(Note : For the next few weeks, Health Reform Talk will focus on detailed explanations for specific provisions in the new health reform law. Click here for previous post.)
So what’s included in Sec. 1201 of the Affordable Care Act, concerning the guaranteed availability and renewal of coverage?
Public Health Service Act (PHSA) provisions related to guaranteed issue and renewability of health insurance coverage for employers in the group market are revised and expanded to ensure availability and renewal of health insurance coverage to both employers and individuals, and to strictly limit the circumstances under which coverage may be denied or not renewed. Accordingly, health insurance issuers that offer health insurance coverage in the individual or group market in a state are required to “accept every employer and individual in the state that applies for such coverage,” except as permitted under the special rules for network plans and insurers that no longer have the financial capacity to underwrite additional coverage. Coverage enrollment may be restricted to open and special enrollment periods, and special enrollment periods must be established for COBRA qualifying events.
Guaranteed Availability Of Coverage
Subject to the following provisions regarding enrollment, and special rules for network plans and financial capacity limits, every health insurance issuer that offers health insurance coverage in the individual or group market in a state “must accept every employer and individual in the state that applies for such coverage.”
Enrollment. Insurance issuers may restrict enrollment in coverage to open or special enrollment periods, and must establish special enrollment periods for COBRA qualifying events, in accordance with regulations to be promulgated by the Department of Health and Human Services (HHS).
The HHS must promulgate regulations with respect to enrollment periods under this subsection.
Special rules for network plans. Where a health insurance issuer offers health insurance coverage in the group and individual market through a network plan, the issuer may:
(1) limit eligible employers to those having eligible individuals who live, work or reside in the service area of the network plan; and
(2) within the service area of the plan, deny coverage to employers and individuals if the issuer has demonstrated, if required, to the applicable state authority that—
(a) it lacks the capacity to deliver services adequately to enrollees of any additional groups or additional individuals because of obligations to its existing group contract holders and enrollees, and
(b) it is applying the denial of coverage uniformly to employers and individuals without regard to the claims experience of individuals, employers and their employees (and their dependents), or any health status-related factor related to those individuals, employees and dependents;
(3) Upon denying health insurance coverage in any service area, an issuer may not offer coverage in the group or individual market within that service area for a period of 180 days after the date that coverage is denied.
Financial capacity limits. A health insurance issuer may deny health insurance coverage in the group or individual market if the issuer has demonstrated, if required, to the applicable state authority that it:
(1) lacks the financial reserves necessary to underwrite additional coverage; and
(2) is applying this provision uniformly to all individuals and employers in the individual or group market in the state consistent with applicable state law and without regard to the claims experience of those individuals, employers and their employees (and their dependents), or any health status-related factor relating to those individuals, employees and dependents.
A health insurance issuer, upon denying health insurance coverage in connection with group health plans in a state in accord with this provision, may not offer coverage in connection with group health plans in the individual or group market in the state for a period of 180 days after the date coverage is denied, or until the issuer has demonstrated to the applicable state authority, if required by state law, that the issuer has enough financial reserves to underwrite additional coverage, whichever date is later. An applicable state authority may provide that this provision be applied on a service-area-specific basis.
Guaranteed Renewability Of Coverage
A health insurance issuer that offers health insurance coverage in the individual or group market must renew or continue in force such coverage at the option of the plan sponsor or individual, as applicable, subject to the following general exceptions and provisions for uniform termination of coverage, uniform modification of coverage, and coverage offered only through associations.
General exceptions. An issuer may not renew, or may discontinue coverage offered in connection with health insurance coverage offered in the group or individual market only based upon one or more of one of the following:
(1) the individual or plan sponsor has failed to pay premiums or contributions under the terms of the coverage or the issuer has not received timely premium payments;
(2) the individual or plan sponsor has “performed an act or practice that constitutes fraud,” or made an intentional misrepresentation of material fact under the terms of coverage;
(3) as to a group health plan, the plan sponsor has failed to comply with a material plan provision that relates to employer contribution or group participation rules, under applicable state law;
(4) the issuer ceases to offer coverage in the market in accordance with the rules requiring uniform termination of coverage, and applicable state law;
(5) when an issuer that offers health insurance coverage in the market through a network plan no longer has any enrollee in connection with the plan who lives, resides, or works in the issuer’s service area (or in the area in which the issuer is authorized to do business), and in the case of the small group market, the issuer would deny enrollment with regard to such plan under the special rules for network plans; or
(6) when the health insurance coverage is made available in the small or large group market only through one or more bona fide associations, the membership of an employer in the association (based on which the coverage is provided), ceases, but only if the coverage is terminated uniformly without regard to any health status-related factor related to any covered individual.
Uniform termination of coverage. When an issuer decides to discontinue offering a particular type of group or individual health insurance coverage, it may be discontinued by the issuer in accordance with applicable state law in such market, but only if:
notice of discontinuation is given to each individual or plan sponsor provided that type of coverage in such market (and covered participants and beneficiaries) at least 90 days prior to the date of discontinuation of coverage;
each individual or plan sponsor provided that type of coverage in such market is given the option to purchase all (or in the case of the large group market, any) other health insurance coverage currently being offered by the issuer in that market; and
in exercising the option to discontinue the particular type of coverage and in offering to plan individuals and plan sponsors the option to purchase other coverage offered by the issuer in such market, the issuer acts uniformly without regard to the claims experience of those individuals or plan sponsors, or any health status-related factor pertaining to any covered participants or beneficiaries, or new participants or beneficiaries who may become eligible for such coverage.
If a health insurance issuer elects to discontinue offering all health insurance coverage in the individual or group market, or all markets, in a state, health insurance coverage may be discontinued by the issuer in accordance with applicable state law, only if:
(1) the issuer provides notice to the applicable state authority and to each individual or plan sponsor (and covered participants and beneficiaries) of such discontinuation at least 180 days prior to the date of the discontinuation of coverage; and
(2) all health insurance issued or delivered for issuance in such market(s) in the state are discontinued and such health insurance coverage in such market(s) is not renewed.
When health insurance coverage is discontinued in a market, the issuer may not provide for issuance of any health insurance coverage in the state and market involved for a period of five years beginning on the date of discontinuation of the last health insurance coverage not so renewed.
Uniform modification of coverage. At the time of coverage renewal, a health insurance issuer may modify the health insurance coverage for a product offered to a group plan:
in the large group market, or
in the case of the small group market, only if, as to coverage in such market, other than only through one or more bona fide associations, the modification is consistent with state law and effective on a uniform basis among group health plans with that product.
In the case of health insurance coverage made available by an issuer in the small or large group market to employers only through one or more associations, any reference in this section to “plan sponsor” is deemed, with respect to coverage provided to an employer member of the association, to include a reference to such employer.
Effective date. The provision is effective for plan years beginning on or after January 1, 2014.
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