Rumors are flying in health policy circles that the Obama Administration might delay implementation of the Affordable Care Act (ACA). Some worry there may not be time to get the ACA entirely stood up by October 1—the date enrollment in qualified health plans (QHPs) is scheduled to begin through new Health Insurance Exchanges. The truth is, however, that significant new delays are unlikely.
The Department of Health and Human Services (HHS) already has delayed by a year a key aspect of the Small Business Health Options Program (SHOP)—the feature that would permit employees of small employers to choose among qualified health plans—in the states where HHS is administering SHOP. (As a reminder, under the ACA, small employers are defined as those with fewer than 50 employees.) The decision to delay SHOP seems to be the point at which HHS evaluated whether it would be able to have all ACA components functioning this year and decided where it should cut its losses.
HHS and the states have an ambitious schedule the remainder of this year to approve health plans under new ACA regulations, expand Medicaid, and alert consumers about their new coverage options. HHS has made some minor concessions in timing. For example, it gave insurers three extra days to submit plans for approval to participate in the federally-administered Exchanges—extending the deadline from April 30 to May 3. Further delays in implementation are likely to be of similarly short duration—on the order of days or weeks, not months or years.
The One Delay Exception: Holding onto Lower Rates as Long as Possible
There is one exception to the statement that further delays are unlikely—and it’s driven by employers and insurers rather than HHS or the states. In many cases, premiums for policies issued under the new rules may be more expensive than the policies individuals and employers currently hold, because the new policies will offer more comprehensive coverage and will not exclude individuals with chronic conditions. Employers, insurers and their consultants are evaluating how to keep the lower rates they currently have as long as possible. In their search for a way to keep costs down, they have latched on to the fact that the new rules don’t become effective precisely on January 1, 2014. Instead, for individual and small employer health insurance plans, the new rules become effective with the first policy renewal year that begins on or after January 1, 2014. That fact opens up some options for delaying rate hikes.
One strategy might be to renew policies in December 2013 and have a renewal year of thirteen months or longer. That could mean that the first policy year beginning after January 1, 2014 might be some time in 2015—or even later. This strategy is not likely to work. An existing HHS regulation generally requires that policy years be no more than twelve months. If an insurer did write a policy with extra-long “years,” the policy would likely become subject to the ACA rules on January 1, 2014—or on the date the employer’s tax year starts in the small group market.
Insurers could, however, renew policies in December 2013—even as late as December 31, 2013—for a twelve-month period. That would enable them to lock-in 2013 rates for their customers for almost all of 2014. This approach may benefit existing customers, who are generally healthier than the uninsured population and therefore could pay lower premiums now than they would under the 2014 rating rules. But there is a downside. It could damage the risk pool of the insurance market in 2014, by keeping healthier individuals in a separate risk pool for almost the full year.
How Are Regulators Reacting?
The regulatory reaction to renewing policies in December to lock in lower rates is uncertain. HHS recently suggested to insurers that they tell their enrollees about the availability of Health Insurance Exchange coverage when they renew policies—even when renewals are in 2013. The suggestion from HHS reflects some federal concern that insurers may steer individuals to particular products based on their health status. HHS may not feel it has the authority to take further action, however.
State reactions are mixed. Some state regulators are effectively prohibiting late 2013 renewals by requiring 2014 renewals to occur in the first half of 2014. Other states—particularly those generally opposed to the ACA—are encouraging insurers to preserve lower prices by offering the late 2013 renewals.
Individuals and small employers may want to wait until the fall to decide whether to renew their policies in 2013. By that time, they will be able to see what products and prices are available in the Exchanges and compare them to their current coverage. Price may not be the only deciding factor. Even more expensive products may be attractive if they cover pre-existing conditions or include other benefits not available in current coverage.
Insurers, on the other hand, may want to preserve their existing enrollment as much as regulators permit. Therefore, they should consider the implications of offering December renewals to their current customers.