The health care reform process under which employers can contest adverse determinations (that can trigger pay-or-play penalties) due to an insurance exchange finding that their plans fail to provide minimum essential coverage was finalized in program integrity rules put on public display on Aug. 29 by the U.S. Department of Health and Human Services.
The rule is important for large employers seeking to challenge exchange determinations that their coverage was unaffordable or failed to deliver on minimum value.
It finalizes rules that were proposed in the Federal Register on June 19, 2013 (78 Fed. Reg. 37032), mostly without change. However, the final rule changes the proposal by allowing employees whose eligibility is re-determined as a result of an employer appeal to appeal that redetermination.
The rule also describes how small businesses can challenge denied attempts to buy coverage through a Small Business Health Options Program, and describes program integrity standards for exchanges and SHOPs themselves. Here is a link to a fact sheet on the rules.
Employer Appeals of Adverse Exchange Decisions
The rule sets an appeals process for employers to contest an exchange determination (and penalties under health care reform rules) that it does not provide minimum essential coverage because either it failed on minimum value or provided unaffordable coverage to an employee.
Employers need this right to appeal because failure to provide minimum essential coverage can trigger employer pay-or-play penalties. (Note: This has less immediate importance because enforcement of the employer mandate has been postponed until 2015.)
When an employee has been determined eligible for subsidies to buy coverage on an exchange, the exchange will notify his or her employer. That notice must include an explanation of the appeal decision, factual findings relevant to the decision and citations to the controlling regulations.
If an employee loses his or her subsidy because of an employer’s successful challenge to the exchange’s determination, the employer can offer a special enrollment period for him or her to re-enroll in employer-sponsored coverage.
State-run exchanges can establish their own appeals process for employers, and if the state does not opt to do so or does not operate an exchange, HHS will step in and do it for them.
If an employer does not like an exchange’s appeal decision, it has no right to appeal to HHS, in contrast to individuals who may appeal their adverse eligibility determinations to HHS. However, states that run exchanges may set up an appeal arm employers can use to contest exchange decisions. This may spell complexity for employers operating in several states, commenters noted to no avail.
The employer is supposed to be able to access the information used in making the initial determination that its coverage was inadequate or unaffordable. However, the law prohibits disclosure of the employee’s tax return information in the course of an employer appeal.
Appeals will be given a de novo review without deferring to the exchange’s previous decision.
The final rule changes the proposed rule by allowing employees whose eligibility is revoked as a result of an employer appeal to appeal that redetermination. Family members related to the employee also may challenge an exchange’s reversed determination because they could more affected from that redetermination than the employee, the rule provided.
Notices sent by exchanges to employers will say what information is deemed relevant to the employer appeal. That will include: (1) what coverage (if any) the employer makes available to the employee; (2) what the cost of that coverage is to the employee; and (3) the compensation the employer pays to the concerned employee.
The health care reform law directed HHS to set rules to discern whether an individual meets eligibility standards for exchange coverage, subsidies and cost-sharing reductions.
SHOP Eligibility Appeals
The final rule allows paper, telephone applications for coverage, but also those facilitated by brokers, agents and Navigators.
Employer and employee applicants to the SHOP may appeal denials of eligibility to purchase coverage through the SHOP, under standards developed in the final rule. The SHOP has the flexibility to establish state-specific eligibility criteria; therefore, any state that operates a SHOP also will operate the SHOP appeals process. HHS will provide the appeals process for states that do not operate a SHOP. SHOP employers are not allowed to elevate an appeal to HHS.
HHS said SHOP eligibility appeals will be rare, partly because SHOP eligibility standards allow for states to require additional verification before providing the employer or employee with an eligibility determination.
Commenters noted that retroactive eligibility after a SHOP re-determination could have a broader impact than a reversal affecting one individual or family.
Oversight of Insurers on Exchanges
The final rule also sets standards that would establish oversight of health insurers.
Abuses by exchanges of federal money can be punishable under the federal False Claims Act, which allows for triple damages.
Unlike the employer mandate (which was postponed for one year until January 2015), the individual mandate and the exchanges are taking effect on schedule. They will start issuing policies on Oct. 1, 2013; and coverage by qualified health plans sold on exchanges will begin on Jan. 1, 2014.