HHS Issues Proposed Rule Prohibiting Discrimination Based on Pre-Existing Conditions

On November 20, the U.S. Department of Health and Human Services (HHS) issued a proposed rule that will implement one of the Affordable Care Act’s (ACA) most important provisions: prohibition of insurance companies from denying health care coverage to individuals with pre-existing conditions.

Highlights of the proposed rule include:

• Prohibition of  insurers from discriminating against individuals because of a pre-existing or chronic condition;
• Prohibition of insurers from charging higher premiums to enrollees because of their current or past health problems, gender, occupation, employer size or industry;
• Requiring that insurers renew coverage even after an employee develops an illness or chronic condition; 
• Imposing very strict limits—related to age, tobacco use, family size, and geography—on how insurers will be allowed to vary the cost of premiums for individuals with pre-existing conditions;
• Ensuring that people for whom coverage would otherwise be unaffordable, including young adults, have access to a catastrophic coverage plan in the individual market;
• Requiring that insurers place all participants in a single risk pool, thereby preventing insurers from raising the rates on certain individuals while leaving rates lower for others;
• Allowing states to enact stronger consumer protections than exist under the ACA; 
• Permitting large employers to purchase insurance through the Exchanges beginning in 2017; and 
• Extending the pricing standards to those large employers who purchase their insurance through the Exchanges.

The final version of the rule will take effect in 2014. Comments to HHS are due on or before December 20, 2012. NLC will be reviewing the proposed rule as well to determine whether the organization will submit comments.

CBO Issues New Report on Payments of Penalties for Being Uninsured Under the Affordable Care Act

A new report, issued by the Congressional Budget Office (CBO) and the Joint Committee on Taxation (JCT), predicts that about 30 million nonelderly Americans would remain uninsured even after the Affordable Care Act individual insurance mandate (Sec. 1501) goes into effect in 2014. Of those, six million—two million more than was predicted about two years ago—would be subject to the penalty tax and would pay a total of $7 billion in 2016 and $8 billion thereafter for not having insurance –about $3 billion more per year than originally predicted. The penalty tax would range from either a flat per person rate of $695 or a household rate of 2.5 percent of the household’s annual income.

Of the 24 million who are not likely to be subject to the penalty tax, 12 to 13 million would be exempted because they are unauthorized immigrants; are not required to file income tax returns; members of an Indian tribe; or required to pay more than eight percent of their household income on insurance. Of the remaining 11 to 12 million, some individuals would be granted exemptions from the penalty because of hardship, and others would be exempted on the basis of their religious beliefs. Unauthorized immigrants are exempted from the individual mandate because they are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges.

According to the CBO and JCT, changes in the economic outlook—primarily a higher unemployment rate and lower wages and salaries—would account for about 85 percent of the increase in the numbers subject to the penalty. The remaining 15 percent would come from the increase in the number of uninsured people expected to pay the tax penalty because they reside in states that will opt out of the Medicaid expansion program.

IRS Issues Guidance for Employers on Definition of Permanent, Seasonal, Part-Time Employees

On September 10, the Internal Revenue Service (IRS) issued updated guidance that describes the safe harbor methods small and large employers, including local governments, may use to determine which of their employees are permanent, seasonal and variable, or part-time (not likely to work more than 20 hours per week) when determining qualification for employer-sponsored health care under the Affordable Care Act (ACA). The guidance also describes various methods and parameters that the IRS may use to determine under which circumstances employers, including local governments, will be assessed penalties should they fail to provide health care coverage.

Of note is that the guidance grants employers an extended window of up to 12 months when determining which employees must be considered full-time and which employees may be considered part-time—something that NLC requested in a May 2011 letter to the IRS. The guidance is effective immediately, however, it will have no fiscal impact on cities and towns until 2014 when the requirement that certain employers must provide health care coverage goes into effect.

WEBINAR: Complying with the ACA: A Guide for Cities and Towns (Archive)

On September 11, NLC hosted a free webinar designed for cities and towns as employers. View the full presentation by attorneys Rita Patel and Paolo Pasicolan of the law firm DLA Piper, which provided local governments with information on how to effectively implement the ACA. Specifically, the webinar focused on each of the necessary steps cities and towns must take to ensure that the ACA is properly and lawfully implemented. (DOWNLOAD WEBINAR SLIDES)

NLC Response: Supreme Court Decision Must Be Given A Chance To Work

Statement from NLC President Ted Ellis, mayor of Bluffton, Indiana, regarding the recent U.S. Supreme Court decision on the constitutionality of the Affordable Care Act.