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Regulators post sickness insurance drafts

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State insurance regulators may update the standard rules for the health insurance products that are beyond the reach (or mostly beyond the reach) of the Patient Protection and Affordable Care Act of 2010 (PPACA).

A team at the Regulatory Framework Task Force, part of the National Association of Insurance Commissioners (NAIC), is asking for comments on two early model revision drafts.

One is a draft update of Model 170, the Accident and Sickness Insurance Minimum Standards Model Act.

The other is a draft update of Model 171, the Model Regulation to Implement the Accident and Sickness Insurance Minimum Standards Model Act.

The NAIC is a trade group for state insurance regulators. States often use NAIC models to shape their own insurance laws, regulations and notices. 

See also: King vs. Burwell: Not the only PPACA court game around

When the NAIC approved the accident and sickness models, back in April 1999, the models provided examples of how states could regulate a wide range of products, including individual major medical coverage, basic hospital expense coverage, basic medical surgical expense coverage, individual basic medical expense coverage, disability income protection coverage, accident-only coverage, specified disease coverage, specified accident coverage and limited-benefit health coverage.

The medical coverage requirements in PPACA now appear to prohibit the sale of many of those products, task force officials say.

In the proposed revisions, the drafters have eliminated the sections on basic hospital expense coverage, basic medical surgical expense coverage, basic hospital/medical surgical expense coverage and individual basic medical expense coverage.

The drafters have also eliminated the individual major medical expense category, because that category of coverage is now governed by other models.

The drafters have included a drafting note talking about which sets of rules they believe apply to which health insurance products.

PPACA itself includes a provision, PPACA Section 1251, that exempts in-force products that were already in place as of March 23, 2010, from most PPACA requirements.

But PPACA Section 1251 does apply some PPACA requirements to grandfathered plans. The PPACA requirements that apply to grandfathered plans include the ban on annual and lifetime benefits limits, the ban on rescissions for reasons other than fraud, and the ban on what PPACA classifies as excessive waiting periods, or periods early on when a plan provides no benefits.

PPACA changed how many sections of the federal Public Health Service Act (PHSA), the Internal Revenue Code (IRC) and the Employee Retirement Income Security Act (ERISA) govern major medical coverage.

In some cases, the PPACA-amended versions of the PHSA, the IRC and ERISA sections do apply to a grandfathered plan. When the PPACA-amended versions do not apply, the pre-PPACA versions of those sections continue to apply, officials say.

“In general,” officials say, “grandfathered plans must also comply with all applicable state laws.”

PPACA prohibits states from putting PPACA grandfathered plans in the rating pool for non-grandfathered plans, but that’s the only PPACA provision that directly affects states’ ability to regulate the grandfathered plans, officials say.

See also: PPACA: New HHS Health Agency Helps Issue Grandfather Regs