Subsidies Offered For Policies Outside Obamacare

By  //  March 4, 2014

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Last week, with just a month left for Americans to select health plans this year through the Affordable Care Act (ACA, aka Obamacare) insurance marketplaces, the Centers for Medicare and Medicaid Services (CMS), the agency within Health and Human Services that oversees the Obamacare exchanges, announced that some people, who because of technical issues sought and bought health coverage on their own through the private market instead of the exchanges, would still be able to get tax subsidies.

The sudden shift in policy, outlined in a three-page guidance memo published without notice on a federal website, provides flexibility for people who submitted an application but did not get prompt information about their eligibility for subsidies.


The subsidies have been one of the major attractions of the new exchanges because the law’s rules and the Obama administration had previously said that taxpayer-subsidized coverage was only available for health plans sold through the new marketplaces — not plans sold outside it.

The Obama administration has rewritten the healthcare law’s rules to allow premium tax subsidies for qualified buyers of policies outside dysfunctional state exchanges.

This latest in a series of policy changes, extensions and clarifications by the Obama administration trying to help beneficiaries and minimize political damage to Democrats in this election year will be especially helpful in states where officials decided to run their own websites but faced program debilitating technical problems. Those include Hawaii, Maryland, Massachusetts, Minnesota, Nevada, and Oregon.

These six states are among 14 that created an insurance marketplace under the ACA, while the other 36 states relied on the federal online marketplace,, and are not intended to be part of the rewritten rules.


There are some caveats. The rewritten federal rules would allow people to receive federal subsidies for health plans outside exchanges only if the covered benefits are comparable to those of plans sold through the exchanges.

In order to get retroactive subsidies, people will have to start to pay the full price of their health plan, then get the reduction once their state’s exchange is working well enough to determine whether their incomes make them eligible for the help.

Brian Haile
Brian Haile

In an email to CQ HealthBeat, Brian Haile, senior vice president for health policy at the Jackson Hewitt Tax Service Inc. said, “The policy probably covers a small number of people but translates into significant administrative costs for insurers. It only applies to insurance that meets the federal standards required to be a ‘qualified health plan,’ instead of cheaper and less comprehensive coverage.”


Opining on the onerous impact of the new rule on the insurance industry, Haile said, “The guidance requires insurers to re-process eligibility and enrollment files, bill the federal government for subsidies, re-adjudicate past medical claims, refund enrollees premiums and cost-sharing that exceed subsidy amounts, and repay any tax credits funded by state governments during this period.”

Clare Krusing
Clare Krusing

Clare Krusing, a spokeswoman for America’s Health Insurance Plans (AHIP), the industry’s main trade group, told the Washsington Post that, “this latest change adds to the operational challenges in processing enrollments.”

However, she added, “Health plans will continue to work with state and federal agencies to help consumers through the enrollment process.” (Goldstein/Johnson, Washington Post, 2/28; Adams, CQ Healthbeat, 3/3)