Insurance Marketing Nondiscrimination Reforms for 2014

Effective for 2014, the Affordable Care Act (or ACA) requires health plans and health insurance issuers to comply with a new set of market reforms related to nondiscrimination. These reforms include:

• Premium rating restrictions for health insurance issuers in the individual and small group markets;
• Additional limits regarding discrimination based on a health status-related factor;
• Prohibition on imposing preexisting condition exclusions; and
• Expanded guaranteed issue and renewability requirements.

On Feb. 22, 2013, HHS released a final rule to implement ACA's health insurance market reforms for 2014. The final rule addresses ACA's reforms regarding premium rating, guaranteed issue and renewability and risk pooling to create the foundation for a competitive and accessible health insurance market starting in 2014.

This Legislative Brief summarizes select ACA insurance market reforms for 2014. Please read below for more information.

PREMIUM RATING

ACA creates federal standards for setting insurance premium rates, effective for plan or policy years beginning on or after Jan. 1, 2014. Under the federal standards, health insurance issuers in the individual and small group markets will be generally prohibited from determining premium rates based on health status, gender or other factors.

Issuers will only be able to vary premium rates based on the following factors:

• Age (may not vary by more than 3:1 for adults);
• Rating area;
• Individual or family enrollment; and
• Tobacco use (may not vary by more than 1.5 to 1).

ACA's premium rating restrictions do not apply to issuers in the large group market, unless states elect to offer large group coverage through their insurance exchanges beginning in 2017. In addition, the premium rating restrictions do not apply to insurance coverage that has grandfathered status under ACA.

HEALTH STATUS-RELATED FACTORS

The Health Insurance Portability and Accountability Act (HIPAA) currently prohibits group health plans and group health insurance issuers from discriminating against an individual with respect to plan eligibility or coverage based on a health status-related factor. HIPAA identifies the following as health status-related factors:

• Health status;
• Medical condition (both physical and mental illnesses);
• Claims experience;
• Receipt of health care;
• Medical history;
• Genetic information;
• Evidence of insurability; and
• Disability.

Effective Jan. 1, 2014, ACA adds the following broad, "catch all" category to the list of health status-related factors:

• Any other health status-related factor determined appropriate by the Department of Health and Human Services (HHS).

Under this category, HHS will have the regulatory authority to specify additional health status-related factors without the need for legislation.

In addition, effective Jan. 1, 2014, ACA prohibits health insurance issuers in the individual market from discriminating based on health status-related factors.

Health plans and insurance coverage with grandfathered status are not required to comply with ACA's changes related to nondiscrimination based on health status-related factors.

PRE-EXISTING CONDITION EXCLUSIONS

ACA currently prohibits group health plans and health insurance issuers from imposing preexisting condition exclusions on enrolled individuals who are under age 19. This prohibition became effective for plan years beginning on or after Sept. 23, 2010 (that is, Jan. 1, 2011, for calendar year plans).

Effective for plan years beginning on or after Jan. 1, 2014, ACA prohibits group health plans and issuers from imposing any preexisting condition exclusions, regardless of an individual's age.

"Preexisting condition exclusion" means a limitation or exclusion of benefits related to a condition, based on the fact that the condition was present before the date of enrollment for the coverage, whether or not any medical advice, diagnosis, care or treatment was recommended or received before that date. Based on this definition, ACA prohibits exclusions of coverage of specific benefits and a complete exclusion from a plan based on a preexisting condition.

ACA's prohibition on preexisting condition exclusions applies to group health plans and group health insurance coverage, including grandfathered plans and coverage. This prohibition also applies to individual health insurance coverage, although it does not apply to grandfathered individual policies.

GUARANTEED ISSUE AND RENEWABILITY

HIPAA currently requires health insurance issuers in the small group market to comply with certain guaranteed issue requirements. In addition, HIPAA requires issuers in both the small and large group market to renew coverage at the option of the plan sponsor, subject only to some limited exceptions.

Effective Jan. 1, 2014, ACA significantly expands the guaranteed issue requirements and makes small changes to the guaranteed renewability rules. Under these new requirements:

• Issuers that offer coverage in the individual or group market (both small and large group markets) must accept every employer and individual that applies for coverage. However, enrollment may be limited to open enrollment or special enrollment periods.
• Issuers that offer coverage in the individual or group market (both small and large group markets) must renew coverage at the option of the plan sponsor, subject to only to some limited exceptions (for example, nonpayment of premiums or fraud).

Grandfathered health coverage is not required to comply with ACA's changes to the guaranteed issue and renewability requirements.

This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice.

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