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More Changes for Individuals with Cancelled Policies

The Centers for Medicare and Medicaid Services issued new guidance yesterday regarding  options for individuals with cancelled health insurance policies. A plan cancellation now qualifies as a hardship exemption, meaning that those facing cancellations can enroll in catastrophic plans or can opt out of insurance while avoiding the individual mandate penalty.

Catastrophic or Minimum Coverage plans available through Covered California have a deductible of $6,350 for an individual, which is equal to the out-of-pocket maximum. This means that members pay for all healthcare costs (except for 3 primary care visits) until the deductible/out-of-pocket max is met. After that, all costs are fully covered. Because of the limitations in coverage, the costs are cheaper than the metal-tiered plans: a 25-year-old in San Bernardino/Riverside would pay $19 less a month for the lowest cost catastrophic plan compared to the lowest cost bronze plan, while a 60-year-old would pay $53 less.

REMEMBER: Subsidies are not available with catastrophic plans, meaning that they not a good option for individuals with income below 400% FPL. Prior to this guidance, catastrophic plans were only available to consumers under age 30 and individuals for whom the lowest cost bronze coverage exceeds 8% of household income.

catastrophic

Individuals interested in utilizing these options will need to apply for a hardship exemption by submitting this form to the federal government and providing documentation of the cancellation and the increase in prices from previous plans to Exchange plans.  The hardship exemption for cancelled policies will only be available for one year. Individuals who have received cancellation notices can contact Covered California at 1-855-857-0445 to review their options.

Some news sources have reported that individuals with cancelled policies will also be exempt from the open enrollment period and can enroll at any time. ITUP does not believe this to be the case, as the only group exempt from open enroll is Native Americans, and no guidance from CMS mentioned altering open enrollment.

This policy change could come as a relief to some consumers, particularly those who do not qualify for premium subsidies and face increases in premium costs in the Exchange and those in states like California that have limited insurance carriers’ ability to renew policies that are not compliant with the ACA. There are however political and practical concerns to the policy. Insurance companies fear that an exemption to the individual mandate could reduce the number of individuals who enroll in the Exchanges. Opponents of the ACA could use the new exemption to advocate for additional individual mandate delays or exceptions.

See the CMS guidance for full details of the policy change.

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