12 Mar Option for Some to Renew Policies That Do Not Fully Meet PPACA Standards
Originally posted by United Benefit Advisors (UBA)
On March 5, 2014, the Department of Health and Human Services (HHS) released a Bulletin that allows state insurance departments to permit the renewal through October 1, 2016, of individual and small group policies that do not meet the “market reform” requirements of the Patient Protection and Affordable Care Act (PPACA). The primary market reforms are the requirements that policies include the 10 essential health benefits, be valued at the “metal levels” (platinum 90%, gold 80%, silver 70%, or bronze 60%), and be community rated (which means that rates may only be based on age with a 3:1 limit, smoking status with a 1.5:1 limit, rating area and whether dependents are covered). In addition, in the small group market the deductible generally must be limited. It is likely that the out-of-pocket maximum will not apply to renewed policies in the individual and small group markets, but that is not entirely clear yet. It does appear that it will apply to any large insured or self-funded policies that are renewed.
This Bulletin does not mean that all existing policies automatically may or will be renewed. In addition to permission from the federal government, both the state insurance department and the insurance company must agree to renew these non-compliant policies. This Bulletin extends the option that was announced last November to renew non-compliant individual and small group policies for 2014. At that time, approximately half of the states decided to permit renewal of non-compliant policies. A list of state decisions as of January 2014 is available at this Commonwealth Fund blog. Some states will likely revisit their decision in light of the longer available period.
States and insurers have the option to include some of the market reform requirements that the federal government says may be disregarded. States also have the option to allow renewals of individual policies only, small group policies only, or both types of policies, and to allow this for 2015 only or for both 2015 and 2016. In 2016, when these market reforms are scheduled to apply to mid-size employers (those with 50 to 100 employees), states may extend the option to renew existing policies to those employers as well.
Requirements that Apply to Plans Renewed Under This Exception
| Requirement |
Applies to Non-grandfathered Renewed Non-compliant Plans |
Applies to Grandfathered Plans |
Applies to Fully PPACA-Compliant Plans |
| Essential health benefits (EHBs) must be offered |
No |
No |
Yes |
| Must meet metal levels (60%, 70%, 80%, 90%) except for catastrophic plans |
No |
No |
Yes |
| Deductible generally may not exceed $2,000/$4,000 |
No |
No |
Yes |
| Modified community rating |
No |
No |
Yes |
| Out-of-pocket may not exceed $6,350/$12,700 |
Probably not |
No |
Yes |
| Nondiscrimination in health care providers |
No |
No |
Yes |
| Guaranteed issue and renewal |
Pre-2014 rules apply (participation and contribution requirements allowed) |
Pre-2014 rules apply (participation and contribution requirements allowed) |
Yes |
| Single risk pool |
No |
No |
Yes |
| Annual and lifetime dollar limits prohibited on essential health benefits |
Yes |
Yes |
Yes |
| Protections for those in clinical trials |
No |
No |
Yes |
| Dependent to age 26 coverage |
Yes |
Yes |
Yes |
| Nondiscrimination based on health status |
Pre-2014 rules apply |
Pre-2014 rules apply |
Yes |
| Small business tax credit |
Not available |
Not available |
Yes (in SHOP) |
| HRAs must integrate with a group medical plan |
Yes |
Yes |
Yes |
| Health insurer provider tax (indirect obligation) |
Yes (insurer will report and pay) |
Yes (insurer will report and pay) |
Yes (insurer will report and pay) |
| Transitional reinsurance fee |
Yes (insurer will report and pay) |
Yes (insurer will report and pay) |
Yes (insurer will report and pay) |
| Penalties apply if employer doesn’t offer coverage to employees who average 30 or more hours/week |
Not unless employer has 50 or more employees within the controlled group* |
Not unless employer has 50 or more employees within the controlled group* |
Not unless employer has 50 or more employees within the controlled group* |
| Penalties apply if employer doesn’t offer affordable, minimum value (60%) coverage to employees |
Not unless employer has 50 or more employees within the controlled group* |
Not unless employer has 50 or more employees within the controlled group* |
Not unless employer has 50 or more employees within the controlled group* |
| Report to IRS regarding affordable, minimum value coverage |
Not unless employer has 50 or more employees* |
Not unless employer has 50 or more employees* |
Not unless employer has 50 or more employees* |
| Cadillac tax |
Yes |
Yes |
Yes |
| Nondiscrimination (highly compensated) |
Yes (once rules are issued) |
No |
Yes (once rules are issued) |
| First dollar coverage for preventive care |
Yes |
No |
Yes |
| Patient protections on choice of provider and emergency room |
Yes |
No |
Yes |
| Claims and appeals requirements |
Yes |
No |
Yes |
| MLR rebates must be distributed |
Yes |
Yes |
Yes |
| Summaries of Benefits and Coverage (SBCs) required |
Yes |
Yes |
Yes |
| W-2s must include the cost of health coverage |
Not unless employer issued more than 250 W-2s in prior calendar year |
Not unless employer issued more than 250 W-2s in prior calendar year |
Not unless employer issued more than 250 W-2s in prior calendar year |
| Patient-Centered Outcomes Research Institute (PCORI) fee due |
Yes (insurer will report and pay on medical; employer will report and pay on any HRA) |
Yes (insurer will report and pay on medical; employer will report and pay on any HRA |
Yes (insurer will report and pay on medical; employer will report and pay on any HRA |
All newly-issued policies must meet all of the PPACA requirements. It is not clear yet if any changes to the renewing policy will be allowed.
Insurers that choose to renew existing policies must send a notice to all individuals and small businesses each year that explains:
- Any changes in the options that are available to them
- Which of the market reforms would not be included in the renewed policy
- The person’s potential right to enroll in a qualified health plan offered through a health insurance Marketplace and possibly qualify for financial assistance
- How to access coverage through a Marketplace
- The person’s right to enroll in health insurance coverage outside of a Marketplace that complies with the market reforms
Renewed policies will satisfy the individual’s requirement to have “minimum essential” coverage in 2014. It appears that each renewed policy will need to be evaluated to determine whether it meets minimum value (60%). While the employer-shared responsibility requirements (play or pay) have been delayed, access to affordable, minimum value coverage through an employer will make the individual ineligible for a premium tax credit/subsidy now.
Rate increases will need to be reported, and in some cases reviewed.
The opportunity for individuals to request a hardship exemption from the individual mandate — if their non-compliant coverage was cancelled and they cannot find affordable replacement coverage — also is extended until October 1, 2016.
* This requirement will not apply to most employers with 50 to 99 employees until 2016.