathway to allow approved direct enrollment partners to host the Exchange eligibility application and enrollment service for Exchange applicants on their non-Exchange websites without redirecting to HealthCare.gov.
New Special Enrollment Period through the Exchanges
Under the Exchanges, certain special enrollment periods (SEPs) are available for people who lose health insurance during the year or experience other qualifying events. The 2020 proposed rule would establish a new SEP for off-Exchange enrollees who experience a decrease in household income and are determined to be eligible for the premium tax credit through the Exchange. This would allow enrollees to enroll in a more affordable Exchange plan when their household income decreases mid-year.
On Oct. 12, 2017, the White House announced that it would no longer reimburse insurers for cost-sharing reductions made available to low-income individuals through the Exchanges, effective immediately. Because Congress did not pass an appropriation for this expense, the Trump administration has taken the position that it cannot lawfully make the cost-sharing reduction payments.
In response to this, many issuers increased premiums in 2018 and 2019 only on silver level qualified health plans (QHPs) to compensate for the cost of those cost-sharing reduction payments—a practice sometimes referred to as “silver loading” or “actuarial loading.” Because premium tax credits are generally calculated based on the second-lowest-cost silver plan offered through the Exchange, “silver loading” has led to consumers receiving higher premium tax credits.
Because there has been no Congressional appropriation for the cost-sharing reduction reimbursements, the proposed rule requests comments on ways to address the practice of “silver loading” for future plan years. Any future guidance addressing this issue will not take effect prior to the 2021 plan year. Comments must be submitted by Feb. 19, 2019.
This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.