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March 20, 2014

CMS Announces Extended Transition for Non-Compliant Policies

On March 5, the Centers for Medicare and Medicaid Services (CMS) of the HHS announced a two-year extension of its previous transition policy allowing insurers in the individual and small group markets to renew certain policies that do not comply with ACA market reforms.

At the option of the states, eligible individual and small group policies with policy years beginning from Jan. 1, 2014 through Oct. 1, 2016 (previously Oct. 1, 2014, under the initial rule) will not be considered out of compliance with listed reforms. Carriers must provide a notice of the right to continue existing coverage using one of two versions provided by CMS.

Listed reforms subject to relief include premium rating rules, guaranteed availability and renewability, and the requirement to provide essential health benefits. For individual policies only, listed reforms also include prohibitions on preexisting condition exclusions for adults and discrimination based on a health factor, but small group policies covered by the transition policy must still comply with these two reforms.

In addition, the individual mandate penalty hardship exemption announced in Dec. 2013, which allows individuals with canceled noncompliant policies to qualify for a hardship exemption if they find other options to be more expensive and are able to purchase catastrophic coverage, will also continue to be available until Oct. 1, 2016. The exemption from the individual mandate penalty, however, does not make individuals eligible for premium tax credits for their noncompliant policies.

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