Another Shift in Health Insurance Rules: Helping Consumers Keep Up

In yet another last-minute policy change, the Obama Administration released a bulletin December 19, 2013, announcing that individuals whose health insurance policies were cancelled would be eligible for an exemption from the ACA’s tax penalty for failure to maintain health insurance coverage. They will also be allowed to buy a catastrophic health plan. For consumers and those tasked with advising them – navigators, in-person assisters, agents and brokers, and application counselors – these new rules raise a number of questions. We’ve attempted to answer a few of them here.

What exactly does the Administration’s December 19 Bulletin say?

The bulletin outlines the circumstances under which a consumer can obtain a “hardship exemption” from the mandate to maintain health insurance coverage. Hardship exemptions include situations such as being homeless, facing eviction or foreclosure, or personal bankruptcy. And individuals for whom the lowest priced plan available would be more than 8 percent of their income can also qualify for a hardship exemption. The Administration’s December 19 bulletin notifies consumers of a new option: they can now apply for a hardship exemption if they can show that their individual health insurance policy was cancelled and they consider the new insurance options unaffordable. Individuals who qualify for the hardship exemption are eligible to purchase a catastrophic health plan, which is likely to be less expensive than unsubsidized plans on the health insurance marketplace. However, these plans have much higher deductibles and cost-sharing. Consumers who want to buy a catastrophic plan are advised to call local insurers – not the health insurance Marketplace – to enroll.

My plan was cancelled and I’d like to buy a catastrophic plan. How do I demonstrate that alternative coverage options were unaffordable?

You don’t have to. If you want to buy a catastrophic plan, you will need to fill out the hardship exemption form and submit it to the insurer, along with the cancellation letter you received from your insurer. But you do not have to provide documentation of your income or the premiums of alternative plans. You also do not have to show that the premiums of other plans were more than 8 percent of your income (which was the standard prior to the Administration’s December 19 announcement). You simply have to assert that you consider other options to be unaffordable.

If I buy a catastrophic plan, can I get a tax credit or cost-sharing reduction?

No. You do not qualify for premium tax credits or cost-sharing reductions if you buy a catastrophic plan, whether on or off the health insurance marketplace.

I got a cancellation notice and have already enrolled in a new plan. Can I drop it and enroll in a catastrophic plan instead?

That depends. Once you enroll in coverage, you can change plans prior to the coverage effective date. Once the coverage takes effect, you cannot change plans again until the next annual open enrollment period. For example, if coverage under your new plan begins January 1, 2014, then you may not drop that plan and switch to a new one until November 15, 2014, the start of next year’s open enrollment. You will have only until December 23, 2013 to make a new plan selection. Also, if you’ve paid your first month’s premium but choose to switch to another plan, you will need to seek a refund from your insurer.

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