As Congressional negotiators put the final touches on a deal to avert national default and re-open the federal government, lawmakers are considering two small changes to the Affordable Care Act: an income verification system for individuals and families receiving subsides and a one-year delay in the law’s “reinsurance tax,” a little-known provision designed to spread risk among health care insurers and stabilize the health care market in the first two years of reform.
The Transitional Reinsurance Program, which will be established in every state, reimburses health care insurers that attract high-cost individuals and is scheduled to operate from 2014 to 2016, though states can continue it thereafter.
Reinsurance is funded through assessments on all insurers in all markets — $63 per enrollee — but will only make payments to individual market plans operating outside or inside the exchanges. In theory, the program would allow insurers to charge lower premiums than they otherwise would have to in order to compensate for uncertainty and limit the impact of adverse selection.
It was not immediately clear whether the Senate deal will only delay the collection of reinsurance contributions or also push back the redistribution of payments to 2015. Health insurers have already calculated the reinsurance payments into their 2014 premiums, setting rates approximately 10 percent below what they otherwise would have been. Thus, delaying the full program could increase premiums, while only postponing the collection of assessments would leave it with a funding gap. The program is estimated to pay out approximately $10 billion in 2014.
Changing the reinsurance tax has been a top priority for unions. At its 2013 convention, the AFL-CIO adopted a resolution specifically criticizing the tax, along with other ACA provisions, arguing that since public unions commonly “build benefit structures through three different plans,” the current structure of the reinsurance tax would hit the same group of workers “three times.” “These fees should only be charged once and only to the plan sponsor of the base health plan, as is the ACA rule for single employers,” the resolution notes.
Meanwhile, the GOP is pressuring the Department of Health and Human Services to strengthen the income verification requirements for individuals who earn above 400 percent of the federal poverty line and qualify for subsidies under the law. HHS had announced that it would rely on applicants’ self-reported income information to verify whether they accurately represented their earnings and “only double-check a statistically significant number of these people with large income discrepancies, rather than the entire group.” The Senate deal would “call for the Secretary of Health and Human Services tocertify that adequate verification processes were already in place” and require a follow-up audit from the Inspector General.