Understanding Off-Exchange Health Plans and Their Oversight
A series produced by Tsunami Health, article 1 of 4.
Off-Exchange health insurance plans are policies purchased directly from insurance carriers, brokers, or advisors, rather than through federal platforms like Healthcare.gov or Medicare.gov. Although often ACA-compliant, these plans exist outside the direct oversight of federally facilitated marketplaces (FFMs), meaning they are subject to state-level regulatory authority.
Why Oversight Matters
Federally-run platforms like Healthcare.gov mandate strict adherence to ACA requirements, including comprehensive coverage (Minimum Essential Coverage or MEC). Off-Exchange plans, however, have flexibility that allows insurers to offer additional options—some compliant with MEC and ACA standards, and others not.
Employer-Sponsored Plans and MEC
Applicable Large Employers (ALEs)—businesses with 50 or more full-time equivalent employees—are mandated by ACA regulations to offer health insurance that meets MEC standards to avoid employer-shared responsibility payments (ESRP).
However, ALEs sometimes sponsor alternative forms of coverage, such as limited or "skinny" plans, that technically count as MEC but provide minimal coverage. In other instances, employers may offer supplemental, indemnity, or accident-only coverage that does not meet MEC standards.
Risks and Benefits of Non-MEC Employer Plans
Employers may choose non-MEC plans as supplemental or interim coverage options. These plans can appear financially attractive, providing employers cost-saving opportunities. However, offering only non-MEC plans exposes ALEs to significant financial penalties under ACA mandates.
How Non-MEC Plans Persist in the Market
Despite potential ACA penalties, these plans persist because they serve niche purposes:
Temporary or transitional coverage
Supplemental benefits to traditional coverage
Cost savings for employers facing financial constraints
Regulatory Oversight and Transparency
Off-Exchange non-MEC plans are regulated at the state level by each state's Department of Insurance (DOI), not federally. This decentralization can create variation in oversight, transparency, and consumer protection.
Consumer Awareness and Due Diligence
Employees and employers should remain vigilant:
Clearly understand whether their coverage meets MEC requirements.
Verify potential ACA penalties if non-MEC plans are sponsored by ALEs.
Use state DOI filings and public disclosures (e.g., SERFF filings) to verify compliance and coverage details.
Conclusion
Off-Exchange plans serve critical market needs but require careful oversight and consumer education to ensure regulatory compliance and adequate coverage. Employers, especially ALEs, must carefully balance cost considerations with the stringent requirements of MEC to avoid significant penalties and ensure responsible coverage.