PPACA FAQ: Everything we knew is wrong.

(Cross posted at Corrente)

Lambert and I are taking our PPACA FAQ project seriously – but, it’s pretty difficult in the face of the obvious lack of commitment by the Obama Administration.

I cannot imagine the frustration suffered by the programmers implementing the inner-workings of the Health Care Exchange Marketplace — or whatever it’s supposed to be called this week. Just trying to write a PPACA FAQ post every week is a bizarre-other-worldly experience.

And it’s no wonder. The answers weren’t (publicly) available: it wasn’t until Friday July 5 (!!) that The IRS released their 600+ Final Regulations regarding a huge range of outstanding PPACA/ObamaCare issues.

But, were they privately available to ObamaCare system planners and developers?

Megan McArdle has this to say (link to Must Read Corrente post, ObamaCare Clusterfuck: How bad is it? Megan McArdle gets it right on the exchanges, with more detail):

One of two things must be true: the administration knew this was necessary long ago, but concealed it from the public and the congress in order to limit the time they had to react; or the administration is so incredibly inept that it has only just now realized that it wasn’t going to be able to handle any of the complicated bits. Either way, why would we assume that anything else they say about the systems–like, “It’ll be ready next year”–is true? Indeed, why should we assume that this is the last such revelation? (emphasis mine – kb)

Our ignorance on which isn’t a simple issue of poor reporting or lack of Congressional oversite. Here’s Kathleen Sebelius lying to Congress last April:

ObamaCare Clusterfuck: Sibelius says Federal “data hub” for exchanges is “built and paid for”

The Hill:

Sibelius said Friday that the $1.5 billion would help her department with information technology projects, including the data hub that exchanges will use to retrieve information from other state and federal agencies

“That’s really to get the IT hub, the call center, the IT up and running,” she said.

But later in the same series of questions, Sebelius said the data hub is nearly finished.

“The hub is basically built and paid for,” she said.

Except that 34 states haven’t connected to it.

As if that’s not bad enough, read this incredible bit of information at the top of The Hill’s story:

The Health and Human Services Department will meet its central ObamaCare deadline and does not need a backup plan for delays, HHS Secretary Kathleen Sebelius said Friday.

Sebelius told the House Ways and Means Committee that a federally run insurance exchange will be up and running by Oct. 1.

“No,” Sebelius said when asked whether there’s a backup plan in case that deadline slips. “We are determined and on track to meet the Oct. 1 deadline.” (emphasis mine – kb)

(Except there’s always a backup plan, isn’t there?)

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I have to take a break here to say that this implementation issue is not a trivial thing. Many, many, many people are counting on it. They expect to have access to health insurance and for that health insurance to give them access to actual health care. I repeat: This is not trivial. It is not a game.

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So, at the end of April, Sebelius is totally in control — everything is on schedule and there are no problems on the horizon. Bolstering that status, this post appeared in The Healthcare Marketplace and Policy Review with encouraging news about the Maryland Exchange:

Will the Affordable Care Act’s Health Insurance Exchanges Be Ready On Time? The Obama Administration’s Top Secret Enterprise

Last week, I received my weekly email update from the Maryland health insurance exchange:

Maryland Health Connection completed its Final Detailed Design Review (FDDR) live system demo on Thursday, May 30. The FDDR is a federal stage-gate required of all state-based exchanges. Maryland Health Connection successfully demonstrated end-to-end enrollment of a split family scenario including user log in, eligibility determination, real-time data verification through the Federal Data Services Hub, enrollment into plans, payment and file generation to be sent to an insurance carrier. This major information technology milestone received high marks by federal partners. We will continue with development of Maryland Health Connection over the next several weeks and begin user acceptance testing in July.

This report tells us a few things.

First, the Maryland health insurance exchange is on track to launch on time and ready to serve all comers. I continue to be impressed by how well this state-run health insurance exchange is working toward implementing the Affordable Care Act (“ObamaCare”) on October 1, 2013.

Second, apparently the Federal Data Hub is up and running. While that is what the Obama administration has been telling us, it has been hard to find anyone who has actually seen it or used it.

Third, Maryland has its system ready to exchange eligibility and premium information with the health insurance plans––perhaps the biggest challenge the new exchanges, state or federal, face.

Can any of that be true? I honestly don’t know what to make of it.

Checking back at The Healthcare Marketplace and Policy Review there IS a post about the “Final Regulations” but there is no mention of the previous post about the Maryland Exchange and their ability to interact successfully with the (mythical?) Federal Data Hub.

Except for the disappointment of not addressing the mystery of the Maryland Exchange, this story is outstanding in a number of ways.  But my favorite part is when the author describes the frustration of the consumer who does not want to commit fraud:

Health Insurance Exchange Subsidies Will Be Granted on the Honor System!––Is There Something Wrong With “ObamaCare’s” Federal Data Hub?

I can also imagine lots of innocent consumers getting their subsidy all bollixed up on the front-end (Do you know your likely “modified adjusted gross income” for 2014?) only to get hit with a whopper tax bill when they finally reconcile all of this on their 2014 tax return. For example, a family of four getting subsidies based upon 200% of the poverty level but ending up making 250% of the poverty level for the year, would see a retroactive liability of about $1,700 on their tax return because of subsidy overpayments.

That begs another question: What happens if subsidy recipients don’t file a tax return––as millions of Americans now don’t––for 2014?

Two of the essential things the Federal Data Hub was supposed to be able to do was to determine and report to the exchange if a person was eligible for a qualifying employer plan and to be able to feed an individual’s income history to the exchanges to help determine the amount of subsidy they would be eligible for.

As of the week of the Fourth of July, it would appear the Federal Data Hub will be doing neither of these things––or at least not doing them to the extent they can be relied upon.

That begs yet another question: Is the Federal Data Hub not working as intended?

And there we are — that question seems like as good a place to end this sordid piece as any. Frequently Asked Questions Without Answers.

TWO Notes:

1) This post would not be necessary if the massive Democratic majorities in the House and Senate had been encouraged, pushed and led by the Democratic President Obama to pass Medicare for Everyone. President Obama came into office with tremendous popularity, authority and power. With a strong commitment to truly Universal Health Care for Everyone by him, Medicare for Everyone could have been implemented with little more than his signature on the bill.

2) Lambert and I would LOVE more contributors to this project (there are multiple tasks including writing posts, a weekly Link Dump and our still in development Resource Library). Contact us through Corrente or The Confluence if you are interested in working with us.

PPACA FAQ: Verifying Eligibility, The Honor System

In previous segments (Part 1, Part 2) we’ve talked about the health insurance options of a four person family with wife (employee) husband and two children. In the scenario we discussed, the employee was offered affordable coverage through her employer but, coverage that included her children was well over what this family could afford and there was no option at all for her husband.

In a way, the situation for this family is still the same — the law hasn’t changed. But with the announcement this week (see this and this) that due to the complexities in reporting, the penalties for large companies (those with 50+ employees) will not be collected until 2015, how will this family’s eligibility be verified?

For now it seems, we are all on The Honor System:

Delay in Obamacare requirement puts onus on the honor system

In addition, without the reporting requirements of the employer mandate in 2014, “the exchanges and the IRS will not be able to verify whether someone’s coverage is unaffordable” and thus whether the person is eligible for subsidies, said law professor Timothy Jost of Washington and Lee School of Law in Lexington, Virginia.

That leaves it up to individual consumers to be honest about what they do, or do not, qualify for.

A ‘BOATLOAD’ OF ILLEGITIMATE TAX CREDITS

“The shift of employees to the exchanges could cost (the government) a boatload,” said Nicholas Bagley, a law professor at the University of Michigan. “Some people who are ineligible for subsidies, because their employer offers affordable insurance, may attempt to get subsidies on the exchanges. The IRS will have a hard time policing that sort of conduct.”

States running their own Obamacare exchanges are scrambling to figure out how to deal with the delay in the employer-reporting requirement.

I can see how they think that would work. But, let’s look at our family again.

Mom’s insurance costs 9.5% of family income but the employer-offered plan that covers the children is much more than that. Will the family understand that the mom’s affordable insurance means that the children are not eligible for insurance through the exchanges? And what if Mom’s employer does offer a plan for dad? My understanding of the PPACA is that dad isn’t eligible for subsidies and the new Exchanges either.

Is that really true? It seems very unfair to me.

How can an Honor System work for such a deeply unfair policy?

I am going to ask my Senators, Pat Roberts & Jerry Moran and my Congressman, Kevin Yoder what they think about it.

PPACA FAQ: Affordability and Subsidies (Part 2)

(This would be so much more fun if I was writing about a plan for universal health care for everyone. Medicare for Everyone or whatever.  Put us all in one bucket and let us all wait in the same lines.)

(Cross-posted to Corrente)

My plan was to continue the discussion of Affordability and Subsidies with an answer to a remaining after discussion in the comments on The Corrente site regarding this piece of the story:

I’ll list the essentials:

1. Employee earns $35,000/yr
2. Employee-only coverage = $275/mo (This is just under 9.5% of her salary)
3. Employee +children = $500/mo or 17% of Employee Income (The IRS ruling says that only the cost of Employee-Only coverage is considered for affordability. But, PPACA does require an option for dependent coverage on parent’s policies)
4. There is no spousal coverage option (there is no PPACA requirement for spousal coverage)
5. Spouse may purchase insurance through an Exchange and would be eligible for a subsidy (because family income is under 400% of poverty)
6. Employee & Children do not qualify for Subsidies because the Employee’s share of the insurance is affordable.

The question I’ve been hammering on all week (6 hours when I stopped counting) Relates to points 4 & 5 above. He may purchase insurance through the Exchange — but what will he be expected to pay? His wife is already paying 9.5% of the household income (using MAGI which will not be explained here) for her affordable employee-only coverage. Will he be expected to pay another 9.5% of their income before his subsidy kicks in?

Sadly, those 6+ hours didn’t reveal a definitive answer (to me). If I was going to make a guess, I would go to the California Calculator and enter the family’s information and take that for my answer. Their calculator happens to have one of my favorite explainations — the one labeled, “A married couple earning $40,000 per year if one spouse in on Medicare” (You might be able to tell just how frustrating my week has been that I am collecting favorite explanations.) It seems possible that this family’s situation might be comparable to that One Spouse on Medicare situation. But, I’m not at all sure.

For now at least, file this one under Questions Without Answers.

Update:

Commenter t, quoted below gave me an Ah, HA! moment:

No, he won’t be required to fork over 9.5%. Search Mandate exceptions. One of the exceptions of the ACA is that if individual insurance premiums with subsidy cost more than 8% of the MAGI, then the individual is exempt from the mandate. He will not be required to carry insurance at all. If he does carry insurance in your scenario, because he is part of a family of 4, he will qualify for a subsidy that will take his costs quite a bit below 9.5%. Exactly how much below, it’s hard to say. I’m guessing via looking at calculators that it will be in the range of 6.5%, which is still exorbitant.

But yes, this is a sticking point for sure. MAGI in his case should exclude the cost of the other family premiums. But because this law is a complete mess, it doesn’t.

I am predicting pitch forks, tar and feathers by 2014.5

T clarified something I didn’t understand:

1) Mom’s insurance could cost as much as 9.5% of her salary because that is how affordability is defined for employer-offered insurance.

2) But the subsidies for Exchange policies are calculated by which Bucket group your family falls into … see this Table from Wikipedia

Which explains why entering this family’s into the California Calculator, the cost to the family is so far below 9.5%

Still not a firm answer – The mom’s purchase of insurance through her employer (at 9.5% of family income) is within the scope of the PPACA requirements.  And, Medicare (referring to the California Calculator explanation) is NOT within the scope of PPACA requirements.

But, we can be pretty sure that Dad’s premiums will be something under another 9.5% of their household income.

As t says, “still exorbitant.”

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What DID I find during that 6+ hours of research? …. Lots and lots and lots of interesting stuff.  And an idea for keeping track of it all. Now I can say that as part of the PPACA FAQ we’ll have an organized resource library to be unveiled as soon as it actually exists!

One of the most interesting essays I found is, “How the Affordable Care Act Will Create Perverse Incentives Harming Low and Moderate Income Workers“. I’m still reading through it (and the over 150 footnotes!) but I can already tell that it will be a very important reference throughout the course of this project.

It cannot be said often enough: Things do not have to be this complicated. We could be talking about the changes coming with Medicare for Everyone. Struggling to understand how the PPACA affects us is not what I expected from the 2008 election.

PPACA FAQ: How much are penalties for non-compliance with the ACA’s mandate, and how do they work?

[Authored (and cross posted) by Lambert at Corrente]

Let us begin our wonderful journey of discovery to find out how the PPACA (Patient Protection and Affordable Care act, commonly known as ObamaCare) is going to work out for you and me and people like us.*

 

* * *Q: How much are penalties for non-compliance with the ACA’s mandate, and how do they work?

A: You pay whichever is less: (1) The national average of the Bronze plan, or (2) a penalty.

For the penalty, you pay whichever is greater: (a) A dollar amount or (b) a percentage of income, pro-rated by the number of months you were not covered. (So, if the dollar amount were $95 — as itsometimes will be — and you were not covered for three months, the penalty would be $95 / 3 = $31.)

The dollar amount and the percentage of income are both phased in, starting with the Federal taxes you pay for 2014, in 2015. (The dollar amount, at least next year, is almost certainly less than the Bronze plan, even if we don’t have a Bronze plan to look at.) After phase-in, the dollar amount is adjusted for COLA. You pay the penalty at tax time. However, the IRS can’t put a lien or levy on you if you don’t pay the penalty.

This a little more complicated than the story you read in the press, and may cost you more money than you think. Spoiler alert: You could end up paying more than $95, which is the figure everybody quotes. I’m going to focus mostly on what happens next year, before the complete structure of penalties for non-compliance phases in.

 

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PPACA FAQ: Call for questions

This post introduces and explains a new series, “PPACA FAQ” which is a joint venture between The Confluence and Corrente.  lambert, the proprietor of Corrente, is the author and “I” in the post below:

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KatieBird and I, with assists from Hipparchia and Rainbow Girl, are starting a new series, whose title is as you see:

PPACA is, of course, the “Patient Protection and Affordable Care Act” which, being none of those things (except a big Act), is informally known as ObamaCare.

FAQ stands for Frequently Asked Questions (origin on USENET; example from the IRS).

So, our concept is to pose and then answer questions about the PPACA (ObamaCare), for two reasons:

• People need help, and AFAIK only conservatives are offering it.
• People should also understand that ObamaCare’s complexity just doesn’t have to be, and that single payer is a real and better alternative.

So this is the plan: