Questions and Answers About Health Insurance Marketplaces and the Affordable Care Act

Despite the pandemic-triggered economic downturn, the number of people with insurance grew from 2020 to 2021 in part because of the Affordable Care Act’s subsidized marketplace-based insurance. In early 2022, a record number of people were enrolled in marketplace-based plans. Additionally, states have been barred from disenrolling people from Medicaid coverage during the pandemic public health emergency.

High coverage rates were driven by enhanced subsides resulting from the passage of the American Rescue Plan Act (ARP). ACP supported provisions in the ARP that removed the premium tax credit “subsidy cliff” providing subsidies to people with incomes 400% and above the federal poverty level. The law also enhanced existing subsidies; as a result, many people were able to enroll in plans with monthly premiums of $10 or less. In 2022, ACP supported the Inflation Reduction Act’s provision to extend the enhanced subsidies through 2025.

ACP’s advocacy in response to COVID-19 can be found here.

Many people are unaware of the availability of financial assistance, how to enroll in coverage, or how to use health insurance once they have it. To address this, HHS is providing $98.9 million in grant funding for Navigator programs across the country. Navigators are community-based experts that provide objective information and enrollment guidance to help people find coverage that meets their needs.

ACP supports sustained funding for dedicated outreach, consumer assistance, and education to promote open enrollment, provide in-person and virtual enrollment assistance, and respond to inquiries from the community.

A 2018 federal regulation permitted the sale of expanded short-term, limited duration plans, which are not required to comply with the ACA’s ban on pre-existing condition exclusions, essential heath benefit coverage requirements and other consumer protections. ACP is concerned that short-term limited duration plans may destabilize the individual insurance market and increase premiums for those who need comprehensive insurance. People who enroll in short-term limited duration plans may be exposed to high health care costs if the plan they buy doesn’t cover the services they need. An investigation by the Government Accountability Office found that one-quarter of health insurance brokers deceptively marketed the plans to shoppers, with some claiming that the plans covered pre-existing conditions. ACP believes that efforts should be made to make comprehensive coverage more affordable rather than allow the sale of cheap insurance that offers little value when it’s needed most.

A federal regulation released in September 2021 takes steps to curb the sale of extended short-term limited duration plans by prohibiting states from promoting them through 1332 waivers. Additionally, President Biden revoked a 2017 Executive Order directing the federal government to promote short-term limited duration plans and other products that do not comply with the ACA.

Generally, people who are offered health coverage through their job are not eligible for premium tax credits to purchase marketplace-based insurance. However, a person may be eligible for subsidized coverage if their job-based coverage is unaffordable or not comprehensive (minimum value). Under the previous interpretation of the law, if the employee’s portion of the premium for self-only coverage exceeded a percentage of their household income (originally 9.5% but adjusted annually; it’s 9.12% in plan year 2023), then they qualified for premium tax credits. However, the cost of coverage for dependents was not considered, so if the employee’s premium for family coverage exceeded 9.12% of their household income, they wouldn’t be eligible for subsidized marketplace coverage because the premium for self-only coverage was considered affordable. This is the so-called “family glitch.” The Kaiser Family Foundation estimated that over 5 million people were affected by the family glitch in 2021.

In 2022, the Internal Revenue Service issued a new interpretation that ensures the affordability test is based on the employee’s premium for family coverage, providing a way for families with an offer of unaffordable job-based insurance to qualify for premium tax credits for marketplace-based insurance. ACP applauded the change, since it is projected to give families more options to find affordable, comprehensive coverage.

Small businesses, defined as being up to 50 full-time equivalent (FTE) employees, can shop for and purchase health insurance for their employees through a Small Business Health Options Program (SHOP)-registered agent or broker or directly from an insurance carrier. Like the individual marketplace, the SHOP enables employers to make informed decisions about their options and pick coverage that meets their needs and budget. Businesses with up to 25 FTEs and an average annual employee wage of less than $50,000 in 2014 (annually adjusted for inflation; in 2023 it’s about $56,000) are eligible for a sliding scale tax credit to purchase SHOP-based health insurance for their employees. The qualifying small business must also pay at least 50% of full-time employees' premium costs. Beginning in 2014, the amount of the credit is a maximum of 50% of the for-profit employer's health insurance contribution, and 35% for tax-exempt entities.

How do qualifying small business owners, e.g., physicians who qualify, claim the tax credit?

The definition of "business owner" includes a shareholder owning more than 2 percent of an "S" corporation, a sole proprietor, a partner in a partnership, an owner of more than 5 percent of other businesses, or a family member or dependent of such an individual. Additionally, an owner would not count as an employee when calculating the number of full-time employees. So, if a physician is also the owner of their practice, their salary would not be counted when determining if their firm qualifies for the small business tax credit. The salary of a physician employed by a practice would be considered if they do not meet the above criteria (partner in a partnership, sole proprietor, etc.).

Employers can visit healthcare.gov or the Internal Revenue Service for more information on claiming the tax credit.

Employer contributions towards employees' individual market health insurance premiums

Some small employers have considered dropping their group health insurance and providing their employees a stipend or reimbursement to help them purchase individual market insurance. As of 2017, certain small employers that do not offer group health insurance to their employees may be able to provide a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA), an HRA to help employees pay for qualifying medical expenses, including insurance premiums. Employers large or small may offer an Individual Coverage Health Reimbursement Arrangement (HRA) to reimburse medical care costs, including premiums for individual market or Medicare coverage, instead of providing traditional group health insurance. Small physician practices may find that providing their employees with funding to buy individual market insurance is a viable option, but a few points should be considered:

• The ACA provides premiums tax credits to individuals who do not have an offer of affordable and comprehensive job-based insurance and meet the income thresholds. Practices should be aware of the eligibility requirements for premium tax credits for marketplace-based insurance. Eligibility information can be found here. Even with the ACA's premium tax credits, employees may end up with higher premiums than employer-based group health insurance. Practices should also consider how any additional premium-offsetting income would affect employees' eligibility status for tax credits to purchase marketplace-based insurance. For example, an employee’s premium tax credit is reduced by the monthly QSEHRA amount.
• Employees cannot receive tax credits to purchase marketplace-based insurance if they have an offer of job-based health insurance that meets affordability and comprehensiveness criteria. If a practice is considering transitioning their employees to the individual market and contributing to their health costs, then they would need to terminate existing group coverage with sufficient time to permit their employees to enroll in marketplace-based coverage.
• As stated above, Individual Coverage HRAs can now be used to help pay individual market health insurance inside or outside of the marketplace instead of traditional group health insurance. However, there are many rules and regulations to be considered. For example, an employer has to offer the HRA on the same terms to all individuals within a class of employees, such as full-time workers, part-time workers, and seasonal employees. This FAQ provides additional information on the Individual Coverage HRA option.
• Employers receive a tax break for providing group insurance to their employees. Practices should consider the financial impact if health benefits change.
• Employers with over 50 full-time equivalent employees may be subject to a tax penalty if they do not offer affordable, comprehensive health insurance and their employees receive tax credits to purchase marketplace-based insurance. More information on the employer penalty can be found here and here.
• Consult your tax or financial advisor to determine the best option for your practice.

For more information on health insurance options for small businesses, consult this guide from Small Business Majority.

Only if the service occurs in the first month that an enrollee is in the 3-month grace period before coverage is terminated. During months two and three of the grace period, insurers may pend claims for services provided during that period; if the patient's coverage is terminated, the insurer is not obligated to pay claims for services provided during the final 2 months of the grace period. The federal regulations state that insurers are required to notify providers that the patient has entered the grace period and that claims may go unpaid for services provided during final 60 days.

To prevent any unpaid claims, staff should verify each patient's health coverage status to ensure they are in good standing. In 2017, the Centers for Medicare and Medicaid Services (CMS) finalized a regulation allowing insurers to collect past-due premiums upon re-enrollment. ACP commented that if this policy is adopted, insurers should be required to pay claims for services provided to the enrollee during the grace period. CMS clarified "that issuers are required to pay all appropriate claims for services rendered to the enrollee during any months of coverage for which past-due premiums are collected."

Some marketplace-based insurance plans have narrow “provider” networks to curb costs. The ACA and state network rules are in place to ensure that plan networks are adequate. Federal regulations mandate that a plan's network be sufficient in number and types of providers to assure that services are accessible without unreasonable delay. States establish and enforce specific network adequacy rules. Marketplace-based plans must also ensure that "essential community providers" that serve predominately low-income, medically-underserved individuals are available in their network.

• Despite these safeguards, narrow networks persist. For example, a McKinsey & Co. report found that in 2017, 53% of individual market hospital networks across all metal tiers were tiered, narrow or ultra-narrow. Network breadth is declining in some areas and the percentage of consumers who only have access to narrow network plans has increased three-fold since 2015.
• According to a 2022 report from the Robert Wood Johnson Foundation, state network adequacy measures for qualified health plans vary considerably: for example, Florida has appointment wait time standards, but Georgia does not.

ACP remains concerned that narrow networks may prevent affordable access to high quality, local providers. Patients with limited health insurance literacy may not understand the implications of choosing a narrow network plan, including having to pay elevated cost sharing for seeking an out of network preferred physician. To function correctly and mitigate the potential for surprise charges and frustration, health plans need to improve network transparency and regulators need to provide ongoing scrutiny of provider networks to ensure they are adequate. To address the narrow network issue, ACP has made several recommendations to federal and state regulators regarding network adequacy, including calling for quantitative standards and continuous monitoring to ensure compliance.

Network adequacy policies are moving in the right direction due in part to ACP advocacy. Starting in the 2023 plan year, CMS will conduct network adequacy reviews for marketplace-based health insurance offered through the federal exchange. The plans will be assessed on whether they meet standards for travel time and distance and appointment wait times. For example, CMS would review a plan’s network to determine if 90% of enrollees in a large metro county have access to at least one pulmonologist within 20 minutes or 10 miles. A plan that doesn’t meet the standard will have to add additional physicians or health care professionals to the network or provide a justification with information regarding why the standard hasn’t been met, mitigation measures being taken to address the problem, enrollee complaints, and “provider” recruitment efforts.

Prescription drug coverage is considered an essential health benefit that all qualified health plans offered through the marketplace are required to cover. However, there can be variation among plans as to which drugs are covered and which ones are not; a drug covered in one plan may not be covered in another. Qualified health plans are required to cover at least the greater of one drug in every U.S. Pharmacopeia category and class or the same number of drugs in each category and class as the state's essential health benefit benchmark plan. Health plans must also have procedures in place to ensure that enrollees have access to clinically appropriate drugs prescribed by a provider but not included in the health plan's drug formulary. It is best for the patient to review the prescription coverage offered by a plan in consultation with their physician prior to purchasing the plan to ensure it covers their medications. If the patient is still unsure if their specific medications are covered, they should contact the plan directly to inquire about coverage.

ACP has asked health plans and federal and state regulators to provide increased oversight of formularies to ensure they are not unduly restrictive. Regulators should closely monitor formularies and other benefit design features to ensure that coverage does not exclude vulnerable patients. The prescription drug exception process should be strengthened so that patients can receive necessary services. The College has recommended that health plans with restrictive formularies should allow patients to have access to prescription drugs in dispute during the entire exception review process, with expedited internal appeals for urgent care situations, and if an exception is granted, plans should continue to provide coverage.

First off, starting in the 2019 plan year there is no penalty for failing to enroll in health insurance coverage. However, having comprehensive coverage is incredibly important and is associated with reduced mortality. Healthcare.gov now features new shopping tools to help consumers find plans that reflect their level of health care usage, a simplified re-enrollment process, a provider directory and formulary search tool, and more resources designed to educate shoppers about health insurance and how to use it.

The healthcare.gov website is not the only way to apply for coverage. There are other ways that consumers can sign up for health insurance:

• Over the phone - Call center is available 24 hours a day, 7 days a week. The number is 1-800-318-2596/ TTY: 1-855-889-4325
• In-Person - find in-person assistance in your community here.
• By mail using a paper application

Visit this page  for more details on how to apply.