On October 27, 2017, the U.S. Department of Health & Human Services (HHS) released proposed rules governing the Affordable Care Act (ACA) marketplaces and several insurance reforms. The public was given just 30 days to respond, and 429 individuals and organizations did, submitting comments by the November 27th deadline.
The proposal includes potentially significant changes affecting consumers’ eligibility for and enrollment in the federally facilitated marketplaces and the value of their insurance coverage. These include changes to the essential health benefit (EHB) standard, oversight of premium rate increases, the marketplace navigator program, consumer notices, eligibility for premium tax credits, and the display of health plan information.
To better understand the impact of these proposed changes, CHIR reviewed a sampling of comments from key stakeholders, including insurance companies, consumer and patient advocates, and state marketplace and department of insurance officials. In this first of a series of three blog posts, we examine the comments of the following insurers and insurer associations:
Not surprisingly, there was considerable unanimity among insurer stakeholders on a number of proposed rule changes. For example, all of the insurers in our sample supported the end of the Obama-era standardized plan options and their preferential display on healthcare.gov. They all supported giving greater deference to states to certify plans’ network adequacy. And most supported the administration’s continued efforts to make it more difficult for consumers to qualify for and enroll in coverage through special enrollment periods (SEPs).
There were, however, several provisions that insurers strongly opposed, or asked federal officials to modify. And in several cases, the insurer community had divergent views. We review a selected set of proposed changes to the rules, and insurer responses, below.
Risk Adjustment – Ability of States to Limit Insurer Payments
The proposed rule makes some changes to the risk adjustment formula, which is designed to discourage cherry picking by requiring that individual and small-group market insurers with relatively lower risk enrollees transmit payments to insurers with higher-risk groups. Most of these changes were supported by insurers, but one proposal generated significant divisions. In response to requests from state regulators, HHS is proposing to allow them to limit payment transfers for insurers in the small-group market, with the possibility of doing so for the individual market too. Several insurers raised “strong” concerns or expressed outright opposition to this proposal. Centene, for example, argued that it will lead to “administrative complexity” and a greater burden on industry. BCBSA believes it will create incentives for more insurers to engage in risk selection, further noting that it doesn’t make sense to operate a federal risk adjustment program that states can later “undermine.” Other insurer stakeholders were just lukewarm, such as AHIP, which suggested that, at a minimum, states be required to demonstrate via actuarial analyses that limiting risk adjustment payments would improve market stability, and cautioning that such state flexibility should be limited to the small-group market only.
On the other hand, two regional non-profit insurers (Priority Health in Michigan and the northeast-based Emblem Health) strongly supported the proposal, arguing that it would empower states to improve market stability. They urged HHS to extend the option to the individual market as well.
Rate Review: New “Unreasonable” Increase Threshold and Timing of Filings
Not surprisingly, all of the insurers in our sample supported HHS’ proposal to increase the threshold definition of an “unreasonable” premium rate increase from 10 percent to 15 percent. However, there was almost unanimous opposition to HHS’ proposals to allow states to set different filing deadlines for on- and off-marketplace insurers, and to allow for the “rolling” publication of proposed rates. For example, BCBSA noted that posting rate information on a rolling basis would allow for shadow pricing by some market players, while AHIP asserted that uniform deadlines are “justified and necessary to maintain the competitive integrity of the market.” Similarly, United Healthcare argued that the lack of uniform submission and public disclosure dates could “promote manipulation by some market competitors.” Other insurers, such as Kaiser Permanente, expressed concern that non-uniform disclosure of rates would increase consumer confusion.
Navigator Program Standards
Several insurers commented on HHS’ proposed changes to the Navigator program, particularly the removal of the requirements that the navigator have a physical presence in the state, and that at least one grantee be a non-profit, consumer-oriented organization. For the most part, insurers opposed these changes. For example, UPMC argued that the proposal would reduce assistance for underserved, vulnerable, and limited English proficient individuals, noting “these populations are particularly susceptible to confusion and outreach challenges.” ACAP urged HHS to retain the requirement that one grantee be a non-profit, consumer-focused entity, suggesting that other assistance options, such as brokers or Navigators working for hospital systems may not be “entirely unbiased.” Centene and Cigna both emphasized the need for a local, visible presence for many populations with high uninsured rates. AHIP also argued that HHS needs to develop a broader set of metrics to assess the impact of Navigators, noting that assessing enrollment volume alone doesn’t adequately capture the work they do.
BCBSA supported the proposal on the grounds it would enhance the efficiency of the program, noting that funds for Navigator grants are derived from user fees paid by insurers.
Marketplace Financial Assistance: Eligibility Standards
Under current federal rules, a recipient of marketplace advance premium tax credits (APTC) loses eligibility for that subsidy if they fail to file a tax return and reconcile their advance premium tax credits with the actual amount for which they were eligible. Current rules require the administration to provide “direct notice” to consumers at risk of losing APTCs because they failed to file/reconcile their past year’s APTCs. HHS is proposing to eliminate the direct notice and instead combine it with a general notice about marketplace open enrollment.
Several insurers opposed this change, arguing that consumers need “targeted and detailed messaging” (Cigna) that is “specific” and “actionable” (AHIP, UPMC). Kaiser Permanente urged HHS to promote policies that maximize continuity of coverage, not put it at risk, and Emblem Health worried that the proposal would lead to people losing coverage without understanding why.
Data Matching Inconsistencies
To prevent individuals from receiving APTCs for which they’re not eligible, consumers who project their income to be less than the amount reported by the Internal Revenue Service (IRS) and/or Social Security are required to submit documentation verifying that income. But if their projected income is higher than IRS or Social Security data show, they currently don’t have to provide documentation. HHS is proposing to require that low-income individuals who project income showing them to be above 100 percent of the federal poverty line (FPL) (and thus eligible for APTCs) to document that income if federal data sources can’t confirm it. This requirement could cause many individuals close to the poverty line living in states that have not yet expanded Medicaid to lose coverage.
AHIP, BCBSA and Centene all raised concerns about this proposal, arguing that it creates a burden on low-income people, many of whom work hourly or irregular jobs and will face challenges providing the necessary documentation. BCBSA further noted that this requirement will particularly deter healthy enrollees from enrolling.
Exchange User Fee
HHS has proposed an insurer user fee of 3.5 percent for 2019, the same as the 2018 amount. Several insurers objected to the proposed amount. For example, Molina argued that, in light of significant cuts in federal spending on marketing, navigator assistance, and consumer outreach, the proposed user fee is too high. Cigna observed that the administration’s shift towards more direct enrollment would further lower healthcare.gov operational costs. Others urged HHS to publicly disclose how it allocates user fee revenue to specific marketplace functions.
Essential Health Benefits (EHB)
Perhaps not surprisingly, insurers saved their most extensive comments for HHS’ proposals to modify the selection of an EHB benchmark plan. Those comments reflected a wide range of views, although almost all agreed that 2019 was far too soon to implement such a significant change, and urged HHS to wait to 2020 at the earliest.
New Options for Selecting a State Benchmark
HHS has proposed three new ways for states to choose a benchmark plan: (1) adopt the EHB benchmark plan of another state; (2) replace one or more benefit categories in their own benchmark plan with those of another state; or (3) create a new EHB benchmark plan.
Among our sample of insurers, Priority Health was the only one to support this proposal. For the others, comments were generally critical. United Healthcare and Molina observed that the current benchmark selection process works fine, and questioned the need to tinker with it. United further noted that coverage can vary widely based on geography, so the proposed new approach doesn’t “align with reality.” Other carriers, including Kaiser Permanente and Molina, raised concerns that the new approach would increase administrative burdens on plans and add to consumer confusion. ACAP argued that the proposal would advantage big national carriers over local ones.
BCBSA and AHIP highlighted a perhaps unintended consequence of the proposal, arguing that it would allow states to increase the generosity of their benefit packages without having to defray the costs. Several insurers also argued that states should not be allowed to change the EHB benchmark more than once every three years, instead of annually as HHS proposes.
Definition of a “Typical” Employer Plan
The ACA requires that the scope of EHB benefits be equal to those offered by a “typical” employer plan. HHS proposes to broaden the definition of what it means to be a typical employer plan by allowing any small-group, large-group, or self-insured group health plan with at least 5,000 enrollees in one or more states to be deemed as a typical employer plan.
The insurers in our sample objected to allowing a self-insured group plan be considered a “typical” plan. Several noted that self-insured plans are highly “customized” and, by their very nature “inherently atypical.” They also noted that, as a practical matter, benefit information for these plans is generally unavailable to states.
BCBSA further urged HHS to exclude from the definition any employer plans that don’t already cover the 10 ACA-prescribed benefit categories, do not meet the ACA’s minimum value standard, or are indemnity or account-based plans. BCBSA also argued that the 5,000 enrollee threshold is too low to ensure that a plan is truly typical.
Currently insurers are allowed to substitute specific items and services within an EHB benefit category, so long as they are actuarially equivalent. In its 2019 proposed rule, HHS proposes allowing insurers to substitute benefits between benefit categories, so long as they are actuarially equivalent. Insurers opposed this idea. For example, BCBSA and Molina argued that allowing this type of flexibility would “increase gaming” and the use of benefit design for risk selection. AHIP argued it would lead to the introduction of “overly complex” benefit designs.
Of note, Kaiser Permanente posted a particularly strong plea against such benefit substitution, calling it “ill-advised,” and arguing that the result would be an “influx of plans devaluing certain EHB categories,” such as maternity and behavioral health. “We believe there are better ways to enhancing affordability in our health care system than redistributing costs to expectant mothers,” they wrote.
Federal Default Standard
HHS has asked for comment on whether they should develop a national default EHB definition, as well as a national benchmark standard for prescription drugs. Insurers had mixed views on the idea of a national EHB standard. Some opposed the whole concept; others were more comfortable with it (AHIP) but called for a “rigorous stakeholder process” and the preservation of insurer flexibility to create “innovative” plan designs.
Centene also objected to a national prescription drug formulary, noting not only that insurers need flexibility to design a formulary that meets the needs of their enrollees, but also that if they are required to cover a certain drug, they will lose their ability to negotiate prices with manufacturers.
Meaningful Difference Standard
Marketplace plans offered by the same insurer are required to be “meaningfully different” from one another in order to prevent insurers from flooding the market with look-alike plan designs and causing consumer confusion. HHS is proposing to eliminate this requirement.
Insurers were mixed on this proposal. AHIP, BCBSA, Centene, Cigna, and United all supported getting rid of the meaningful difference standard. But UPMC, Kaiser Permanente, and ACAP opposed it, noting that the requirement prevents certain insurers from dominating the market with numerous products that offer little variation. UPMC cited modern psychological research demonstrating that an increasing number of choices among complex products like health insurance results in “choice overload” for consumers and hampers their decision-making ability. They argued that a profusion of product designs with only minor differences “benefits no one.”
A Note on our Methodology
This blog is intended to provide an overview of comments from a sampling of insurers and insurer organizations. Insurer comments were selected to provide a range of perspectives, including those of large for-profit carriers, regional non-profits, former Medicaid-only plans, and integrated HMO plans. Some have a large marketplace footprint, others a small one. This is not intended to be a comprehensive catalogue of all insurer comments on every proposal in the 2019 NBPP. For more insurer and other stakeholder comments, visit https://www.regulations.gov/.