HealthCare.gov Updates: Automatic Rescue Plan Subsidies, No Eligibility Bar For Failure To Repay Excess Credits

As we near the end of the Biden administration’s broad COVID-19 special enrollment period (SEP) on August 15, 2021, the Centers for Medicare and Medicaid Services (CMS) continues to roll out additional changes for HealthCare.gov. This includes automatic premium tax credit increases for certain enrollees under the American Rescue Plan Act, changes to the current “failure to reconcile” policy, and updates to Medicaid eligibility for migrants under the Compact of Free Association (COFA). Federal officials have also released several new analyses of coverage trends for historically underserved communities.

Automatic Premium Tax Credit Increases For Current Enrollees

CMS officials have been busy with the six-month broad COVID-19 SEP that began on February 15 and will end on August 15, as well as implementation of enhanced premium tax credits under the American Rescue Plan Act (ARPA). Enhanced subsidies for those who have received or been approved to receive unemployment compensation went live on July 1, 2021, while two subsidy enhancements—new subsidies for higher-income people who did not previously qualify and increased subsidies for lower-income people who already qualified—went live on April 1, 2021. All three of the subsidies are temporary: maximal subsidies for those who receive unemployment compensation are in place for 2021 only; the other two enhancements will remain available through 2022 (i.e., expiring in 2023).

CMS previously opted against automatically applying the enhanced premium tax credits to current enrollees’ 2021 premiums (as many state-based marketplaces chose to do). Instead, CMS encouraged current enrollees to return to HealthCare.gov to “claim” their enhanced premium tax credit and choose whether to apply the savings to their current coverage or change plans. Those that did not return to HealthCare.gov would not lose this benefit, but they would have to wait until tax time in 2022 to receive the enhanced premium tax credit (as opposed to seeing lower premiums in 2021). Even in declining to apply savings automatically, federal officials left open the possibility that this could change, noting in March 2021 that CMS is “exploring whether tax credits can be updated on behalf of consumers during 2021.”

That brings us to an announcement made in July 2021, when CMS changed course. Beginning in early August, CMS will automatically apply enhanced subsidies for current enrollees who have not yet updated their application. This automatic update will become effective on September 1, meaning millions of consumers will see lower premiums without taking any action at all. Although the numbers may be different now based on changes to effectuated enrollment, more than 7.2 million of the 8.3 million individuals who enrolled through HealthCare.gov during the 2021 open enrollment period qualified for premium tax credits. In the most recent SEP enrollment snapshot, fewer than half—about 2.5 million current enrollees—had returned to HealthCare.gov to “claim” enhanced subsidies, meaning several million people could be affected by the automatic shift.

CMS adopts this policy to ensure that as many consumers as possible can benefit from enhanced subsidies during the 2021 coverage year. This change was announced alongside CMS’s “summer sprint to coverage” campaign for the end of the SEP. This campaign involves a media and advertising push to ensure that people are aware of their coverage options and the availability of the SEP.

The Details

Based on materials posted at RegTap, this update will take place during a batch redetermination process and includes several caveats. First, HealthCare.gov will rely on the information previously submitted by the consumer, such as income and family size. If there have been changes to, say, income, consumers should report this data to the marketplace to ensure that they receive the appropriate amount of advance premium tax credit (and thus do not owe additional money at tax time). Second, affected enrollees can still return to HealthCare.gov and update the amount of advance premium tax credit that they choose to apply towards their coverage. This flexibility already exists and will remain under this automatic new policy.

Third, CMS will not automatically apply cost-sharing reduction benefits for those who received or are eligible to receive unemployment compensation for 2021. These individuals qualify for maximal subsidies under the American Rescue Plan Act, including the highest level of cost-sharing reductions. But this change will not be made automatically. For this group, CMS encourages consumers to return to HealthCare.gov to update their application and receive this benefit. CMS may be hesitant to apply this change automatically because eligible consumers may not be currently enrolled in a silver plan.

HealthCare.gov will notify consumers of the overall policy change. Those who currently receive advance premium tax credits but have not yet updated their information will be notified by the marketplace in advance of the process noted above, with the goal of encouraging these consumers to return to HealthCare.gov to update their application and enrollment. Ideally, these notices will arrive before the August 15 deadline for the SEP to ensure that individuals can, if they would like to, still switch plans. Enrollees will also be notified after the batch redetermination process occurs through an updated eligibility determination notice and an advance premium tax credit expansion reenrollment message.

Insurers that already set September bills should update those bills accordingly, and CMS urges direct enrollment partners to access API information to ensure that those platforms reflect correct financial amounts for enrollees.

Failure To Reconcile Policy Suspended For 2021 And 2022

On July 23, CMS, in coordination with the Internal Revenue Service (IRS), announced that it will not enforce the “failure to reconcile” policy for plan years 2021 and 2022. The “failure to reconcile” requirement is related to the premium tax credit reconciliation requirement, which was most recently discussed when Congress waived this requirement for 2020. As a result, taxpayers did not need to reconcile and repay excess premium tax credits at tax time in 2021. In waiving this requirement, Congress recognized the need to hold consumers who received ACA subsidies harmless from income fluctuations during the pandemic.

Congress did not, however, explicitly address the “failure to reconcile” policy adopted by CMS. Under the current policy, an individual that fails to file their tax return and reconcile the amount received in advance premium tax credit is barred from receiving further advance premium tax credits (i.e., for a subsequent plan year). Thus, an individual’s “failure to reconcile” bars them from receiving advance premium subsidies, leaving them responsible for the full cost of premiums until after the completion of the (often complex) reconciliation and appeals process.

This policy was challenging under normal circumstances. Although limited data is available, CMS previously estimated that the failure to reconcile policy led to advance premium tax credit discontinuation for 40 percent of households that were notified of the need to take action to maintain their eligibility. And estimates from former Obama administration officials suggest that a change to the failure to reconcile policy to eliminate certain notice requirements could deprive up to 800,000 eligible individuals of advance premium tax credits.

To avoid these consequences—and in light of the pandemic, the American Rescue Plan Act, and delays in processing federal tax returns—CMS announced that it will not act on IRS data that shows that a consumer failed to file their tax return and reconcile a prior year’s payment of advance premium tax credit. As such, consumers should not lose their eligibility for premium tax credits because of their tax filing status from 2021 and 2022. CMS repeatedly implores enrollees to file their federal tax return and reconcile any past advance premium tax credits (and confirms that this requirement remains in place), but these consumers will no longer lose access to future subsidies for not doing so.

The Details

This policy applies to all marketplaces, including state-based marketplaces, although the guidance itself lays out additional details only for the federal marketplace (with less indication for how state-based marketplaces should implement the change).

For the federal marketplace, CMS will not undertake a filing/reconciliation recheck for those who enrolled during the 2021 open enrollment period. This is true even though CMS previously notified the consumer that it would recheck their status later in 2021. CMS does not intend to notify consumers about this change since there is no action for the consumer to take. As a result (and subject to the caveat below), consumers should not lose eligibility for advance premium tax credits during 2021 as a result of failing to file/reconcile.

The same will be true for the 2022 plan year. CMS will not bar consumers from advance premium tax credit because they did not file and reconcile for 2020. This makes sense because consumers were not required to reconcile under the American Rescue Plan Act. CMS also will not send open enrollment notices or direct warning notices to alert consumers to any filing/reconciliation requirements for 2022 nor will it run a filing/reconciliation recheck.

But one important caveat could cause confusion and have negative implications for enrollees. Under the guidance, enrollees must still attest to having filed and reconciled when updating or completing their marketplace application. This includes enrollees who are updating their information to claim enhanced subsidies under the American Rescue Plan Act. Those that fail to check this attestation box on the application (which says “Yes, I reconciled premium tax credits for past years”) still inexplicably risk losing their eligibility for advance premium tax credits for 2021 coverage. CMS reasons that it was still a requirement to file/reconcile for the 2019 tax year and consumers should have done this, but this could be a point of confusion.

The notice does not, of course, change the underlying failure to reconcile policy, which is codified in federal regulations. If the Biden administration wants to make permanent changes to this policy, this must be done through notice and comment rulemaking procedures.

As of late June 2021, CMS updated the federal marketplace to correctly determine Medicaid eligibility for migrants under the COFA. Doing so was critical to ensuring that this newly eligible population has access to the coverage and care they need.

COFA migrants are generally citizens of the Marshall Islands, Federated States of Micronesia, and Republic of Palau who are lawfully residing in one of the U.S. states or territories. These individuals were previously barred from Medicaid coverage under federal law, but Congress restored access their to the Medicaid program in the December 2020 budget/pandemic relief bill. (Dan Diamond has an excellent summary of this history, the need for the change, and the policy adopted by Congress.) Under the new law, COFA migrants are now considered qualified non-citizens for the purpose of Medicaid eligibility and thus are not subject to the five-year bar to enroll in Medicaid coverage. As a result, those who are otherwise eligible for Medicaid coverage can enroll.

To correctly determine Medicaid eligibility for COFA migrants, the federal marketplace needed to update its system and did so as of late June. Now, when an eligible COFA migrant submits their application through the federal marketplace, they will be identified as a qualified non-citizen for purposes of Medicaid eligibility. In July, CMS sent notices to individuals who may be eligible for Medicaid under this change.

Separately, CMS issued an information bulletin to state Medicaid and CHIP programs to reaffirm that the public charge rule is no longer in effect and encourage states to inform eligible communities about the availability of these benefits. Under the guidance now in place (from 1999), accessing Medicaid benefits usually has no bearing on an individual’s immigration status. The bulletin also reminds state officials of the safeguards that are in place to protect applicant and beneficiary information from disclosure outside of the Medicaid context.

New Federal Data Resources

Last but not least, it is worth highlighting many of the coverage data resources being issued by the Office of the Assistant Secretary for Planning and Evaluation (ASPE) within the U.S. Department of Health and Human Services. In addition to general publications on the uninsured rate and eligibility for marketplace subsidies (many of which have been previously covered by Health Affairs Blog), ASPE recently issued several briefs on health coverage, access to care, and key challenges for historically underserved populations including American Indians and Alaska Natives, LGBTQ people, rural communities, and Asian Americans and Pacific Islanders.