15.2 Guaranteed Issue, Rating Rules, and Marketplaces

The ACA fundamentally changed who can buy coverage and how much insurers may charge. Three reforms dominate exam questions: guaranteed issue, the modified community rating factors, and the Health Insurance Marketplace (Exchange) with its enrollment periods.

Guaranteed Issue and Renewability

In the individual and small-group markets, coverage is guaranteed issue: an insurer must accept every applicant regardless of health status, claims history, or pre-existing conditions. There are no pre-existing condition exclusions and no health-based denials. Policies are also guaranteed renewable — the insurer cannot cancel because the insured got sick.

Because anyone can enroll, the ACA controls adverse selection through limited enrollment windows rather than medical underwriting.

The Four (and Only Four) Permitted Rating Factors

This is the single most tested rating concept. An insurer may vary individual-market premiums based on only these factors:

Trap: Gender, health status, claims experience, and occupation may NOT be used to set ACA-market premiums. A 60-year-old non-smoker can be charged at most three times a 21-year-old non-smoker's rate for the identical plan in the same area. A tobacco user can be charged up to 50% more, and that surcharge is not offset by premium tax credits.

Worked Example

A 21-year-old's benchmark premium in a region is $300/month. The maximum an insurer may charge a 64-year-old for the same plan is 3 x $300 = $900/month. If that older applicant uses tobacco, a 50% surcharge raises the premium to $900 x 1.5 = $1,350/month, and the tax credit is computed before the surcharge is added.

The Marketplace and Enrollment Periods

The Health Insurance Marketplace (Exchange) is where individuals shop for Qualified Health Plans (QHPs) and is the only place to claim premium tax credits. States run their own Exchange or default to the federal HealthCare.gov platform.

• Open Enrollment Period (OEP): The annual window (typically Nov 1 - Jan 15 in federal-Exchange states) when anyone may enroll or switch plans.
• Special Enrollment Period (SEP): A 60-day window triggered by a qualifying life event — marriage, birth/adoption, loss of other minimum essential coverage, permanent move, or loss of Medicaid eligibility. Voluntarily dropping coverage or non-payment is NOT a qualifying event.

Outside OEP/SEP, an applicant cannot buy individual major-medical coverage, which is the mechanism replacing medical underwriting to prevent people from waiting until they are sick to enroll.

Qualified Health Plans and Minimum Essential Coverage

Plans sold on the Marketplace are Qualified Health Plans (QHPs): they cover the EHBs, follow the metal-level AV structure, limit cost sharing to the OOP cap, and are certified by the Exchange. Buying a QHP (or other qualifying coverage) satisfies Minimum Essential Coverage (MEC).

MEC includes employer-sponsored coverage, individual market plans, Medicare Part A, Medicaid, CHIP, and TRICARE. It does NOT include stand-alone dental/vision, fixed indemnity, accident-only, or short-term limited-duration plans. Having other MEC (such as an affordable employer offer or Medicare) generally makes a person ineligible for premium tax credits.

The federal individual mandate penalty was reduced to $0 starting in 2019, so there is no longer a federal tax penalty for going without coverage, though some states impose their own mandate. Insurance producers should still emphasize that lacking MEC means no SEP protection and full exposure to medical costs.

SHOP and the Small-Group Market

The SHOP (Small Business Health Options Program) Marketplace serves employers with up to 50 full-time-equivalent employees. Small-group coverage is guaranteed issue to the employer and follows the same metal levels, EHB requirements, and modified community rating as the individual market.

Eligible small employers (generally fewer than 25 FTEs with average wages below an indexed threshold) that contribute at least 50% toward employee premiums and enroll through SHOP may claim the Small Business Health Care Tax Credit, worth up to 50% of premium contributions (35% for tax-exempt employers) for two consecutive years.

Trap: The small-employer tax credit (for the employer) is completely separate from the individual premium tax credit (for individuals on the Marketplace). Exam questions deliberately blur the two.

Remember that the small-business credit goes to the employer and requires SHOP enrollment plus the 50% contribution test, whereas the individual premium tax credit goes to the enrollee.

Guaranteed Issue and the Ban on Health Rating

The ACA requires guaranteed issue in the individual and small-group markets: insurers must accept every applicant regardless of health status and may not impose pre-existing condition exclusions. This reversed the pre-ACA practice of declining or rating sick applicants.

Premiums may vary based on only four factors:

1. Age (no more than a 3:1 ratio between oldest and youngest adults)
2. Geographic rating area
3. Tobacco use (up to 1.5:1)
4. Family size / individual vs. family tier

Insurers may not rate based on gender, health status, claims history, or occupation. The exam reliably asks you to identify the four permitted factors and to recognize that health status and gender are prohibited rating variables — a sharp break from pre-ACA underwriting.

Marketplaces, Enrollment, and Qualified Health Plans

The Health Insurance Marketplace (Exchange) is where individuals shop for qualified health plans (QHPs) and where subsidies are applied. Coverage is available only during the annual Open Enrollment Period, or during a Special Enrollment Period (SEP) triggered by a qualifying life event — marriage, birth or adoption, loss of other coverage, or a permanent move.

A plan must be a QHP (certified, EHB-compliant, offered on the Exchange) for the buyer to receive premium tax credits. Minimum essential coverage (MEC) is the baseline that satisfied the former individual mandate. The SHOP (Small Business Health Options Program) serves small employers. The exam tests that subsidies require buying a QHP on the Exchange and that enrollment outside open enrollment requires a qualifying event documented within a limited window (typically 60 days).