6.3 ACA, COBRA & Federal Regulation

The Affordable Care Act (ACA)

The Affordable Care Act (ACA), enacted in 2010, transformed the individual and small-group health markets. Its core mandates that the exam tests:

• Guaranteed issue — insurers must offer coverage to any applicant regardless of health status; medical underwriting that declines applicants is prohibited in ACA-compliant plans.
• No pre-existing condition exclusions — plans may not exclude or limit coverage for conditions that existed before enrollment, for adults or children.
• Essential health benefits (EHBs) — every ACA plan must cover ten categories: ambulatory care, emergency services, hospitalization, maternity and newborn care, mental health and substance-use treatment, prescription drugs, rehabilitative services, laboratory services, preventive/wellness and chronic-disease management, and pediatric services (including dental and vision).
• No annual or lifetime dollar limits on essential benefits, and free preventive care with no cost sharing.
• Dependent coverage to age 26, regardless of student or marital status.

Plans are sold through the individual marketplace (the Exchange) and grouped into metal tiers by actuarial value — the share of covered costs the plan pays on average:

All tiers cover the same EHBs; only cost sharing differs. For 2026, the maximum out-of-pocket cap is $10,600 for an individual.

Premium Tax Credits and COBRA Continuation

The ACA makes coverage affordable through premium tax credits (advanced premium tax credits, or APTCs). These subsidies are available to people buying on the marketplace whose household income qualifies; the credit is pegged to the cost of the second-lowest-cost Silver plan (the benchmark plan), and cost-sharing reductions that lower deductibles and copays are available only with a Silver plan. A buyer can apply the credit in advance to reduce monthly premiums.

COBRA — the Consolidated Omnibus Budget Reconciliation Act — lets employees and dependents continue the same group health coverage after they would otherwise lose it. It applies to employers with 20 or more employees. Coverage continues for a period set by the qualifying event:

Under COBRA the qualified beneficiary pays the premium — up to 102% of the full group cost (the extra 2% is an administrative charge), rising to 150% during the 11-month disability extension. The beneficiary has 60 days to elect coverage and must be notified of these rights.

HIPAA, ERISA, and Federal Oversight

The Health Insurance Portability and Accountability Act (HIPAA) has two exam-relevant halves. Its portability rules limit how new group plans treat coverage gaps and prohibit discrimination based on health status, making it easier for workers to change jobs without losing protection. Its privacy rules protect protected health information (PHI): covered entities (providers, plans, clearinghouses) may use and disclose PHI only for treatment, payment, and healthcare operations or with the individual's authorization, and must give patients access to their records.

The Employee Retirement Income Security Act (ERISA) sets federal minimum standards for employer-sponsored welfare benefit plans, including group health and life. ERISA requires plans to provide a Summary Plan Description (SPD) to participants, establishes fiduciary duties for those who manage plan assets, and creates reporting and disclosure obligations. ERISA generally preempts conflicting state laws for self-funded employer plans, which is why some large employer plans escape state insurance mandates.

How the layers fit together

• State law (Texas Department of Insurance) licenses producers, regulates contract forms, and enforces solvency.
• Federal law overlays consumer protections: the ACA reshapes the individual and small-group markets, COBRA preserves group coverage after qualifying events, HIPAA guarantees portability and privacy, and ERISA governs employer plan administration.

For the exam, match each statute to its function: ACA = guaranteed issue and essential benefits; COBRA = continuation; HIPAA = portability and privacy; ERISA = employer plan standards.

Election, notice, and common traps

Several COBRA timing rules appear on the exam alongside the duration figures. The employer must notify the plan administrator within 30 days of a triggering event such as the employee's death, termination, or Medicare entitlement. The plan administrator then has 14 days to send the qualified beneficiary an election notice. The beneficiary has 60 days from the later of the coverage-loss date or the notice date to elect continuation, and then 45 days after electing to make the first premium payment. Coverage is retroactive to the date it would otherwise have ended, so there is no gap if the beneficiary pays.

A frequent trap distinguishes COBRA from conversion: COBRA continues the same group coverage temporarily at the group rate plus an administrative fee, while the group conversion privilege issues a new individual policy at the insured's attained age. Another trap is the gross misconduct exclusion — an employee fired for gross misconduct is not entitled to COBRA at all. Finally, candidates should remember COBRA applies only to employers with 20 or more employees; smaller employers fall under state continuation laws instead.

Mastering these federal overlays — and being able to attach the correct number of months, percentage, or days to each rule — is essential because the modern exam blueprint weights health insurance regulation heavily.