President Obama announced on November 14 that the Administration will allow health insurers to continue certain coverage in the individual and small group market which would have not otherwise met the market reform requirements of the Affordable Care Act (ACA). This change raises significant questions and operational problems for issuers, providers, employer sponsors of health plans, and other organizations operating in the health care industry. In conjunction with the President’s announcement, the Centers for Medicare & Medicaid Services of the Department of Health and Human Services (CMS) has issued a letter to state insurance commissioners (CMS Letter) detailing the Administration’s new “transitional policy” in regard to this issue. The CMS Letter provides some guidance regarding health insurance policies that now may be continued, and specifies the necessary conditions under which these policies may be continued. However, there remains much uncertainty as to whether issuers will be able to continue to offer these policies, as well as the overall impact on the insurance market.
Summary of the CMS Letter
The transitional relief described in the CMS Letter applies to health insurance coverage in the individual and small group market that is renewed for a policy year between January 1, 2014 and October 1, 2014 and “associated group health plans of small businesses.” In order to take advantage of the relief, the following conditions must be met:
- The coverage must have been in effect on October 1, 2013, and the relief applies only to individuals and small businesses with coverage under the policy as of that date. In other words, if a policy is extended under the relief, it cannot be sold or offered to new insureds.
- The issuer sends a new notice to all individuals and small businesses that received (or would have received) a cancellation notice with respect to the coverage, informing them of the following: (1) any changes in the options that are available to them; (2) which of the specified market reforms would not be reflected in any coverage that continues; (3) their potential right to enroll in a qualified health plan offered through an Exchange and possibly qualify for financial assistance; (4) how to access such coverage through an Exchange; and (5) their right to enroll in health insurance coverage outside of an Exchange that complies with the specified market reforms.
If individuals or small businesses have already received a cancellation notice, the issuer must send this notice as soon as reasonably possible. If the cancellation notice has not yet been sent, the issuer must send the notice by the time it would have otherwise had to have sent the cancellation notice.
Under the relief, eligible policies will not have to comply with the following market reforms which otherwise would be mandated by the ACA for 2014:
- the prohibition on using factors other than rating area, actuarial value, age, tobacco use, and individual/family status to determine premium rates;
- guaranteed availability of coverage;
- guaranteed renewability of coverage;
- the prohibition of pre-existing condition exclusions or other discrimination based on health status, with respect to adults (except with respect to group coverage);
- the prohibition of discrimination against individual participants and beneficiaries based on health status (except with respect to group coverage);
- the prohibition of discrimination against health care providers acting within the scope of their license and state laws;
- the requirement to provide essential health benefit packages;
- the prohibition on discriminating against an individual who requires treatment for cancer or another life-threatening condition because the individual chooses to participate in a clinical trial.
Note that this list does not encompass all of the market reforms under the ACA; for example, the relief does not extend to the prohibition on waiting periods that exceed 90 days, or the prohibition against establishing lifetime or annual limits on the dollar value of benefits.
The CMS Letter states, at its conclusion, that “State agencies responsible for enforcing the specified market reforms are encouraged to adopt the same transitional policy with respect to this coverage.” In other words, while the CMS Letter reflects the Obama Administration’s policy, CMS acknowledges that state insurance regulators will dictate whether this relief will be available for any particular state.