CHA News Article

HHS Issues Guidance on Individual Shared Responsibility

The U.S. Department of Health & Human Services (HHS) has released guidance regarding the penalty dates related to the individual shared responsibility provision under the Affordable Care Act (ACA). The length of the initial open enrollment period and the coverage effective dates, in tandem with the terms of the short coverage gap exemption, inadvertently created the possibility that an individual who enrolled in coverage through a marketplace (exchange) during an initial open enrollment period could be liable for a shared responsibility payment for months prior to the effective date of that coverage, if the individual was not otherwise exempt. According to the new guidance, HHS recognizes that the duration of the initial open enrollment period implies that individuals have until the end of the initial open enrollment period to enroll in coverage through a marketplace while avoiding liability for the shared responsibility payment. 

If an individual enrolls in a plan through a marketplace prior to the close of the initial open enrollment period, when filing a federal income tax return in 2015 the individual will be allowed to claim a hardship exemption from the shared responsibility payment for the months prior to the effective date of the individual’s coverage, without the need to request an exemption from the marketplace. HHS will provide additional information in 2014 regarding how to claim this exemption.

Background
The shared responsibility payment generally applies to individuals who have access to affordable coverage during a taxable year but who choose to spend a substantial portion of that year uninsured.  The ACA gave the HHS Secretary the authority to establish hardship exemptions from the shared responsibility payment for individuals, as well as authority to determine the initial open enrollment period for individuals to enroll in coverage through marketplaces for 2014.  The Exchange final rule specifies that the initial open enrollment period for individuals begins onOct. 1, 2013, and extends to March 31, 2014.  The final rule also provides the coverage effective dates for individuals enrolling in coverage through the marketplaces during the initial open enrollment period: 
•         For plan selections made between the first and the 15th of a given month, the coverage effective date is the first day of the immediately following month.
•         For plan selections made between the 16th and the end of a given month, the coverage effective date is the first day of the second following month. 

The short coverage gap exemption specifies that an individual is exempt for “[any] month the last day of which occurred during a period in which the applicable individual was not covered by minimum essential coverage for a continuous period of less than three months.” 

The length of the initial open enrollment period and the coverage effective dates, in tandem with the terms of the short coverage gap exemption, created the possibility that an individual who enrolled in coverage through a marketplace during an initial open enrollment period could nonetheless be liable for a shared responsibility payment for months prior to the effective date of that coverage, if the individual were not otherwise exempt.  Under this structure, an individual enrolling between Feb. 16, 2014, and the close the initial open enrollment period (March 31, 2014) would have coverage effective April 1 or later, making the individual ineligible for the short coverage gap exemption, which applies only when the coverage gap is less than (but not equal to) three months.  HHS’ guidance remedies this apparent conflict.

For more information, an FAQ document about the guidance is attached.

 

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