Health Insurance Update

As you know, in some cases, health insurance carriers are
terminating or cancelling coverage because it would not
comply with certain market reforms that are scheduled to
take effect for plan or policy years starting on or after January
1, 2014, such as the new modified community rating and
essential health benefits package standards. In a news
conference yesterday President Obama announced that
transitional relief would be offered for individuals. Following
the news conference, the Obama administration released
guidance on the transitional delay. It is important to note that
the guidance indicates that the transitional relief is applicable
to individual policies and non grandfathered, small market
group health plans. A “small” employer is an employer that
employed an average of not more than 100 employees on
business days during the preceding calendar year and who
employs at least 1 employee on the first day of the plan year.
For plan years beginning before January 1, 2016, a state may
elect to substitute “50” for “100.” This transitional relief does
not apply to large employer-sponsored plans and self-insured
plans. Additional guidance is needed to fully understand all
implications of this transitional relief.
The transitional relief permits, with the approval of both a
State’s insurance commissioner and the insurance carrier,
the continuation of plans, subject to certain restrictions, that
would not have otherwise complied with certain mandated
benefit requirements for plan year years beginning in 2014.
Such plans will not be considered to be out of compliance
with the market reforms discussed below under the
conditions specified. Importantly, if a State’s insurance
commissioner and applicable insurance carrier do not
adopt this transitional relief, individuals and small employers
will be required to adopt plans that are compliant with the
mandated benefit requirements, for plan years beginning
in 2014. Currently it does not appear that State insurance
commissioners will be receptive to adopting this relief. Just
hours after the President spoke, the insurance commissioner
for the state of Washington announced that he would not
allow the extension of such policies in his state. It is likely
many other state insurance commissioners will follow suit, in
the near future. Additionally, the President for the National
Association of Insurance Commissioners (NAIC) and
Insurance Commissioner for Louisiana stated yesterday:
“[I]t is unclear how, as a practical matter, the changes proposed
today by the President can be put into effect. In many states,
cancellation notices have already gone out to policyholders and
rates and plans have already been approved for 2014. Changing
the rules through administrative action at this late date creates
uncertainty and may not address the underlying issues. We look
forward to learning more details of this policy change and about
how the administration proposes that regulators and insurers
make this work for all consumers.