The Facts
* Those who fail to obtain ACA-compliant coverage must pay a fine. In 2014, the fine is $95 or 1% of income per person. The fine increases to $325 or 2% of income in 2015, and to $695 or 2.5% of income in 2016.
* The ACA authorizes the Department of Health and Human Services (HHS) to regulate health insurance issuers, which it defines as, “an insurance company, insurance service, or insurance organization (including a health maintenance organization, as defined in paragraph (3)) which is licensed to engage in the business of insurance in a State and which is subject to State law which regulates insurance.” Therefore, if a state licenses an entity as a “health insurance issuer,” the federal government is generally obliged to recognize the entity as such.
* The Texas House passed HB 2732 in the 83rd legislative session but the bill failed to pass the Senate. The bill would have created a mechanism for individuals to self-insure as “dedicated personal insurers” by authorizing a savings-based approach to health insurance that satisfied the ACA’s individual mandate.
Recommendations
* The Legislature should pass an amended version of HB 2732 that requires a self-insurer to deposit funds equal to at least 8% of their adjusted gross income annually up to $60,000, after which no further deposits are required. These funds would be used to pay medical bills, and self-insurers would be issued a certificate of authority (COA) by the Texas Department of Insurance (TDI), thereby fulfilling the ACA’s individual mandate.
* The state should establish a reinsurance program to encourage uninsured individuals to self-insure. The program would offer low-cost reinsurance to all those opting to self-insure, and could be funded with past and ongoing revenue previously dedicated to the Texas Health Insurance Pool (high-risk pool).
* For low-income individuals, the state could lower the 8% threshold for self-insurance on a sliding scale based on income and offer a partial state match to encourage the uninsured to participate.