HHS Guidance Addresses Marketplace Enrollment Deadline and Penalties | Practical Law

HHS Guidance Addresses Marketplace Enrollment Deadline and Penalties | Practical Law

The Department of Health and Human Services (HHS) has announced a hardship exemption from the Affordable Care Act's (ACA's) individual mandate payment for individuals who enroll in plan coverage through the health insurance exchanges (referred to as marketplaces) toward the end of the initial open enrollment period that was established in implementing HHS regulations.

HHS Guidance Addresses Marketplace Enrollment Deadline and Penalties

Practical Law Legal Update 1-547-2225 (Approx. 3 pages)

HHS Guidance Addresses Marketplace Enrollment Deadline and Penalties

by Practical Law Employee Benefits & Executive Compensation
Published on 29 Oct 2013 • USA (National/Federal)
The Department of Health and Human Services (HHS) has announced a hardship exemption from the Affordable Care Act's (ACA's) individual mandate payment for individuals who enroll in plan coverage through the health insurance exchanges (referred to as marketplaces) toward the end of the initial open enrollment period that was established in implementing HHS regulations.
On October 28, 2013, HHS issued guidance announcing a hardship exemption for individuals who enroll in coverage through the Affordable Care Act's (ACA's) health insurance exchanges (referred to as "marketplaces") toward the end of the designated initial open enrollment period, but who might otherwise be subject to an individual mandate payment.
As background, under the ACA's individual mandate rules, beginning in 2014, individuals must either:
  • Maintain health coverage, known as minimum essential coverage (MEC), or qualify for an exemption from the MEC requirement.
  • Make a "shared responsibility payment" when filing their federal income tax returns.
The payment applies to individuals who:
  • Have access to affordable coverage during a tax year.
  • Are nonetheless uninsured for a significant portion of the year.
The ACA authorized HHS to determine the initial open enrollment period for individuals to enroll in coverage for 2014 through the marketplaces. In 2012 regulations, HHS determined that the initial open enrollment period would begin on October 1, 2013 and extend through March 31, 2014. This guidance also specified that for plan selections made between:
  • The first and the fifteenth of a given month, the coverage effective date would be the first day of the immediately following month.
  • The sixteenth and the end of a given month, the coverage effective date would be the first day of the second following month.
The ACA also included several exemptions from the individual mandate requirement, including an exemption for short coverage gap periods. Under the statutory definition, a short coverage gap period is any month the last day of which occurred during a time when the individual did not have MEC "for a continuous period of less than 3 months." The interplay of the initial open enrollment period, coverage effective dates and short coverage gap period exemption meant that an individual could:
  • Timely enroll for marketplace coverage during the initial open enrollment period.
  • Nonetheless be liable for an individual mandate payment for months (in 2014) before the effective date of that coverage, assuming the individual was not otherwise exempt.
Specifically, this situation could occur for individuals who:
  • Enrolled between February 16, 2014 and the end of the initial open enrollment period, and who would therefore have coverage effective April 1 or later.
  • Would not be eligible for the short coverage gap exemption, which requires a coverage gap of less than (but not equal to) three months.
HHS concluded that it would be unfair for individuals who purchased marketplace coverage toward the end of the initial open enrollment period to be required to make an individual mandate payment. The HHS guidance therefore establishes a hardship exemption, as permitted under the ACA, for individuals in this situation. Under the exemption, an individual who enrolls in marketplace coverage before the close of the initial open enrollment period can claim a hardship exemption from the individual mandate payment for the months in 2014 before the individual's coverage is effective. Additional guidance on claiming the exemption will be provided in 2014.

Practical Impact

The HHS guidance clarifies an area of confusion regarding how individual mandate payments under the ACA would be imposed. Although the guidance does not directly reference the troubled rollout of the government's healthcare.gov site, the new hardship exemption will also provide additional time for individuals to enroll in coverage through the marketplace without being subject to the individual mandate payment.