H&W: Transition Relief for Policy Terminations

In a November 14, 2013 letter to the Insurance Commissioners of all the States, the government announced transition relief for policy terminations in the individual and small group insurance market that are being terminated because they fail to comply with one or more specified market reform provisions of the Affordable Care Act transitional relief for insurance policies.

The letter states that health insurance issuers may choose to continue coverage that would otherwise be terminated or cancelled, and affected individuals and small businesses may choose to re-enroll in such coverage.  This applies to health insurance coverage in the individual or small group market that is renewed for a policy year starting between January 1, 2014, and October 1, 2014.

Note that this relief is only available in states where insurance regulators approve this transition relief. Employers should check with their state insurance commission to determine if this relief is available. Even then, while the relief permits insurers to keep existing policies in force, it does not require them to do so.

In order to qualify for this transitional relief:

• The coverage in question had to have been in effect on October 1, 2013; and
• The health insurance issuer must send a notice to all individuals and small businesses that received a cancellation or termination notice with respect to the coverage, or send a notice to all individuals and small businesses that would otherwise receive a cancellation or termination notice with respect to the coverage, that informs them of:

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.

The market reform provisions in question are the following:

• Section 2701 (relating to fair health insurance premiums);
• Section 2702 (relating to guaranteed availability of coverage);
• Section 2703 (relating to guaranteed renewability of coverage);
• Section 2704 (relating to the prohibition of pre-existing condition exclusions or other discrimination based on health status), with respect to adults, except with respect to group coverage;
• Section 2705 (relating to the prohibition of discrimination against individual participants and beneficiaries based on health status), except with respect to group coverage;
• Section 2706 (relating to non-discrimination in health care);
• Section 2707 (relating to comprehensive health insurance coverage);
• Section 2709, as codified at 42 U.S.C. § 300gg-8 (relating to coverage for individuals participating in approved clinical trials).

Also note that grandfathered health plans are not subject to most market reforms; therefore, they do not need transitional relief.