On March 25, 2019, the Centers for Medicare & Medicaid Services (CMS) announced a one-year extension to the transition policy (originally announced November 14, 2013 and extended five times since) for individual and small group health plans that allows issuers to continue policies that do not meet ACA standards. The transition policy has been extended to policy years beginning on or before October 1, 2020, provided that all policies end by December 31, 2020.
This means that individuals and small businesses may be able to keep their non-ACA compliant coverage through the end of 2020, depending on the policy year. Carriers may have the option to implement policy years that are shorter than 12 months or allow early renewals with a January 1, 2020 start date in order to take full advantage of the extension.
Background
The Affordable Care Act (ACA) includes key reforms that create new coverage standards for health insurance policies. For example, the ACA imposes modified community rating standards and requires individual and small group policies to cover a comprehensive set of benefits.
Millions of Americans received notices in late 2013 informing them that their health insurance plans were being canceled because they did not comply with the ACA’s reforms. Responding to pressure from consumers and Congress, on Nov. 14, 2013, President Obama announced a transition relief policy for 2014 for non-grandfathered coverage in the small group and individual health insurance markets. If permitted by their states, the transition policy gives health insurance issuers the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms.
Transition Relief Policy
Under the original transitional policy, health insurance coverage in the individual or small group market that was renewed for a policy year starting between January 1, 2014, and October 1, 2014 (and associated group health plans of small businesses), will not be out of compliance with specified ACA reforms. These plans are referred to as “grandmothered” plans.
To qualify for the transition relief, issuers must send a notice to all individuals and small businesses that received a cancellation or termination notice with respect to the coverage (or to all individuals and small businesses that would otherwise receive a cancellation or termination notice with respect to the coverage).
The transition relief only applies to individuals and small businesses with coverage that was in effect since 2014. It does not apply to individuals and small businesses that obtained new coverage after 2014. All new plans must comply with the full set of ACA reforms.
One-Year Extension
According to CMS, the extension will ensure that consumers have multiple health insurance coverage options and that states continue to have flexibility in their markets. Also, like the original transition relief, issuers that renew coverage under the extended transition relief must provide a notice to affected individuals and small businesses for each policy year.
Under the transition relief extension, at the option of the states, issuers that have issued policies under the transitional relief in 2014 may renew these policies at any time through October 1, 2020. Affected individuals and small businesses may choose to re-enroll in the coverage through October 1, 2020. Policies that are renewed under the extended transition relief are not considered to be out of compliance with the following ACA reforms:
- Community premium rating standards. Consumers may be charged more based on factors such as gender or a pre-existing medical condition, and it might not comply with rules limiting age banding.
- Guaranteed availability and renewability.
- The ban on pre-existing medical conditions for adults, if the coverage is an individual market policy. Policies may exclude coverage for treatment of an adult’s pre-existing medical condition such as diabetes or cancer.
- Discrimination based on health status, if the coverage is an individual market policy. Consumers may have premium increases based on claims experience or receipt of health care.
- Coverage of essential health benefits or limit on annual out-of-pocket spending. Policies may not cover benefits such as prescription drugs or maternity care, or they may have unlimited cost-sharing.
- Standards for participation in clinical trials. Consumers may not have coverage for services related to a clinical trial for a life-threatening or other serious disease.
Stacy Barrow advises UBF clients on various topics around ERISA and the ACA. One of the nation’s leading experts on the Affordable Care Act, Stacy uses a practical, business-focused approach to counsel his clients on all matters related to employee benefit plans. Stacy also has extensive technical knowledge and experience designing and implementing health and welfare plans that meet the numerous and intricate requirements of applicable federal and state law.