If you read only last Thursday’s headlines, you probably concluded that the Administration had decided not to enforce the ACA’s 2014 health care coverage mandates until after the 2016 Presidential election. If you clicked the hyperlinks and read the actual CMS notices, you got a headache, as did your humble correspondent. As a supplement to a November 2013 letter to state insurance commissoners, the Administration actually issued a two sets of rules, dealing with separate ACA problems. Here, we address only the set that grabbed the headlines.
Many small employers with calendar year group health plans renewed those plans before January 1, 2014, to avoid one or more of the new coverage mandates that became effective for plan years beginning on or after January 1, 2014. In September 2014, people covered by those plans were scheduled to receive 90-day cancellation notices, because their plans could not be renewed again in December. The same was true of individuals whose cancellations the Administration had allowed to be rescinded for 2014. The government feared that the pre-election 2014 cancellation wave might become a political tsunami. Here’s a short summary of how the Balch ACA Strategists think the government solved this problem.
First, nothing was said about grandfathered plans. The concern was for plans that, due to non-grandfathered status, were exposed to all the new mandates for plan years beginning on and after January 1, 2014. The new mandates that apply even to grandfathered plans still apply to grandfathered plans.
Plans not in effect by October 1, 2013 got no relief. And, non-grandfathered, large employer group health plans that were in effect by that date got only a right that they already had, i.e., to be treated as small when the “small” cap goes from 50 to 100 employees in 2016, assuming that the employer’s workforce was between 50 and 100 during the relevant measurement period.
The big news was made for non-grandfathered, individual and small group plans that were in effect by October 1, 2013 and that, absent this relief, would have been cancelled for failure to comply with these new Public Health Service Act mandates effective for plan years beginning on or after January 1, 2014:
§ 2701 (modified community rating);
§ 2702 (guaranteed issue);
§ 2703 (guaranteed renewal);
§ 2704 (individual plan pre-existing condition exclusions);
§ 2705 (barring certain health status discrimination)
§ 2706 (barring discrimination against certain providers);
§ 2707 (Essential Health Benefits and cost-sharing caps);
§ 2709 (clinical trial coverage).
That relief, for plan years beginning not later than October 1, 2016, is conditioned on each of these things (paraphrasing CMS):
- The coverage was in effect on October 1, 2013;
- The insurer notifies all individuals and small businesses that received a cancellation or termination notice with respect to the coverage, and all that would otherwise receive a cancellation or termination notice with respect to the coverage, explaining (1) any changes in the options that are available to them; (2) which of the specified market reforms would not be reflected in any coverage that continues; (3) their potential right to enroll in a qualified health plan offered through a Health Insurance Marketplace and possibly qualify for financial assistance; (4) how to access such coverage through a Marketplace; and (5) their right to enroll in health insurance coverage outside of a Marketplace that complies with the specified market reforms. Where individuals or small businesses have already received a cancellation or termination notice, the issuer must send this notice as soon as reasonably possible. Where individuals or small business would otherwise receive a cancellation or termination notice, the issuer must send this notice by the time that it would otherwise send the cancellation or termination notice.
- State insurance officials elect to implement the relief;
- To the extent of discretion left to them by state officials, insurers elect to implement the relief.
If an individual plan qualifies for relief that is denied by state officials, then the individual may avoid the individual mandate penalty by buying a cheap, “catastrophic coverage” plan.
The relief does not extend to these new PHS Act mandates:
§ 2708 (maximum 90-day waiting period);
§ 2711 (no lifetime or annual limits);
§ 2712 (no rescission except for fraud);
§ 2713 (coverage of preventive health services);
§ 2714 (adult child coverage up to age 26);
§ 2715 (summary of benefits and coverage);
§ 2716 (prohibition of discrimination favoring the highly compensated);
§ 2719 (appeal rights).
Simplified media reports of a complex ACA rule change should never be deemed adequate for compliance planning purposes. If you think you may have a related compliance issue after reading this, please seek current, competent legal advice about your particular situation.