On December 1, 2014 the Department of Health and Human Services, Centers for Medicare and Medicaid Services issued their “Bulletin #14: Guidance for Issuers on 2015 Reenrollment in the Federally-facilitated Marketplace (FFM).” All cites to Guidance will be from this document unless otherwise indicated.
Enrollment is the most important topic to understanding the seeming backwards situation in King v. Burwell where the citizen did NOT want to receive premium tax credits under the Affordable Care Act and the government WANTED TO PAY the premium tax credits under the Affordable Care Act.
The citizen in King v. Burwell didn’t want the premium tax credits because without including such amounts the citizen’s earnings were low enough for the citizen to be EXEMPT from Obamacare’s requirement to purchase a health plan or face the TAX PENALTY (individual shared responsibility tax). The government was concerned about just such a scenario stating that without the premium tax credits, “Too few people would be able to afford coverage, and too few would be subject to the incentivizing effect of the tax penalty,” King v. Burwell.
The government claims that it provided for subsidies based on the nondiscrimination policy outlined by insurance companies because prohibiting discrimination based on a person’s medical condition or history (preexisting conditions) would require broad participation of healthy and less healthy people and therefore that nondiscrimination required an “…enforceable individual purchase mandate and appropriate income-sensitive subsidies,” (as cited in King v. Burwell).
So subsidies in the ACA were born because if insurance companies were expected to treat those with preexisting conditions no differently from other enrollees in terms of health insurance plan availability and premium cost then there needed to be more people paying premiums to achieve the right balance of healthy to less healthy people.
This idea was explained more fully in King v. Burwell in another cite from “Market Reform 59” stating, “Subsidies must go ‘hand in hand’ with an individual mandate because Congress cannot ‘mandate people having something they can’t afford.’” So in order to require people to purchase health insurance, Congress had to make funds available to help it be affordable.
This concept of bringing in more people into health insurance plans of different ages and health so that the unhealthy expenses insurance companies cover of some people with pre-existing conditions are balanced out by the less expensive coverage of healthy individuals represents no new “reform” in health insurance. It is a continuation of the idea of having a pool of insured all paying premiums where the premiums paid by some would be more than the money laid out on their behalf and would balance out the likely scenario that the less healthy would require more insurance company payout.
The government's reasoning goes that because Obamacare wanted to reduce costs for those with pre-existing conditions and to make it illegal to drop these individuals from health insurance coverage that these nondiscrimination rules would make it more expensive for insurance companies to provide health insurance plans and instead of making consumers bear all these increased costs in premiums that premium tax credits would help make the plans “affordable.”
So in order to impose the requirement that individuals purchase health insurance (the individual mandate) to create a big enough pool to keep it profitable for insurance companies to be bound by prohibitions against discriminating against those with pre-existing conditions, premium tax credits were chosen as a means of making health insurance more affordable for people.
But we know that premium tax credits were NEVER intended to be available to all individuals to help them “afford” health insurance because at best they are only available to SOME of the people who enroll through exchanges in certain types of plans in specific situations where the individual’s income and family status meet eligibility requirements for such payouts. (Government estimates are at around 85 percent of the under 10 million people who enrolled in Obamacare received subsidies).
We also know that the government has bent over backwards to make these premium tax credits available to the point where the Government Accountability Office found this summer that in the majority of instances investigators using fake IDs were able to obtain Obamacare with premium subsidies.
Therefore, it is no surprise that in King v. Burwell the government hopes to continue paying premium tax credits to all enrollees through both state and federally facilitated exchanges, as the IRS has done contrary to the provisions of the Affordable Care Act and IRS 36B that requires that such premium tax credits only be made available to enrollees who enroll through state exchanges established under 1311 of the Affordable Care Act, which excludes enrollees through the federally facilitated exchanges.
But there is nothing new in the fact that even with the availability of premium tax credits to some consumers that the cost of health insurance remains unaffordable to millions of Americans. We know this because the Hardship Exemption from the individual shared responsibility tax has EXPANDED.
In addition to the nine exemptions that include the “hardship exemption” identified by the IRS, there are 14 TYPES of hardship listed that will allow individuals to escape the individual mandate (go to healthcare.gov hardship exemptions).
We also know that premium tax credits are not necessarily boosting enrollment as anticipated since enrollment goals are not being met even with the IRS unlawfully making premium tax credits to those individuals who enroll through federally facilitated exchanges. HHS has already lowered enrollment targets for 2015 and in spite of reports of January 27, 2015 that enrollment has "beat" these targets, it would be foolish to assume the enrollment numbers are accurate until all the factors such as those enrolling only in dental plans, those who were enrolled in spite of lack of verification of eligibility, those fictional people who were enrolled, and those who don't pay their premiums at least are factored in.
We also know that the Affordable Care Act was designed to be a national policy with deference to and primarily administered by the states. The federal government’s role under 1311 was clearly intended to be one of oversight and assistance for states in establishing their exchanges as indicated in 1311(c) where we’re informed that HHS will “establish criteria for certification,” “…continue to operate, maintain, and update the Internet portal…to assist States.”
We also know that the Act anticipated more widespread adoption than the number of states that actually chose to establish their own exchanges.
In the face of fewer than 20 states undertaking the establishment of exchanges, suddenly the Act’s detailed provisions providing for grants of money for state establishment and criteria for establishment under Section 1311 and the detailed options indicating that the federal government would be FLEXIBLE in helping states establish their exchanges under 1321 became less important than the brief contingency provision of section 1321 describing what would happen in the event there was a FAILURE TO ESTABLISH EXCHANGE OR IMPLEMENT REQUIREMENTS providing that “…the Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements,” PPACA 1321.
We suddenly saw the expansion of federally facilitated exchanges, a term not included in the Affordable Care Act. The federal government’s role suddenly expanded and we’ve seen the mammoth creation of a federally facilitated marketplace as all the Act’s provisions for state-established exchanges took a back seat to the federal government because states chose NOT to establish state exchanges.
Suddenly new attention was paid to the few words of section 1321 covering the contingency of IF a state failed to establish or implement. Carefully using the term “facilitated” implying the federal government was being true to its anticipated role as helper, overseer, enabler of state exchanges one cannot deny that the federal government in fact has moved towards establishing its own exchange looking to the provisions of the ACA for state exchanges as its obligations contrary to the intent and provisions of the ACA.
As a facilitator, and as the contingency establisher of an exchange under the ACA 1321, the federal government’s role was obviously anticipated to be similar to the role of a generator in a blackout, a less than perfect, not quite the same substitute that provides the minimal requirements to fulfill the needs, the requirements of the Act. We know this because the contingency plan, in cases where the states did not establish or implement was only that the, “…Secretary shall (directly or through agreement with a not-for-profit entity) establish and operate such Exchange within the State and the Secretary shall take such actions as are necessary to implement such other requirements.”
Are premium tax credits considered requirements? Nowhere in the Act is the premium tax credit a requirement. It was obviously not anticipated that people would reject the government money. The government’s own statements indicate that premium tax credits were designed to “help” make plans affordable.
In fact individuals across the country in every state are bound by the individual mandate REQUIREMENT without the availability of premium tax credits for any variety of reasons besides being enrolled in Obamacare through the federally facilitated exchanges including choice of plan or the availability of employer-sponsored health insurance to dependents even if that is “unaffordable,” to name two.
Further, we know that under PPACA 1401, 36B (a) taking of the credit is NOT mandatory: “There shall be ALLOWED as a credit against the tax imposed by this subtitle for any taxable year an amount equal to the premium assistance credit amount of the taxpayer for the taxable year.” Not mandatory. When it comes to the availability of premium tax credits and their amounts, there are painstakingly detailed rules designed to LIMIT the availability of such tax credits.
Under 36B (b) (1) the definition of premium assistance credit amount is “…with respect to any taxable year, the sum of the premium assistance amounts determined under paragraph (2) with respect to all coverage months of the taxpayer occurring during the taxable year.”
Under the same provision, 1401, IRS 36B (b)(2)(A), the law states that, “The premium assistance amount determined under this subsection with respect to any coverage month is the amount equal to the lesser of—
‘(A) the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311 of the Patient Protection and Affordable Care Act, or…”
Section 36B by its own words is a LIMITING provision providing for the LESSER of amounts stated to be paid out. Part of that limitation also confines payouts to those “…enrolled in through an Exchange established by the State under 1311…” (I’ve discussed this in posts such as, “Democrats Abandon Truth and Reason: Subsidies.”)
Federally facilitated exchanges in idea, not name, were anticipated as a means of ensuring that the Act would be implemented even in states rejecting establishment of their own exchanges. But the federal government was not tasked with creating a federal exchange that was the same as the state exchanges, only that it must implement the requirements of the Act.
But the government chooses to argue that in spite of the specific language regarding state exchanges established under 1311 and in spite of the obvious intent to limit premium amounts to the “lesser of” as described in that provision that somehow the law should be subject to an expanded provision permitting payouts under federally facilitated exchanges established under 1321.
We also know that premium tax credits are nowhere described as a REQUIREMENT except in the federal government’s reasoning that if all citizens are to be bound by a penalty if they don’t purchase health insurance than the federal government should provide a means of making such health insurance affordable. But this cannot be because if the availability of premium tax credits were a requirement then anyone not eligible for premium tax credits would be exempt, which is not the case.
We also know that there are 14 types of hardship exemptions to the individual mandate indicating that premium tax credits do NOT make health insurance affordable for many types of citizens. Therefore, premium tax credits are not required but are “granted,” to help make health insurance affordable to SOME people.
Since the individual mandate is a requirement even though millions of people are ineligible for the premium tax credit, it is obvious that in spite of the government’s idea that premium tax credits are necessary for a government to impose a tax penalty on individuals for not having health insurance that this is not the case. Therefore, we know that the availability of premium tax credits does not go hand in hand with the individual mandate.
Therefore, while premium tax credits may be related to the individual mandate, the individual mandate was passed as and functions as a stand-alone requirement and premium tax credits stand as a limited benefit available to some people.
I believe that the Guidance reflects these same principles, flexibility for state exchanges and no requirement of uniform experience for individuals using state exchanges or the federally facilitated exchanges.
For enrollment 2015, the Guidance indicates that states have already exercised their flexibility being permitted to establish different enrollment deadlines for residents of their states that extend the enrollment period beyond February 15 which remains the deadline for the federally facilitated exchanges. Is this punishing individuals using the federally facilitated exchanges? Well, they don’t have as long to enroll so that might be DIFFERENT treatment but obviously is not considered punishment by the federal government.
Guidance 2015 also indicates that citizens in some states face hardships that those relying on the federally facilitated healthcare.gov do not face such as additional hurdles in obtaining health insurance through their state exchanges such as rules regarding automatic renewal of health insurance policies or as they’re referred to by the federal government “Passive reenrollment.”
Many state exchanges provide for auto-renewal but according to THE COMMONWEALTH FUND as reported on December 15, 2014, “Marketplace Coverage Renewals: Variation in State Approaches May Affect Consumers’ Finances,” by Sabrina Corlette, Justin Giovannelli, Ashley Williams and Kevin Lucia, of the 17 state-based exchanges some, “largely because of changes to their IT systems, required enrollees to return to the marketplace to maintain their coverage or financial assistance…”
This differs from the federally facilitated exchange where individuals who meet certain criteria will be automatically renewed as long as they checked off the financial authorization allowing the federally facilitated marketplace to see their tax returns for a number of years.
Is this different treatment PUNISHING state residents who must verify their financial information annually? No, though it is obviously more burdensome than the automatic renewal available for those using federally facilitated exchanges.
Under the Guidance 2015 individuals who do NOT provide financial authorization to the federally facilitated exchanges by checking off a box might find that their policy is RENEWED but they do not get the premium tax credits that they’d previously gotten, cms.gov, 12/1/2014, “Guidance for Issuers on 2015 Reenrollment in the Federally-facilitated Marketplace (FFM).”
People updating their information on healthcare.gov will also see a difference depending on whether they’re in an establishing state or a federally facilitated state. States have the option of allowing individuals to update their information via email or mail while those using the federal portal MUST use email, CMS.gov, 12/1/2014, “Guidance for Issuers on 2015 Reenrollment in the Federally-facilitated Marketplace (FFM).” Is this “punishing” individuals in states with federally facilitated exchanges? Some would say so.
What the Guidance 2015 and the PPACA tell us is that the Affordable Care Act did not anticipate the creation of a federal exchange but rather anticipated an oversight and enforcement role for the federal government with the provisions that if something was made mandatory, like having an exchange, or having an individual mandate that there would be options available in the implementation of these requirements.
Regarding the individual mandate, there are premium tax credits made available to some citizens and there are exemptions from the individual mandate for others. There is no requirement that individuals receive the premium tax credits because otherwise all ineligible people would automatically be relieved of responsibility with compliance with the individual mandate which is not the case.
Similarly, there is no guarantee that the federally facilitated exchange experience will be the same for all exchange enrollees. We see this in many ways including some discussed above in the IRS Guidance 2015.
Therefore, expanding the provisions of IRS 36B designed to limit who was eligible for and what amounts would be available to individuals in the form of premium tax credits should not be unlawfully expanded to include populations enrolled in Obamacare through federally facilitated exchanges that are clearly not exchanges established by the states under section 1311 as provided in IRS 36B.
