Transition proposed to help consumers facing product discontinuation
Nov. 15, 2013
On November 14, President Barack Obama announced administrative guidance in an effort to allow insurers to renew existing individual market and small group market plans even if they do not include the full menu of required health care reform benefits.
The President’s announcement came in response to concerns expressed by individuals and groups who had received notification that their current plan would be discontinued because it was not compliant with Affordable Care Act requirements.
After the President’s announcement, the Department of Health and Human Services (HHS) issued a letter to state insurance commissioners detailing the “transitional policy” that the federal government is proposing. Importantly, while HHS is encouraging states to adopt this approach, insurance commissioners have discretion regarding whether they will permit issuers in their state to extend policies in the manner specified by HHS.
Under the transition policy:
- Issuers would be permitted, but not required, to extend individual market and small group market policies that were in effect on October 1, 2013 without amending the policies to meet all ACA standards. The transition policy cannot apply to individuals or small businesses that obtain new coverage after October 1, 2013.
- The transition policy would apply to renewals of existing business occurring from January 1, 2014 until October 1, 2014. HHS indicated that it will re-evaluate this policy in 2014 and could extend it to additional renewal months.
- If issuers choose to use this transition policy to extend existing coverage, they must provide notification to enrollees in the extended coverage that includes the following:
- any changes in the options available to them
- which of the specified ACA market reforms would not be reflected in any coverage that continues
- their potential right to enroll in a qualified health plan offered through a Health Insurance Marketplace and possibly qualify for financial assistance
- how to access such coverage through a Marketplace
- their right to enroll in health insurance coverage outside of a Marketplace that complies with the specified market reforms
- Policies that are extended using this transition relief are not technically grandfathered. But the HHS guidance indicates that they will not be expected to comply with certain ACA market reforms, including:
- The requirement to limit premium variations to age, tobacco use and geography
- Essential health benefits
- Actuarial value metal levels
- Restrictions on cost sharing
- Guaranteed availability of coverage
- Guaranteed renewability of coverage
- Non-discrimination against a provider operating within their scope of practice
- Non-discrimination in coverage for individuals participating in approved clinical trials
- Prohibition of pre-existing condition exclusions or waiting periods for adults (exclusion would not apply to small group)
- Prohibition on health status discrimination (exclusion would not apply to small group)
Though the President’s proposal grants discretion to insurers to allow people in individual market or small group market plans to stay on their existing plans, there is no guarantee that insurers will do so, or that the states will allow such renewals.
Individual market policies that are extended using the transitional policy are not eligible for premium tax credits. Only insurance sold through the Marketplace can receive government subsidies for those who qualify. The “transitional policy” plans that President Obama is proposing to allow to be renewed for an additional year cannot be sold in 2014 and are not eligible for subsidies.
This transition policy does not impact those who are uninsured or have Medicare, Medicaid or large employer coverage.
Where can I find more information?
Read the Commission Letter (PDF).