Reform Alert - News from the Blues' Office of National Health Reform

Michigan issues individual and small group 2014 market rules for plans sold on and off the Marketplace

April 19, 2013

On March 21, the Michigan Department of Insurance and Financial Service (DIFS) issued an Insurance Bulletin with key information regarding requirements that apply on and off the Marketplace for individual and small group plans issued or renewed on or after January 1, 2014.

Small group definition
DIFS defines small employer as an employer with 1 to 50 full-time equivalent employees, using the counting method defined in the Affordable Care Act’s employer mandate provisions.

Under the full-time equivalent counting method, the determination of whether an employer is a small employer requires the following calculation, with respect to the preceding calendar year:

  • Determination that the employer does or will employ at least 1 employee on the first day of the plan year.
  • Determine the number of full-time employees for each month of the calendar year using the 130-hour-per-month standard.
  • Calculate the number of full-time-equivalent employees for each month of the calendar year using the 120-hour-per-month standard. For this purpose, any employee that works more than 120 hours but less than 130 hours in a month is treated as having worked 120 hours in the month.
  • Find the sum of the number of full-time employees and full-time equivalent employees for each month in the calendar year.
  • Add up the 12 monthly calculations and divide by 12. Round down to the nearest whole number.
  • If the number is less than or equal to 50, then the employer is considered a small employer. If the number is greater than 50, then the employer is likely to be a large employer, so long as the exemption for seasonal workers does not apply.
  • If an employer’s workforce exceeds 50 full-time equivalent employees for 120 days or fewer during a calendar year, and the employees in excess of 50 that were employed during that period were seasonal employees, the employer would not be an applicable large employer.

Network adequacy and essential community providers (ECPs)
Network adequacy requirements will apply to business on and off the Marketplace. Network adequacy standards apply to all essential health benefit categories, including pediatric dental, pediatric vision and prescription drug benefits. All plans in the individual and small group markets will be reviewed to ensure that their provider networks are adequate at the time of the initial filing, and annually thereafter. All QHPs offered on the Exchange will also be reviewed to ensure the network contains a sufficient number and geographic distribution of Essential Community Providers to ensure reasonable and timely access to providers for low income, medically underserved individuals within the QHP’s service area.

The State of Michigan did not exercise any of its discretion except with respect to geographical rating areas. Rating includes:

  • Not require an age rating ratio that is less than 3:1
  • Defer to the federal default age rating factors
  • Not require a tobacco use rating ratio less than 1.5:1
  • Not require the use of a standard family tier
  • Require aggregate per-member rating in the small group market
  • Require separate risk pools for the individual and small group markets (will not merge the risk pools)

Geographic rating areas
DIFS is establishing 16 prescribed geographic rating areas that all carriers must use in the individual and small group markets. CCIIO has approved the rating areas without change. The Insurance Bulletin includes a map of the geographic rating areas.

Requirements that apply only to Marketplace products

  • Specifies that DIFS will ensure that issuers comply with federal requirements, including accreditation, offering at least one gold and one silver plan, offering a child-only plan at each AV level at which a QHP is offered and other federal requirements.
  • DIFS will exercise its authority under Michigan state law to designate product filings, both on and off the Marketplace, as nonpublic and confidential. This confidentiality will be in effect until October 1, 2013.
  • QHP binders will be submitted through SERFF by May 31. DIFS expects CMS to review its QHP certification recommendations in August 2013. In late August, issuers will have the opportunity to review plan data and submit necessary corrections. CMS will review and confirm with issuers any revised data. Final certification decisions will be communicated to issuers on September 4, 2013. Open enrollment begins October 1, 2013.

Where can I find more information?
More information can be found online in the Insurance Bulletin.


The information in this document is based on preliminary review of the national health care reform legislation and is not intended to impart legal advice. The federal government continues to issue guidance on how the provisions of national health reform should be interpreted and applied. The impact of these reforms on individual situations may vary. This overview is intended as an educational tool only and does not replace a more rigorous review of the law’s applicability to individual circumstances and attendant legal counsel and should not be relied upon as legal or compliance advice. As required by US Treasury Regulations, we also inform you that any tax information contained in this communication is not intended to be used and cannot be used by any taxpayer to avoid penalties under the Internal Revenue Code.