Obamacare clarification raises new questions

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ST. CROIX - The territory is seeking clarification from the U.S. Health and Human Services Department about the federal agency's revised view that the territories are exempt from certain provisions of the Affordable Care Act.

"We just need them to be clearer on some of these issues," said John McDonald, Director of the Division of Banking and Insurance within the V.I. Lieutenant Governor's Office.

Meanwhile, the Division of Banking and Insurance is notifying local insurers that they still need to comply with the Affordable Care Act until the clarifications come through, McDonald said.

The federal agency's new interpretation of the law - which involved deciding which definition of a "state" applied to certain Affordable Care Act provisions that amend the Public Health Service Act - has grabbed a few headlines stateside in the last week or two.

The new interpretation, according to a July 16 letter from Centers for Medicare and Medicaid Services Administrator Marilyn Tavenner to V.I. Lieutenant Governor Gregory Francis, grew out of a "careful review" of the statutory language after federal officials heard concerns from the territories that some of the new market reforms were undermining the stability of the territories' health insurance markets.

Under the new interpretation, Health and Human Services decided that the definition of "state" should follow the definition used in the Affordable Care Act and not the definition used in the Public Health Service Act.

Because of the new interpretation, certain Affordable Care Act requirements that amended the Public Health Service Act will not apply to individual or group health insurance issuers in the territories, according to the letter.

Those so-called "market reform" provisions that the territories will be exempt from under the new interpretation include guaranteed availability; community rating; single risk pool; rate review; medical loss ratio; and essential health benefits.

However, a lengthy footnote to the letter notes a number of exceptions and a number of provisions that still apply or apply to group health plans and contains some language that needs clarification, local officials said.

McDonald and Taetia Phillips-Dorsett, policy adviser to the governor, said that the territory will send a response seeking clarification on a number of issues raised by Tavenner's letter.

The letter from Tavenner also notes that the Centers for Medicare and Medicaid Services intends to issue regulations to affirm its new interpretation and eliminate any text in existing regulations that is inconsistent with the new interpretation.

The U.S. Department of Health and Human Services in 2012 had sent a letter to the U.S. territories explaining that because of its previous interpretation of the definition of "state," some provisions of the Affordable Care Act applied to the territories and some did not. It also explained that certain tax-related provisions, including the individual mandate, might not apply.

Because of the difference in the application of the law, and the experience of the territories so far, the Department of Health and Human Services noted that adverse selection was occurring in the territories and was resulting in fewer options and higher costs for consumers, according to information provided by Health and Human Services.

That led to revisiting the previous interpretation.

McDonald said that the Affordable Care Act's market reforms cannot work as they are supposed to unless all the law's provisions - the subsidies and the individual mandate requiring most people to get health insurance or pay a penalty - are in place.

"It's a three-legged stool, the mandates, the subsidies and the market reforms. It cannot work without all three," he said. "And they gave us the reforms, but not the subsidies or the mandates."

McDonald noted that in 2010, when the law first was enacted, insurers in the territory stopped issuing new individual policies. In 2013, as more provisions kicked in, the territory's small group-insurance market contracted a little, he said.

He said he hopes that once the territory's exemptions are clarified, the territory may be able to attract insurers to again issue individual health plans.

McDonald also pointed out that part of the answer for the territory may be to adopt into local law some of the ACA provisions that are deemed beneficial.

Phillips-Dorsett said that the new interpretation provides an opportunity for the territory "to go back and see which provisions work for us and enact them locally."

The letter from Tavenner also said that the territories will not have to pay back to the federal government any grants - such as those provided for rate review and consumer assistance - that have been spent as of the date of the letter, July 16.

- Contact Joy Blackburn at 714-9145 or email jblackburn@dailynews.vi.

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