Last week, the Centers for Medicare & Medicaid Services (CMS) issued a new rule in an effort to encourage state flexibility, promote affordability, and encourage innovation in the health insurance market. Prompted by sky-high premiums and fewer and fewer choices, this new rule is meant to put power back in consumers’ hands and give more freedom to each state to decide what’s best for them. Considering that in the past five years following the ACA, the average premiums have doubled and half the counties in the U.S. only have one insurer to choose from, we are interested to see how this pans out.
This rule is the latest in a series of steps the Trump administration has taken to reduce the regulations of Obamacare, a key campaign promise. Other key pieces of this initiative are the removal of the individual mandate and the executive order from October 2017 that prompted the Departments of Health and Human Services, Labor, and the Treasury to publish a proposed rule to expand the availability of short-term, limited-duration health insurance to provide consumers with more affordable options.
How the new CMS rule affects states
This rule gives states the tools they need to lower premiums, or at the very least, stabilize premium growth, including:
- Increase state flexibility
- Make plans for affordable for consumer
- Enhance consumer choice
- Strengthen program integrity
- Encourage market stability
- Reduce unnecessary regulatory burdens from the ACA
- Allows states to define essential health benefits
Flexibility for Essential Health Benefits (EHB)
Currently, states can choose from only 10 EHB-benchmark plans. With the final rule passed, states will have 50 EHB-benchmark plans from which they can choose that were used for the 2017 plan year in other states or they can choose from specific EHB categories, such as drug coverage or hospitalization, that were used in other states as well. Another option for states will be to build their own set of benefits that could potentially become their EHB-benchmark plan, subject to a certain parameter of benefits requirements. This new flexibility will allow insurers to offer more affordable health plans.
Qualified Health Plan (QHP) Certification StandardsTaking off some weight on issuers related to essential community providers, the final rule gives back significant oversight authority to states regarding state review of network adequacy. The rule also eliminates the meaningful difference requirement for QHPs to give insurers more flexibility in designing plans.
Exchanges will be able to determine the lack of affordable coverage based on projected income using the lowest cost plan offered through the Exchange when there is no bronze level plan available in the service area.
Risk Adjustment to reduce burden on insurers
The final rule amends the HHS-operated risk adjustment data validation program to reduce burdens on issuers. In addition, the HHS-operated risk adjustment program is recalibrated for the 2019 benefit year to incorporate new data that reflects the actual experience of individual and small group market enrollees, which should more closely reflect the risk within markets. In States where HHS operates the risk adjustment program, CMS will also provide states with the flexibility to request a reduction to the otherwise applicable risk adjustment transfers in the individual, small group or merged market by up to 50 percent beginning with the 2020 benefit year, which may be helpful in attracting and retaining insurers and more precisely accounting for relative risk differences in the state market. States requesting such a reduction must provide evidence and analysis that show the state-specific rules or market dynamics warrant the adjustment to more precisely account for the relative risk differences in the State’s market and justifies the reduction amount requested.
Advanced Premium Tax Credit (APTC) Program Integrity
Many individuals and families apply for and receive the APTC, which is a great perk when it is actually needed. However, some people have taken advantage of the program by not giving accurate information on their income to receive the credit. The final rule improves program integrity by requiring Exchanges to implement a stronger system to verify that applicants actually earn the income they claim to make. The rule also requires Exchanges to discontinue APTCs for enrollees who fail to file taxes and reconcile past APTCs, even if the Exchange does not first send notice directly to the tax filer.
Consumer-friendly adjustments for special enrollment
The rule helps the special enrollment process be a little more consumer friendly.
- To align enrollment options, all dependents applying for new health insurance through the Exchange during an SEP and are being added to an application with current enrollees.
- For those having a baby, adopting, or undergoing foster care placement, CMS amended and standardized the alternate coverage start date options available under all of these SEPs.
- Pregnant women with coverage through Children’s Health Insurance Program (CHIP) for their unborn child will qualify for a loss of coverage SEP upon losing access to this coverage.
- If a consumer lives in a service area without qualified health plans, they are exempt from prior coverage requirement.
How it affects Small Business Health Options Program (SHOP)
The final rule removes several regulatory requirements on SHOPs and outlines a new enrollment process in the SHOP Exchanges using the Federal platform. This change allows SHOPs to eliminate the online enrollment process and allows employers to enroll directly with an Exchange-registered agent, broker, or other third-party. This change will help small businesses more easily enroll in coverage and lower costs. In contrast to the 4 million people that the CBO projected to use the Shop Exchange, only 7,600 employer groups, covering 39,000 lives, were in enrolled in the federal SHOP Exchange as of January 1, 2017.
Good news for thousands of individuals regarding the rule passed by CMS: new guidance was issued that will increase hardship exemptions. Individuals who live in counties with either no issuers or only one issuer will now qualify for a hardship exemption that allows them to not have to pay the ACA’s penalty for not having coverage. While the individual mandate will be gone soon, it will still help people for this coming year.
Any ruling that puts power back into the consumers' hands and brings more freedom to the states is worth keeping an eye on. While it will take a while before we can determine how effective this new ruling is, it's important to stay informed about decisions in DC that can affect you, your family, and your wallet. Hit the button below to subscribe to policy updates!