CMS has adopted the proposed rules for QHP renewal and redetermination of premium tax credits published with very few changes. As I wrote in this blog, the good news is that the final rules provide an opportunity for consumers to be automatically re-enrolled in the same or a similar plan without taking action. The downside is that the renewal is based on the consumer’s 2014 premium tax credit using the 2013 federal poverty thresholds.
Consumer advocates were particularly concerned about the proposed hierarchy to guide issuers in substituting a similar plan or product at renewal if the enrollee’s current plan is no longer being offered. The hierarchy remains but CMS removed the final provision that would have potentially moved someone from a marketplace plan to a plan outside the marketplace, where premium tax credits are not available.
So why are we concerned about automatic renewals? First, it’s important to acknowledge that keeping people enrolled is a great goal. Allowing automatic renewal without requiring the consumer to take specific action should contribute to coverage retention. If the same plan that the consumer is enrolled in and is happy with remains available, automatic renewal can be quite helpful.
Here’s the “but” – there are many components in determining eligibility for financial assistance. If consumers don’t contact the marketplace, their eligibility for premium tax credits and cost sharing reductions will be exactly the same as 2014, despite the fact that the federal poverty levels (FPL) have been updated, and the possibility, or even likelihood, that the benchmark plan and/or an enrollee’s income may have changed.
Why is it important for consumers to contact the marketplace update their eligibility for financial assistance?
1) Federal Poverty Level Update: For 2015 coverage, eligibility for financial assistance should be based on the 2014 FPL. However, unless enrollees contact the marketplace to update their eligibility, their financial assistance will be based on the 2013 FPL. Although the difference in the FPL between 2013 and 2014 is small and will have only a modest impact on premium tax credits, even slight differences can mean lower cost-sharing for consumers whose income based on the 2013 FPL was just over the cusp of one of the three cost sharing reduction levels. Consider the family of four with household income of $47,500, which is $400 over 200 percent of the 2013 FPL but $200 under the same level based on the 2014 FPL. For the current year, this family would have qualified for a plan that covers 73 percent of average costs but for next year, they would be eligible for a plan that covers 87 percent of average costs. If they don’t contact the marketplace, this change won’t take effect.
2) Changes in Income: Low-income families have frequent fluctuations in income and any income change, up or down, will affect the level of premium tax credit although it may be minimal. But even a small income decrease could mean lower cost sharing, which can be significant for these families as noted in the example above.
3) Silver Benchmark Plan: Premium tax credits are determined by subtracting the premium contribution an individual or family is expected to pay (based on a sliding percentage of income) from the cost of the silver benchmark plan (which is the second lowest cost silver plan available). If the 2015 silver benchmark plan costs more than the 2014 plan, the consumer could qualify for a larger premium tax credit (and vice versa). Conversely, if the 2015 benchmark plan costs less than 2014, the consumer could be faced with repaying excess premium tax credits when they file their 2015 taxes.
4) Plan Choice: There may be new, better and/or lower-priced plans available to consumers depending on their specific needs and preferences. Without returning to the marketplace to review plan choices, consumers may not be getting the best value or the best coverage for their families.
I appreciate that CMS is “putting in place the simplest path for consumers this year to renew their coverage,” (according to Andy Slavitt, CMS’ new principle deputy administrator). But to emphasize that people can renew by doing “absolutely nothing” is the wrong message for the 85 percent of enrollees who are receiving financial assistance. For the 2015 plan year, it may have been unrealistic for CMS to fully develop a renewal mechanism that would automatically re-determine financial eligibility, and even risky to launch a less than perfect technology solution. But it is only fair to make it clear that enrollees must contact the marketplace in order to get the most accurate assessment of premium tax credits and cost sharing for the upcoming year. It’s a shame to send mixed messages to enrollees, but that’s likely to happen if on one hand the message is “do nothing to renew” and on the other hand, consumers are encouraged to “update their eligibility”.