How
ACA Regulates Private Health Insurance Providers
The Affordable Care Act (ACA) establishes federal
requirements that apply to private health insurance. The reforms affect insurance offered to
groups and individuals and impose requirements on sponsors of coverage (e.g.
employers).
Together, the ACA reforms create federal minimum
requirements with respect to access to coverage, premiums, benefits,
cost-sharing, and consumer protections.
The reforms can be grouped under the following categories:
- 1. Obtaining coverage;
- 2. Keeping coverage;
- 3. Cost of purchasing coverage;
- 4. Covered Services
- 5. Cost-sharing limits
- 6. Consumer assistance and other health care protections
- 7. Plan requirements related to health care providers
The private health insurance market is characterized
as having 3 segments – the large group,
small group, and individual markets.
Insurance sold in the large and small group markets refers to plans
offered through a plan sponsor, typically employer. Prior to 2016, states can elect to define
“small employers” as those that employ 100 or fewer employees or those that
employ 50 or fewer. Beginning in 2016,
small employers will be defined as those with 100 or fewer workers. The nongroup,
or individual, market refers to insurance policies offered to individuals and
families buying insurance on their own (i.e., not through a plan sponsor).
Analogous to HIPAA (Health Insurance Portability and
Accountability Act of 1996), ACA follows the model of federalism where the Act
establishes federal rules and the states have primary responsibility for
monitoring compliance with and enforcement of such rules.
- Obtaining Coverage
o
Guaranteed
Issue
“Guaranteed issue” in health insurance
is the requirement that a plan accept every
applicant for health coverage, as long as the applicant agrees to the terms
and conditions of the insurance offers (such as premiums).
o
Nondiscrimination
Based on Health Status
ACA
prohibits plans from basing eligibility or coverage on health status-related
factors. Such factors include health
status, medical condition (including both physical and mental illness), claims
experience, receipt of health care, medical history, genetic information,
evidence of insurability, disability, and any other health status-related
factor determined appropriate by the Secretary of HHS.
ACA
allows, however, for the offering of premium discounts or rewards based
on enrollee participation in wellness programs.
o
Extension
of Dependent Coverage
ACA
requires that if a plan offers dependent coverage, the plan must make such coverage
available to a child under age 26.
Plans that offer dependent coverage must make coverage available for
both married and unmarried adult children under age 26 but not for the adult
child’s children or spouse (although the plan may voluntarily choose to cover
them).
o
Prohibition
of Discrimination Based Salary
Employers
are banned from establishing eligibility criteria for any full-time employee,
which are based on the total hourly or annual salary of the employee.
Eligibility
rules cannot be permitted to discriminate in favor of higher-wage employees.
o
Waiting
Period Limitation
ACA
prohibits plans from establishing waiting periods greater than 90 days. 42 U.S.C. § 300gg-7.
A
“waiting period” is the time period
that must pass before coverage for an individual who is eligible to enroll
under the terms of the plan can become effective.
- Keeping Coverage
o
Guaranteed
Renewability
“Guaranteed renewability” in health
insurance is the requirement on a plan to renew individual coverage at the
option of the policyholder, or renew group coverage at the option of the plan
sponsor. Under ACA, most plans offered in the nongroup and small group markets
must renew coverage at the option of the enrollee or plan sponsor; however,
plans may discontinue coverage under certain circumstances. 42 U.S.C. §
300gg-4.
For
example, a plan may discontinue coverage if the individual or plan sponsor
fails to pay premiums or if an individual or plan sponsor performs an act that
constitutes fraud in connection with the coverage. 45 CFR § 147.106.
o
Prohibition
on Rescissions
The
practice of “rescission” refers to
the retroactive cancellation of medical coverage after an enrollee has become
sick or injured. ACA generally prohibits rescissions, except that rescissions
will still be permitted in cases where the covered individual committed fraud
or made an intentional misrepresentation of material fact as prohibited by the
terms of the plan. 42 U.S.C. § 300gg-12.
- Cost Associated with Coverage
o
Rating
Restrictions
ACA
requires adjusted (or modified) community rating rules on the determination of
premiums. 42 U.S.C. § 300gg.
“Adjusted community rating” rules
prohibit plans from pricing health insurance products based on health factors
but allow it for other key characteristics such as age. ACA’s rating rules
restrict premium variation to 4 factors described below.
·
Self-only or family enrollment
o
In most states, plans can vary premiums
based on whether an individual or an individual and any number of his/her
dependents enroll in the plan.
·
Geographic rating area
o
States are allowed to establish one or
more geographic rating areas within the state for the purposes of this
provision.
o
The rating areas must be based on one of
the following geographic boundaries: (1) counties; (2) three-digit zip codes;
or (3) metropolitan statistical areas (MSAs) and non-MSAs.
·
Tobacco use
o
Plans are allowed to charge a tobacco
user up to 1.5 times the premium
that the plan will charge an individual who does not use tobacco.
·
Age
o
Plans can vary premiums by no more than
a 3 to 1 ratio for adults aged 21
and older. This means that a plan will not be allowed to charge an older
individual more than three times the premium that the plan will charge a
21-year-old.
- Covered Services
o
Coverage
of Essential Health Benefits (42 U.S.C. § 18022)
ACA
requires plans to cover the essential
health benefits (EHB).
ACA
does not explicitly list the benefits that comprise EHBs; rather, it lists 10
broad categories from which benefits and services must be included.
1) ambulatory
patient services;
2) emergency
services;
3) hospitalization;
4) maternity
and newborn care;
5) mental
health and substance use disorder services, including behavioral health
treatment;
6) prescription
drugs;
7) rehabilitative
and habilitative services and devices;
8) laboratory
services;
9) preventive
and wellness services and chronic disease management;
10) and
pediatric services, including oral and vision care.
Each
state is required to select a benchmark plan.
If the benchmark plan does not cover services from all 10 categories
listed in statute, a state is required to supplement the benchmark plan to
ensure that all 10 categories are represented.
In general, plans that are required to offer the EHB must model their benefits
package after the state’s selected benchmark plan.
o
No
Cost-Sharing for Preventive Health Services
Plans
are required to provide coverage for certain preventive health services without
imposing cost-sharing.
o
Coverage
of Preexisting Health Conditions
ACA
prohibits plans from excluding coverage for preexisting health conditions. 42 U.S.C. § 300gg-3.
A
“preexisting health condition” is a
medical condition that was present before the date of enrollment for health
coverage, whether or not any medical advice, diagnosis, care, or treatment was
recommended or received before such date.
- Cost-Sharing Limits
o
Limits
for Annual Out-of-Pocket Spending
ACA
places annual limits on out-of-pocket spending.
The limits apply only to in-network coverage of the essential health
benefits (EHB).
In
2014, the limits cannot exceed existing limits specified in the tax code
applicable to certain high-deductible health plans: $6,350 for self-only
coverage and $12,700 for coverage other than self-only.
o
Minimum
Actuarial Value Requirements
ACA
requires plans to tailor cost-sharing to comply with one of 4 levels of
actuarial value. Actuarial value (AV) is
a summary measure of a plan’s generosity, expressed as the percentage of total
medical expenses that are estimated to be paid by the issuer for a standard
population and set of allowed charges. AV reflects the relative share of
cost-sharing that may be imposed. On average, the lower the AV the greater the
cost-sharing for the enrollee.
Each
level of plan generosity is designated according to a precious metal and
corresponds to a specific actuarial value:
·
Bronze: 60% AV
·
Silver: 70% AV
·
Gold: 80% AV
·
Platinum: 90% AV
o
Prohibition
of Lifetime Limits and Annual Limits
Prior
to ACA, plans were generally able to set lifetime and annual limits—dollar
limits on how much the plan would spend for covered health benefits either
during the entire period an individual was enrolled in the plan (lifetime
limits) or during a plan year (annual limits).
Under
ACA, both lifetime and annual limits are prohibited; the limits apply
specifically to essential health benefits (EHB).
Plans
are permitted to place lifetime and annual limits on covered benefits that are
not considered EHBs, to the extent that such limits are otherwise permitted by
federal and state law.
