New Funding Opportunity Allows States to Bolster Consumer Protections

Calling all states – on February 5th, the Center for Consumer Information and Insurance Oversight (CCIIO) put out a Notice of Funding Opportunity. The federal agency, housed within the Department of Health and Human Services (HHS), expects to award $8.1 million this year for initiatives that take place between June 2018 and June 2020. This grant program focuses on insurers’ compliance with federal market reforms and consumer protections, giving states the opportunity to improve their oversight efforts.

The money comes from a $250 million pot appropriated for rate review grants. During the first five years of the Affordable Care Act’s (ACA) implementation, HHS awarded grants to 43 states and the District of Columbia to help improve state oversight of premium rate increases. After fiscal year 2014, any money left over from the program became available for HHS to fund implementation of federal market reforms and consumer protections at the state level.

In 2016, HHS used some of the unobligated funds to award more than $25 million to states for activities that advanced compliance with a range of federal requirements, from mental health parity to the Medical Loss Ratio (MLR). This new round of grants, the State Flexibility to Stabilize the Market Grant Program, will fund more state-based initiatives in three key areas of market reforms and consumer protections: guaranteed issue, guaranteed renewability, and the ACA’s Essential Health Benefits (EHB).

Guaranteed Issue and Guaranteed Renewability

Under the ACA, insurers are required to accept anyone who applies for coverage during specified enrollment periods, and to renew that coverage upon application, regardless of health status, age, gender, and other factors. To ensure compliance with these federal requirements, states can apply for funding through this new grant cycle. CCIIO provides few details or examples of state activities they hope to fund, beyond suggesting that states “[conduct] a market scan” or “actuarial or economic analysis” to evaluate issuer compliance, or to “assess whether other innovative measures are needed” to “strengthen” coverage and increase access in underserved areas. While this aspect of the funding opportunity is vague, it gives states the opportunity to use federal resources to enhance oversight efforts that preserve this keystone component of the ACA’s consumer protections.

Essential Health Benefits

For this grant cycle, states are encouraged to apply for funding to enhance compliance with the ACA’s EHB requirements. The EHB require insurers to cover a set of benefit categories to make coverage more comprehensive and health care more affordable for consumers. In the notice, CCIIO emphasizes the provision of the EHB requirement that prohibits discriminatory benefit design, or plans that “cherry pick” healthy enrollees by creating products that deter sick individuals from enrolling. HHS has taken steps to reduce federal oversight of discriminatory benefit design, leaving states with a greater responsibility to protect consumers. Through this grant, CCIIO suggests that states can fund new initiatives to identify discriminatory benefit design, such as augmenting their formulary review by hiring additional staff or contracting with a clinician. Given the relaxation of federal oversight in this area, state regulatory efforts are critical to ensuring that insurers design plans that work for all consumers, not just the healthy ones.

States already play a significant role in enforcing EHB protections through their selection and oversight of an EHB “benchmark plan,” which establishes a coverage standard that all non-grandfathered health plans sold on the individual and small group markets must meet. Beyond putting more boots on the ground for discriminatory benefit design oversight, CCIIO also encourages states to apply for grants to fund a review of their EHB benchmark plan, recommending an evaluation of “potential modifications” to the benefits included in the benchmark to “increase affordability for consumers,” also suggesting that states “research other state EHB benchmark plans.” This aligns with HHS’ proposed changes to the EHB benchmark selection process, which would allow states to create a new benchmark plan from scratch or adopt some or all of another state’s plan. These proposals were met with mixed reviews from states and fierce opposition from a number of consumer advocates; the new flexibility, they argue, could lead to weaker EHB standards, resulting in inadequate coverage for consumers. This grant presents the opportunity for states to bolster their EHB oversight, using the review to ensure a comprehensive benchmark plan that sets adequate standards for benefit design.

The two-year funding opportunity will launch in June, but states must submit a letter of intent to CCIIO by February 26th, with final applications due April 5th. All states and the District of Columbia are eligible for a grant.

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