The federal government just announced a new wrinkle in its ACA approach. HHS released guidance that may allow certain individuals who faced enrollment difficulties with Marketplaces to receive the tax credits and cost-sharing reductions.
In short, the guidance allows certain Marketplaces to provide the credits and cost-sharing reductions retroactively, provided that an individual applied for coverage using the federal application form during the open enrollment period and did not enroll in any form of coverage. The qualified health plan would also provide retroactive coverage for this period. In addition, the guidance notes that persons who enrolled in a qualified health outside of the Marketplaces may be eligible for retroactive assistance back to their date of enrollment.
The precise effect on newly-insured households will vary by state. The HHS guidance may prove especially relevant for taxpayers in states in which the implementation of the new Marketplaces has been particularly challenging (e.g., Hawaii, Maryland, Massachusetts, Nevada, Oregon, etc.). However, the guidance is permissive in that Marketplaces “may” but are presumably not obligated to implement this approach. It is unclear which, if any, state-based marketplace will adopt the guidance; likewise, HHS has not clarified whether and how the federal Marketplace (healthcare.gov) will implement this guidance for the 36 states that it serves.
The guidance may ultimately affect a small number of people, but it will likely entail substantial administrative costs for insurers. Because the HHS guidance now limits retroactive eligibility to persons who enroll in qualified health plans rather than other (and often less expensive) forms of coverage, this move may benefit a relatively small number of people. In comparison, the effect on the insurance industry is substantial: the guidance requires insurers to re-process eligibility and enrollment files, bill the federal government for subsidies, re-adjudicate past medical claims, refund enrollees premiums and cost-sharing that exceed subsidy amounts, and repay any tax credits funded by state governments during this period.
Several policy questions remain unanswered. For example, it is unclear whether this change will affect the definition of the “benchmark plan,” upon which the IRS computes the value of the tax credit for an individual taxpayer. Additionally, it is unclear whether HHS will extend this guidance to apply to special enrollment periods after the open enrollment period ends if Marketplaces are not fully functioning by that time. Lastly, this guidance does not appear to address situations in which an individual tried to apply but was unable to do so.
