Government Affairs: Health Care 101: Whats next?
Government Affairs: Health Care 101: What's next?

The impact of health insurance exchanges

Within the next few weeks, health insurance exchanges that are authorized in the Patient Protection and Affordable Care Act (ACA) will begin operations. Currently 34 states have chosen either to have the federal government run their exchanges or form state/federal partnership exchanges, while the other 16 states and the District of Columbia will operate their own. The exchanges are designed to be marketplaces for individuals and small businesses to purchase health insurance that is required under the individual mandate provisions of the ACA.

The Obama Administration recently has chosen to delay implementation of the employer mandate provisions of the ACA for one year, until Jan. 1, 2015. These provisions would require businesses with more than 50 full-time-equivalent employees to offer their full-time employees affordable coverage that meets the minimum benefit requirements of the ACA.

The important point to take from this is that although the ACA employer mandate will be delayed for a year, the Administration continues to move forward with implementation of other parts of the law, including the individual mandate.

It is through the exchanges that individuals can buy health insurance products and apply for a federal subsidy to help them pay for the insurance. One issue rental business operators may need to be aware of is that employees may decide for one reason or another to go to the exchange to buy health insurance. One reason they might do this is that they can get a federal subsidy from the exchanges to help them pay for their insurance. The question some are asking is how easy it might be to get a subsidy in 2014 and how closely exchange officials will be checking to verify a person’s reported income.

Recently published regulations and guidance by the Center for Medicare and Medicaid Services (CMS) have cleared up much of the confusion on this issue. First, there will be some differences between exchanges that are run by states and those that are federally operated. Only for the year 2014, in state-operated exchanges, individuals buying insurance and applying for a subsidy, called a “premium tax credit,” will be allowed to self-attest their income level if they are not able to provide documentation like pay stubs.

However, CMS will require these state exchanges to check the veracity of these self-attested income claims using statistical samples and checking to verify those samples. Moreover, attesting one’s income for the purposes of receiving a premium tax credit is the same as signing a tax return. That means the signer does so under penalty of tax fraud if the information is found to be knowingly incorrect.

If individuals are purchasing health insurance through one of the 34 exchanges that are either federally run or state/federal partnership exchanges, full income verification will be required in all instances. Income verification will be the responsibility of the applicant. Internal Revenue Service (IRS) and Social Security information will be one source of information to verify income as will data from Equifax, the credit reporting and income data company.

If these data sources cannot provide verification within 90 days, the applicant will not be able to receive premium tax credits that help pay for health insurance through the exchange. This information is important to employers who are helping their employees purchase
health insurance through one of these exchanges or who may want to purchase their own coverage using the individual exchange.

Making a false statement about income in order to qualify for a premium support credit will be considered fraud and the penalties for fraud are greater than any amount that may be gained by giving false information.

Another concern with the exchanges centers on the computer systems that will be used to create electronic health insurance marketplaces. Income verification is only one of the issues. Making sure that all of the policy information and pricing is available for every insurance offering also has the potential to be a large undertaking.

Recently CMS and IRS officials told congressional committees that about 80 percent of the testing of these computer systems for the federal and federal/state partner exchanges have been completed, but there is not much time left before the remaining 20 percent has to be up and running for the Oct. 1, 2013, launch.

Finally, those who will be using the exchanges for themselves or their businesses, or who plan to talk with their employees about insurance options, may have to work a little harder than expected to get the information they need. It was anticipated that most states would opt to build their own exchanges, so this is where most of the education and outreach money was designated. That means not a great deal of money is available to distribute among the 34 states that are having the federal government either run their exchanges
or participate as a partner.

One source of information about how to buy health care coverage continues to be trusted insurance agents. They may not be able to help employees who are eligible for premium support credits, but they still can sell policies that will be the same as or similar to what is available in the exchange. In addition, all states will have a team of people trained and certified to help with health coverage options and enrollment. These navigators, application assistors and certified application counselors will be available when open enrollment starts Oct. 1, 2013.

Visit the Marketplace Help Center on the website or call 800-706-7893 for more information as the implementation date approaches. To read the BGOV Regulation Tracker Health Law Highlights, go to