UPDATE: HC.gov cracking down bigtime on those who didn't file tax returns or reconcile their subsidies

2018 MIDTERM ELECTION

Time: D H M S

PLEASE NOTE IMPORTANT UPDATES BELOW.

I just received the following from a healthcare broker, who I trust from past communication exchanges, who wishes to remain anonymous. I'm presenting it as sent, with the only changes being breaking it out into paragraphs for readability & with their state's identifying information removed.

Glossery:

  • Q2 obviously means the 2nd quarter of 2018 (April - June).
  • FFM = Federally-Facilitated Marketplace...that is, HealthCare.Gov, as opposed to one of the state-based exchanges.
  • APTC = Advance Premium Tax Credits...in other words, the financial subsidies that around ~9 million exchange enrollees receive nationally.
  • SEP = Special Enrollment Period...this refers to people who enroll in ACA exchange policies during the "off season"...that is, outside of the official November 1st - December 15th Open Enrollment Period. You're allowed to do this if you have a qualifying life event like losing your existing coverage, moving, getting married/divorced, or giving birth...as in the example below.
  • BCBS = Blue Cross Blue Shield
  • 834 = 834 EDI Transmission...basically, this is the electronic transfer of your policy/enrollment/subsidy information from HealthCare.Gov over to the insurance company itself.

Q2 has been extremely busy for us with service issues on our FFM business. It seems that anyone who either didn't file, OR filed an extension for 2017 taxes lost their APTC in May. In the past, APTC's weren't dropped midyear like this - if someone didn't file, they would be unable to re-enroll with an APTC during the OEP. Seems somebody is trying their damndest to undermine the system from the inside.

In addition, SEP enrollments (which we are already doing for FREE) are becoming increasingly problematic - I just spent an hour trying to add a newborn (typically a 5 min process) & still isn't completed.

Other agents I work with have noted that many, if not most of our SEP enrollments to BCBS have errors on the 834 when they arrive at the issuer. In addition, the BCBS FFM agent hotline has been running hold times the last few weeks - which NEVER happens outside of OEP. It's a mess out here.....the midyear loss of APTC's due to filing issues is a MAJOR issue for us right now!

UPDATE: I've just received confirmation from another broker in a different state:

I am seeing massive numbers of folks who lost APTC in May here on the carrier side as well.

...It’s twice as many (as % of membership) as lost it last year.

This sounds...significant. Stay tuned...

Meanwhile, if you're a subsidized ACA exchange enrollee who's received notice that your ACA subsidies are being cut off (or already have been), please contact me using this form. There's checkbox if you'd like to remain anonymous. Thanks!

UPDATE: OK, I have some additional details about just what the official policy is regarding tax credit eligibility and federal tax form filing status; it doesn't sound quite as bad, though it's still bothersome for several reasons.

Here's last year's Guidance on Annual Eligibility Redetermination and Re-enrollment for Exchange Coverage for 2018 (scroll down for the relevant section):

2017 Procedures Retained for 2018

The Secretary’s alternative procedures for benefit year 2018 retain the following key components of the alternative procedures for benefit year 2017, as described in the published guidance:

  • Requesting updated data. The Exchange will continue to request updated data from the Internal Revenue Service (IRS) for all enrollees on whose behalf advance payments of the premium tax credit (APTC) or income-based cost-sharing reductions (CSRs) are being provided, and who have provided authorization to the Exchange to request such data, for purposes of annual redetermination. The IRS’s response will continue to include information on compliance with the filing and reconciliation requirement for tax filers who had APTC provided on their behalf for a prior benefit year.
  • Exchange notices. The Exchange will continue to send a Marketplace Open Enrollment Notice (MOEN) that will include general information about the upcoming Open Enrollment Period, as well as information tailored to the groups listed in the alternative procedures for benefit year 2016.
  • Issuer notices. Issuers will continue to send notices to current enrollees before open enrollment that comply with regulations specified at 45 CFR 147.106 and 45 CFR 156.1255.
  • Redeterminations. For enrollees who return to the Exchange to update eligibility information or for the other purposes described in the alternative procedures for benefit year 2016, the Exchange will continue to redetermine eligibility using updated federal poverty level (FPL) tables, the applicable benchmark plan information, and the applicable percentage indexed for the upcoming benefit year in accordance with 26 CFR 1.36B-3(g). For enrollees who do not return to the Exchange to obtain an updated eligibility determination and select a QHP4 by the last day on which a plan selection may be made for coverage effective January 1, 2018 in accordance with the effective dates specified at 45 CFR 155.410(f), the Exchange will continue to establish eligibility for the upcoming benefit year based on the hierarchy described in the alternative procedures for benefit year 2016, with all references to years advanced by two years, and will continue to discontinue APTC and income-based CSRs for certain enrollees who have been automatically re-enrolled more than once, as described below.
  • Re-enrollment. The Exchange will automatically re-enroll 2017 enrollees who do not select a QHP by the last day on which a plan may be selected for coverage effective January 1, 2018 in accordance with the effective dates specified in 45 CFR 155.410(f), to the extent that the enrollee can be re-enrolled, consistent with 45 CFR 155.335(j).
  • Certain repeat automatic re-enrollees. The Exchange will continue using the procedure first implemented for benefit year 2017 to discontinue APTC and income-based CSRs for benefit year 2018 for enrollees who: 1) were automatically re-enrolled by the Exchange for benefit year 2017 with APTC or income-based CSR; 2) were also automatically reenrolled by the Exchange for benefit year 2016 with APTC or income-based CSR; 3) did not submit an updated application that was used as the basis for enrollment in a QHP for benefit year 2016 or 2017; 4) do not submit an updated application that is used as the basis for enrollment for benefit year 2018 by the last day on which a plan selection may be made for coverage effective January 1, 2018, in accordance with the effective dates specified at 45 CFR 155.410(f); and 5) have no income information available from IRS for tax year 2015 or tax year 2016.

Procedures Newly Applicable for 2018

Failure to File and Reconcile Group. As Exchange regulations in 45 CFR 155.305(f)(4) specify, an enrollee may not be determined eligible for APTC if the tax filer for the household did not comply with the requirement to file an income tax return for a year for which APTC was provided and reconcile APTC previously paid on his or her behalf. Beginning in September 2016, IRS expanded the data it provided upon request from an Exchange to include three different indicators regarding the tax filing status for the household. These indicators separately distinguish whether APTC was paid on the tax filer’s behalf for a given year, and for the same year, whether the tax filer a) did not file a tax return and did not request an extension; b) did not file a tax return but did request an extension;5 or c) did file a tax return but did not reconcile the APTC using Form 8962.

Under the alternative procedures for benefit year 2018, the Exchange will expand upon the process first implemented for benefit year 2016 by discontinuing APTC for tax filers who fall into category c) above. Thus, the Exchange will discontinue APTC and income-based CSR for benefit year 2018 in instances where:

  • 1) the enrollee is on an application on which one or more enrollees is receiving APTC or income-based CSR;
  • 2) the enrollee authorized the Exchange to request updated tax return information for use in the annual redetermination process;
  • 3) IRS indicated in response to the Exchange’s request for updated tax return information that APTC was provided for the tax filer, but the tax filer did not file a tax return for the year for which APTC was provided, or the tax filer did file a tax return for the year for which APTC was provided, but did not reconcile APTC for that year using Form 8962; and
  • 4) the enrollee does not contact the Exchange to obtain an updated eligibility determination that results in eligibility for APTC or income-based CSR and is used as the basis of enrollment by the last day on which a plan selection can be made for coverage effective January 1, 2018, in accordance with the effective dates specified at 45 CFR 155.410(f).

In other words, it sounds like at the very least this policy crack-down was at least made public last summer (the notice was sent out in July 2017), and it is reasonable to expect people receiving federal tax credits to have to file a tax return (I've actually written about this very issue myself in the past). The big difference here seems to be that until now, CMS was letting people who failed to file a return (or who didn't reconcile their subsidies properly) to keep their subsidies for the current year, and only cut them off starting the following Open Enrollment Period.

This year, they appear to be cracking down immediately, cutting off people's APTC assistance as early as May.

This may seem harsh, but I can't really fault them too much for following the rules to the letter.

However, there's still a few items which are extremely bothersome. For one thing, they may be jumping the gun a little too early; from my 2nd source above:

...here's something weird, though: we got the 834 files (the enrollment files that remove / change someone's APTC) on April 11-14. So their tax credit got removed BEFORE the tax filing deadline

The Federal Income Tax Filing Deadline was actually April 17th this year since the 15th fell on a Sunday...so according to this broker, at least some people had their tax credits cut off 3 days before the deadline to file their taxes.

In addition, there's still the issue with major SEP/834 problems which, I admit, are only anecdotal so far.

However, until I hear more details about this situation, I have to say I might have jumped the gun myself on playing the "sabotage" card this time around.

Stay tuned...and in the meantime, if you haven't filed your 2017 federal tax return or reconciled your APTC subsidies properly, make sure you do so ASAP!