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Option for Some to Renew Policies That Do Not Fully Meet ACA Standards

Updated March 2017 by our partners at United Benefits Advisors.

In the fall of 2013, the Department of Health and Human Services (HHS) announced a transitional relief program that allowed state insurance departments to permit early renewal at the end of 2013 of individual and small group policies that do not meet the “market reform” requirements of the Patient Protection and Affordable Care Act (ACA) and for the policies to remain in force until their new renewal date in late 2014.

On March 5, 2014, HHS released a Bulletin that extended transitional relief to permit renewals as late as October 1, 2016, allowing plans to remain in force until as late as September 30, 2017. On February 29, 2016, HHS released another Bulletin to permit renewals until October 1, 2017, with a termination date no later than December 31, 2017. On February 23, 2017, HHS released its Insurance Standards Bulletin Series, in which it re-extended its transitional policy. States may permit issuers that have renewed policies under the transitional policy continually since 2014 to renew such coverage for a policy year starting on or before October 1, 2018; however, any policies renewed under this transitional policy must not extend past December 31, 2018.

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). Under the ACA, all non-grandfathered group health plans must ensure that annual out-of-pocket cost sharing (for example, deductibles, coinsurance and copayments) for in-network essential health benefits does not exceed certain limits; in February 2015, HHS clarified that the out-of-pocket limits apply to each individual, even those enrolled in family coverage

Not 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. A list of state decisions as of March 2016 is available at healthinsurance.org.

States and insurers have the option to include some of the market reform requirements that the federal government says may be disregarded. States had 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, these market reforms apply to mid-size employers (those with 50 to 100 employees) and states may extend the option to renew existing policies to those employers as well.

Requirements that Apply to Plans Renewed Under This Exception

See full download for corresponding data.

All newly-issued policies must meet all of the ACA requirements.

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. It appears that each renewed policy will need to be evaluated to determine whether it meets minimum value (60%). Access to affordable, minimum value coverage through an employer will make the individual ineligible for a premium tax credit/subsidy. Rate increases will need to be reported, and in some cases reviewed.


Download the full UBA ACA Advisor here.