Proposed CMS Rule Could Reduce Number of Premium Tax Credits
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The Centers for Medicare and Medicaid (CMS) has proposed a rule that would ensure that the agency doesn’t wrongfully provide health insurance subsidies, or Premium Tax Credits (PTCs) to ineligible individuals.
The rule, known as the Proposed 2021 Payment Notice would update regulatory and financial standards applied to issuers and Exchanges, as well as set parameters for the risk adjustment program, according to an official announcement by CMS.
CMS stated the following regarding the Proposed 2021 Payment Notice:
● Periodic data matching standards would be amended to help ensure premium subsidies are not inappropriately paid to enrollees who are determined to be deceased, or dually eligible for Medicare.
● States would also be required to annually notify CMS of any state-required benefit mandates for which the Affordable Care Act (ACA) requires states to pay certain costs. There has been limited information collected on such mandates, which has created a potential risk where taxpayers and consumers may inappropriately be footing the bill for such mandates.
● Furthermore, CMS solicits public comment on new automatic re-enrollment processes for enrollees whose share of the premium after applying premium subsidies is $0, in order to reduce the risk of incorrect expenditures on subsidies that cannot be recovered through reconciliation.
The last bullet is of particular importance. Essentially, CMS is seeking feedback regarding the decision to end automatic re-enrollment for low-income exchange enrollees who receive $0 premium plans with tax credits, according to a post by Modern Healthcare. “That change would reduce the risk that ineligible enrollees receive federal subsidies,” the CMS said.
Employers should note however that this move to reduce the number of individuals receiving Premium Tax Credits may not impact the way the IRS identifies ACA non-compliance of the Employer Mandate. The rule would impact individuals whose premium subsidy contribution is $0. Individuals who provide hours of service for their employer would pay a higher contribution and therefore would be unaffected by the proposed rule.
As a reminder, the current process for identifying employers that failed to comply with the ACA’s Employer Mandate is when an ACA full-time employees receives a Premium Tax Credit from the state or federal health exchange.
As a reminder to employers in conjunction with the Employer Shared Responsibility Payment (ESRP), the ACA’s 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 (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV) and is Affordable for the employee or be subject to Internal Revenue Code (IRC) Section 4980H penalties.
Employers should note that the responsibility falls on your shoulders to explain why an employee was not eligible for a Premium Tax Credit. The IRS is issuing Letter 226J penalty assessments for the 2017 tax year to employers identified as having failed to comply with the ACA’s Employer Mandate.
Elect to undergo an ACA Penalty Risk Assessment to learn your potential IRS penalty exposure.
We’re committed to helping companies reduce risk, avoid penalties, and achieve 100% ACA compliance. For questions about the ACA contact us here.
