On 15 February 2017, the Centers for Medicare & Medicaid Services (CMS) took a step toward addressing concerns about the stability of the individual and small group health insurance markets by proposing a modicum of regulatory relief for insurers. Most of the proposed changes are relatively modest and, for the most part, would not be effective until the 2018 plan year. Especially given the ongoing uncertainty regarding the future of the health insurance exchanges under the new administration and Congress, it is unclear whether the proposals would be enough to prevent more insurers from exiting the exchanges, as Humana recently announced it would, or to stave off significant rate increases for 2018. The proposed rule, "Patient Protection and Affordable Care Act; Market Stabilization" (CMS-9929-P), will be published in the Federal Register on 17 February 2017. Commenters should note that the proposed rule has an abbreviated comment period and comments are due by 7 March 2017.
The proposed policy and operational changes include:
- Permitting states to determine network adequacy: For the 2018 plan year, CMS proposes to defer to states to determine whether an exchange plan has an adequate provider network, as long as the state has a sufficient network adequacy review process that is at least equal to the federal "reasonable access standard."
- Changes to the actuarial value de minimis range: The Affordable Care Act requires exchange plans to have one of four actuarial values, known as "metal levels"--bronze, silver, gold, or platinum. Actuarial value measures the percentage of benefit costs for which a plan, as opposed to an enrollee, is responsible. By statute, plans with an actuarial value of 60% are bronze, 70% are silver, 80% are gold, and 90% are platinum. But CMS currently allows a "de minimis" variation of +/-2%, which permits a plan to be up to 2% above or below a statutorily-specified actuarial value and still be found to meet a metal level's requirements. For example, plans with actuarial values of between 58% and 62% are bronze. Under the proposed rule, beginning in plan year 2018, CMS would allow a de minimis variation of +2/-4%, which would afford issuers greater flexibility in plan design by allowing plans to be up to 2% above or up to 4% below a statutorily-specified actuarial value.
- Increased verification requirements for special enrollments: The proposed rule would require that CMS verify all federal exchange consumers' eligibility for special enrollment periods beginning in June 2017. (CMS currently is scheduled to begin a pilot program at that time, in which it is slated to verify only 50% of consumers' eligibility for special enrollment periods.) In addition, the proposed rule would mandate increased verification requirements for consumers who seek special enrollments due to marriage or because they are moving. CMS also proposes to significantly limit its future use of the exceptional circumstance special enrollment period.
- Refusal to effectuate coverage for failure to pay premiums: CMS proposes to allow a plan issuer in the individual or group market to refuse to effectuate an enrollment if the policyholder has outstanding debt associated with the non-payment of premiums to the same issuer within the prior 12 months. Consumers still would be allowed to enroll with other issuers. Issuers would be required to apply their premium payment policy uniformly and abide by applicable non-discrimination requirements.
- Shortening the open enrollment period: The proposed rule would shorten the 2018 plan year open enrollment period for the individual market, by limiting it to 1 November 2017, to 15 December 2017. This is only half the time that is currently on the books, i.e., 1 November 2017, to 31 January 2018.
- Exchange plan certification schedule: In the proposed rule, CMS announces its intent to establish a revised timeline for the exchange plan certification and rate review process for plan year 2018, which would provide issuers with additional time to implement the proposed changes described above.
The proposed rule is perhaps most notable for what it does not include. There was speculation that the proposed rule would allow issuers to charge older consumers up to 3.49 times more than what they charge younger consumers. However, the current 3 to 1 ratio is required under statute and this policy was not proposed. The proposed rule also does not change how essential health benefits are defined. Furthermore, the proposed rule does not seek to make any changes related to the individual mandate, which generally requires individuals to have health care coverage or pay a tax penalty.
We at Hogan Lovells will continue to monitor changes to the current health insurance regulatory landscape, even as the new administration and Congress consider more fundamental legislative modifications.
Special thanks to Isaac L. Swaiman, who also contributed to this alert.