The Administration is asking LeBron James and players from the NFL to help sell the Affordable Care Act to young, healthy Americans. The more young, healthy people who sign up for coverage in the new health insurance exchanges, the more sustainable the exchanges and the more affordable the insurance. So why then has the Administration just made a decision that could inhibit a significant number of young people from accessing exchange coverage?
Here’s what happened. This week the Administration, through a U.S. Department of Health and Human Services (HHS) final regulation and Department of Treasury guidance, concluded that if a student is enrolled in a college- or university-sponsored self-funded health plan, he or she will not be eligible for premium tax credits on the health insurance exchanges, at least for 2014.
Specifically, the HHS regulation designates certain types of coverage as “minimal essential coverage” for purposes of the Affordable Care Act’s (ACA) individual responsibility requirement. As folks undoubtedly remember from that Supreme Court case decided last June, Americans are required to maintain health insurance that meets minimum coverage standards or make a “shared responsibility” payment on their tax returns. HHS has the responsibility for defining what it means to maintain minimum coverage (MEC), which they did in this final rule.
When HHS released its proposed rule earlier this year, consumer and youth advocates were particularly concerned about a provision deeming self-insured student health plans as MEC. While students enrolled in such plans should not suffer penalties for not meeting the ACA’s individual responsibility requirement, they rightfully pointed out that the proposed rule exposed young people to plans that are essentially unregulated and are often very skimpy. For example, many impose annual and lifetime dollar limits and prescription drug limits, don’t fully cover preventive care, and include pre-existing condition exclusions – the very same provisions that are now prohibited under the ACA.
We might not care if student health plans are skimpy. After all, minimal benefits help keep premiums low, and if a student wants more meaningful coverage, they could just shop for a plan on the exchange. But with yesterday’s Treasury Department decision, if they’re in a self-funded student plan, they’re barred from doing that. The Treasury Department has said that if self-funded student health plans are deemed MEC by HHS, anyone enrolled in that plan is not eligible for the premium tax credits on the exchanges. Under the ACA, individuals are only eligible for tax credits if they are not also eligible for MEC (although an exception is made for individual market coverage, which includes other types of student health plans).
There was good news out of the joint release yesterday. First, HHS has softened its initial stance: While the proposed rule deemed all self-insured student plans as MEC, the final rule only does so for 2014. In future years HHS requires them to apply for MEC recognition.
That’s an improvement, because any plan sponsor applying for MEC recognition has to show that the plan offers “substantially the same” consumer protections as those required of non-grandfathered individual market plans under the ACA. The rule doesn’t say this explicitly, but presumably it means that student plans will have to show such things as coverage of the essential health benefits (including prescription drug, maternity, and mental and substance abuse services) and preventive services without cost-sharing, and elimination of pre-existing condition exclusions and annual or lifetime dollar limits.
In addition, the Treasury Department could have said that mere access to a self-funded student plan bars a student from eligibility for tax credits in the exchanges. Instead, the rule only applies if the student is enrolled in the student plan. But what’s not clear from the guidance is whether a student who enrolls in their school’s plan in August or September (and enrollment in student insurance can often be a condition of matriculation) can drop their student coverage mid-year and switch to an exchange plan.*
Hopefully, students who might be encouraged by LeBron or RGIII to sign up for exchange coverage will be allowed to switch from a sub-par college plan to an exchange plan if they wish, but more clarity from HHS and Treasury would be helpful.
*Students should check university and state Medicaid eligibility rules to see if they can enroll in Medicaid.