Recently, an interim final rule has been passed by the Center for Medicare & Medicaid Service (CMS). The new amendment was made to regulate the Consumer Operated and Oriented Plan (Co-op) programs and tighten Special Enrollment Period (SEP) eligibility in the health insurance marketplace. 

The U.S. Department of Health and Human Services (HHS) has been making efforts to strengthen the integrity of the SEPs as well as make Co-op program rules more simplified. The changes are also brought in with an intention to support financial viability of these programs through capital raising. This will improve the health insurance marketplace stability as well as provide individuals an access to quality and affordable coverage.

Tightened SEP Eligibility Rules to Control Its Abuse & Misuse

SEPs provide a facilitative way out to individuals who come across qualifying life events and need to get enrolled in or make changes to qualified health plans outside the annual open enrollment period. Since the period allows you to make changes in your existing plans or get enrolled in a new one, it is more important to ensure that it is not being abused or misused. 

SEP is only made available to those individuals who had minimum essential coverage for at least one or more days within 60 days prior to the permanent move. This aligns eligibility requirement with the intent of SEP as well as encourages stability in the marketplace. Thus, with the recent announcement, HHS made it clear that SEPs will be available under only six defined and limited types of circumstances. 

The 6 SEP eligibility conditions include:

⇒ Loss of other qualifying coverage
⇒ Changes in household size (e.g. marriage or birth) 
⇒ Changes in residence, with significant limitations 
⇒ Changes in eligibility for financial help, with significant limitations
⇒ Defined types of errors made by Marketplaces or plans, and 
⇒ Other specific cases (e.g. cycling between Medicaid and the Marketplace, leaving AmeriCorps coverage)

Though, eligible individuals do get the advantage of purchasing insurance outside open enrollment period, they tend to remain covered for shorter durations as well as have higher costs of care as compared to those who enroll during the open enrollment period. However, carriers do object and argue that beneficiaries take up insurance plans only when they have any health problem and drop the coverage when the issue is resolved. Thus, it is believed that with the latest amendments to the eligibility, beneficiaries will use it more appropriately. 

The interim rule has also eliminated the January 1, 2017 deadline for the marketplace to provide:

⇒ Advanced availability of the SEP for certain individuals who gain access to new QHPs as a result of a permanent move
⇒ A new SEP for loss of a dependent or for no longer being considered a dependent due to divorce, legal separation, or death. 

Since, it is not appropriate to require marketplaces to expand SEP eligibility, the implementation of these two provisions will be at the option of each individual marketplace.

The new rule has not made any changes to the SEP eligibility of those who are:

⇒ Being released from incarceration
⇒ Moving to United States from abroad
⇒ Previously in a non-Medicaid expansion state and ineligible for advance payments of the premium tax credit because of a household income below 100% of the federal poverty level (FPL) and during the same time frame, are ineligible for Medicaid, who make a permanent move to a state where they are newly eligible for advance payments of the premium tax credit.

Financial Uplifting of Co-Op Programs

The Co-op programs were created by the ACA to fund the establishment of non-profit, private, consumer-operated and oriented health plan issuers of qualified health plans. Initially, the programs were awarded with considerable funds, but currently, there are no remaining funds to award to these programs. Thus, because of the lack of federal funding, HHS has brought in these changes to help Co-ops with the infusion of private capital. 

The interim final rule has made some critical changes to the Co-op governance requirements to smoothen private market transactions that will facilitate access to the much needed capital. The new amendments include some major shifts to make board eligibility more flexible and remove any barriers to private sector investments. 

Additionally, as per the rule, Co-ops that fail to comply with the requirement and do not offer at least two-thirds of the plans in the individual or small group market will be able to avoid the penalties by demonstrating efforts to meet standard requirements in the future years. 

Effective Dates:

The changes made to the SEP eligibility rules will become effective from July 11, 2016, whereas those made to the Co-op programs have already come into effect from May 11, 2016. In order to assure consideration, comments on the interim final rule must be sent by July 5, 2016.

The Bottom Line

Individuals must make sure that they carefully read and follow the SEP eligibility rules while considering getting enrolled in or make changes to their qualified health plans. The move has been made with an effort to bring more stability in the marketplace as well as to avoid misuse of the SEPs. Similarly, changes to the Co-op program rule have been brought in to make them simpler and facilitate fund raising through private sector investments. But, how the two will be implemented and what will be consequences can only be measured once they both come into effect. 

source - CMS