New PPACA Provisions II

Part II of a Two-Post Series – What Just Changed on September 23rd?


In Part I of this series, we outlined how health care reform provisions that went into effect on September 23rd impact employer-based group coverage; and in this Part we’ll take a closer look at how these changes are impacting the individual health insurance marketplace.

As in the group marketplace, “Grandfathered” individual plans (health plans that existed before the law was enacted on March 23rd and remain essentially unchanged) must meet only a portion of the full requirements. However, it is worth noting that turnover is much higher in the ordinary course of individual health insurance business, so it’s expected that a relatively lower percentage of individual policies will remain grandfathered for any significant period of time.

Provisions that impact all individual plans issued or renewed after September 23rd are:

• No lifetime dollar limits may be imposed on essential benefits.
• No rescissions are permitted, except in case of fraud or intentional misrepresentation.
• Children may stay on their parents’ policies until age 26 regardless of financial dependency, student status, marital status, employment, eligibility for other coverage, or any combination of these.
   

Non-grandfathered individual insurance plans also must comply with the following:

• Plans can’t impose annual limits that are less than $750,000 (annual limits will be eliminated entirely by 2014).
• Pre-existing condition exclusions may not be imposed on children under the age of 19.
• The full cost of preventive care must be provided without cost sharing.
• Plans that require or provide for a Primary Care Physician (PCP) designation must allow each member to designate any in-network PCP, or pediatrician for children, accepting new patients. Plans may no longer require an authorization or referral to an Ob-Gyn. Prior authorization for emergency services also is prohibited – and no additional cost sharing is allowed for out-of-network emergency services.

These new regulations should be good news for individuals who prefer to stay with a particular insurer because, for example, they have pre-existing conditions that would make it difficult for them to change carriers before health coverage becomes guaranteed issue in 2014. For these people continuing their plan, the insurer will have only a limited ability to increase their cost sharing or decrease plan benefits. Further, due to other provisions of PPACA such as Medical Loss Ratio minimums, their insurer will be limited in ability to raise premiums too.

A huge unintended consequence of PPACA on the individual marketplace is the recent decision by the carriers to stop selling child-only policies. The five largest publicly traded health insurers based on enrollment (Aetna, Cigna, Humana, UnitedHealth Group and WellPoint) all have announced they are no longer issuing child-only individual policies, although children still can get coverage through a family plan in the individual market.

Carriers will continue to administer individual child-only health insurance policies already on the books, but are discontinuing new sales “to protect our current members from significant price increases” according to a statement made by Aetna. Obviously, carriers are concerned about cost since there are no rules or provisions set forth in PPACA that would prevent or otherwise discourage parents from waiting until their child gets sick before they buy coverage. Rather than comply with the PPACA mandate to issue all child applications without any exclusion on pre-existing medical conditions, the insurers decided to stop offering new coverage.

A provision in the new law tries to allay claims anti-selection by allowing insurers to sign up children only during a fixed annual enrollment period; however there’s no set time of the year for all insurers to hold open enrollment like there is in the Medicare market. The reality is that parents still could wait until their child becomes ill, and then shop around for an individual health insurer that just so happens to be holding open enrollment.

The decision by insurers to stop selling child-only policies could negatively impact children from middle-class families that don’t have employer-based coverage but have incomes too high to qualify for public assistance programs such as Medicaid. Industry experts estimate that about one million children currently are covered under child-only health policies in the United States.

Check back soon for new updates. Coming next will be information about Medicare Part C ratings.