New Option for Cancelled Health Insurance

Beginning in 2014, all non-exempt U.S. citizens and resident aliens are required to have health insurance (minimum essential coverage) or pay a penalty tax when filing their 2014 tax return. Minimum essential coverage includes grandfathered plans which were in existence prior to the enactment of the Health Care Reform Act of 2010. However, if the health insurance provider makes any changes to the plan after the enactment of the Health Care Reform Act, it is no longer considered a grandfathered plan. Some Americans have received notices from their health insurance providers that plans they bought are being cancelled because the plans no longer meet the requirements under the Health Care Reform Act. In November, the President announced that insurers can continue to offer customers the option to renew their 2013 health plans in 2014, without change, allowing them to keep their plans. Insurers, however, were not required to continue to offer these plans. As a result, the Department of Health and Human Services (HHS) announced on December 19, 2013 that individuals who had their insurance cancelled can now apply for a hardship exemption, which allows them to purchase a catastrophic plan. A catastrophic plan generally is only available to people under age 30 and requires the individual to pay all of the medical costs up to a high deductible. These policies have lower premiums, and are usually considered to provide protection for worst-case scenarios. The new HHS announcement opens the door for individuals age 30 and over to buy low cost catastrophic plans, which qualifies as minimum essential coverage for 2014. A special phone number (1-866-837-0677) has been set up for people whose plans have been cancelled and who now want to apply to buy a catastrophic plan. Catastrophic plans do not qualify for the premium assistance credit. Media reports indicate the insurance industry has expressed outrage over this recent development. Some claim this will cause instability in the marketplace and lead to more confusion and disruption for consumers. HHS responded by saying it was a common-sense clarification of the law, giving consumers whose plans have been cancelled one more option.