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Individual Market Insurance Provisions

(Title I, Subtitle B)

Effective date July 1, 1997 with respect to new and existing business.

Scope

The law applies to health plan carriers serving the individual market. The law specifies that carriers offering coverage only in connection with group health plans or through one or more bona fide associations are not required to offer coverage in the individual market.

Guarantee issue of individual health coverage

  • A health plan carrier offering coverage in the individual market may not decline to offer coverage to, or deny enrollment of an eligible individual and may not impose any preexisting condition exclusions with respect to such coverage.
  • This requirement does not apply in states with acceptable "alternative mechanisms" (defined below). In states without an acceptable alternative mechanism, a carrier may limit the coverage offered as described below.

Qualifying /eligibility for guarantee issue of individual coverage

  • Defines eligible individual as an individual:
  • With aggregate of 18 months or more of previous continuous coverage;
  • With most recent prior coverage from a group health plan, governmental plan, or church plan (or health insurance coverage offered in connection with any such plan);
  • Ineligible for group health coverage, Medicare Parts A or B, Medicaid (or any successor program),
  • Not eligible if COBRA continuation benefit was offered by not exercised;
  • Must have exhausted all COBRA continuation coverage benefits;
  • Without any other health insurance coverage; and
  • Not terminated from their most recent prior coverage for nonpayment of premiums or fraud.

Guarantee issue - optional state programs / flexibility

  • A state may notify the Secretary of HHS that it intends to implement (or already has implemented) an alternative mechanism to achieve the law's goals. The chief executive officer of a state is presumed to be implementing an acceptable alternative mechanism as of January 1, 1998, must notify the Secretary no later than July 1, 1997. A state alternative program is presumed to be acceptable unless the Secretary finds otherwise. In states implementing an acceptable alternative mechanism, the federal (fallback) requirements do not apply.
  • To be an acceptable alternative, the state program must satisfy the goals of the law:
    • Provide all eligible individuals with a choice of coverage;
    • Not impose preexisting condition exclusions;
    • The mechanism implements a risk adjuster or risk spreading mechanism; and
    • At least one of the choices must provide benefits comparable to comprehensive coverage in the individual market or standard coverage in the group market.
  • A state program can satisfy the law's portability requirements by:
    • Adopt either NAIC Availability or Portability Model Acts adopted on June 3, 1996;
    • health insurance coverage pools or programs;
    • mandatory group conversion policies;
    • guarantee issue of one or more individual policies;
    • guarantee issue of all plans;
    • open enrollment by one or more individual carriers; or
    • a combination of the above.
  • A state program meeting any of the following criteria would be deemed acceptable by the Secretary of HHS:
    • NAIC Availability or Portability Model Acts as approved by the NAIC on June 3, 1996; or
    • State high risk pool that does not impose preexisting limitations and is consistent with the NAIC Health Plan for Uninsurable Individuals Model Act.

Guarantee issue -- fallback or in absence of state alternative

  • In the absence of an alternative state mechanism, the law requires carriers to guarantee issue health insurance coverage to eligible individuals.
  • A carrier must offer a choice of two policies satisfied by either of two methods:
    • The two most popular plans of a carrier (health plans with the highest premium volume); or
    • Two policy forms with representative coverage:
      1. Lower cost plan must be between 85% to 100% of the weighted average.
      2. Highest cost plan must be 15% greater than lowest plan and between 100% and 120% of the weighted average.
      3. The weighted average may be either: the actuarial average of all health plans offered by a carrier or all plans offered in the state. The weighted average must be based on coverage provided during the previous year and exclude coverage of eligible individuals. Actuarial values must be calculated based on a standardized population and a set of standardize utilization and cost factors.

Guaranteed renewability of individual coverage

  • Requires guaranteed renewal of all products by all individual health plan carriers:
  • Coverage is renewable except for the normal circumstances (non-payment, fraud, etc.)
  • Carriers may cancel a form with a 90-day notice and an offer of replacement coverage.
  • Carriers may cancel all forms in a state with 180-day notice. Must stay out of the market for five years.

Enforcement of insurance provisions

  • Enforcement is left to the states. If a state fails to substantially enforce the federal requirements, the Secretary of HHS will provide enforcement in the same manner as in the small group market. Meaning, the Secretary will impose a civil money penalty of up to $100 for each day for each individual with respect to which a failure occurs. Procedural rules and safeguards are established and penalties will not apply under certain circumstances or if promptly corrected.

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