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HHS: Insurers Can Renew Cancelled Coverage That Does Not Comply With the ACA
Practical Law Legal Update 8-549-3366 (Approx. 4 pages)
HHS: Insurers Can Renew Cancelled Coverage That Does Not Comply With the ACA
by Practical Law Employee Benefits & Executive Compensation
| Published on 18 Nov 2013 • USA (National/Federal) |
The Department of Health and Human Services (HHS) has announced a transitional policy under which certain health insurance coverage in the individual or small group market that is renewed for policy years starting between January 1, 2014, and October 1, 2014 will not be considered out of compliance with market reforms under the Affordable Care Act (ACA) scheduled to take effect in 2014, if certain requirements are met.
On November 14, 2013, HHS announced a transition policy under which health insurance coverage in the small group and individual markets that is renewed for policy years starting between January 1, 2014 and October 1, 2014 will not be considered out of compliance with certain market reforms under the Affordable Care Act (ACA) scheduled to take effect in 2014, if conditions specified in the transition policy are met (see Practice Note, The Affordable Care Act (ACA) Overview: Provisions Effective Beginning in 2014). The transitional policy does not apply to grandfathered health plans under the ACA, because those plans are not subject to most of the affected market reforms (see Practice Note, Grandfathered Health Plans under the ACA).
Under the transition policy:
- Health insurers may choose to continue coverage that would otherwise be terminated or cancelled (because it did not comply with ACA requirements effective beginning in 2014, such as the essential health benefit standards).
- Affected individuals and small businesses may choose to re-enroll in such coverage. The transition policy does not, however, apply to individuals and small businesses who obtain new coverage after October 1, 2013.
- Individual policies will not be considered out of compliance with eight specified market reforms (for example, rules involving guaranteed availability of coverage and nondiscrimination in health care).
- Small group policies will not be considered out of compliance with six specified market reforms, that is, the list specified for individual policies, except for the prohibitions on:
- pre-existing condition exclusions or other discrimination based on health status for adults; and
- discrimination against individual participants and beneficiaries based on health status.
To be eligible for the transition policy, the following conditions must be satisfied:
- The coverage must have been in effect on October 1, 2013.
- The health insurer must timely send a notice to all individuals and small businesses that received (or that would otherwise have received) a notice of cancellation or termination of coverage informing them of:
- any changes in the options available to them;
- which of the market reforms under the ACA are not reflected in the continued coverage;
- their potential right to enroll in a qualified health plan offered through a health insurance exchange (referred to as a marketplace) and possibly to qualify for financial assistance (see Practice Note, Health Insurance Exchange and Related Requirements under the ACA);
- how to access such coverage through a marketplace; and
- their right to enroll in coverage outside of a marketplace that complies with the 2014 market reforms.
An insurer must send the required notice:
- As soon as reasonably possible, with respect to individuals or small businesses that have already received a cancellation or termination notice.
- By the time the insurer would otherwise have sent the cancellation or termination notice, in the case of individuals or small businesses who would otherwise receive a cancellation or termination notice (but for the transition policy).
HHS indicated that it may make future changes to the transition policy, including:
- Assessing whether to extend it beyond October 1, 2014.
- Modifying the risk corridor program final rules to help mitigate unanticipated changes in premium revenue resulting from the policy change (see Legal Update, Final Rules on Reinsurance, Risk Adjustment and Risk Corridor Programs).
Practical Impact
Although HHS is encouraging state agencies responsible for enforcing the market reforms to adopt the transitional policy, at least some states have already indicated that they will decline to do so. For its part, the National Association of Insurance Commissioners (NAIC), in a statement issued by the NAIC president, expressed concern over the new transition policy and how it can be implemented, given that rates and plans for 2014 have already been approved.