The Center for Medicare and Medicaid Services released a proposed rule for the PPACA Exchanges this morning. These are my initial thoughts that I will most likely change as more information comes in and points are clarified. This rule is fundamentally a technical corrections rule that seeks to make the Exchanges work while favoring insurer interests. It is not a rule that will blow up the Exchanges.
The rule can be broken into two broad segments. The first segment is premium decreasing measures through plan design. This segment seeks to lower the cost of premiums (and incidentally, the cost of premium tax credits) by slightly dropping minimum requirements of coverage. This will benefit healthier individuals who do not receive subsidies and it will disadvantage sicker and more expensive individuals who are subsidized.
The second and far broader portion of the rule is risk pool management functions. The rule making assumes that there is significant intentional gaming of the various enrollment rules which have led to an adversely ill and expensive risk pool as healthy people are finding ways to avoid paying for coverage until
Larry Levitt at the Kaiser Family Foundation has a good general take on the rule making direction.
The Trump Administration’s ACA rules strike me as making things less consumer friendly and more insurer friendly. https://t.co/YisMncHVya
— Larry Levitt (@larry_levitt) February 15, 2017
Now let’s dig into the details.
There are two major benefit design proposed changes. The first is to expand the allowed band of actuarial values for a metal band to -4/+2 instead of the current +/-2.
we propose amending the definition of de minimis included in §156.140(c), to a variation of – 4/+2 percentage points, rather than +/- 2 percentage points for all non-grandfathered individual and small group market plans that are required to comply with AV. Under the proposed standard, for example, a silver plan could have an AV between 66 and 72 percent. We believe that a de minimis amount of -4/+2 percentage points would provide the necessary flexibility to issuers in designing plans while striking the right balance between ensuring comparability of plans within each metal level and allowing plans the flexibility to use convenient and competitive cost-sharing metrics.
There will be disparate impact. In currently converged markets like Indianoplis (Marion County), Indiana this will lead to both low cost carriers to decrease their offered actuarial value while holding the post-subsidy pricing constant for subsidized individuals. The Federal government will, all else being equal, pay less in premium tax credits as they are buying slightly less actuarial value. In non-converged markets where there is a a carrier with dominant position either as a sole carrier or the single low cost carrier, it will increase the opportunity for aggressive Silver Gap manipulations to increase the size and health of the risk pool. This would be achieved by offering a 72% AV Silver as the benchmark and then a 66% AV Silver as the least expensive Silver as well as a 56% AV Bronze plan. The increased spread in AV will make the low AV plans significantly less expensive and thus more attractive for subsidized and healthy individuals. Footnote 15 notes that a 56% Bronze is tough to build given current out of pocket maximum limits.
As a side note, the increased spreads will lead to greater consumer confusion as the metal bands go from six spreads to four point spreads between the maximum value of the lower band and the minimum value of the upper band.
The second premium decreasing measure is a minor tweak in Essential Community Providers. Currently 30% of the ECP’s in a plan’s service region must be included. The new rule proposes to reduce this to 20% and allow for insurers to add ECP’s that CMS does not list. It will incrementally lead to more skinny/narrow networks.
These two changes will have the effect of incrementally higher out of pocket amounts, skinnier networks and higher Cost Sharing Reduction Subsidies. The trade-off is lower premiums and lower premium tax credit expenditures. This is a viable set of trade-offs.
The meat of the rule is risk pool management and keeping healthier people in the pool longer.
The first change is to move up the short open enrollment from 2019 to 2018. The new open enrollment would be from November 1, 2017 to December 15, 2017. All new policies written in Open Enrollment would go in effect for January 1, 2018. The theory is that this will capture a significant proportion of the younger and healthier people who sign up for policies that now start in February or March so the January risk pool is significantly healthier and the young people have a longer average length of stay in the pool. I would change this rule so that Exchange open-enrollment aligns with Medicare Annual Enrollment so that everyone gets used to thinking about their health insurance for next year all at the same time.
The second major change address a concern that healthy individuals are gaming the grace period and mandate penalty. Right now an individual who has paid their first premium can go three months without payment and still have some coverage. If an individual drops coverage in October, the insurer is on the hook for October claims while the providers would be on the hook for November and December claims. If that individual then signs back up with the same insurer for January coverage through open enrollment the insurer can not deny them coverage. This rule changes that.
Assuming State law does not prohibit such action, this would permit an issuer to require a policyholder whose coverage is terminated for non-payment of premium in the individual or group market to pay all past due premium owed to that issuer after the applicable due date for coverage enrolled in the prior 12 months in order to resume coverage from that issuer. The issuer would be required to apply its premium payment policy uniformly to all employers or individuals regardless of health status, and consistent with applicable non discrimination requirements.
It partially removes a one sided option. If someone is healthy they currently win by saving premium costs and if they are sick, they would win by having the insurer cover them. I do not know if this is a frequent or costly problem but the theory of change is clear and coherent.
The next major rule concerns the Special Enrollment Periods (SEP). SEP’s are triggered when an individual has a Qualifying Life Event (moving, loss of coverage, marriage/divorce/death/birth etc) so that people can buy a policy outside of the Open Enrollment Period. This rule addresses a concern that relatively healthy people are using SEP enrollment to only get coverage when they anticipate a high cost event or diagnosis. This leads to a claims spike without a concurrent revenue stream to pay for it.
CMS has started verification requirements and auditing of reasons in for a SEP in the past year as carriers complained about SEP costs. These steps have had an effect.
Wow — eligibility Confirmation for SEPs reduced young adult partip by 20%pts.
h/t to .@saynikpay for the ref! pic.twitter.com/sDE5IpEU5t
— John Graves (@johngraves9) February 15, 2017
The new rule would require documentation for all SEPs. Claims that incur after the policy election date and before verification date will be pended. If the SEP is verified, these claims will be paid by the insurer.
Therefore, this rule proposes that HHS conduct pre-enrollment verification of eligibility for Exchange coverage for all categories of special enrollment periods for all new consumers in all States served by the HealthCare.gov platform, which includes Federally-facilitated Exchanges and State-based Exchanges on the Federal platform (SBE-FPs).
Under pre-enrollment verification, HHS would verify eligibility for certain special enrollment period categories for all new consumers who seek to enroll in Exchange coverage through a special enrollment period. Consumers would be able to submit their applications and select a plan and, as is the current practice for most special enrollment periods, the start date of that coverage would be determined by the date of plan selection. However, the consumers’ enrollment would be “pended” until verification of special enrollment period eligibility is completed. In this context, “pending” means holding the information regarding plan selection and coverage date at the FFE or SBE-FP until special enrollment period eligibility is confirmed, before releasing the enrollment information to the relevant issuer. Consumers would be given 30 days to provide documentation, and would be able to upload documents into their account on HealthCare.gov or send their documents in the mail. Where applicable, we intend to make every effort to verify an individual’s eligibility for the applicable special enrollment period through automated electronic means instead of through documentation.
This rule will do two things positive things. First, it will shift some enrollment from healthy individuals who are taking the implied SEP option and are sitting out of the pool into the risk pool during Open Enrollment. Secondly, it will minimize gaming and improve the risk pools.
The downside of the increased verification is that SEP utilization is already very low. It is the domain of the sick or the pregnant. Further requirements for verification will lead to even lower utilization and increase the PMPM costs. It is a barrier to access. Families USA has been banging that drum for a long time.
Overall, these rules are insurance company friendly rather than consumer/individual friendly. They are attempts to address concerns raised by insurers and they are reflective of technical correction bills that are sitting in the House Committee. If the fundamental shape of these rules are enacted, most insurers will have a stronger probability to project profitability for 2018. At that point, Cost Sharing Reduction subsidy payment would become that last major land mine that has yet to be disarmed from the carrier point of view for 2018 participation.
Villago Delenda Est
Everything about the Donald Disaster is about making things less consumer friendly and more corporate rapist friendly.
Major Major Major Major
In a broad sense, does the fact that they’re spending time on things like this mean that repeal is seen as less than assured? Or would they be doing it anyway.
Yarrow
Question about the SEP’s. Are there fewer policy options available outside of the open enrollment period? In one of the threads right before the open enrollment ended, someone said their brother had looked late last year and then looked again in January and more policy options were available in January. And better ones. So he got one.
How does it work? Is there a “best time” to be looking for policies?
David Anderson
@Yarrow: All else being equal, the same policies should be offered on Exchange during Open Enrollment and outside of Open Enrollment during the same policy year. There are two discontinuities. The first is December vs. January as new products are offered and old products are cancelled on 12/31 and 1/1. Secondly if a carrier goes out of business or put into receivership, products will be yanked.
Clem
Struggeling with #silverspammed. A sole provider offers two silver plans, the high plan out of reach for most. The low plan, second silver, still high price but it gets most enrollments? Healthy decide not to buy and Humana in GA says adios because of costly risk pool?
Yarrow
@David Anderson: Thanks. Would it make more sense to wait until January to look for a new policy, then? To avoid policies being yanked or companies going out of business?
David Anderson
@Clem: Silver Spam and Silver Gap only apply to the subsidized portion of the market.
The subsidy for a given income is determined by the gap between the FPL’s calculated contribution and the price of the second least expensive Silver plan. For instance, a single individual who makes $17,500/year would pay $53/month for the 2nd least expensive Silver plan. The federal subsidy would cover the rest.
The key number then is what is the difference between the least expensive Silver plan and the benchmark. If the least expensive Silver plan is at least $53 cheaper, that individual would have a Silver (and a Bronze most likely) plan available with no out of pocket premium cost.
For an individual who has a good reason to believe that they are going to be sick and/or pregnant and/or expensive in the next year $0 Silver is a nice bonus but they were going to buy a $53/month Silver anyways. For the individual at the same income who thinks they are going to be healthy, they’ll be far more likely to buy a $0 Silver or a $23 Silver rather than a $53 Silver. That is Silver Gap.
Silver Spam is when an insurer makes the #1 Silver barely cheaper than the benchmark Silver. For instance there are numerous counties where the least expensive Silver for a 40 year old is less than $5 different from the benchmark.
Silver Gap counties should, all else being equal, have higher enrollment among the subsidized population, longer length of enrollment and generally healthier populations. Silver Spam counties/states should have small risk pools that are sick with significant number of people dropping out over the course of the year.
That make sense?
David Anderson
@Yarrow: Honestly, I don’t know. It would be best to be covered as much as possible as you should be able to buy a policy for Year 1 and then use Open Enrollment to get a new policy for Year 2
low-tech cyclist
Hold on, what Trump Administration ACA rules?
Tom Price has only been HHS Secretary for what, five days? And AFAICT, none of the political-appointee positions under him have been filled – according to the WaPo tracker, of 694 key positions requiring Senate confirmation, only 35 even have nominations yet, and only 12 have been confirmed. I’m sure that none of the other 11 are within HHS.
So this is coming from some combination of Obama Administration holdovers and permanent HHS staff. Chances are it’s been in the works for awhile.
Clem
@David Anderson: T the #1 Silver is the lowest cost Silver? And the benchmark is the second least expensive Silver plan?
Clem
@low-tech cyclist: Maybe the Trumpanistas inside HHS know what to do?
low-tech cyclist
Looks like there’s a nominee for Administrator of the Center for Medicare and Medicaid Services, Seema Verma, but there’s been no action on her nomination yet. (David, does that name mean anything to you?) But that’s the only appointee position under Price that even has a nomination yet.
(Ah*, Clem, I doubt that there are enough Trumpists inside HHS to make anything happen.)
*Firesign reference.
David Anderson
@Clem: correct #1 Silver is cheapest Silver, Benchmark is #2 Silver
Clem
@David Anderson: Thanks, I’m making headway. So much to read today!
David Anderson
@low-tech cyclist: Verma should be going through nomination hearings in the next week or so. She should be easily approved. Her background is Medicaid waiver consultant so we should expect to see approval for a lot of waivers that look like Indiana
low-tech cyclist
@David Anderson: Thanks for the info!