As third open en­roll­ment ar­rives, the ACA en­ters its penalty phase

Modern Healthcare - - NEWS - By Bob Her­man

Dur­ing the first two open en­roll­ments un­der the fed­eral law to ex­pand health in­sur­ance na­tion­wide, the gov­ern­ment and health­care or­ga­ni­za­tions em­pha­sized the “car­rot” of the law by en­cour­ag­ing low­in­come and mid­dle-class Amer­i­cans to reap the ben­e­fits of heav­ily sub­si­dized health cov­er­age.

But as the Af­ford­able Care Act’s third open-en­roll­ment pe­riod be­gins Nov. 1, that mes­sage is shift­ing.

In­sur­ers, health­care providers, en­roll­ment groups and oth­ers are stress­ing that to avoid the in­di­vid­ual man­date’s in­creas­ing tax penalty, or the “stick” of the law, Amer­i­cans must have in­sur­ance. Hos­pi­tals have also ad­justed the el­i­gi­bil­ity cri­te­ria of their char­ity-care poli­cies to prod pa­tients to­ward the in­sur­ance mar­ket­places.

“It’s no se­cret that the low-hang­ing fruit has been picked in the first rounds of open en­roll­ment,” said Lance Lunsford, a vice pres­i­dent at the Texas Hospi­tal As­so­ci­a­tion. “Now it’s about choos­ing to pay that premium ver­sus pay­ing the penalty.”

The ACA’s tax penalty is mov­ing from “a pin prick to a base­ball bat,” over its first three years, said Mark Ciarami­taro, vice pres­i­dent of tax and health­care ser­vices at H&R Block. Next year, the fine will reach “batlevel” sta­tus.

Peo­ple who go with­out health in­sur­ance for most of cal­en­dar year 2016 will have to pay either 2.5% of their an­nual house­hold in­come, or a flat fee of $695 per adult and $347.50 per child, which­ever is higher. The most any house­hold will have to pay is the na­tional av­er­age premium for a bronze plan or $2,085.

For low- and mod­er­ate-in­come Amer­i­cans, that ACA tax could wipe out all or a siz­able por­tion of their tax re­fund when they file in 2017.

The prob­lem could rise to a crescendo this Fe­bru­ary. Peo­ple who don’t pur­chase cov­er­age for 2016 and didn’t buy it in 2015, face a “dou­ble whammy,” Ciarami­taro said. They will have to pay the penalty for 2015, and es­sen­tially will be locked into the penalty for 2016 since open en­roll­ment will be over. This as­sumes the CMS will not hold an­other spe­cial en­roll­ment pe­riod.

H&R Block and other or­ga­ni­za­tions are ramp­ing up their out­reach and ed­u­ca­tion ef­forts. More in­sur­ance agents and bro­kers look­ing for new cus­tomers will be avail­able to ex­plain the penal­ties, said Marcy Buck­ner, vice pres­i­dent of gov­ern­ment af­fairs at the Na­tional As­so­ci­a­tion of Health Un­der­writ­ers.

Hos­pi­tals will con­tinue to screen

pa­tients for their el­i­gi­bil­ity for Med­i­caid or an ex­change plan, us­ing their char­ity-care pro­grams as the con­duit. Last year, BJC Health­Care, a St. Louis-based sys­tem, low­ered the thresh­old of its char­ity-care pro­gram from 400% of the fed­eral poverty level to 300% in the hopes that more peo­ple would buy ex­change plans. Park­land Health & Hospi­tal Sys­tem in Dal­las changed its financial as­sis­tance pro­gram this year, al­low­ing the unin­sured and un­der­in­sured to lower their de­ductibles. But the pro­gram is capped at 200% of the poverty level.

Bob Reed, vice pres­i­dent of pa­tient ac­cess at Park­land Me­mo­rial Hospi­tal in Dal­las, added that his safety net sys­tem has an “ACA cen-

ter” with com­put­ers, phone lines and ap­pli­ca­tion coun­selors to help en­roll area res­i­dents, al­though many likely are el­i­gi­ble for Med­i­caid. He be­lieves com­mu­ni­cat­ing the penalty amount will mo­ti­vate those who live above the poverty level to seek cov­er­age.

Industry play­ers and ad­vo­cacy groups “cer­tainly are plan­ning to talk more about the penalty than they have in the pre­vi­ous two years,” said Ceci Con­nolly, man­ag­ing di­rec­tor of Price­wa­ter­house­Coop­ers’ Health Re­search In­sti­tute. “It be­comes more mean­ing­ful to peo­ple.”

But Con­nolly and oth­ers note that it’s un­clear if the penalty will ac­tu­ally hit ev­ery­one’s wallets enough to force them to change their be­hav­ior. Ap­prox­i­mately 10.5 mil­lion peo­ple are still el­i­gi­ble for ex­change cov­er­age, yet have sat on the side­lines for the first two years. And be­hav­ioral eco­nom­ics re­search shows most pro­cras­ti­na­tors might never get around to en­rolling be­cause the penalty will be in their rearview mir­rors.

“The as­sump­tion used to be that peo­ple act in the most log­i­cal man­ner,” said He­laine Fin­gold, a lawyer at Ep­stein Becker & Green who for­merly worked at the CMS’ Cen­ter for Con- sumer In­for­ma­tion and In­sur­ance Over­sight. “But I don’t think peo­ple al­ways take se­ri­ously the health risks and the need to stay healthy, along with the financial bur­den.”

The fed­eral gov­ern­ment, which has reaped $1.5 bil­lion in penal­ties to date, out­lined very mod­est sign-up goals for next year.

HHS Sec­re­tary Sylvia Mathews Bur­well pre­dicts there will be 10 mil­lion fully pay­ing ex­change cus­tomers by the end of 2016, only about 1 mil­lion more than what’s ex­pected by the end of 2015. Bur­well called the 10 mil­lion fig­ure a “re­al­is­tic goal,” but it’s also a clear sign that reach­ing the re­main­ing unin­sured will be an in­creas­ingly dif­fi­cult task. The agency, which al­lo­cated fewer dol­lars to en­roll­ment ef­forts this time, is push­ing for more tar­geted cam­paigns in Chicago, Dal­las, Hous­ton, Mi­ami and north­ern New Jer­sey.

Most of those who are el­i­gi­ble for ex­change cov­er­age but haven’t yet signed up are the much-de­sired “young in­vin­ci­bles” who gen­er­ally are health­ier and don’t cost a lot to cover. And most in that cat­e­gory don’t make a lot of money, ac­cord­ing to HHS data. Nearly half of the 10.5 mil­lion el­i­gi­ble unin­sured peo­ple are be­tween ages 18 and 34. Roughly 78% of that group makes less than 400% of the fed­eral poverty level, mean­ing they can get premium sub­si­dies. About 48% make less than 250% of poverty and are there­fore el­i­gi­ble for the lesser-known cost-shar­ing sub­si­dies, which sub­stan­tially lower de­ductibles and other out-of-pocket costs.

Brian Eck, di­rec­tor of sales at UCare Min­nesota, an in­surer that sells ex­change plans, be­lieves the tax penalty will help drive peo­ple to buy in­sur­ance, al­though he ad­mits that “ev­ery­body is still look­ing for what is go­ing to move the younger pop­u­la­tion.”

UCare plans to work with its state­based ex­change and seek a pres­ence in the com­mu­nity to ed­u­cate po­ten­tial mem­bers about plan op­tions, as well as the penal­ties they can ex­pect if they con­tinue to opt out.

“I don’t know if there are a lot of ex­cuses for folks to say they don’t know this is pos­si­ble,” Eck said.

Ap­prox­i­mately10.5 mil­lion peo­ple are still el­i­gi­ble for ex­change cov­er­age, yet have sat on the side­lines for the first two years.

The MN­sure health ex­change is braced for a flood of new cus­tomers when open en­roll­ment be­gins Nov. 1, adding more call cen­ter staff to han­dle the load.

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