HHS Extends Transition Policy For Non-ACA Compliant Health Plans

On Feb. 23, 2017, the Department of Health and Human Services (HHS) extended an existing transition policy for certain health plans that do not comply with the Affordable Care Act (ACA) for an additional year, to policy years beginning on or before Oct. 1, 2018.

In states that allow it, health insurance issuers have the option of renewing current policies for current enrollees without adopting all of the ACA’s market reforms that took effect in 2014.  Although originally announced in 2013, the transition policy has already been extended several times.

According to HHS, the additional one-year extension is intended to smoothly bring all non-grandfathered (or sometimes referred to ass “grandmothered”) coverage in the individual and small group markets into compliance with all applicable ACA requirements.

The extended transition relief only applies with respect to individuals and small businesses with coverage that has been continually renewed since 2014, under the previous transition guidance. It does not apply with respect to individuals and small businesses that obtained new coverage in 2014 or after. All new plans must comply with the full set of ACA reforms.

Also, as required under the previous transition policy guidance, health insurance issuers that renew coverage under this extended transitional policy must, for each policy year, provide a notice to affected individuals and small businesses.

Impact on Employers

Individuals and small businesses may be able to keep their non-ACA compliant coverage through 2018, depending on the plan or policy year.

The extension may also mean that ACA compliance is never required for these transitional plans. If the ACA is repealed, replaced or amended, the market reforms may no longer apply to these plans.

Implementing the Extended Transition Relief Policy

HHS has stated that they will work with issuers and states to implement this extended transition policy, including options such as allowing:

  • Policy years that are shorter (but not longer) than 12 months; or
  • Early renewals with a start date of Jan. 1, 2018.

According to HHS, this approach will facilitate smooth transitions from transitional coverage to ACA-compliant coverage, which requires a calendar year policy year in the individual market.
States can elect to extend the transitional policy for shorter periods than outlined above, but may not extend it beyond these periods. Also, states may choose to adopt the extended transitional policy:

  • For both the individual and the small group markets;
  • For the individual market only; or
  • For the small group market only.

All transitional policies that have rate increases subject to review under the ACA should use the rules and processes for submission to states and HHS that were in place prior to April 1, 2013, and updated April 1, 2015, to ensure compliance with the ACA.

State Decisions

Because the insurance market is primarily regulated at the state level, state governors or insurance commissioners have to allow for the transition relief in their state.

A number of states decided against permitting insurers to use the original transition policy, including California, Connecticut, Washington, Minnesota, New York, Indiana, Vermont and Rhode Island. Some states, such as Maryland, are allowing renewals with specific provisions.

Application to Large Employers

HHS’ previous guidance also included transition relief for large employers that had previously purchased insurance in the large group market but that, as of Jan. 1, 2016, would have been redefined by the ACA as small employers purchasing insurance in the small group market. At the option of the states and health insurance issuers, these large employers had the option of renewing their current policies through policy years beginning on or before Oct. 1, 2016, without their policies being considered to be out of compliance with the specified ACA reforms that apply to the small group market but not to the large group market.

However, on Oct. 7, 2015, President Obama signed into law the Protecting Affordable Coverage for Employees (PACE) Act, which repealed the ACA’s small group market expansion requirement. As a result, states now have the option, but are not required, to expand their small group markets to include businesses with up to 100 employees.

Under HHS’ extended transition guidance for non-compliant plans, states that elect to expand the definition of “small employer” to up to 100 employees may, under state law authority, choose to provide transition relief to these employers, as appropriate.

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The information provided is for informational purposes only and does not constitute legal advice. The information above contains only a summary of the applicable legal provisions and does not purport to cover every aspect of any particular law, regulation or requirement. Depending on the specific facts of any situation, there may be additional or different requirements. This is to be used only as a guide and not as a definitive description of your compliance obligations.