HHS Issues Proposed Rule On Determination Of Individuals’ Eligibility For Exemption From ACA’s Shared Responsibility Payment

The Department of Health and Human Services (HHS) has issued a proposed rule to implement certain functions of the Affordable Insurance Exchanges (Exchanges), including determining eligibility for, and granting certificates of exemption from, the shared responsibility payment for not maintaining minimum essential coverage under Code Sec. 5000A. The proposed rule was published in the February 1 Federal Register.

The proposed rule also implements the responsibility of the HHS Secretary, in coordination with the Secretary of the Treasury, to designate other health benefits coverage as minimum essential coverage by providing that certain coverage be designated as minimum essential coverage. It also outlines substantive and procedural requirements that other types of individual coverage must fulfill in order to be certified as minimum essential coverage under the Internal Revenue Code.

Background. The Patient Protection and Affordable Care Act (ACA) requires a nonexempt individual to maintain minimum essential coverage or make a shared responsibility payment. The ACA specifies the categories of individuals who are eligible to receive exemptions from the shared responsibility payment under Code Sec. 5000A, which provides nonexempt individuals with a choice: maintain minimum essential coverage for themselves and any nonexempt family members or include an additional payment with their federal income tax return.

Many individuals are exempt from the shared responsibility payment, including some whose religious beliefs conflict with acceptance of the benefits of private or public insurance and those who do not have an affordable health insurance coverage option available. ACA Sec. 1311(d)(4)(H) directs the Exchanges to issue certifications of exemption from the shared responsibility payment to eligible individuals. ACA Sec. 1411 generally provides procedures for determining an individual’s eligibility for various benefits relating to health coverage, including exemptions from the application of Code Sec. 5000A.

Eligibility standards for exemptions. Code Sec. 5000A provides nine categories of exemptions. Under the proposed rule, Exchanges would issue certificates of exemption in five categories. In the four remaining exemption categories, Exchanges would not issue certifications; the determination of whether an individual is eligible for an exemption in those categories would be made exclusively by the IRS through the tax filing process.

The proposed rule provides that Exchanges would determine an applicant eligible for an exemption where he or she is:

1) a member of a recognized religious sect or division;
2) a member of a health care sharing ministry;
3) confined in a jail, prison, or similar penal institution or correctional facility;
4) a member of an Indian tribe; or
5) experiencing a specified hardship.

Eligibility process for exemptions. Exchanges would be required to use an application established by HHS to collect information necessary for determining eligibility for and granting certificates of exemption. In addition, Exchanges would be required to provide timely written notice to an applicant of any eligibility determination.

Verification process related to eligibility for exemptions. The proposed rule also addresses the verification process related to eligibility for exemptions. Exchanges would undertake a series of steps designed to assemble the information needed to determine an applicant’s eligibility for the exemption for which he or she applied. In addition, the rule provides procedures for the Exchange to follow in the event they are unable to verify information necessary to make an eligibility determination for an exemption.

Other coverage that qualifies as minimum essential coverage. The proposed rule provides that the following types of coverage are designated as minimum essential coverage:

1) self-funded student health coverage;
2) foreign health coverage;
3) refugee medical assistance supported by the Administration for Children and Families;
4) Medicare advantage plans;
5) state high risk pool coverage; and
6) coverage for AmeriCorp volunteers.

In addition, the HHS may recognize other types of coverage, which are not on the above list, as minimum essential coverage provided that HHS determines the coverage meets certain substantive and procedural requirements.

Comments. Comments are due 45 days after date of publication (Feb. 1, 2013) in the Federal Register. In commenting, refer to file code CMS-9958-P. Electronic comments can be sent via http://www.regulations.gov and written comments can be sent to Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9958-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

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