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CCH® BENEFITS — 06/10/10

Health Reform 2010, Guaranteed Availability And Renewal

from Spencer’s Benefits Reports: For the next few weeks, Spencer's Benefits Reports will highlight specific provisions in the new health reform law which affect employer-sponsored plans. Sec. 1201 of the Affordable Care Act concerns the guaranteed availability and renewal of coverage.

Public Health Service Act (PHSA) provisions related to guaranteed issue and renewability of health insurance coverage for employers in the group market are revised and expanded to ensure availability and renewal of health insurance coverage to both employers and individuals, and to strictly limit the circumstances under which coverage may be denied or not renewed. Accordingly, health insurance issuers that offer health insurance coverage in the individual or group market in a state are required to “accept every employer and individual in the state that applies for such coverage.” Coverage enrollment may be restricted to open and special enrollment periods, and special enrollment periods must be established for COBRA qualifying events.

Guaranteed Availability Of Coverage

Subject to the following provisions regarding enrollment, and special rules for network plans and financial capacity limits, every health insurance issuer that offers health insurance coverage in the individual or group market in a state “must accept every employer and individual in the state that applies for such coverage.”

Enrollment. Insurance issuers may restrict enrollment in coverage to open or special enrollment periods, and must establish special enrollment periods for COBRA qualifying events, in accordance with regulations to be promulgated by the Department of Health and Human Services (HHS).

The HHS must promulgate regulations with respect to enrollment periods under this subsection.

Special rules for network plans. Where a health insurance issuer offers health insurance coverage in the group and individual market through a network plan, the issuer may:

(1) limit eligible employers to those having eligible individuals who live, work or reside in the service area of the network plan; and

(2) within the service area of the plan, deny coverage to employers and individuals if the issuer has demonstrated, if required, to the applicable state authority that—

(3) Upon denying health insurance coverage in any service area, an issuer may not offer coverage in the group or individual market within that service area for a period of 180 days after the date that coverage is denied.

Financial capacity limits. A health insurance issuer may deny health insurance coverage in the group or individual market if the issuer has demonstrated, if required, to the applicable state authority that it:

(1) lacks the financial reserves necessary to underwrite additional coverage; and

(2) is applying this provision uniformly to all individuals and employers in the individual or group market in the state consistent with applicable state law and without regard to the claims experience of those individuals, employers and their employees (and their dependents), or any health status-related factor relating to those individuals, employees and dependents.

A health insurance issuer, upon denying health insurance coverage in connection with group health plans in a state in accord with this provision, may not offer coverage in connection with group health plans in the individual or group market in the state for a period of 180 days after the date coverage is denied, or until the issuer has demonstrated to the applicable state authority, if required by state law, that the issuer has enough financial reserves to underwrite additional coverage, whichever date is later. An applicable state authority may provide that this provision be applied on a service-area-specific basis.

Guaranteed Renewability Of Coverage

A health insurance issuer that offers health insurance coverage in the individual or group market must renew or continue in force such coverage at the option of the plan sponsor or individual, as applicable, subject to the following general exceptions and provisions for uniform termination of coverage, uniform modification of coverage, and coverage offered only through associations.

General exceptions. An issuer may decline to renew, or may discontinue coverage offered in connection with health insurance coverage offered in the group or individual market only based upon one or more of one of the following:

(1) the individual or plan sponsor has failed to pay premiums or contributions under the terms of the coverage or the issuer has not received timely premium payments;

(2) the individual or plan sponsor has “performed an act or practice that constitutes fraud,” or made an intentional misrepresentation of material fact under the terms of coverage;

(3) as to a group health plan, the plan sponsor has failed to comply with a material plan provision that relates to employer contribution or group participation rules, under applicable state law;

(4) the issuer ceases to offer coverage in the market in accordance with the rules requiring uniform termination of coverage, and applicable state law;

(5) when an issuer that offers health insurance coverage in the market through a network plan no longer has any enrollee in connection with the plan who lives, resides, or works in the issuer’s service area (or in the area in which the issuer is authorized to do business), and in the case of the small group market, the issuer would deny enrollment with regard to such plan under the special rules for network plans; or

(6) when the health insurance coverage is made available in the small or large group market only through one or more bona fide associations, the membership of an employer in the association (based on which the coverage is provided), ceases, but only if the coverage is terminated uniformly without regard to any health status-related factor related to any covered individual.

Uniform termination of coverage. When an issuer decides to discontinue offering a particular type of group or individual health insurance coverage, it may be discontinued by the issuer in accordance with applicable state law in such market, but only if:

If a health insurance issuer elects to discontinue offering all health insurance coverage in the individual or group market, or all markets, in a state, health insurance coverage may be discontinued by the issuer in accordance with applicable state law, only if:

(1) the issuer provides notice to the applicable state authority and to each individual or plan sponsor (and covered participants and beneficiaries) of such discontinuation at least 180 days prior to the date of the discontinuation of coverage; and

(2) all health insurance issued or delivered for issuance in such market(s) in the state are discontinued and such health insurance coverage in such market(s) is not renewed.

When health insurance coverage is discontinued in a market, the issuer may not provide for issuance of any health insurance coverage in the state and market involved for a period of five years beginning on the date of discontinuation of the last health insurance coverage not so renewed.

Uniform modification of coverage. At the time of coverage renewal, a health insurance issuer may modify the health insurance coverage for a product offered to a group plan:

In the case of health insurance coverage made available by an issuer in the small or large group market to employers only through one or more associations, any reference in this section to “plan sponsor” is deemed, with respect to coverage provided to an employer member of the association, to include a reference to such employer.

Effective date. The provision is effective for plan years beginning on or after Jan. 1, 2014.

CCH Law, Explanation And Analysis Of Health Reform Act Available

CCH's Law, Explanation And Analysis of the Patient Protection and Affordable Care Act of 2010 provides the most comprehensive and practical guidance available to professionals needing to make sense of this historic legislation. Included in the online version is the complete text of the law, integrating both the Affordable Care Act and the Health and Education Reconciliation Act. A hard-copy version of the book is available for $149.

For more information or to order the hard-copy version of the book, please call (800) 248-3248 or click http://hr.cch.com/Products/ProductID-7127.asp. Discounts are available for multiple copies.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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