Special enrollment rules tightened, improving financial viability of CO-OPs

In order to improve stability in the health insurance marketplace and give consumers access to quality, affordable coverage, HHS is taking steps to strengthen the integrity of special enrollment periods (SEPs) for qualified health plans (QHPs) and to simplify the rules for the Consumer Operated and Oriented Plan (CO-OP) program. Under an interim final rule, HHS is tightening the rules for certain SEPs and making it clear that SEPs are only available in certain defined and limited circumstances. The interim final rule also makes several changes to the regulations governing the CO-OP program that are intended to enhance the ability of CO-OPs to attract investors and develop new relationships that will support their short and long-term financial viability.

Background. The Patient Protection and Affordable Care Act (ACA) created health insurance marketplaces through which qualified individuals and qualified employers can purchase health insurance coverage during open enrollment periods or SEPs, if eligible. The ACA also established a loan program to foster the creation of CO-OPs to offer QHPs to individuals and small employers.

SEPs. The ACA established enrollment periods, including SEPs for qualified individuals to enroll into QHPs through a marketplace. The interim final rule amends the eligibility requirements of the SEP for individuals who gain access to new QHPs as a result of a permanent relocation of their residence. Going forward, the SEP will be available only to those individuals who had minimum essential coverage for one or more days within the 60 days preceding their permanent move. This will align the eligibility requirements with the intent of the SEP (to afford individuals the full range of plan options when they relocate), and promote stability in the marketplace. It will also ensure that individuals are not moving for the sole purpose of obtaining health coverage outside of the open enrollment period.

The interim final rule does not alter SEP eligibility for: (1) those being released from incarceration; (2) those moving to the United States from abroad; or (3) those who previously were in a non-Medicaid expansion state and ineligible for advance payments of the premium tax credit because of a household income below 100 percent of the federal poverty level, and ineligible for Medicaid during the same timeframe, who make a permanent move to a state where they are newly eligible for advance payments of the premium tax credit.

The interim final rule also eliminates the January 1, 2017 implementation deadline for a marketplace to offer: (1) advanced availability of the SEP for certain individuals who gain access to new QHPs as a result of a permanent move; and (2) a new SEP for loss of a dependent or for no longer being considered a dependent due to divorce, legal separation, or death. HHS does not believe that it is appropriate to require marketplaces to expand eligibility for an existing SEP or offer a new SEP when both could introduce additional uncertainty to the marketplace risk pool. As a result of this change, the implementation of both of these provisions will be at the option of each individual marketplace.

Lastly, SEPs are only available in six defined and limited types of circumstances: (1) loss of other qualifying coverage; (2) changes in household size like marriage or birth; (3) changes in residence, with significant limitations; (4) changes in eligibility for financial help, with significant limitations; (5) defined types of errors made by marketplaces or plans; and (6) other specific cases like cycling between Medicaid and the marketplace or leaving Americorps coverage.

CO-OP program. The ACA established the CO-OP loan program that helps fund the establishment of private, non-profit, consumer-operated and oriented health plan issuers of QHPs. Although the ACA initially appropriated $6 billion for the program, all but $1.1 billion was subsequently rescinded, and presently there are no remaining funds to award to these CO-OPs. Due to the lack of federal funding, HHS believes that many CO-OPs would benefit from the infusion of private capital.

With this in mind, the interim final rule makes certain changes to the CO-OP governance requirements to facilitate private market transactions that can provide access to needed capital. First, the current requirement that a majority of voting directors be members of the CO-OP, and that all directors be elected by a vote of CO-OP members, is removed. This will add flexibility to board eligibility, consistent with private sector practices, and remove a potential barrier to private sector investments.

Second, the interim final rule provides clarity regarding compliance with the requirement that at least two-thirds of the plans issued by a CO-OP be QHPs in the individual or small group market. Going forward, if a CO-OP temporarily fails to meet this standard in a given year, HHS would not necessarily require early loan repayment, as long as the CO-OP is in compliance with any applicable requirement to offer silver and gold plans, has a specific plan and timetable to meet the two-thirds requirement, and acts with demonstrable diligence and good faith to meet the standard.

Lastly, the IFC provides clarity relating to the current prohibition on a CO-OP converting or selling to a for-profit or non consumer-operated entity. For instance, if a CO-OP is out of compliance with this provision, the CO-OP will cease to be a qualified nonprofit health insurance issuer, and certain rights under the CO-OP loan agreement will become available to CMS, including the right to accelerate repayment of the loans or terminate the loan agreement itself. Notwithstanding these rights, in the appropriate circumstances, to preserve coverage for enrollees upon insolvency of the issuer, HHS now recognizes that a CO-OP could elect to enter into such a transaction with a for-profit or non-consumer-operated entity. However, any sale, conversion, or other change to contract terms with cost implications to the government would be reviewed by CMS prior to implementation.

Comment period and effective dates. To be assured consideration, comments on the interim final rule must be received by July 5, 2016. The changes to the CO-OP program are effective on May 11, 2016. The changes to the SEPs will are effective July 11, 2016.

SOURCE: 81 FR 29146, May 11, 2016.

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