Q. I’ve heard that I need to have an ACA-compliant health plan, but what does that mean?
A: ACA-compliant just means a policy that adheres to the ACA’s regulations. But in order to comply with the ACA’s individual mandate (which is still in place in 2018), you just need to have minimum essential coverage — which doesn’t necessarily have to be ACA-compliant coverage — or an exemption from the individual mandate.
ACA-compliant individual and small group policies must include coverage for the ten essential health benefits with no annual or lifetime coverage maximums. They are guaranteed issue during open enrollment, so pre-existing conditions are not a factor in eligibility. They cannot be arbitrarily rescinded, and carriers must comply with the medical loss ratio (MLR) rules that require them to spent at least 80 percent of premiums (85 percent for large group plans) on medical expenses.
All newly purchased individual and small group policies are required to be ACA-compliant, regardless of whether they are sold on or off-exchange. This has been the case since January 1, 2014. (Employees may still enroll in existing small-group plans that were in effect before 2014, but if a small business purchases a new plan, it must be ACA-compliant.)
The ACA’s requirements for large group plans (51 or more employees in most states, but 101 or more employees in California, Colorado, New York, and Vermont) are different, so ACA-compliance is different for those plans. But from the employee’s perspective, the coverage is still ACA-compliant, and the employee is in compliance with the individual mandate. The same is true for people who get their coverage from Medicare or Medicaid.
Plans that were in force prior to 2014 have varying degrees of exemptions from the ACA’s rules. Grandfathered plans must have already been in effect as of March 23, 2010, and while they are required to comply with some of the ACA’s regulations, they are exempt from many others.
Grandfathered plans may remain in force indefinitely as long as they are still offered by the carrier and do not make any substantial changes to the plan. But they are dwindling in number due to normal turnover of insurance products. No individual or business has been able to purchase a new grandfathered plan since March 23, 2010, although eligible employees may still enroll in existing grandfathered plans.
Grandfathered plans count as minimum essential coverage, so you don’t have to pay a penalty if you’re covered by a grandfathered major medical health insurance plan.
Policies with effective dates prior to 2014, but after March 23, 2010, are not grandfathered, but many are still in existence and they do not have to be fully ACA-compliant. Originally, these plans were all scheduled to terminate and be replaced with ACA-compliant plans at their 2014 renewal date. But the Obama Administration announced in March 2014 that they could be renewed for another year instead, without becoming fully compliant with the ACA’s regulations. Ultimately, that extension has been renewed several times, and these plans are eligible to be renewed until October 2019, and remain in force until the end of 2019, at the discretion of each state.
These plans are called “grandmothered” or “transitional” policies. They must abide by some ACA regulations, such as the ban on lifetime and annual limits for essential health benefits, but the coverage they offer can remain generally the same as it was prior to 2014. Thirty-five states opted to allow their grandmothered plans to remain in force for 2018; most of these states will likely allow grandmothered plans to renew again for 2019 as well.
Grandmothered plans count as minimum essential coverage for as long as they’re allowed to remain in effect, and you won’t have to pay the shared responsibility penalty if you remain covered by your old plan, as long as it is a major medical health insurance policy.
Plans that aren’t regulated by the ACA
In addition to grandfathered plans and grandmothered plans (both of which are major medical health insurance), there are other plans that are not major medical insurance, are not regulated by the ACA, and are thus not required to follow the guidelines of the ACA. They also do not fulfill the shared responsibility provision, which means that unless you’re exempt from the penalty, you’d have the pay a penalty if you’re relying on this type of plan as your only coverage.
They include short-term insurance / temporary health insurance, accident supplements, fixed-dollar indemnity plans, dental/vision plans, some limited-benefit policies, critical-illness policies, and medical discount plans. These plans continue to operate under state regulations much the way they did prior to the ACA.
Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for healthinsurance.org. Her state health exchange updates are regularly cited by media who cover health reform and by other health insurance experts.