Div A, Tit 3, part 3: More Exchange Details

Section 304 and we are past that bit of controversy. 304 is regarding contract conditions. The second half is basically that the process has to follow normal federal contracting rules except where such are specifically contradicted by various other elements of this monster bill; makes special notice of indian reservation differences; and again says there will be no discrimination on whether a plan does or does not allow abortions. Oh – there’s also some stick for the commissioner to use on plan providers who try to cheat the plan up to and including terminating the contract. However, the first part has some elements that are worth detailing.

In addition to providing the essential benefits:

  • The plan’s provider has to be licensed;
  • They’re responsible for reporting data the commissioner requests in addition to what’s already specified;
  • They WILL accept affordability credits, as well as being affordable (this last is defined over and over elsewhere);
  • All applicants will be enrolled (no denials) up to the plan’s capacity (reserve funding limits), and this last has to be documented;
  • Must participate in risk pooling as commissioner directs (Commissioner can require combined risk pooling but has to justify to SecHHS and Congress – stated elsewhere);
  • If using a network instead of ‘any provider’, network must include providers who provide services to low-income and medically-underserved areas of the served community;
  • Must provide cultural and linguistic appropriate services (appropriateness based upon community served, not one size fits all);
  • Special rules for those involved with Indian affairs; requirements for “integrity” of not only providing company but exchange as a whole; and the commissioner may add more requirements later if need is identified.

305 is a “fun” section. See, the bottom line is that the agency will work to make entry and application by both employers and individuals as easy as possible. Some examples: If someone applies for medicaid and they are determined to be ineligible, the application is to be automatically forwarded to and reviewed by the HCA (Health Care Administration) to see if the individual is eligible to qualify to use the exchange. Oh, and here is a bit of detail on affordability credits (ie low income subsidies): it goes directly to the selected plan provider without making a ‘stop’ at the HCA or the credit-eligible individual. IOW, once the person is qualified the money goes straight from Treasury to insurance company. It’s a smart accounting accountability technique.

And finally for this section the HCA has to do a lot of things to help employers (especially small businesses) and individuals select a plan from the exchange.

307 needs some discussion as it will have some narrow focus – it sets up tax authority. The section as a whole is that the agency will run a trust fund which is to help with that exchange-wide risk pooling and other expenses to particularly include affordability credits. This isn’t where the amounts are established, but I’m going to pull this from the appropriate sections so as to keep it simple.

The trust fund is funded from three sources: Individuals not obtaining acceptable coverage; employers not providing acceptable coverage; excise taxes on failure to meet health coverage participation requirements. Actually there’s a fourth source: Congress can add some money in the annual budget or supplemental budget authorities. But let’s look at the three primary sources.

Individuals not obtaining acceptable coverage is detailed in section 501. If the individual (or their children if applicable) does not have: a QHBP; a grandfathered plan; Medicare; Medicaid; Military insurance (to include Tricare); VA; Indian Care plans; or other plans that the SecHHS may say are acceptable, they will pay an additional tax. The tax will be an addition of 2.5% to taxable income (AGI less exemptions and deductions). You don’t HAVE to have insurance but if you don’t you’re going to pay.

Employers not providing acceptable coverage AND excise taxes on failure to meet health coverage participation requirements are both from section 511. Basically, a company that does not provide health care for its employees pays. There are two categories here. If the company says it is providing and it’s discovered it’s not providing for some or all its employees, it pays a fine of $100 per day per employee till it’s fixed – with protections to the company for what I’ll call ‘honest error’ provided they fix it in a timely fashion when the error is found.

The second category is going to be more typical. A company may specifically decide not to provide health care. If it does so, it will pay an excise tax based on employee wages. The base rate is 8%. Small businesses can pay less depending upon annual payroll: under $500,000 pays zero in excise; up to $585,000 pays 2%; up to $670,000 pays 4%; and up to $750,000 pays 6%. I want to point out that all of these receive small business subsidies if they choose to provide health care plans – the costs will go up whether they do or do not provide, but which is the better cost choice will depend on narrow examination of all elements.

It is possible that this will have an undesirable effect: companies may choose to underpay their employees, and even to prefer part-time to full time, so as to remain at a lower excise level while not providing benefits. Some will choose to do so as a matter of principle, others after careful examination of whether it really is a lower tax burden. It will not be so in all cases. $750,000 is nominally 50 FTE at minimum wage, and other laws and realities WILL have an impact. Still, the possibility of unintended consequences must be considered.

Let’s finish out this subtitle in short order shall we? Almost all the remaining sections say that states may do something INSTEAD of participating in the federal exchange, but those things have to provide service functionally equivalent to the exchange. Those things include: State based exchange; Interstate compacts (simplistically multi-state exchanges); and insurance cooperatives (CoOps). Ummm, re the interstate compacts I need to note the bill addresses a major worry many have expressed in regard to such.

The general concern is that insurance companies will use multistate/interstate compacts to bypass more stringent requirements of some states. This bill specifies that all participating states WILL retain full authority – no ‘picking state A’s rules as primary so B can’t use its extraordinary investigation powers or more stringent anti-trust rulings.’ Also please recall that this bill removes the existing anti-trust exemptions for health care insurance providers.

The bill finishes by noting that nothing in the bill supercedes DoD and VA authority.

Next up, subtitle B: the Public Option.

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