15.2 Guaranteed Issue, Rating Rules, and Marketplaces

Guaranteed issue and no health underwriting

In the ACA individual and small-group markets, coverage is guaranteed issue: an insurer must accept any eligible applicant during the proper enrollment window and cannot decline, rate up, or exclude coverage based on health status, claims history, or pre-existing conditions. The pre-existing condition exclusion that once let carriers refuse to pay for prior conditions is prohibited for these plans.

Coverage is also guaranteed renewable: the insurer must renew regardless of the member's health, and can only non-renew for limited reasons such as nonpayment of premium, fraud, or the carrier exiting the market.

What insurers may not do

• May not deny because of diabetes, cancer history, pregnancy, or any condition.
• May not charge a sick applicant a higher premium than a healthy one (no individual health rating).
• May not impose a waiting period for a pre-existing condition.

This is a major shift from pre-ACA individual insurance, where medical underwriting and pre-existing exclusions were standard.

The four permitted rating factors

Because health rating is banned, premiums may vary only on four factors. Memorize the list and the two ratio caps.

Forbidden rating factors include gender and health status. A test trap: "An insurer charges a female applicant more for the same plan." That violates ACA — gender rating is prohibited.

Worked numeric

If a 21-year-old's base premium for a plan is $300/month, the oldest adult rate for the same plan cannot exceed 3 × $300 = $900/month for age alone. If that older adult also uses tobacco, the carrier may add up to a 1.5× tobacco factor on top, so the tobacco-rated premium could reach up to $900 × 1.5 = $1,350/month. Note premium tax credits do not offset the tobacco surcharge.

Enrollment periods

Marketplace coverage is sold on a schedule, not on demand.

• Open Enrollment Period (OEP): the annual window when anyone eligible can enroll in or change a plan without needing a special reason.
• Special Enrollment Period (SEP): triggered by a qualifying life event, generally giving the person 60 days to enroll or change coverage. Common qualifying events include loss of other minimum essential coverage (such as job-based coverage or aging off a parent's plan), marriage, birth or adoption of a child, and a permanent move to a new rating area.

Voluntarily dropping coverage or losing it for nonpayment does not create an SEP. The trigger must be an involuntary loss or a listed life event.

Dependent coverage to age 26

Plans that offer dependent child coverage must allow a child to remain on a parent's plan until age 26. This applies regardless of the child's marital status, student status, residence, financial dependence, or eligibility for other coverage. The child does not have to live with the parent or be a tax dependent to qualify.

Marketplaces (Exchanges) and metal-tier display

The Health Insurance Marketplace (also called the Exchange) is where individuals shop for ACA plans, compare metal levels, and apply for premium tax credits and cost-sharing reductions (covered in 15.3). A state may run its own marketplace or use the federal platform (HealthCare.gov).

Key points:

• Premium tax credits are available only through the Marketplace — a plan bought off-exchange directly from a carrier is ACA-compliant but cannot use the advance premium tax credit.
• The Marketplace verifies income and household size to set subsidy amounts.
• A navigator or certified assister helps consumers enroll but does not replace a licensed producer's role.

Medical Loss Ratio (MLR)

The medical loss ratio rule requires insurers to spend a minimum share of premium dollars on claims and quality-improvement activities rather than administration and profit.

If a carrier spends below the threshold, it must issue MLR rebates to policyholders. Mnemonic: "80 for small, 85 for tall (large)." A rebate does not mean the carrier did anything wrong; it is a refund of premium that exceeded the allowed administrative/profit share for that year.

Guaranteed renewability vs. guaranteed issue

Distinguish two terms exam writers love to swap. Guaranteed issue governs getting in — the insurer must accept eligible applicants regardless of health during the proper window. Guaranteed renewable governs staying in — the insurer must renew the existing policy and may not single out a sick member for non-renewal. A plan can be both, and ACA individual/small-group coverage is.

Minimum essential coverage (MEC)

Minimum essential coverage (MEC) is the broad category of coverage that satisfies the ACA's coverage standard: employer plans, individual marketplace plans, Medicare, Medicaid, CHIP, and most other comprehensive coverage. Excepted benefits such as standalone dental, standalone vision, fixed-indemnity, and accident-only policies are not MEC. This matters for subsidy eligibility: a person already enrolled in other MEC (Medicare or Medicaid, for example) generally cannot also receive premium tax credits, and losing MEC is what triggers a Special Enrollment Period.