By Sara Rosenbaum

This update to the health insurance Exchange Implementation Brief examines a proposed regulation issued on August 17, 2011 as part of three proposed rules to implement provisions of the Affordable Care Act related to health insurance affordability. Companion Updates explain the proposed Medicaid eligibility rule and the proposed rule related to health insurance premium tax credits; this Update focuses on Exchange functions related to determinations of eligibility for “Exchange participation and insurance affordability programs,” as well as standards for employer participation.

Background

The Affordable Care Act establishes health insurance Exchanges whose purpose is to “facilitate the purchase of insurance coverage”^[1] offered through “qualified health plans”^[2] (QHPs). Individuals eligible to purchase such coverage are known as “qualified individuals.”[3] In addition, the ACA also establishes eligibility for advance payment to qualified individuals of the premium tax credit made available under the Act.[4] The law directs the Secretary to establish a “program for determining whether an individual meets the eligibility standards for Exchange participation, advance payments of the premium tax credits, cost-sharing reductions, and exemptions from the individual responsibility provision under the law.”^[5]

The Exchange eligibility regulation builds on a proposed rule issued on July 15, 2011,^[6] which establishes Exchanges and standards for QHPs. Because the ACA effectively juxtaposes the Exchange and Medicaid markets in order to assure a mechanism for providing continuous access to affordable insurance coverage regardless of family income or circumstances at any point in time, it is important to view this proposed rule in relation to the proposed Medicaid eligibility regulation as well as the proposed rule implementing the Act’s advance premium tax credit provisions.

Overview of the Exchange Eligibility NPRM

The proposed rule addresses proposed standards for state Exchanges in relation to eligibility determinations, one of a state Exchange’s minimum functions. In essence, the NPRM recognizes two phases of eligibility: eligibility for enrollment in a QHP, which may be sought by individuals and families who do not need financial support and simply want to enroll in a plan offering; and eligibility for help under an insurance affordability program, which may consist of advance premium tax credits, the Basic Health Program, Medicaid, or CHIP. Each eligibility determination has requirements attached to it.

The proposed rule also outlines the standards that employers must meet in order to participate in the Small Business Health Options Program (SHOP). HHS notes that it will issue separate proposed rules addressing Exchange procedures for issuing certificates of exemption from the individual responsibility requirement of the law, essential health benefits, actuarial and benefit design standards, and QHP issues related to health care quality.

Exchange Functions in the Individual Market: Eligibility Determinations for Exchange Participation and Insurance Affordability Programs

Eligibility standards

The NPRM:

• prescribes a series of definitions governing the proposed rule and aligns certain definitions with those used in Medicaid and the Internal Revenue Code in order to assure continuity and harmonization of the eligibility determination process as well as the standards that govern advance premium tax credits.^[7]
• establishes eligibility determinations as a minimum Exchange function, and provides that “[t]he Exchange must determine an applicant eligible for enrollment in a QHP through the Exchange if he or she meets” the Act’s eligibility requirements.^[8] Thus, unlike separately administered CHIP programs, the NPRM frames the program as an individual entitlement, requiring a determination of eligibility if eligibility requirements are satisfied.
• specifies the following criteria governing who is eligible for enrollment in a QHP:^[9]
  • citizenship, status as a national, or lawful presence in the U.S. with the proviso that the individual must be “reasonably expected” to be a citizen, national, or lawfully present for the entire period for which enrollment is sought;^[10] and
  • residency, which is defined (as in Medicaid) as an intent to reside in a state within the service area of the Exchange. The NPRM proposes to allow a primary taxpayer (i.e., the person who files the tax returns and claim the premium credits) living apart from a spouse and dependent children to select for either the Exchange service area in which the taxpayer resides or the Exchange service area in which the spouse and children reside.^[11]
• clarifies that incarceration disqualifies an individual from Exchange eligibility unless it is “incarceration pending disposition of charges.”^[12]
• provides that an Exchange must determine the applicant “eligible for an enrollment period” if he or she meets the criteria for an “enrollment period.”^[13] This obligation assures that at the time that eligibility is determined, individuals are actually able to enroll in a QHP. The concept of an enrollment period, established under the July 15th rule, is designed to assure that at the time eligibility is determined, an individual is actually eligible to enroll in a QHP.^[14]
• provides that an Exchange must determine Medicaid eligibility if the individual meets the eligibility requirements spelled out in the Medicaid regulations (i.e., legal status or citizenship, residency, income eligibility based on the modified adjusted gross income (MAGI) standard, and status as either a child under 19, a pregnant woman, a parent or a caretaker relative, or under age 65 and not enrolled in Medicare).^[15]
• provides that an Exchange must determine CHIP eligibility if the applicant meets CHIP eligibility standards,^[16] as well as eligibility for the Basic Health Program if one operates in the Exchange service area.^[17]
• requires that in the case of applicants who are primary taxpayers, an Exchange must determine such applicants eligible for an advance payment of premium tax credits if the Exchange determines that:
  • the applicant’s household income is at least 100 percent and not more than 400 percent of the federal poverty level (FPL) (the NPRM permits premium tax credit eligibility for persons with incomes under 100 percent FPL if they are lawfully present noncitizens who are ineligible for Medicaid);^[18]
  • the applicants for whom the primary taxpayer “expects” to claim a personal exemption deduction on his tax return for the benefit year (i.e., a spouse and children) meet the requirements for enrollment in a QHP; and
  • neither the primary care taxpayer nor his or her dependents is eligible for “minimum essential coverage” as defined under the Internal Revenue Code.^[19]
• provides that an Exchange can provide advance payments of the premium tax credit only if there is actual QHP enrollment, that is, only if “one or more of the applicants for whom the primary taxpayer attests that he or she expects to claim a personal exemption deduction for the benefit year” actually is enrolled in a QHP.^[20]
• bars an Exchange from determining a primary taxpayer eligible for advance premium tax credit payments if HHS notifies the Exchange that the taxpayer failed to file a tax return for a prior year for which tax data would be used for income and eligibility verification in the year of application.^[21]
• directs Exchanges to collect social security numbers from primary taxpayers if the person filing the application attests that the primary taxpayer has a number and filed a tax return.^[22]
• requires an Exchange to determine eligibility for cost-sharing reductions for individuals who meet the eligibility requirements for QHP enrollment, qualify for an advance premium payment, and have household income that does not exceed 250 percent FPL.^[23]
  • In addition, the NPRM specifies that cost-sharing reduction is available in the case of non-Indians only for persons enrolled in a silver-level QHP.
  • The NPRM also specifies the ranges to be used to determine the size of the reduction (100-150 percent FPL; 150 percent to 200 percent FPL; and 200 to 250 percent FPL).^[24]

Eligibility determination procedures

In discussing the eligibility determination process the NPRM describes the key difference between advance premium tax credits and Medicaid and CHIP — the latter two of which are based on current income, while, by contrast, the premium tax credit is paid in advance and thus must be reconciled based on information reported on the tax return for the entire year in which the credit is received. Although the ACA, as amended, places statutory caps on the amount of the recoupment, recoupment levels can be as high as $2,500 for persons with incomes of 400 percent of the FPL.^[25] Furthermore, as the NPRM notes, the annualized process may offer inadequate assistance to persons who experience a major decline in income during a year and thus receive insufficient credits given their reduced income. The NPRM states that “[t]o address these concerns, the Exchange can decrease the difference between the amount of advance payments and the premium tax credit amount based on actual income at the end of the year through a strong initial eligibility process that maximizes accuracy and a strong process by which individuals can report changes that occur during the year. We solicit comments on ways of achieving this outcome.”^[26]

With respect to the eligibility determination process, the NPRM:

• requires Exchanges to accept applications, a requirement consistent with the right of qualified individuals to enroll in QHPs.^[27]
• bars an Exchange from seeking information on citizenship, national status, or immigration status from any individual who is a non-applicant.^[28]
• requires an Exchange to allow individuals to decline eligibility determinations for insurance affordability programs and proceed directly to enrolling in a QHP. However, the NPRM requires a full screening for individuals who seek insurance affordability assistance through advance premium tax credits and cost-sharing assistance.^[29]
• requires an Exchange to accept applications and make eligibility determinations at any time during a year (even if there is no QHP enrollment period at the time of the application).^[30]
• provides that an Exchange must permit an individual found eligible for advance premium tax credits to accept less than the full amount for which he or she is determined eligible.^[31]
• allows the Exchange to authorize advance payments only if the primary taxpayer accepting the credits attests that he or she will file a tax return for the year (or if married, file jointly), is not claimed as a dependent by any other taxpayer, and he or she will claim a personal exemption deduction on his or her tax return for applicants identified as family members.^[32]
• requires that following a Medicaid eligibility determination, the Exchange notify the state Medicaid agency and transmit relevant information to the agency “promptly and without undue delay.”^[33]
• provides that once an Exchange makes an eligibility determination it must implement the determination (in order to achieve QHP enrollment, advance premium tax credit payments, and cost sharing reductions) and notify the applicant.^[34]
• requires an Exchange to notify the individual’s employer of an employee’s eligibility for advance premium tax credits and cost-sharing reductions.^[35]
• provides that if an individual found eligible does not seek enrollment during the enrollment period for which eligibility has been determined and instead seeks coverage in a new enrollment period, an Exchange must require an attestation regarding any changes before determining whether the individual is eligible for a new enrollment period. (As discussed below, Exchanges will be expected to redetermine eligibility; the attestation process is used for individuals who are not due for a redetermination.)^[36]

Eligibility verification

The NPRM focuses extensively on the issue of verification. The proposed rule describes when attestation can be relied upon, when the Exchange is required to verify through electronic resources, the situations in which the Exchange can turn to additional sources of information in the event that permissible electronic information is unavailable or produces results that are incompatible with the attestation. A particular focus is on verification of household income, family size, and eligibility for insurance affordability programs other than advance premium tax credits.^[37] The NPRM also creates affirmative obligations on Exchanges to attempt to gain complete and correct information before denying eligibility for QHP enrollment or an insurance affordability program rather than simply denying the coverage. In addition, the NPRM addresses Exchange enrollment obligations while attempting to clarify inconsistencies or missing information related to attestations.

The NPRM:

• requires an Exchange to verify citizenship, status as a national, or lawful presence and provides, as in the case of Medicaid, for use of Social Security and Department of Homeland Security information. In the event that the Exchange cannot verify an attestation of citizenship or lawful status using SSA or DHS information, the Exchange must provide the applicant with 90 days from the date notice is received (deemed to be 5 days from actual date of notice) to provide “satisfactory document evidence or resolve the inconsistency with the Social Security Administration or the Department of Homeland Security.”^[38]
• provides that an Exchange must accept an attestation of state residency without further verification, unless electronic verification is required by the state Medicaid and CHIP agencies.^[39]
• requires an Exchange to verify non-incarceration status unless there are no electronic data sources available to the Exchange that have been approved by HHS as “sufficiently current, accurate, and . . . [with] less administrative complexity than paper verification,” in which case the Exchange can rely on attestation.^[40] The Preamble specifically notes that this opens up the possibility that no electronic data source will be authorized.
• sets forth procedures for verification (through tax returns) of the income of household members of the applicant or primary taxpayer who will claim the credit.^[41]
• sets forth additional verification procedures that an Exchange must follow in the event that information needed for eligibility, QHP enrollment, premium tax credits, or cost-sharing reductions cannot be verified, requiring that an Exchange “make a reasonable effort to identify and address the causes of such inconsistency” (through telephone calls if necessary).^[42]
• requires that if the inconsistency cannot be resolved, provide an applicant with 90 days from the date on which notice is received to resolve the inconsistency. The NPRM also allows an Exchange to extend the inconsistency resolution time period if a good faith effort to resolve the inconsistency has been made.^[43]
• requires that if verification on a particular matter is pending, the Exchange must nonetheless “proceed with all other elements of eligibility determination using the application filer’s attestation. . . provide eligibility for enrollment in a QHP to the extent that an applicant is otherwise qualified; and ensure that advance payments of the premium tax credits and cost sharing reductions are provided on behalf of an applicant . . . if the primary taxpayer attests to the Exchange that he or she understands that any advance payments of the premium tax credit received are subject to reconciliation.”^[44]
• requires that if an Exchange remains unable to verify an attestation, it must notify the applicant based on the information available and “implement” the determination no later than 30 days after notice is sent.^[45]
• bars an Exchange from requesting more than the “minimum necessary” information to support the eligibility and enrollment processes of the Exchange, Medicaid, CHIP, and any operating Basic Health Program.^[46]
• in the case of individuals seeking insurance affordability program assistance (i.e., Medicaid, CHIP, advance premium tax credits, or Basic Health Program assistance), requires an Exchange to verify an applicant’s lack of eligibility for any other minimum essential coverage through an employer plan, Medicaid, CHIP, or a basic health program. The verification process must use information specified by HHS and must determine whether the individual “already has been determined eligible” for another affordability program. The NPRM specifies that in verifying household size and income, the Exchange must use tax data to verify attestations, and in the case of Medicaid eligibility, must accept an attestation of who is in the applicant’s household and the total household income (unless there is information incompatibility, in which case the Exchange must attempt to resolve it).^[47]
• in verifying eligibility for advance premium tax credits, provides that an Exchange may accept attestation as to family size (unless there is incompatibility of information in which case the Exchange must attempt to resolve it electronically or otherwise). With respect to household income, the “Exchange must compute annual household income for the family . . . based on tax return data” and require validation through attestation of its accuracy by the applicant.^[48] (An Exchange would be able to utilize additional electronic information if the attestation is incompatible with available data sources or if data are missing).^[49]
• in the case of applicants who are projecting an increase in income, the NPRM specifies that an Exchange can use attestation evidence only.^[50] But where the applicant projects a drop in income during the benefit year that in turn would qualify the applicant and his or her family for higher advance premium tax credits, the NPRM requires additional verification procedures designed to assure the reliability of the projection and the absence of qualification for alternative affordability programs such as Medicaid. This alternative system is to be used in cases in which the applicant projects an income drop during the year of at least a 20 percent drop or has filed for unemployment benefits, and who do not have recent tax data and are not Medicaid eligible based on MAGI.^[51] In the event that electronic data are insufficient, the NPRM requires an Exchange to attempt to resolve inconsistencies, notify the applicant, and provide the applicant with a 90-day window to supply additional information. If anyone in the primary taxpayer’s family appears to be eligible for an alternative premium affordability program, the Exchange must deny advance premium tax credits.^[52]
• requires an Exchange to verify whether an applicant seeking advance premium tax credits is enrolled in an eligible employer-sponsored plan but requires only acceptance of attestation without further verification, “unless the information provided is not reasonably compatible with other data provided by the applicant or in the records of the Exchange.”^[53] In such cases, the Exchange may use data obtained through other data sources and may, if other information is not available or compatible with the individual’s attestation, make a request for additional documentation.^[54]

Redetermining eligibility

Exchanges must redetermine eligibility both annually and during a “benefit year” if new information is received. The NPRM:

• requires an Exchange to redetermine eligibility “if it receives and verifies new information reported by the enrollee or identifies updated information through . . . data matching.”^[55]
• requires an Exchange to require enrollees to report changes affecting eligibility within 30 days and verify such information.^[56]
• requires an Exchange to periodically examine both available DHS and SSA data to identify changes such as death and data on Medicaid, CHIP, and Basic Health Program data.^[57]
• permits an Exchange, as part of its initial or revised operating plan, to propose additional efforts to identify and act on changes with HHS approval.
• requires an Exchange to redetermine eligibility if it “verifies updated information reported by an enrollee or identifies updated information through . . . data matching” and notify both the enrollee and employer where applicable.^[58]
• specifies that changes resulting from a redetermination take effect on the first day of the month following the date of the redetermination notice but allows Exchanges to report an alternative date in the month following the month in which notice is given.^[59]
• where a redetermination results in a notice of ineligibility for QHP enrollment, requires that an Exchange maintain the individual’s eligibility for enrollment without advance payments of the premium tax credit and cost sharing reductions for a full month following the month in which notice is sent.^[60]
• requires that an Exchange annually redetermine eligibility to enroll in QHPs through the Exchange.^[61]
• requires that an Exchange notify enrollees annually about the redetermination process, including the data obtained and used to redetermine eligibility and the enrollee’s “projected eligibility determination for the following year. . . ”.^[62]
• requires that enrollees sign and return, and to the extent that the enrollee does not sign and return the notice, the Exchange must proceed with the redetermination based on the data to which the Exchange has access under the rules as well as any enrollee-provided and verified information.^[63]
• specifies that if an individual remains eligible, enrollment with a QHP will continue unless the individual terminates coverage or changes QHPs.^[64]
• In the case of premium tax credits and cost-sharing reductions, if an Exchange determines that an individual is eligible or that eligibility has changed, it must simultaneously notify the QHP issuer (so that the issuer can modify the individual’s enrollment to reflect premium payments and cost sharing reductions) and transmit eligibility and enrollment information to HHS to enable the agency to begin, end, or change the individual’s advance premium tax credit and cost sharing reduction payments.^[65]
• requires an Exchange to notify HHS if it determines that an individual’s employer does not provide minimum essential coverage or else provides coverage that is unaffordable or that the individual has changed employers.^[66]
• requires an Exchange to notify HHS and an individual’s employer if the individual disenrolls from a QHP during the year.^[67]

Coordination with Medicaid, CHIP, the Basic Health Program, and the Pre-Existing Condition Insurance Program

The NPRM:

• specifies an Exchange’s obligation to enter into agreements with Medicaid and CHIP agencies necessary to carry out its obligations.^[68]
• specifies the Medicaid eligibility screening obligations of an Exchange as well as its obligation to transmit the information to the Medicaid agency.^[69]
• specifies an Exchange’s obligation to provide for advance payment of premium tax credits and cost sharing deductions until notified that an individual is eligible for Medicaid.^[70]
• specifies the Exchange’s obligation to “provide an opportunity for an applicant to request a full determination of eligibility for Medicaid based on eligibility criteria” other than those linked to MAGI-related determinations (i.e., evaluation of income based on MAGI for persons who are pregnant, children, parents/caretakers, or adults under 65 who are ineligible for Medicare).^[71]
• in the case of applications submitted to Medicaid or CHIP agencies or a Basic Health Programs and found ineligible based on MAGI, requires the Exchange “to establish procedures to ensure that an eligibility determination for enrollment in a QHP, advance payments of the premium tax credit and cost sharing reductions is performed….”^[72] The procedures used must “not require the Exchange to duplicate any eligibility and verification findings already made” and “provide for following the same eligibility determination process…regardless of the agency that initially receives the application.”^[73]
• provides for use of an electronic data exchange interface among the agencies, using model agreements that may be developed by HHS at an Exchange’s option.^[74]

Treatment of Indians

The NPRM:

• requires an Exchange to determine whether an applicant who is an Indian is eligible for special cost-sharing reductions applicable to Indians under the ACA who have family income below 300 percent FPL and clarifies that the special cost sharing reductions to which Indians are entitled applies only to Indians enrolled in QHPs. Specifies that this determination must be made for an Indian regardless of whether the applicant requests such a determination.^[75]
• requires an Exchange to verify attestation of Indian status using federally permissible documentation, supplemented by additional documentation that have been approved by HHS as well as information supplied by the individual, which can be requested if other approved data sources are unavailable or a conflict with an attestation exists.^[76]

Appeals rights

The NPRM requires an Exchange to notify individuals of their right to appeal “any determination” made. The appeal rights notification must be part of the determination notice.^[77]

Employer Interactions with Exchanges and SHOP Participation

The NPRM:

• specifies that only a qualified employer may participate in a SHOP, while allowing continued participation by participating employers that cease to be small employers as well as participation in multiple SHOPs.^[78]
• permits qualified employers to select a QHP during an election period and requires qualified employers to disseminate information to qualified employees about the QHP enrollment process.^[79]
• requires qualified employers to submit employee premium contributions using the procedures spelled out in the July 2011 Exchange regulations.^[80]
• requires qualified employers to allow new employees to enroll in a QHP beginning on the first day of employment, even if employment commences outside the initial or annual open enrollment period.^[81]
• requires qualified employers to adhere to employer election periods and specifies that if the employer “does not take action during the annual employer election period and remains eligible” for SHOP participation, the employer will continue to offer the same plan(s) and contribution level(s) as during the prior year.^[82]