Affordable Care Act State Action News 48

Patient Protection and Affordable Care Act: State Action Newsletter

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Jan. 11, 2013

Guidance from Feds on New Method for Determining Medicaid and CHIP Eligibility

The Patient Protection and Affordable Care Act (PPACA) requires states to use Modified Adjusted Gross Income (MAGI) to determine eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) for everyone except the elderly and disabled populations.  A recent letter to state Medicaid directors from the Centers for Medicare & Medicaid Services (CMS) provides states with much needed guidance on implementing the new MAGI eligibility standard for Medicaid and the CHIP, which must be in place by Jan. 1, 2014.

MAGI is defined in the Internal Revenue Code section 36B(d)(2).   This new methodology standardizes the calculation across all states. Currently, income eligibility standards vary among states, with some states using income disregards, deductions and asset tests that are not used in others.  The MAGI method eliminates these differences. It also helps facilitate interoperability with the health insurance exchange. MAGI will also be used to determine eligibility for premium tax credits and cost sharing reductions for certain people who purchase coverage through the health insurance exchange.  

According to the letter, CMS evaluated a range of conversion methodologies and processes for establishing MAGI-equivalent standards.  CMS identified two options for states to use for income conversion.  The first, called “Standardized MAGI Conversion Methodology,” can be implemented with national survey data or with state data. The letter includes a short description of this option and indicates that CMS will release more details in the future. The second, called “State Proposal Option,” provides states with the flexibility to design, propose and implement alternative methodologies, with federal approval. CMS will conduct webinars to review this information with state officials. States are required to submit a non-binding statement to CMS indicating which MAGI conversion methodology they will use by Feb. 15, 2013.

Inside This Issue

Larger Employers Mandated to Offer Health Coverage

On Dec. 28, 2012 the Treasury Department and the IRS issued proposed regulations aimed at clarifying the Employer Shared Responsibility provisions of PPACA, often called the “employer mandate,” which require employers with 50 or more employees to offer health insurance to each full-time employee. The coverage must pay a minimum of 60 percent of the price for services and treatment, referred to as the “minimum value requirement.” The coverage also must be “affordable,” which means that the cost for the individual employee should not exceed 9.5 percent of the employee’s household income. Starting in 2015, the coverage also must be offered to dependents, defined as children under 26 years of age; coverage for spouses is not mandatory. 

The proposed rules do not call for an automatic penalty on employers solely because they do not meet the 9.5 percent affordability requirement or the 60 percent minimum value requirement. A penalty may be assessed month-by-month if the employer doesn’t offer insurance and it leads to one or more of its full-time employees receiving a premium tax credit or cost-sharing reduction for purchasing individual coverage through a health insurance exchange. The penalty can total $2,000 annually for each of the full time employees, with the first 30 employees exempt from the charge.

Penalty payments will be handled by the IRS, not the states.  The process, including exceptions and payments, are detailed in Questions and Answers on Employer Shared Responsibility Provisions.  The regulatory provisions, published January 2, 2013, are not final and are subject to change, with public comments accepted until March 18, 2013.

Save the Date: Upcoming Webinars

Look out for registration information on two upcoming health webinars that are a part of NCSL’s annual “2013 Top Issues Series.” The webinars will be offered on Mondays & Fridays at 11:00 MT/1:00pm ET. Each webinar will be 60 minutes. The webinars are free to NCSL members and $39 for all non-members.
  • Feb. 1, 2013: Medicaid
  • Feb. 4, 2013: Health Reform
For more information, go to

States Get Health Exchange Green Light & Partnership Guidance from HHS

In the past month, 20 states received conditional approval from the U.S. Department of Health and Human Services (HHS) to fully or partially establish and operate health insurance exchanges, with 18 running state-based exchanges and two choosing a state partnership exchange. 

Conditional approval implies that the state is making progress towards establishing an exchange that complies with federal requirements and will be prepared to begin open enrollment for consumers by Oct. 1, 2013 with coverage starting on Jan. 1, 2014. By this time next year, every state will have a health insurance exchange. The only variation among them will be who runs it: the state, the federal government, or a partnership between the two. 

Seventeen states—California, Colorado, Connecticut, Hawaii, Idaho, Kentucky, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, New York, Oregon, Rhode Island, Utah, Vermont and Washington—and the District of Columbia received conditional approval to establish and operate a state run health insurance exchange. Mississippi is awaiting approval from HHS for the blueprint submitted by the insurance commissioner; however, the legislature and governor have not supported a state exchange. State-exchange blueprints had to be submitted Dec. 14, 2012.

States that choose a partnership exchange can manage the consumer assistance and/or plan management pieces of the exchange. Five states submitted blueprints for a partnership exchange and two received conditional approval so far—Arkansas and Delaware.  Approval for Iowa, Illinois, and North Carolina is still pending.  Governors in Michigan and West Virginia have announced their intention to pursue this option, although they have not yet submitted their blueprint. The deadline for submitting a plan for a state-federal partnership is Feb. 15, 2013.

If a state does not submit a blueprint of any kind, a fully federal-run exchange is the default. After 2014, states can change their mind about partnering or move towards a fully state-run exchange. However less federal funding will be available to assist with their establishment.

The rules for territories are a bit different—by Oct. 1, 2013 they can either choose to establish an exchange or not have one at all, meaning the feds will not step in and establish one as the default.

In light of the upcoming February deadline for states, HHS released additional guidance on the state partnership exchange option on Jan. 3. The guidance offers more information on the two functions that states can administer and how the federal government will work with each state that pursues this route.

The map shows state activity as of early January. Some of the states shown in grey may choose a state partnership exchange by mid-February. For updates and more details, please click here.

Where States Stand

As of Jan. 4, 2013

United States map of state activitiy

*As of Jan. 4, state received conditional approval of blueprint from HHS.

^ State announced intent to partner with the federal government, but has not submitted a blueprint, as of Jan. 4. Every state has until Feb. 15 to declare and plan for a federal/state partnership.


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