Federal government issues updated guidance on employee health benefit exchange marketplace notice requirement

In January, the U.S. Department of Labor (DOL) issued guidance delaying when employers must notify employees about their state’s health benefit exchange marketplace and advance premium tax credits available through exchanges to help employees purchase individual coverage. The notice requirement, codified at Section 218b of the federal Fair Labor Standards Act of 1938, was to have been effective March 1, 2013, but DOL had not timely issued regulations making specific the notice requirements.

DOL issued updated guidance May 8 that requires employers to provide the notice to existing employees before October 1, 2013 and to newly hired employees at the time of hiring beginning October 1, 2013.  For 2014, the DOL stated it will consider notice provided at the time of hiring if the notice is provided within 14 days of an employee’s start date.  DOL’s guidance states the notice “must be provided in writing in a manner calculated to be understood by the average employee,” and may be delivered electronically or by first-class mail.

The employee notice requirements, according to the latest guidance:

  1. Inform the employee of the existence of the Marketplace (referred to in the statute as the Exchange) including a description of the services provided by the Marketplace, and the manner in which the employee may contact the Marketplace to request assistance;
  2. If the employer plan’s share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs, that the employee may be eligible for a premium tax credit under section 36B of the Internal Revenue Code (the Code) if the employee purchases a qualified health plan through the Marketplace; and
  3. If the employee purchases a qualified health plan through the Marketplace, the employee may lose the employer contribution (if any) to any health benefits plan offered by the employer and that all or a portion of such contribution may be excludable from income for Federal income tax purposes.

To aid employers in complying with the notice requirement, DOL developed two model notices:

  • Model Notice for employers that offer a health plan to some or all employees
  • Model Notice for employers that do not offer a health plan.

“The Department is issuing this temporary guidance and model notice in advance of the expected timeframe announced in the guidance because, since the issuance of the (January) guidance, the Department has received several requests from employers for a model notice on an earlier timeframe so that they may be able to inform their employees now about the upcoming coverage options through the (Exchange) Marketplace.”

Dozen health plan issuers to participate in marketplace, Oregon health benefit exchange announces

Oregon’s health benefit exchange, Cover Oregon, announced today that 12 health insurance plan issuers have filed plans to sell on its marketplace opening this fall for 2014 pre-enrollment.  Ten are commercial carriers and two are nonprofit Consumer Operated and Oriented Plans as authorized by Section 1322 of the Patient Protection and Affordable Care Act.  Below are the carriers listed in Cover Oregon’s news release:

Individual Market Carriers in Cover Oregon

  • ATRIO Health Plans
  • BridgeSpan Health Company
  • Oregon’s Health CO-OP
  • FamilyCare Health Plans
  • Freelancer’s CO-OP
  • Health Net
  • Kaiser Permanente
  • LifeWise Health Plan of Oregon
  • MODA (ODS)
  • PacificSource Health Plans
  • Providence Health Plans
  • Trillium Community Health Plan

Small Employer Market Carriers in Cover Oregon

  • ATRIO Health Plans
  • Oregon’s Health CO-OP
  • Freelancer’s CO-OP
  • Kaiser Permanente
  • MODA (ODS)
  • PacificSource Health Plans
  • Providence Health Plans
  • Trillium Community Health Plans

California bill aimed at deterring large employers from placing low wage workers on part time status to avoid ACA coverage mandate

California employers with 500 or more workers would be required to pay the state a penalty based on the average cost of coverage provided by large employers for those employees that enroll in Medicaid (Medi-Cal in California) coverage under advancing legislation.

According to an analysis of AB 880 prepared by the Assembly Health Committee, the bill is aimed at deterring large employers with sizable numbers of low wage workers from reducing their hours to less than 30 hours per week in order to avoid the Patient Protection and Affordable Care Act requirement to offer coverage to all workers employed at least 30 hours per week. “The author states this bill is designed to ensure that the largest employers in the state do not evade their responsibilities under the ACA by cutting hours and eliminating benefits so that their employees qualify for Medi-Cal,” the analysis states.  “This shifts costs onto the public and threatens the fiscal solvency of the state.”

As AB 880 moves forward, legislation stating intent to expand California’s Medicaid eligibility under the Affordable Care Act to households earning up to 133 percent of federal poverty level has bogged down over the extent to which counties should share in the cost and the Brown administration’s concern over the long term fiscal impact of the expansion and specifically whether California will remain obligated to honor it if federal cost share funding is cut in the future. Anxiety over Medicaid remains high among the state’s budget writers.  They viewed the state’s Medicaid cost share as a budget buster during years of fiscal shortfalls following the economic downturn that began in 2008.

California measure that would deter self-insurance of medical risk by small employers advances

To insure or self-insure?  That’s the policy question underlying pending California legislation that passed its first committee test this week.  SB 161 is designed to reduce the incentive for small employers to self-insure their workforces for medical costs by making it less feasible for these employers to limit their losses once they reach a certain point.  Supporters of the bill maintain it’s needed to give the state health benefit exchange’s Small Business Health Options Program (SHOP) the opportunity to bring down insurance rates by aggregating small employers’ purchasing power into a single buying mechanism starting in 2014.  Click here for an analysis of the measure prepared by the Senate Health Committee, which passed out the bill May 2.  A similar bill stalled in 2012.

Self-insurance arose as a solution for small employers beleaguered by rising small group insurance premiums over the past decade.  But self-insuring medical risk is a high risk proposition for small employer since unlike large employers, they are unable to spread the risk of a large claim over a sizable group of employees.  That’s why it’s a no go for small employers without “stop loss” coverage to kick in when an individual employee’s or all employees as a group incur losses in a policy year exceeding a set amount.  SB 161 would bar stop loss coverage from protecting a small employer until an individual employee incurred medical bills of $65,000 or those of the entire workforce reach dollar amounts specified in the bill.

Opponents of the bill argue that the market should determine which approach works best for small employers: self-insurance or insurance.  Other issues cause consternation among supporters of the measure.  Only larger small employers are likely to consider self-insurance given the inherent risk that favors size.  That could leave the SHOP with the low end of the small group segment – employers having less than 20 to 30 employees.  This could reduce the SHOP’s market power with health plan issuers since there would potentially be fewer “covered lives” and larger employers to bring to the bargaining table.  (In California, the small group market is employers with 50 or fewer employees.)

Apparently concerned about stop loss coverage’s potential to undermine the SHOP exchange marketplace, the U.S. Department of Health and Human Services issued a proposed rule April 5, 2013 barring entities with relationships to issuers of stop loss insurance, including those who are compensated directly or indirectly by issuers of stop loss insurance, from serving as exchange navigators.

Medicaid beneficiaries likely to get coverage in some state exchange marketplaces

Medicaid beneficiaries appear increasingly likely to participate in health benefit exchanges in at least some states in 2014.  Two Medicaid-eligible populations may end up getting commercial health insurance via the exchanges:  those whose incomes fluctuate above and below Medicaid eligibility levels and those residing in states that have opted not to expand the Medicaid eligibility cutoff to 133 percent of federal poverty guidelines.  Both scenarios require waivers from the Center of Medicare and Medicaid Services (CMS).

The first group would be offered exchange products called Medicaid bridge plans authorized under guidance issued by CMS on December 10, 2012.  This is the so-called “Tennessee Plan” since that state originated the concept and is designed to ensure continuity of medical care of Medicaid beneficiaries so they don’t have to change plans and providers as their incomes rise and fall.

The second population would participate in the exchange marketplace under the so-called “Arkansas Plan” in states that have not chosen to expand Medicaid eligibility to those earning up to 133 percent of federal poverty as authorized by the Patient Protection and Affordable Care Act.

In California, legislation that would expand that state’s Medicaid eligibility has failed to advance for nearly two months amid state fiscal concerns over the long term cost share impact and to what extent counties should participate in the cost share.  Legislation authorizing Medicaid bridge plan products for those earning up to 200 percent of federal poverty, SBX1-3, has passed the Senate and awaits action in the state Assembly.

Independent study of potential benefits of direct primary care needed

The California HealthCare Foundation has published an issue brief on pre-paid primary care plans, known as direct primary care.  Direct primary care (DPC) unbundles physician office visits and some other limited services from health insurance coverage and is directly paid out of pocket by consumers, leaving insurance to cover hospitalizations and catastrophic care events.  It has the potential to lower premiums since it eliminates the administrative burden on both payers and providers to process routine care reimbursements as well as potentially avoiding higher cost care by allowing primary care providers to offer more intensive preventative care and lifestyle coaching to ward off preventable, chronic conditions.

The issue brief notes some DPC providers have pegged overall health care cost savings in the 20 to 30 percent range.  Cost reductions of that size can go a long way toward achieving the triple aim of better care at lower cost and with better outcomes and warrant independent research to more fully investigate the potential savings.  The research should also examine how DPC might favorably affect the business model of primary care medical practice and its potential to attract more physicians to the field at the same time the number of people with insurance coverage – and the concurrent need for primary care practitioners – is expected to increase starting in 2014 under the Patient Protection and Affordable Care Act.

Changes in the individual market, adverse selection to have largest impact on 2014 premiums, Milliman projects

One month after it produced a projection of factors affecting 2014 premiums in California’s individual health insurance market segment for the Golden State’s health benefits exchange, Covered California, the actuarial consulting firm Milliman has issued a similar study with a national focus.  Like its analysis of the California market, Milliman’s review examined the impact of new coverage requirements under the Patient Protection and Affordable Care Act as well as individuals opting to “buy up” to plans with richer benefits, premium and benefit subsidies and the underlying upward trend in the cost of medical treatment.  It was commissioned by America’s Health Insurance Plans.

Milliman’s national study took into account additional factors including new taxes and fees on health plan issuers and premium stabilization programs including a transitional reinsurance program to protect plans from unexpectedly high care costs.  It concludes “average individual market pre-subsidy premiums are anticipated to increase significantly from what standard rates are today.”  It adds advance tax credit premium subsidies for coverage purchased through state benefit exchanges for those earning 400 percent or lower of the federal poverty level will produce “significant reductions from current premium levels.”

The Milliman study projects that Affordable Care Act changes in the individual risk pool and adverse selection — largely due to the law’s ban on medical underwriting of individuals looking to purchase or upgrade coverage — will have the largest impact on premiums.  Those factors including the potential for younger, healthier individuals to remain in plans issued prior to 2014 and sicker people opting for 2014 plans with more extensive coverage could increase premiums by 20 to 45 percent, according to Milliman.

The study raises a red flag over the law’s restriction on the use of age as a rating factor for older individuals, predicting it will boost premiums for younger people and thus potentially drive adverse selection if they opt to forgo coverage until they need it — notwithstanding the Affordable Care Act’s tax penalties for not having some form of health coverage. “For the individual market risk pool to remain a stable market in 2014 and beyond, it is vital that young and healthy individuals enter and remain in the insurance market in addition to individuals with an immediate need for healthcare services,” the study concludes.

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