Independent Health is closely following plans by the Trump Administration and Congress to address the future of the Affordable Care Act (ACA) and will keep our customers up-to-date on developments. We provide this latest overview in our occasional series of ACA updates.

March 3, 2017 Update:
HHS Market Stabilization Proposed Rule Released

american flag with stethoscope in foreground

Recent Activity
In his address to a joint session of Congress on February 28, President Trump restated his commitment to repeal and replace the Affordable Care Act. He outlined four principles that should guide the creation of a new health care system:

  • Ensure that people with pre-existing conditions have access to coverage and have a smooth transition for those currently enrolled in Health Exchanges.
  • Assist people with purchasing their own coverage through tax credits and expansion of Health Savings Accounts.
  • Give states the resources and flexibility with respect to Medicaid.
  • Implement legal reforms that protect patients and physicians from unnecessary costs that drive insurance price hikes, and address rising pharmacy costs.

On February 17, 2017, the Department of Health and Human Services (HHS) published a proposed rule in the Federal Register intended to improve the stability of the individual and small group markets. The proposed rule addresses several mechanisms toward stabilizing the individual and small group markets:

  • Open Enrollment: A shortened Open Enrollment period from November 1 to December 15. Currently, open enrollment periods take place on November 1 until January 31.
  • Special Enrollment Period: Increase in the pre-enrollment verification of eligibility for all categories of special enrollment periods, from 50 percent to 100 percent of new consumers seeking to enroll outside of the open enrollment period.
  • Product Design and Actuarial Value: Greater flexibility to both the states and health plans in designing products, including greater ranges in actuarial value requirements for certain metal tiers.
  • Guaranteed Availability: The ability for health plans to require past due payments of premiums from consumers before issuing a new policy.

While this proposed rule is a first step in recognizing the need to stabilize the market during ACA transition, there are still more areas that need to be addressed, including risk adjustment payments for high-cost plan members, resolving the cost-sharing reduction payment issue, and establishing incentives and/or penalties to ensure continuous coverage.

Following a public comment period that ends March 7, a final rule will be issued.

ACA Provision Review
As President Trump’s administration and Congress consider alternatives, proposals to replace the ACA will have to address key components, such as:

Each issue of the ACA Update will revisit a key provision from the ACA that will likely be repealed as part of the process to replace the ACA. This Update covers taxes and penalties.

Taxes and Penalties
The ACA included taxes and penalties to pay for the cost of the ACA’s coverage expansion, including premium subsidies for individuals who qualify. Estimated tax and penalty revenues are in the chart below.

Tax/Penalty Estimated Tax & Penalty Revenue Over 10 Years
3.8% tax on investment income over $200,000 for individuals or $250,000 for couples $223 billion
Tax penalty on larger employers that do not provide health insurance to workers $178 billion
Annual fee on health insurance companies $130 billion
0.9% Medicare surtax on income over $200,00 for individuals and $250,000 for couples $123 billion
“Cadillac” tax on value of high-cost employer provided health insurance. (Postponed until 2020; revenue may differ). $79 billion
Deductibility of medical costs exceeding 10% of people’s income, raised from prior 7.5% threshold $40 billion
Tax penalty on individuals who don’t obtain health insurance (individual mandate penalty) $38 billion
Annual fee on manufacturers and importers of some medical devices, such as artificial joints, radiation therapy machines, etc). $20 billion
Annual fee on manufacturers and importers of prescription drugs $30 billion
$2,500 annual limit on employee contributions to flexible spending accounts for medical costs (cap grows with inflation) $32 billion
10% tax on indoor tanning services $800 billion
Total Estimated Revenue $893 billion
Although the ACA expanded coverage to more than 20 million Americans, it requires revenue through additional taxes and penalties to fund this expanded coverage. As rising health care costs and the affordability of the law remain as concerns, Independent Health will continue to focus on initiatives and programs aimed at offering quality, accessible and affordable coverage.