The company goes out of business and Mrs. Smith loses coverage. She seeks coverage in the individual market. The state and issuer must recognize Mrs. Smith's prior coverage as group health coverage for determining if she is an eligible individual for guaranteed issue without pre-existing condition limitations. The plan would not appear to be a small employer plan for guaranteed issue purposes in the small group market because Mrs. Smith is the only current employee participating. Small employers, insurers, consultants and brokers may want to review current products within their respective state markets to determine whether small groups have product options of which they were not aware or were denied.
Some caution is required, however.
Not all state insurance commissioners are willing to concede authority to federal regulators. Consideration should be given to discussions with state regulators over any applicability issues. If a state is unwilling to recognize HCFA's position, contact with the appropriate HCFA regional office may be the preferred next step. Nevertheless, HCFA's interpretation is likely to create additional options for small employers. The issue then will be affordability.