On June 26 and June 28, 2013, the Internal Revenue Service (IRS) and the Department of Health and Human Services (HHS) issued guidance related to the individual mandate provision of the Patient Protection and Affordable Care Act (PPACA).
The recent guidance included:
A final rule on:
- How the Exchange/Marketplace and IRS will determine eligibility for, and grant exemption from, the shared responsibility payment; and
- Standards to determine whether certain health coverage qualifies as minimum essential coverage.
- A notice explaining eligibility for minimum essential coverage, for purposes of the premium tax credit to purchase coverage on a Marketplace.
- A notice about transition relief for employees and related individuals who are eligible to enroll in an employer plan with a non-calendar plan year.
As a reminder, the individual mandate requires most individuals to have minimum essential coverage or pay a penalty beginning in 2014. The penalty is now called a “shared responsibility payment.” Some individuals may qualify for an exemption so they will not be required to have coverage or pay a penalty. An individual seeking an exemption may do so prospectively – in advance – through an application submitted to the Exchange/Marketplace or retrospectively – after the fact – with the IRS through the tax filing process. An applicant can apply for multiple exemptions simultaneously.
1a. Final Rule on how the Marketplace and IRS will Determine Eligibility and Exemptions from the Shared Responsibility Payment
The first section of the final rule focuses on the standards and processes the Marketplace and IRS will use to determine eligibility for, and grant exemption from, the shared responsibility payment. With changes noted below, the final rule is largely consistent with our February 7, 2013 news alert, which summarized the proposed rule.
Exemptions still fall under the same broad categories.
- Individuals who cannot afford coverage
- Taxpayers with income below the tax filing threshold
- Individuals who qualify for a hardship exemption
- Individuals who have a gap in minimum essential coverage of less than three consecutive months in a calendar year
- Members of religious groups that object to coverage on religious principles
- Members of health care sharing ministries
- Individuals in prison
- Individuals who are not U.S. citizens
- Members of Native American tribes
- U.S. citizens residing in a foreign country are typically exempt
Changes from the Proposed Rule for Exemptions
The final rule included the following changes:
The final rule specifies, as appropriate, when the Marketplace must make the various categories of exemptions available prospectively or retrospectively.
Individuals receiving an exemption because they belong to a religious group that objects to coverage on religious principles must re-apply for the exemption upon turning 21. This was changed from the proposed age of 18.
The final rule adds an exemption for an individual who is not a member of a federally recognized tribe, but who is eligible for services from the federal Indian Health Service.
The final rule:
- Provides detailed criteria to assist Marketplaces in determining eligibility for a hardship exemption.
- Clarifies that a hardship exemption will, at a minimum, be provided for the month before the hardship, the month or months of the hardship, and the month after the hardship, and gives the Marketplaces flexibility to provide the exemption for additional months after the hardship.
- Provides additional detail about how the Marketplace will determine the hardship exemption for “lack of affordable coverage based on projected income.”
1b. Final Rule on What Qualifies as Minimum Essential Coverage
Again, the final rule is largely consistent with our February 7, 2013 news alert, which summarized the proposed rule.
Here is the updated list of what qualifies as minimum essential coverage, including the few noted changes:
- An employer group health plan
- An individual health insurance policy
- A government plan such as Medicare, Medicaid, Children’s Health Insurance Program (CHIP), TRICARE (health care program of the United States Department of Defense Military Health System, formerly known as the Civilian Health and Medical Program of the Uniformed Services or CHAMPUS) or veterans coverage
- Fully insured student health coverage
- Self-insured student health coverage *
- Medicare Advantage plan
- State high risk pool coverage*
- Coverage for non-U.S. citizens provided by another country**
- Refugee medical assistance provided by the Administration for Children and Families
Coverage for AmeriCorp volunteers**
*Designated as minimum essential coverage for plan/policy years beginning on or before December 31, 2014. For coverage beginning after December 31, 2014, sponsors of high risk pool or self-funded student health coverage may apply to be recognized as minimum essential coverage.
**Coverage provided by another country and coverage for AmeriCorps volunteers are no longer automatically deemed minimum essential coverage. However, individuals may apply to have their coverage recognized as meeting minimum essential coverage.
2. Notice on Eligibility for Minimum Essential Coverage for Purposes of the Premium Tax Credit
An individual may receive health insurance coverage subsidized by the premium tax credit only for months the individual is enrolled in a Qualified Health Plan through a Marketplace and is not eligible for other minimum essential coverage.
The notice explains when an individual is eligible for minimum essential coverage under certain government-sponsored health programs or other coverage as follows:
- Children’s Health Insurance Program (CHIP) disenrollment – If an individual loses CHIP coverage for a period of time because he or she failed to pay premiums, the individual is still treated as eligible for minimum essential coverage through CHIP during that time.
- CHIP waiting period – If an individual may not enroll in CHIP during a pre-enrollment waiting period, he or she is not eligible for CHIP coverage during that time.
- Eligibility requiring determination of a disability or diagnosis of a particular disease – An individual is eligible for minimum essential coverage under Medicaid or Medicare in the following circumstances if the responsible agency confirms the findings.
- Medicaid coverage requiring a finding of disability or blindness
- Medicare coverage based solely on a finding of disability or illness
- Eligibility based on enrollment – An individual is eligible for minimum essential coverage if he or she is enrolled in Medicare Part A requiring payment of premiums, a state high risk pool, a student health plan, or a TRICARE program.
3. Notice about Transition Relief for Employees and Related Individuals who are Eligible to Enroll in an Employer Plan with a Non-calendar Plan Year
Employers with non-calendar year health plans may qualify for “transition relief” that allows them to not be subject to penalties under the employer mandate if they comply upon their 2014 renewal date. In the same way, this notice explains that employees and spouses/dependents eligible for an employer-sponsored plan with a non-calendar year may avoid the individual mandate shared responsibility penalty between January 1, 2014 and the start of the 2014 plan year, if they enroll for the 2014-2015 year.
Employees and their spouse/dependents who didn’t enroll in the employer’s plan for the 2013-2014 plan year are examples of individuals who might benefit from this transition relief. More detailed examples are included in the notice.
For more details, here are links to the various pieces of guidance:
- Exchange Functions: Eligibility for Exemptions; Miscellaneous Minimum Essential Coverage Provisions
- Eligibility for Minimum Essential Coverage for Purposes of the Premium Tax Credit
- Transition Relief for Employees and Related Individuals who are Eligible to Enroll in an Employer Plan with a Non-calendar Plan Year
We encourage you to bookmark Cigna’s health care reform website, InformedOnReform.com.