How the New CMS Guidance Impacts You

The Centers for Medicare and Medicaid Services (CMS) unveiled a new interim final rule May 6, 2016 which amends certain special enrollment periods (SEPs) in the individual marketplace and revises certain rules pertaining to consumer operated and oriented plans (CO-OPs). The rule aims to curb abuse of the SEP, which insurers have said is occurring when consumers claim to have a qualifying event but actually do not. The rule also aims to strengthen the CO-OP program. Highlights of the new rule have been provided below.

New SEP Guidance

  • Individuals requesting an SEP as a result of a permanent move must have had minimum essential coverage for one or more days in the 60 days preceding the move, unless they were living outside of the U.S. or in a U.S. territory prior to the move. This is to ensure individuals aren’t moving for the sole purpose of obtaining health coverage outside of the open enrollment period.
  • Individuals who were incarcerated, or individuals who were living in a state which did not expand its Medicaid program, and have moved and became newly eligible for advanced premium tax credits, will qualify for an SEP without having prior minimum essential coverage in place. This is because these individuals would have been previously ineligible to obtain minimum essential coverage or they would’ve qualified for an exemption from the Individual Mandate.
  • The deadline of January 1, 2017 to provide advance availability of an SEP for a permanent move has been eliminated. In addition, the loss of a dependent, or for no longer being considered a dependent due to death, divorce or legal separation will no longer be an SEP (although if it results in a loss of coverage it will be an SEP for those individuals losing coverage). The rule does provide each Marketplace with the option of allowing one or both of these events as an SEP.
  • Finally, clarified in separate guidance, is that SEPs are only available in six defined and limited types of circumstances: (1) losing other qualifying coverage, (2) changes in household size like marriage or birth, (3) changes in residence, with significant limitations, (4) changes in eligibility for financial help, with significant limitations, (5) defined types of errors made by Marketplaces or plans, and (6) other specific cases like cycling between Medicaid and the Marketplace.


  • CO-OPs are insurance companies that were created by the Affordable Care Act (ACA) to increase competition in the individual and small group markets. Many CO-OPs have struggled and several have even closed. The new rule allows CO-OPs to seek private capital to achieve short-term and long-term stability. CO-OPs, which received their start-up dollars through federal loans, were under a previous agreement which essentially prohibited outside investors.
  • ​The requirement that a majority of voting directors be members of the CO-OP, and that all directors be elected by a vote of CO-OP members has been removed. However, a majority of directors must still be elected by the members of the CO-OP. This adds flexibility to board eligibility, consistent with private sector practices, and removes a potential barrier to private sector investments.

The interim final rule is effective May 11, 2016 with some amendment provisions taking effect on July 11, 2016. Public comments can be made up until July 5, 2016. A summary of the interim final rule can be found here.
The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.

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