With the failure of the American Health Care Act—the House Republicans’ first attempt at repealing and replacing Obamacare—there will be more pressure on federal regulators like HHS Secretary Tom Price to “do something” to increase competition, expand plan options, and keep prices under control.
The Affordable Care Act delegated much of the responsibility for implementing the health reform legislation to government agencies like Health and Human Services, the Department of Labor, and the IRS. For the first three or four years after the ACA was signed into law, we eagerly awaited proposed and final rules on everything from the individual mandate and premium tax credits to market reforms and the employer shared responsibility requirement. Once we knew the rules, we could properly advise our clients and recommend solutions to help them comply with and, in some cases, get around the regulations.
The good news for the Trump administration, which has had difficulty unifying the party on this complicated and controversial topic, is that regulatory changes do not require an act of Congress. Instead, the authority to make these changes is authorized when Congress passes sweeping legislation like the ACA. That means that Secretary Price can re-write many of the rules written by his predecessors Kathleen Sebelius and Silvia Mathews Burwell without getting approval in the House and the Senate.
He actually started this process a few weeks ago. On February 15, the Department of Health and Human Services released the proposed Market Stabilization Rules with the hopes of stopping the bleeding in the individual market, and after a short comment period, issued the final rules April 13. Over the past two years, prices have increased significantly and many carriers have made the decision to stop selling coverage through the Marketplace; these rules are aimed at reversing this trend.
The purpose of the market stabilization rules, as explained by Timothy Jost with Health Affairs Blog, was “to shore up the individual health insurance markets pending a possible repeal,” and they also represented “the first step taken by HHS to fulfil President Trump’s agenda announced by executive order on Inauguration Day to unwind ACA regulatory requirements.” The following items are addressed in the new rules.
The 2017 open enrollment period lasted three months, beginning November 1, 2016 and ending January 31, 2017. The new rule shortens the open enrollment period to just 45 days, beginning November 1, 2017 and ending December 15, 2017. The reason for this change is that insurers report that those who enroll late in the open enrollment period tend to have significantly more claims than those who enroll early. The shorter timeframe is intended to reduce adverse selection.
There are several new rules relating to special enrollment periods (SEPs). The most notable is one that will require 100% of individuals who sign up during an SEP to provide documentation proving that they are eligible before their coverage takes effect. As Timothy Jost with Health Affairs Blog explains, “this is necessary both to encourage consumers to maintain continuous coverage and to discourage adverse selection and inappropriate use of SEPs.”
The Affordable Care Act creates actuarial value (AV) corridors that correspond with the “metallic tiers” in the Marketplace. A bronze plan has an actuarial value of 60%, a silver plan has an AV or 70%, gold plans have an AV of 80%, and the AV of platinum plans is 90%. Plans are allowed a de minimus variation of +/- 2%. What this means is that a silver plan can have an actuarial value that ranges from 68 to 72%.
One of the criticisms of the actuarial value requirement is that these narrow AV ranges limit a carrier’s flexibility in designing plans that consumers actually want to buy. The new rule increases the AV ranges to -4 to +2% for platinum, gold, and silver plans and -4% to +5% for bronze-level plans. Therefore, unless otherwise subject to state law, these are the new ranges:
|Bronze||56% to 65%|
|Silver||66% to 72%|
|Gold||76% to 82%|
|Platinum||86% to 92%|
Under the ACA, people who purchase coverage through the Marketplace and who receive an advance premium tax credit have a 90-day grace period to pay their premiums before their coverage is cancelled. If an individual falls behind on his premium payments, insurers will pay claims during the first month and pend claims for the next two months, giving the consumer time to catch up on his payments. If he fails to make the payment during the grace period, his coverage is cancelled back to the end of the first month. Providers argue that this allows people to game the system and results in uncompensated care.
Insurers have a similar concern. Some people stop paying their premium near the end of the year. If something happens during that time, they’ll catch up on the payments, but if they don’t have any claims they’ll let their coverage terminate, only to re-enroll in coverage the following year.
Under the new rule, if an individual whose coverage is cancelled for nonpayment later re-enrolls with the same carrier (or with a carrier that’s part of the same controlled group), even if the individual chooses a different plan, the insurer can apply premiums to previously owed amounts and refuse to effectuate coverage until outstanding premiums are paid.
Finally, we’ve all seen a shrinking of provider networks under the Affordable Care Act, and this is especially true in the individual market. HHS has worked to ensure that a sufficient number of providers are available before certifying plans to be sold through the Marketplace, but under the proposed rules, state regulators will take over the task of ensuring reasonable access to providers if they’re able to do so. Additionally, the current requirement that Qualified Health Plans include at least 30 percent of Essential Community Providers (ECPs) in their provider networks would change: in an effort to “lessen the regulatory burden on issuers while preserving adequate access to care provided by ECPs,” plans would be required to include only 20 percent of ECPs.
As with all of these regulations, the government agency issues proposed rules and opens up a comment period, during which time anyone who has an opinion on the new regulations is welcomed to share his or her thoughts. At the end of the comment period, the agency will review and consider the comments that are submitted and may make some changes as a result of the suggestions before issuing final rules. This isn’t an easy job. The proposed market stabilization rules, for example, attracted four thousand comments during the 20 day comment period according to Health Affairs Blog.
It’s also worth pointing out that the administration really does listen to the comments. The National Association of Health Underwriters, for example, commented on most of the proposed rules during the Obama administration and is doing the same thing under the Trump administration, and the organization has had some success in getting its ideas implemented. In fact, NAHU staff recently visited with Dr. Price about some of the ACA regulations they believe could use some adjustments, and they’ll continue to share their thoughts going forward. At AHCP, we’re big fans of NAHU and other organizations that are working to improve the laws for insurance professionals and the clients they serve. If you’re not yet a member, you should consider joining.
If you weren’t too impressed with the market stabilization rules, don’t despair—they’re just a start. HHS has also issued the Notice of Benefit and Payment Parameters for 2018, which makes some additional changes in the individual market, and we’ll no doubt see more rule changes in the coming weeks and months, just as we’ll see new legislation introduced in the House and the Senate. The difference is that proposed legislation may or may not become law. These regulations, on the other hand, are already law, and that’s what makes the President so powerful. Yes, we have three branches of government, but the executive branch can also implement rules that the market plays by.
You can read the 139-page final market stabilization rule here.