Home Affordable Care Act ACA Funding Freeze Won’t Impact the ACA’s Employer Mandate

ACA Funding Freeze Won’t Impact the ACA’s Employer Mandate

3 minute read
by Robert Sheen

2 minute read:

The Trump administration has said it would temporarily freeze funding for the “risk adjustment” program under the Affordable Care Act (ACA) because of conflicting court rulings, but a temporary fix may be in the works.

The risk adjustment program takes health insurance payments from healthy enrollees and gives it to insurers to help offset the costs for the individuals with chronic illnesses, pre-existing conditions, and overall poorer health. The freeze could result in serious long-term consequences for the health insurance landscape.

The Centers of Medicare and Medicaid Services (CMS) sent an interim final rule to the U.S. Office of Management and Budget (OMB) last week in an effort to restart the payments. Bloomberg reported that the interim final rule, titled “Ratification and Reissuance of the Methodology for the HHS-operated Permanent Risk Adjustment Program under the Patient Protection and Affordable Care Act,” could go into effect once it is reviewed by OMB.

In a press release, the Centers for Medicare and Medicaid Services had said the funding was on hold because of a U.S. District court decision in New Mexico that invalidated the formula for calculating the risk adjustment payments, arguing that the funding formula was “arbitrary and capricious.” Earlier in the year, the U.S. District Court for the District of Massachusetts had ruled that CMS acted within its authority in promulgating the HHS-operated risk adjustment methodology based on the statewide average premium.

The court cases had been initiated by lawsuits filed in July 2016 by healthcare providers in those states. The healthcare provider that filed the lawsuit in Massachusetts, Minuteman Health, ceased operations at the end of 2017. According to information provided on Mass.gov, the non-profit healthcare organization had experienced adverse results for some time, primarily due to significant start-up costs and risk adjustment obligations. Minuteman Health, which offered plans in Massachusetts in 2014, and in both Massachusetts and New Hampshire from 2015 to 2017, was required under U.S. Department of Health and Human Services and Massachusetts regulations to pay 71% of its gross premium revenues to the implement the ACA’s risk adjustment program. In 2015, it was required to pay 40% of its New Hampshire revenues and 39% of its Massachusetts revenues.

The freeze could halt payments and collections totaling roughly $10.4 billion from being issued to insurers. With over 10 million individuals covered by the state and federal health exchanges, an extended payment freeze could cause uncertainty in the health insurance ecosystem. Larry Levitt, a VP at the Kaiser Family Foundation, told NPR, “insurers hate uncertainty and, when faced with it, tend to raise premiums to hedge their bets.”

Scott Serota, President of the Blue Cross Blue Shield Association, told the AP that the funding freeze, “will significantly increase 2019 premiums for millions of individuals and small business owners and could result in far fewer health plan choices… It will undermine Americans’ access to affordable coverage, particularly those who need medical care the most.”

A component of the ACA that remains unmentioned through the ongoing political discourse around the ACA, however, is the employer shared responsibility payment (ESRP) provision commonly referred to as the employer mandate.

Under the employer mandate, applicable large employers (ALEs), organizations with 50 or more full-time employees and full-time equivalent employees, are required to offer minimum essential coverage to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets minimum value and is affordable for the employee or be subject to IRS 4980H penalties.

Employers anticipating a repeal of the law should reconsider their position as the ACA is here to stay.

Failing to comply with the ACA’s employer mandate can result in penalties in IRS Letter 226J. For the 2015 year, to date, more than 30,000 penalty notices have been issued representing penalty assessments of $4.4 billion.

If your organization has received Letter 226J, see the infographic on how to respond.

We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.

Summary
ACA Funding Freeze Won’t Impact the ACA’s Employer Mandate
Article Name
ACA Funding Freeze Won’t Impact the ACA’s Employer Mandate
Description
The Trump administration’s decision to freeze funding for the ACA’s risk adjustment program will not affect the employer mandate.
Author
Publisher Name
The ACA Times
Publisher Logo
Short URL of this page: https://acatimes.com/ubn
Related posts

Brought to you by Trusaic

Featured In

© 2022 Copyright Trusaic – All Rights reserved.