Funds Running Low

The Center for Medicare and Medicaid Services (CMS) to ordered California to suspend enrollment in the Pre-Existing Condition Insurance Plan (PCIP). This enrollment suspension applies to applications received by the state of California after March 2, 2013. The demand for the PCIP program has outstripped expectations. CMS has announced this nationwide suspension of enrollment to assure that there are sufficient funds available throughout 2013 to continuously cover people currently enrolled in PCIP through the period when the program is already scheduled to end in December.

There are only two exceptions to this suspension:

1. California will still enroll people after March 2 if the individual is currently enrolled in a PCIP program in another state and they move to California
2. California will continue to screen applications submitted after March 2 to see if the individual qualifies for the state’s own high risk pool, the Major Risk Medical Insurance Program, MRMIP

The current PCIP enrollees will remain covered and will receive services through December 31, 2013.

PCIP was established as a temporary program for people who were unable to secure coverage in the insurance marketplace. Starting January 1, 2014, there will no longer be a need for PCIP because the Affordable Care Act does not allow insurers to deny individuals with pre-existing conditions or charge them higher rates than those without such conditions. Also, the California Exchange, “Covered California” will be open for business in January for both individuals and small businesses to buy affordable health benefits plans.

This Affordable Care Act represents sweeping changes for how the middle class will get insurance. Whether or not you qualify for premium subsidies, also called “Advanced Tax Credits”, becomes a primary concern for consumers looking for a way to afford mandatory health insurance.

Your 2012 tax return is key to determining if you’re eligible for any financial assistance. Using the information from his 2012 return, a tax advisor at H&R Block advised his client that she would qualify for a significant tax credit and would have to pay pay only about $65 a month in for health insurance after the subsidy. If she skips coverage, H&R Block warned her, she faces a $95 tax penalty next year and $356 the following year.

For customers who want help with getting health insurance, H&R Block refers them to insurers affiliated with the Blue Cross and Blue Shield Assn., an industry group that represents both Anthem Blue Cross and Blue Shield of California in the state. That partnership stands to give those insurers valuable leads on potential customers.

Although the Blue Cross and Blue Shield logos are present, there is no mention inside H&R Block’s offices of Covered California, the new California health insurance marketplace.

This could be the first evidence of the competition that is likely to develop between health insurance carriers and the exchange. On the one hand carriers are motivated to “partner with the exchanges in a marriage of necessity and on the other hand do what they can to retain or gain market share.

Covered California, is planning to spend about $250 million on marketing statewide to establish its brand name and make it a prime destination for consumer information. Peter Lee, executive director of Covered California, said he welcomes the information H&R Block is providing before the state’s marketing ramps up this summer closer to when enrollment begins. “We will be exploring relationships with tax preparers because they offer a great way to provide one-on-one assistance,” Lee said. “But we don’t want to be too far ahead of when people can enroll.”

Here’s an early look at what the health insurance marketplace online application process will look like. A demonstration copy was released for comment by the feds last week. It will be used as the online application for federally-facilitated State Marketplaces and will also serve as the model that may be used by Covered California and other state-operated marketplaces. This application is a big improvement when compared to online applications in use today by health insurance companies and online retailers.

Real-Time Verification

With integrated electronic verification, the information the applicant enters will be integrated with data from other sources including the IRS, Social Security, and the Department of Homeland Security.

Smart Application

Because this application is a dynamic tool, certain questions appear only for appropriate applicants. For example, only female applicants are asked about pregnancy. Another example is that only people between the ages of 18 and 22 are asked if they are full-time students.

Household Size

Verifying household size is a complex task, but because the application is dynamic, information is requested only once. The applicant must identify anyone on his or her federal income tax return, including spouse, children, and live in partner if they have children together who need health insurance. Tax filing, employment and income information is verified for each household member.

Income Verification

When federal income tax data is available the applicant’s income data from his last federal income tax return in 2012 is already displayed and serves as a reference point to help determine his or her estimated income for the year in which he wants insurance coverage.

Eligibility for Tax-Credit

Once the applicant’s household size and income is known, the system can determine if the applicant is eligible to receive a premium subsidy and cost-sharing reductions to help pay premiums. Next, the applicant is asked whether he or she receives or could receive affordable employer-sponsored coverage through his job. Assuming the applicant does not, the system puts him or her on the path to receive advance payments of the premium tax credit.

Eligibility Confirmation

The applicant receives congratulations, a list of programs for which he qualifies and what his next steps are. Applicants can print the eligibility page and have their eligibility determination saved to their electronic account. With the application process complete, the applicant can enroll in a qualified health plan and apply his tax credit right away.

The ACA says that someone with access to affordable employer-sponsored coverage cannot get a premium subsidy from state exchanges in 2014, unless the cost of the employer-based health care coverage for that employee exceeds 9.5 percent of the worker’s household income. The IRS ruled last week that the calculation of affordability will be based on the cost of employee-only coverage, not family coverage.

Many Families Priced Out

This is highly disappointing ruling. Estimates made in 2011 by respected research organizations suggested that some 2 million to 3.9 million non-working spouses and dependents would be harmed by the strict ruling. It could leave millions of Americans with modest incomes unable to afford family coverage under their employers’ health insurance but ineligible for subsidies to buy coverage in the Exchange. A Kaiser Family Foundation survey found that in 2012, employees’ annual share of insurance premiums averaged $951 for individual coverage and $4,316 for family coverage. Under the I.R.S. rule, such costs would be considered affordable for an employee with a household income of $35,000 a year — making the employee’s spouse and children ineligible for a premium subsidy on a health exchange, even though that family would have to spend 12 percent of its income for the employer’s family plan.

Exempt form Penalties

The IRS said in a proposed rule also issued today that most families in such a situation won’t have to pay a penalty if they choose not to buy insurance coverage. This helps some, but it still leaves families that can’t afford health coverage either through an employer or on their own without the subsidy they need. There will be a substantial number of families who are priced out of needed health care,