New ACA Rules Tighten Eligibility for Exchange Coverage

Treasury Dept. Decision Increases Importance of Strong BadgerCare Coverage

A long-awaited rule issued by the Treasury Department today contains bad news for many health care advocates and for some low-income families who were hoping that subsidies for coverage through the new exchanges would provide a more affordable alternative to the employer coverage they are currently offered.  As a story on National Public Radio reported today, the result of the regulations is that:
“quite a few families with expensive job-based health insurance may be ineligible for federal subsidies to help them buy cheaper coverage through new online insurance markets.”

The new rules – which can be found here and here – interpret the part of the Affordable Care Act (ACA) that makes an individual or family ineligible for subsidized exchange coverage if they have an offer of “affordable” employer-sponsored insurance (ESI). The ACA says coverage is affordable if the premiums cost less than 9.5% of household income, but the statute doesn’t make it clear whether that standard should be based on an employee’s share of the premiums for individual coverage or for covering the employee’s full family.

The Treasury Dept. stuck with its preliminary interpretation that ESI offered to an employee is affordable based on the premium cost for covering the employee, regardless of whether the added cost of covering a spouse and/or children would push the employee share above the 9.5% standard.

The reasons cited for the decision are primarily legal arguments, but it also seems to have been driven by cost considerations and by some of the early Congressional Budget Office assumptions about the intent.  Although the outcome doesn’t come as a shock, this interpretation is extremely disappointing.  “It doesn’t make sense to test the affordability of children’s coverage by looking at the cost of covering one person, the employee,” said Joe Touschner, senior health policy analyst at Georgetown University’s Center for Children and Families.

I think the new rule’s most significant effect in Wisconsin is to hold down the number of adults who are able to use the exchange to purchase health insurance. For some childless adults, their only option will be the ESI coverage offered to a spouse, which may continue to be out of their reach financially. In light of the rule, it will be all more important to take advantage of the ACA option to close the current gap in BadgerCare coverage, and also extremely important to preserve existing eligibility standards for parents.

In our state, the negative effect on children will be mitigated by the fact that BadgerCare provides subsidized coverage to kids up to 300% of the federal poverty level, and unsubsidized coverage for kids in families with higher incomes.  The ACA’s maintenance of effort (MOE) provisions require states to continue their current eligibility standards for children until 2019.  However, because the new regulations limit the number of kids who will qualify for subsidized exchange coverage, it becomes even more important now for Congress to preserve the MOE provisions of the law and reauthorize the Children’s Health Insurance Program (CHIP), which provides a key part of the financing for public coverage of kids.

A broader summary of the new regulations, including provisions relating to the exceptions to the individual mandate in the ACA, can be found in this Wall Street Journal article.

Jon Peacock

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