CMS on Monday issued a final rule that sets standards for health plans sold through the Affordable Care Act's (ACA) exchanges for the 2019 coverage year that will give states more regulatory authority over the plans.
Final rule details
The final rule makes an array of changes to both individual market and Small Business Health Options Program (SHOP) exchange plans for the 2019 coverage year.
Changes related to the ACA's EHBs
The final rule gives states more flexibility to determine how exchange plans must comply with the ACA's 10 essential health benefits (EHB) requirements. The ACA requires individual and small-group health plans sold through the exchanges to cover EHBs in a manner "equal to the scope of benefits provided under a typical employer plan, as determined by the [HHS] secretary." HHS previously allowed state officials to use an employer-sponsored health plan sold in their state as benchmarks for EHB coverage. The default benchmark was the largest small-group plan available in the state.
Under the final rule, states beginning in the 2020 coverage year will be able to mix-and-match EHB benchmarks from different states. For instance, CMS will allow states to choose from any of the 50 EHB-benchmark plans used for the 2017 coverage year. CMS also will allow states to construct a benchmark plan by replacing one or more of the 10 EHB coverage categories with those used in other states. Under such a scenario, for example, Georgia could select the inpatient benchmark coverage used in Tennessee and the prescription drug benchmark coverage used in a third state to create a new benchmark. The final rule states that, in such instances, the benchmark plan's benefits must not exceed those of comparable plans, and the benchmark plan must comply with the ACA's requirement that the benefits be "equal to the scope of benefits provided under a typical employer plan."
CMS Administrator Seema Verma on Monday said the changes to how states select benchmark plans will give insurers more flexibility to "create plans that more directly address the needs of (states') citizens," as opposed to "a one-size fits all D.C. mandate." Verma clarified that states under the final rule cannot allow insurers to sell exchange plans that do not cover all of the ACA's 10 required EHBs.
Changes to MLR requirements
The final rule also changes the ACA's medical-loss ratio (MLR) requirements to make it easier for states to request lower thresholds.
Under the ACA's MLR provision, insurers must issue refunds to customers if their spending on medical care is less than 80% of the premiums they collect for plans sold on the individual and small group markets, and is less than 85% of premiums collected for plans sold in the large group market. The remaining 15% to 20% can be used for administrative costs, profits, and other expenses.
CMS in the final rule said it revised the information a state must submit to demonstrate that lowering the MLR threshold would bolster their individual insurance markets.
When considering whether to approve a state's requested MLR adjustment, CMS will consider whether the adjustment would keep insurers from exiting exchange markets, as well as whether the change would encourage more insurers to enter exchange markets. CMS also will review how the proposed MLR change would affect health plan premiums and cost-sharing. CMS in the final rule said any state request for an MLR adjustment will be treated as public documents with instructions for how the public should assess them.
CMS in the final rule also permits health insurers to automatically claim 0.8% of premium revenue from any relevant state and market as quality improvement expenses "for a minimum of three consecutive MLR reporting years without having to separately track such expenses."
Changes in the threshold for mandatory rate review
CMS in the final rule also increased the threshold at which states must review insurers' premium rate increases. Currently, insurers that plan to raise premiums by 10% or more must submit their premiums rates to state regulators. The final rule raises that threshold to 15%.
Income verification change
In addition, the final rule requires exchanges to put in place "stronger checks" to verify individuals' incomes when they apply for federal subsidies. CMS in a press release said, "This new check will only be for households for which trusted data sources reflect income below 100% FPL, because an accurate eligibility is critical for consumers near this threshold to ensure that advance payment of the premium tax credit is not paid on behalf of consumers who are statutorily ineligible." U.S. residents with incomes between 100% and 400% of the federal poverty level (FPL) are eligible for federal subsidies to help pay exchange plan premiums under the ACA. The architects of the ACA had assumed individuals with incomes below 100% FPL would be eligible for coverage under the ACA's Medicaid expansion, but in light of the Supreme Court's 2012 ruling, several states have elected not to expand their Medicaid programs, meaning in some states individuals with incomes below 100% FPL are ineligible for both Medicaid and federal subsidies, according to a Kaiser Family Foundation factsheet.
CMS in the final rule also said it will no longer encourage insurers to offer standardized health plan options beginning in the 2019 coverage year. CMS encouraged insurers to offer and highlight standardized options during the 2017 and 2018 coverage years as a way to simplify the shopping and enrollment process for consumers using the federal health insurance exchange.
In addition, the final rule:
- Eases requirements regarding so-called navigator organizations that help consumers enroll in exchange plans, including those that require at least one organization to be a "community and consumer focused" nonprofit and that require the navigator to be located in the exchange's geographic area;
- Eliminates the SHOP exchange as an online enrollment tool for plan years beginning on or after Jan. 1, 2018.
- Exempts student health insurance from federal rate review requirements to reduce the regulatory burden on states and insurers;
- Increases state regulators' role in reviewing rates for exchange plans;
- Streamlined some special enrollment periods available under the ACA;
- Transfers oversight of whether exchange plans have adequate provider networks to the states; and
- Updates the ACA's risk-adjustment model "to reduce burdens" on insurers.
According to Axios' "Vitals," the final rule did not prohibit the practice of so-called "silver loading"—under which insurers load premium increases onto silver-level exchange plans, which subsequently increases federal subsidies U.S. residents can receive to help offset the costs of their exchange plans—but Verma said CMS is "reviewing that at this time."
HHS expands exemptions to ACA's individual mandate
In conjunction with the final rule, CMS on Monday also released a guidance that expands exemptions to the ACA's individual mandate.
Previously, the Department of the Treasury granted so-called "hardship exemptions" in instances where individuals faced difficulty complying with the mandate because of:
- A natural disaster;
- Not being able to afford utilities; and/or
- The death of a family member.
Under the new guidance, CMS also will grant hardship exemptions to individuals who live in counties where either only one or no insurers are selling exchange plans. In addition, CMS under the guidance will grant a hardship exemption to individuals who oppose abortion if they live in an area where the only available exchange plans cover abortion care.
Several consumer groups and Democratic lawmakers said the final rule represents another effort by the Trump administration to weaken the ACA, the Wall Street Journal reports.
Brad Woodhouse, campaign director of Protect Our Care, said the final rule will "undermine protections for people with pre-existing conditions with a race-to-the-bottom approach that fundamentally undermines the [ACA's EHB] coverage guarantee."
Andy Slavitt, who served as acting CMS administrator under the Obama administration, said the Trump administration "is making it clear that they're implementing a law that they have no intention of making succeed." Slavitt called the changes included in the final rule and guidance "a gift to the insurance companies by finding lots of ways for them to get around the standards Americans have come to expect."
Dan Mendelson, president of the consulting firm Avalere Health, said the direction in which the Trump administration is taking the ACA "is significant because what the ACA did was create a national standard" for coverage, and "[a]spects of this rule … imply that national standard is going away" (Armour, Wall Street Journal, 4/9; CMS release, 4/9; CMS final rule, 4/9; Livingston/Luthi, Modern Healthcare, 4/9; CQ Health, 4/9 [subscription required]; Baker, "Vitals," Axios, 4/10; Goldstein, Washington Post, 4/9; CMS fact sheet, 4/9).
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