By Sandy Ahn and JoAnn Volk

It’s gearing up to be quite a different enrollment experience this fall for Affordable Care Act (ACA) marketplace coverage. As we’ve blogged about previously, the Trump administration finalized a Market Stabilization rule making numerous changes to the regulatory environment in which health insurance markets are operating. According to the administration, the aim of the Market Stabilization rule is to “lower premiums and stabilize individual and small group markets and increase choices for Americans.”

One of the biggest changes is the administration’s interpretation of guaranteed issue or availability. The guaranteed availability provision of the ACA requires individual market insurers to accept any individual who applies during open enrollment or special enrollment if eligible. The Obama administration interpreted this ACA provision to prohibit insurers from denying new coverage to individuals who owed premiums for previous coverage and were subsequently terminated for non-payment.*

The Trump administration’s new interpretation allows insurers (including a parent company and its subsidiaries) to require an individual to pay past-due premiums owed for coverage in the previous 12 months before enrolling them into the same or different product from the insurer. In other words, insurers are now allowed to refuse coverage to individuals who are applying for new coverage if the individual owes that insurer any past-due premiums for previous coverage up to 12 months. This new interpretation goes into effect on June 19, 2017, but does not apply when state law prohibits it.

Policy Goals of New Interpretation

According to the administration, its new interpretation will discourage “gaming” by consumers who only pay for coverage when they need health care and drop coverage when they are healthy since they know they can reapply during the next open enrollment or, if applicable, a special enrollment period. The administration states the new policy will encourage individuals to maintain continuous coverage throughout the year. It also cites to abuse of grace periods as another reason for its new policy, although it did not provide any data to support the existence of such abuse.

Potential Impact of Conditioning Past-Due Premiums on Re-enrollment

Consumers in areas where there is more than one insurer can avoid paying past-due premiums as a condition of enrollment if they obtain coverage with a different insurer. However, this new interpretation may effectively cut off individual market coverage to those consumers who are unable to pay their past-due premiums and have only one insurer available to them. Since only consumers whose incomes fall between 100 to 400 percent of the federal poverty level are eligible for premium assistance, and thus the grace period for non-payment of premiums, it will make it much more difficult for low-income Americans who may owe past-due premiums to have access to marketplace coverage. One survey of 2015 marketplace enrollees found 71 percent of the surveyed individuals that stopped premium payments had incomes of less than 250 percent of the federal poverty level (i.e., an individual making less than $30,000). For 2017 coverage, approximately 20 percent of marketplace consumers had only one participating insurer in their marketplace, up from two percent in 2016. For 2018, even more consumers may have only one insurer to choose from, given the considerable uncertainty about the continuation of cost-sharing payments and the regulatory environment. If a consumer falls behind on premium payments and have their coverage terminated, they will have no choice but to pay past-due premiums or forgo coverage.

This interpretation is also likely to backfire by resulting in a sicker, not healthier risk pool. It is those needing health care that are much more likely to pay past due premiums to ensure coverage. Therefore, rather than stabilizing the risk pool, this requirement could prompt healthier individuals to decline to enroll into coverage and drive up premiums for everyone.

There will also likely be consumer confusion if they receive a determination that they owe past-due premiums before they can enroll into a plan, and federal rules do not provide for any sort of appeals or complaint resolution process should a consumer believe they have been wrongly billed.

Protecting Consumers and Shoring up the Marketplace Risk Pools: a Range of State Options Exist

While the administration “encourages” states to adopt the policy, this policy does not apply when state law prohibits it. The rule also allows states to delay implementation of this policy. Given the extent of changes facing the marketplaces and consumers for 2018, states may want to take the administration up on its offer.

In addition, states can limit the policy to certain circumstances or create exemptions to the policy. For example, states can:

• Require that the policy only apply in areas where consumers have a choice of more than one insurer so no consumer is shut out of coverage for non-payment of premium for prior coverage.
• Require insurers to provide exemptions to this policy for extenuating circumstances like temporary job loss, unexpected financial loss, or if a consumer simply transitioned to another form of coverage.
• Require insurers to establish installment plans for individuals with past-due premiums and only apply the policy if individuals fail to follow the installment plan. Likewise, states can set a threshold for payment in full (e.g., 75 percent of past due premium amounts) of past due premiums for purposes of reenrolling.
• Require insurers to establish an independent administrative appeals process for individuals who wish to appeal an insurer’s decision about whether and what amount is owed in past-due premiums.

For all these options, state may need to adopt legislative or regulatory changes.

States could also strengthen consumer notice requirements. The rule does not require insurers to provide notice to current enrollees of the implications of unpaid premiums on their ability to obtain future coverage. Nor does it require any effort to warn current enrollees who may stop paying premiums because they obtained other coverage or encounter financial difficulty to actively terminate their plan rather than stop paying their premiums. At a minimum, states that adopt this policy now or in the future can require all insurers to provide notice of this policy to enrollees – with consistent and clear language developed by the state – so consumers can know in advance the consequences of skipping premium payments.

The new interpretation of the ACA’s guaranteed issue protection is a marked shift away from a core protection of the ACA. States, however, have the authority to step in with a range of options to protect access to coverage for consumers.

*The Obama administration allowed one exception to this requirement. Insurers could apply binder payments to outstanding premium amounts if a consumer is still within the 90-day grace period and is renewing into the same product. In that limited circumstance, insurers could decide not to renew coverage if the consumer failed to pay all his past due premiums by the end of the grace period. However, if the consumer enrolled into a new product, even with the same insurer, the Obama administration required the insurer to accept the enrollment as new coverage and could not condition such enrollment on payment of outstanding premiums.