Off-Exchange Health Plans Are ACA-Compliant Too

Even if you don't shop in the exchange, ACA provisions apply to your plan

Off-exchange health insurance plans are compliant with the ACA's regultions and consumer protections
Shopping for health insurance? On or off-exchange, the choice is yours, and the plans are all ACA-compliant. Daly and Newton/Creative RM/Getty Images

If you buy your own health insurance, you're likely aware by now of the health insurance exchanges (marketplaces) that were created by the Affordable Care Act. Each state has an exchange, although as of 2016, the Heathcare.gov enrollment platform is used in 38 states (four of them technically have state-based exchanges, but use Healtcare.gov for enrollment; in the other 34 states, HHS either runs the exchange in its entirety, or partners with the state to run the exchange).

In each state, you can buy health insurance through the exchange during open enrollment, or during a special enrollment period triggered by a qualifying event. But you also have the option to enroll in plan outside the exchange, if that's your preference. Off-exchange coverage can be purchased directly from the health insurance carrier, through a private exchange, or with the help of a broker (note that brokers can also help you enroll in a plan through the exchange).

Regardless of whether you purchase your plan on-exchange or off-exchange, all small group and individual major medical health plans with effective dates of January 2014 or later are fully-compliant with the requirements of the ACA. There are still non-compliant plan in effect. Some are grandfathered and some are grandmothered (transitional). But new plans cannot be sold - including outside the exchange - unless they comply with the ACA.

 

It's important to note that the ACA's requirements don't apply to plans that are considered "excepted benefits." These include things like accident supplement plans, critical illness policies, dental/vision plans, discount medical/Rx programs, auto insurance that provides some medical coverage, etc.

That sort of coverage is still available outside the exchanges - and in the case of dental/vision plans, it's often available in the exchanges too. Excepted benefits can be purchased at any time of the year, and are not regulated by the ACA.

Off-exchange plans are ACA-compliant

But if we only consider major medical health insurance - ie, ignoring the excepted benefits - all new health plans are fully compliant with the ACA. It doesn't matter if you buy your plan through the exchange or outside the exchange - your plan will

  • spend at least 80% of premiums (85% in the case of large group plans) on medical claims, with no more than 20% of premiums going towards administrative costs. If admin expenses exceed this limit, they'll owe you a refund
  • cap your in-network maximum out-of-pocket costs at $6,850 for a single individual in 2016, and $13,700 for a family, with the individual out-of-pocket maximum embedded in all family plans. This upper limit for out-of-pocket costs will increase to $7,150 ($14,300 for a family) in 2017, but many plans will still be available with out-of-pocket maximums well below the upper threshold allowed under the law.

Enrollment windows still apply

Regardless of whether you buy your health insurance on-exchange or off-exchange, the same enrollment windows apply. Open enrollment is the period in the fall/winter when you can purchase coverage for the coming year or switch to a different plan. For 2014, it was six months long. For 2015 and 2016, it was three months long, but the timing was different for the two years.

For 2017, the Department of Health and Human Services (HHS) finalized the same schedule that was used for 2016 coverage, so open enrollment for 2017 coverage - both on and off the exchange - will begin on November 1, 2016, and will continue until January 31, 2017. In most states, the deadline to enroll in a plan with a January 1, 2017 effective date will be December 15, 2016.

Carriers can choose to extend the enrollment deadline for off-exchange enrollees, depending on the circumstances. But in general, once open enrollment has ended, you can't sign up for a new plan on or off the exchange unless you have a qualifying event.

In almost all cases, special enrollment periods triggered by qualifying events allow you to purchase coverage inside the exchange or outside the exchange, but there are some exceptions: The provision that allows Native Americans to enroll year-round only applies in the exchange, as do the special enrollment periods for people who gain US citizenship.

In Nevada, off-exchange plans must allow for year-round enrollment, but they can impose a 90 day waiting period before coverage takes effect. 

In DC and Vermont, there is no off-exchange market, as all individual and small group plans are required to be on-exchange (and neither DC nor Vermont allowed grandmothered plans to continue to renew in 2014, so all non-grandfathered individual and small group plans in Vermont and DC are ACA-compliant and available only through the exchange).

In every other state, off-exchange plans are available, but only during open enrollment or during a special enrollment period triggered by a qualifying event (note that small group plans can be purchased by an employer at any point during the year, but then employees will have an annual open enrollment period that corresponds to the plan's coverage year).

Subsidies aren't available off-exchange - now, or on your tax return

If you buy your plan outside the exchange, you're not eligible to receive premium subsidies to offset the cost. You'll have to pay full price for your plan - regardless of your income - and you won't have an opportunity to switch to an on-exchange plan until the next year (during open enrollment), unless you experience a qualifying event. 

decrease in income or the loss of a job is NOT a qualifying event, and it's important to understand that if your plan is purchased outside the exchange, you won't be able to recoup your premium tax credit on your tax return, even if your income for the year ends up being less than 400% of the poverty level and you would have been eligible for a subsidy.

In short, it's important to be certain that you won't qualify for a premium subsidy before you make the decision to buy a plan outside the exchange. That said, as long as you know for sure your income - or other circumstances, like the family glitch, for example - will make you ineligible for premium subsidies throughout the year, the health plans available outside the exchange will provide the same basic level of coverage as those available inside the exchange.

Single risk pool for on- and off-exchange plans

In each state, a health insurance carrier that offers plans both on- and off-exchange must combine all of its individual plans into a single risk pool. And the same is true for the small group market: a carrier's on-exchange small group plans must be merged into the same risk pool as its off-exchange small group plans. States can opt to go further and require carriers to merge their individual and small group risk pools, but only Vermont and Massachusetts have done so thus far; DC has a modified version of a merged risk pool.

In addition, if a carrier offers the same plan on- and off-exchange, the premiums must be identical, so even exchange user-fees must be spread across the carrier's entire book of business. In short, you can't "get a deal" by shopping for the same plan on the exchange or outside of the exchange - the playing fields are level. 

The choice is yours

Regardless of whether you shop on or off-exchange, the regulations and consumer protections in the ACA apply to all plans in the individual and small group market. 

If you're eligible for premium subsidies, the exchange is the obvious plan to shop. If you're not, it's up to you. You may find that some carriers only offer their plans outside the exchange, which can be a reason some people opt to shop outside the exchange if they know they won't qualify for subsidies.

But either way, you can rest assured that your coverage will be compliant with the Affordable Care Act.

Continue Reading