Proposed 2019 Affordable Care Act Payment Rule: A Big Role for States

Last week, the Department of Health and Human Services (HHS) issued its highly anticipated 2019 Notice of Benefit and Payment Parameters proposed rule. This “payment notice” rule is released annually and often includes a variety of changes in implementation and oversight of the Affordable Care Act’s (ACA) insurance marketplaces, the market reforms, and the premium stabilization programs, among other areas. This year’s rule was no exception and marked the first payment notice rule issued under the Trump administration.

Among its many changes summarized here and here on the Health Affairs Blog, the proposed rule, if finalized, would defer a number of critical decisions to state policymakers. As discussed regularly on CHIRblog, states have long been key decision makers when it comes to implementing (or not implementing) the ACA. The proposed rule would defer additional decision making and oversight to state insurance regulators. This blog highlights some of the major decisions that states would be tasked with under the proposed rule, including in the areas of essential health benefits, qualified health plan (QHP) certification standards, rate review, medical loss ratio (MLR) rules, and risk adjustment.

(The proposed rule also makes a number of changes in areas where states, especially state-based marketplaces, have long played a regulatory role and have flexibility to exceed federal standards. These include meaningful difference standards, standardized plan options, navigators, and special enrollment periods, among others. Although these provisions of the rule are not discussed here because HHS did not propose additional autonomy for states, states can continue to have or adopt policies that are more protective of consumers than federal standards.)

Essential Health Benefits. States had flexibility to help define their state’s essential health benefits (EHB) package under the Obama administration. Federal regulations directed states to select an EHB-benchmark plan for the 2014 plan year and again for the 2017 plan year. In doing so, states could choose from among 10 HHS-specified plan options or default to their state’s largest small group plan based on enrollment. Although 26 states ultimately defaulted to the largest small group plan, many studied their EHB-benchmark plan options at length to make an informed decision and states have made a variety of policy decisions regarding EHB implementation since then.

It is within this context that HHS proposes to provide states with additional flexibility to define their EHB-benchmark plan for plan year 2019 and annually thereafter. HHS outlines four options for states: maintain the current 2017 EHB-benchmark plan, select another state’s 2017 EHB-benchmark plan, replace one or more EHB categories with another state’s 2017 EHB-benchmark plan, or select a new EHB-benchmark plan altogether (with some restrictions). To the extent a state re-defines its EHB benchmark plan under this proposal, however, the state must continue to defray the cost of any state-level benefit mandates adopted after December 31, 2011.

In the proposed rule, HHS notes that the fourth option—selecting a new EHB-benchmark plan altogether—could be burdensome for states who would need to invest resources in assessing whether the new benchmark plan option meets new federal requirements, facilitating a public notice and comment period, collecting and submitting additional data to HHS, instructing insurers on how to make changes, and implementing new EHB-benchmark plans and limits (such as converting dollar limits to non-dollar limits). HHS also notes that legislative action or “other high level state approval” may be required in certain states before making a change to the EHB-benchmark plan.

The proposed rule would require states to adopt reasonable notice and public comment requirements before making a change to the EHB-benchmark plan. However, HHS does not include any specific requirements, such as the length of a comment period or a public hearing, and would defer to states to develop a reasonable process. States would also have to submit additional data when selecting EHB-benchmark plans; materials for plan year 2019 would be due in March 2018. Overall, HHS estimates that 10 states would change their EHB-benchmark plans each year.

Under the ACA, states’ benchmark plans must be equal to a “typical employer plan.” The rule proposes to account for variation among employer plans 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 serve as the “typical” employer plan, and the rule asks for comment on whether there should be some minimum presence within the specific state defining an EHB benchmark. The state’s EHB benchmark plan would thus need to demonstrate that it is equal in terms of scope of benefits to the selected “typical” employer plan.

Finally, states would have to make a familiar decision regarding whether to ban or limit benefit substitution. Under current federal regulations, plans are allowed to substitute non-prescription drug benefits within each of the 10 EHB categories, but not between two categories. The proposed rule would allow plans to do both—to substitute non-prescription drug benefits both within and between EHB benefit categories so long as the benefit changes are actuarially equivalent. States would continue to be responsible for enforcing these requirements and could prohibit benefit substitution altogether, limit it to substitution within EHB categories, or otherwise enforce these standards.

Qualified Health Plan Certification Standards. Consistent with previous federal rules issued in early 2017, HHS intends to further defer regulatory review and oversight to state insurance regulators for 2019 and beyond. For instance, HHS proposes to continue to shift oversight of network adequacy to the states despite significant state variation in this area. Specifically, HHS would lift the requirement that state-based marketplaces that use the platform enforce federal standards for network adequacy and essential community provider requirements; these states would be able to set their own standards. In federally facilitated marketplace states, HHS proposes deferring to states on additional QHP certification areas—such as accreditation requirements, compliance reviews, and quality improvement strategy reporting—and requests comment on other areas of review where HHS could defer to states.

Rate Review. Under the proposed rule, HHS would increase the threshold for review of “unreasonable” premium increases from 10 to 15 percent. States could impose a lower filing threshold but would have to obtain permission from HHS to impose a threshold above 15 percent. States with an effective rate review program could set different filing dates for insurers that offer QHPs and those that do not and could choose to post rate filing information on a rolling basis (rather than all at once as is currently required). States would also largely be responsible for regulating student health insurance rates because HHS proposes to exempt student health insurance rates from rate review beginning with plan year 2019.

Medical Loss Ratio. States could decide to request an adjustment to the federal MLR in their state. Although this option has been available to states since the phase-in of the market reforms, HHS proposes to dramatically simplify the waiver process. In particular, HHS proposes to reduce the amount and type of information that states would have to submit to seek a waiver. This includes eliminating the requirement that the state describe their MLR standard and formula or provide detailed individual market enrollment and premium data. Although states would have to explain how their proposed MLR adjustment would help stabilize the individual market, they would no longer have to justify how they calculated their adjustment or how it would affect rebates. HHS assumes that 22 states would request MLR adjustments during the first year with reductions of MLR rebates of up to $64 million.

Risk Adjustment. States could also request changes to their risk adjustment charges for some insurers. In response to requests from state regulators, HHS proposes to allow state regulators to adjust risk adjustment transfer amounts of up to 50 percent of the premium in the small group market. To do so, states must be able to demonstrate that risk differences due to adverse selection are mitigated and notify HHS that they wish to make adjustments within 30 days of publication of the proposed payment notice rule.

HHS has requested comments in response to the proposed rules by 5pm on November 27, 2017. Comments can be submitted here.

1 Comment

  • Judi Fulmer says:

    My health insurance would normally cost me $800.00 a month with a $300.00 deductible. Through the affordable care act my insurance is $55.23 a month with a $300.00 deductible.
    Since we will no longer be required to get insurance in 2019, will I still be able to get insurance a cheap as I am getting it? Does this mean I can no longer afford health care? That I won’t be penalized for not having any because I can’t afford it?

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The opinions expressed here are solely those of the individual blog post authors and do not represent the views of Georgetown University, the Center on Health Insurance Reforms, any organization that the author is affiliated with, or the opinions of any other author who publishes on this blog.