Topic Employee Benefits,

Which Health Plans Are ACA-compliant?

Which Health Plans Are ACA-compliant?

After the Affordable Care Act was implemented, healthcare markets exploded. The Act ushered in numerous health insurance regulations. You often hear a certain health coverage being 'ACA-compliant.' Remember, not all available health plans comply with the new rules. To avoid finding yourself a victim, your company can get medical insurance from a Professional Employer Organization (PEO). All the same, you must understand which health plans are ACA-compliant and those that are partially compliant. 

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What Makes a Plan ACA-compliant? 

The most complicated task is knowing the difference between ACA-compliant plans and lower-quality options when buying a health plan. The numerous non-ACA-compliant plans in the market won't provide the same coverage as ACA-compliant plans.   

An ACA compliant plan entails the following: 

The Ten Health Benefits 

An ACA-compliant plan must include the ten health benefits on all individual and small-group plans. These ten essential health benefits are:   

  1. Hospitalization 
  2. Emergency services 
  3. Ambulatory services including visits to doctors and outpatient healthcare 
  4. Maternity and newborn care 
  5. Services to treat substance abuse problems and mental health illnesses 
  6. Prescription drugs 
  7. Lab tests 
  8. Preventive services 
  9. Pediatric services for children 
  10. Rehabilitation service 

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No Annual/Lifetime Maximum Coverage 

Before ACA was implemented, only a few plans covered all the essential health benefits. The Act requires plans effective from 2014 moving forward to cover the ten benefits and scrap the maximum dollar limit on the annual and lifetime benefits.  

Pre-existing conditions are not a factor in eligibility  

Another change in ACA compliance is that pre-existing conditions do not factor in eligibility. Pre-existing conditions include an injury or illness experienced before enrollment in a health plan, such as diabetes, cancer, depression, pregnancy, or acne. Before the ACA regulations, insurance companies would apply a waiting period, charge higher rates, or reject your application altogether if you had a pre-existing condition. 

Must comply with Medical Loss Ratio Rules 

ACA-compliant insurance companies must comply with the Medical Loss Ratio (MLR). According to this regulation, insurance companies should spend at least 80% (and 85% for large groups) of the premium dollars on medical care and clinical services. If they don't meet this requirement, the company should refund its customers or face harsh penalties.   

Small-Group Coverage Vs. Large Group Coverage 

When it comes to employer-sponsored coverage, the plans vary depending on the company's size. There is small group and large group coverage. In most states, except for Colorado, New York, California, and Vermont, a small group implies the employer has up to 50 employees. The types of plans you can find and the underwriting rules for the small group market plans are very similar the same as for the individual/family markets. 

The difference comes in large group plans. These are businesses with over 51 employees and 101 employees in the four states mentioned previously. Some large employers opt to self-insure rather than buy a health plan from an insurance company, with over 50 million workers under this program. The self-insured plans must also be ACA-compliant, but the rules are different. The policies must provide a minimum value by covering at least 60% of the healthcare cost and substantial physician and inpatient services plans. It must also be considered affordable for the employee and not necessarily their family members. Finally, the medical loss ratio dictates spending 85% of the premium on medical care. However, not all insurance plans are ACA-compliant. 

Grandfathered Plans 

Grandfathered plans are coverage plans that were in existence before 2014, before the ACA regulations were implemented. The plans must have been in existence as of March 23, 2010. They are not required to provide all the essential health benefits required by the ACA, among other exemptions. The plan might charge higher premiums based on your health status and exclude coverage for pre-existing conditions.  

Grandmothered Plans 

Grandmothered plans are considered transitional plans. These plans' effective dates were before 2014, but after March 23, 2010, and are not grandfathered. The difference is that grandmothered plans have an expiration date, unlike grandfather plans which could be in force forever as long as the carrier decides to keep them.  

Some states did not allow these plans to renew and terminated them altogether. For instance, in DC and 15 other states, there was no transitional plan by 2016. In other states, the enrollment of these plans is on the decline as they are being replaced by ACA-compliant coverage.  

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Short-Term Health Insurance 

If you cannot apply for an ACA coverage plan, you can apply for short-term health insurance. This plan covers you for a transitioning period of your life. It fills the coverage gap when looking for a long and sustainable solution. It is the perfect coverage for people turning 26 and coming off their parent's insurance and people between jobs. 

Fixed Indemnity Plan 

This type of policy pays the insured person a fixed amount based on the medical services regardless of the actual cost of the medical care. The amount is based on the particular type of service, the period care, or both. This plan is not ACA-compliant since it does not cap patients' out-of-pocket costs. The sum to be paid is predetermined based on the policy terms.  

Always Go with Compliant Plans 

An ACA- compliant insurance package will help you attract and retain top talent in your industry. All the non-ACA-compliant, including grandfathered, grandmothered, short-term, and fixed indemnity plans, do not cover all the essential health benefits provided in the ACA regulations and might not be such a good fit. Luckily, there are plenty of ACA-compliant plans from which you can choose. 

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Please note that the information presented above is not intended to be specific, technical, or professional advice. Our aim is to educate and provide insight into relevant topics.