Late last week, two major proposals arose that will have a significant impact on the health care industry. First, the Trump Administration’s Department of Health and Human Services (HHS) under new HHS Secretary Tom Price released a 71-page proposed rule regarding health insurance market stabilization. The proposed rule makes regulatory changes to the small group and individual insurance markets, the majority of which are sold on state or federal marketplaces created by the Affordable Care Act (ACA). These targeted proposals apply nationwide but will have varied impacts in different states to some extent, certainly in Minnesota. Shortly after, the GOP released a policy brief to outline its strategy for ACA reform. The GOP promised more concrete next steps after the legislature returns from recess (February 27, 2017), but in the meantime, its outline gives the health care industry insight on the current focus of the GOP's replacement plan. Key health reform components that are included in these proposals, and, perhaps more importantly, what is left out, are highlighted in greater detail below.
What's included in the HHS proposed rule and GOP policy outline:
1. Measures to tighten special enrollment periods and shorten open enrollment: One major objective of the HHS proposed rule is to attract a healthier pool of people to sign up for the small group and individual markets. One measure the proposed rule suggests to accomplish this is enforcing stricter documentation during special enrollment periods. Insurers have asserted gaming of special enrollment is occurring – whereby consumers skip buying insurance during open enrollment periods when they are healthy, but then buy insurance when they need health care coverage via special enrollment. Special enrollment is typically reserved for special “qualifying life events” – such as loss of job-based health insurance or birth of a child – but state-based exchanges have more flexibility to determine other times when a special enrollment is warranted within the parameters of the ACA. MNSure, Minnesota’s state-based exchange, will still maintain that authority under the proposed rule. However, MNSure may be directed to undertake more scrutiny with documentation review for additional special enrollment periods as a result of this proposed rule, adding administrative work. Additionally, the proposed rule significantly shortens the annual open enrollment period, compared to past years. HHS states it hopes this will give insurers better insight into their new enrollment and avoid some lapses in coverage which are allegedly higher at the end of the calendar year, discussed more below.
2. Stricter rules on lapses in payment: The proposed rule also allows insurers to terminate health insurance coverage more quickly if someone fails to pay their premiums for said coverage under the current rules. If someone receives an advanced premium tax credit for his or her health insurance premium, that person has a three month grace period to pay that month’s premium. The proposed rule changes that by removing the grace period, so long as state law allows. Minnesota law does not explicitly state the grace period time-frame for paying premiums. However, it does have an ACA conformity statute on the books—Minnesota Statute § 62A.04—requiring grace periods for qualified health plans to be no less restrictive than the requirements of the ACA, which could be interpreted as a roadblock to applying this particular rule without a formal change to the language of the ACA.
3. Continuous coverage is considered: The HHS proposed rule asks for comments on establishing "continuous coverage" requirements for the individual and small group markets (except the federally facilitated Small Business Health Options Program for operational reasons). Now-HHS Secretary Tom Price had this reform initiative in his "Empowering Patients First Act" (EPFA) he proposed in 2015 when he was a congressman. A continuous coverage scheme could allow insurers to charge higher premiums by rating an individual on his or her health status if that individual does not maintain continuous coverage, or could subject an individual to a waiting period to purchase coverage. The proposed rule did not specify the penalty for failing to maintain continuous coverage, but Price's EPFA allowed an insurer to charge a consumer up to 150% higher premiums, whereby that consumer would be eligible for the standard, lower rate again after maintaining at least 18 months of coverage. This is a significant deviation from the ACA, where only age, geographic area, and smoking status are allowable rating factors for calculating health insurance premiums.
4. Actuarial Value Standards are loosened: The HHS proposed rule allows a variation in the current "actuarial value standards" as prescribed by the ACA. Actuarial value refers to the percentage of the total cost of health care expenses of a standard population in the plan, rather than by one sole individual. These are expressed in metal levels for purchasers to know what kind of cost-sharing of coverage he or she will be responsible for. The proposed rule keeps the metal levels – platinum, gold, silver, and bronze – but allows a greater increase in the low end of the range by which the plan can deviate. For example, currently under the ACA, a silver plan has an actuarial value of 70%, but can vary by +/- 2%; the proposed rule keeps the silver metal level actuarial value at 70%, but allows a new variation of +2% and -4%. This gives insurers more flexibility in their plan designs and could lower premiums for consumers, but it conversely increases backend cost-sharing when health care services are actually utilized—i.e., higher deductibles or coinsurance. This model is attractive and useful for healthier people who do not anticipate using their health insurance much. However, another important impact of this proposed change is that a low actuarial value plan could become the second-lowest cost silver plan, which is determined in every county in the state. Premium tax credit amounts are based off of that plan and would be consequently reduced if the price of that plan is also reduced, ultimately affording people less tax credits even if they do not want to purchase a lower premium plan with higher cost-sharing upon utilization.
5. Network Adequacy standards are redirected to the states, and Essential Community Provider standards are relaxed: The HHS proposed rule also confers regulatory power to the states to evaluate Network Adequacy. While some states have had little regulatory oversight in this arena, in Minnesota, Network Adequacy review for the state marketplace is already thoroughly conducted by state regulators in accordance with state and federal laws. Minnesota state regulators have also diligently reviewed ACA requirements for inclusion of Essential Community Providers (ECPs), which serve predominantly low-income and medically underserved populations, as part of the Network Adequacy review process. The proposed rule does not change that role in Minnesota, but it does propose that qualified health plans would be allowed to include a lower percentage of ECPs in a given geographic area, going from 30% to 20%.
6. Tax credits get a make-over: While the ACA determines tax-credit eligibility by income, the GOP policy outline determines it by age, giving an individual more tax credits the older he or she becomes, regardless of income. This is helpful for older purchasers, because health insurance companies can charge higher rates based on age. However, a consumer can be low-income at any age, so even if an individual's health insurance rates are lower when he or she is younger, lack of tax-credit assistance could still make purchasing insurance cost-prohibitive for certain income levels, especially if Medicaid expansion is retracted (see more in #8 below). Furthermore, the GOP policy outline does not allow the new tax credits to be used towards plans that cover abortions.
7. Health Savings Accounts are a focal point: The GOP's outline champions Health Savings Accounts (HSAs) as an effective tool for lowering individuals' health care costs. HSAs are accounts that receive tax advantages that can be used to pay for certain medical expenses. The GOP proposes to increase the maximum limit that an individual can contribute to an HSA annually, purporting that this would give individuals and families more flexibility with how to spend money on health care. The GOP outline also advocates for allowing both an individual and his or her spouse to contribute "catch-up contributions" to a either the individual or the spouse's HSA, depending on which one has reached its annual limit or which individual needs to utilize the funds more. These proposals are helpful for married couples and those who have extra money to save toward health care, but don't necessarily help solve the overarching issue of high cost of health insurance premiums.
8. Medicaid funding changes: The GOP outline proposes to repeal Medicaid expansion as instated under the ACA. The outline allows states which embarked on expansion under the ACA to continue to enroll the expanded group of people eligible, but states would not receive the generous federal funding that was previously associated with the expansion. This puts states that expanded, like Minnesota, in the position of deciding whether to allocate state funds to subsidize the cost of coverage for their Medicaid expansion population or revert back to the more restrictive eligibility scope prior to the ACA. Additionally, Minnesota has a special program called a basic health plan—or, MinnesotaCare—that will be in jeopardy if the federal government is not willing to fund a state's choice to expand eligibility for a public program, as much of MinnesotaCare relies on federal funding. The GOP outline also gives the states a choice as to whether they want a reformed per capita funding mechanism or a block grant for its Medicaid program, with both funding options likely resulting in a cut to the program overall.
9. State innovation grants are available for certain reform efforts: The GOP outline proposes utilizing innovation to reform the health care industry by issuing waivers to states to try new things. One of the key suggestions for a waiver proposal is that of forming state-based, high-risk pools. High-risk pools are intended to control the extreme health insurance premium increases in the individual market—spurred by a small number of high-cost individuals—by placing them all in one separate pool. However, the cost or utilization of the care does not disappear with such a mechanism, and this population still needs to be subsidized, as individuals could not afford to pay the catastrophic costs of their high health care needs on their own. In Minnesota, the high-risk pool—the Minnesota Comprehensive Health Association—was funded by a life and health insurance industry-wide assessment, but other states’ high-risk pools are funded from the state’s general funds.
What's not included in the HHS proposed rule and GOP policy outline:
1. Will the Medicare program be changed under the new reform efforts? Neither of the new proposals address any reform to the Medicare program. While the GOP policy outline frequently references Paul Ryan's "Better Way Plan," it did not adopt the Better Way Plan's Medicare reform proposal: to change Medicare to a premium support or voucher program. Under this model, those eligible for Medicare would receive a fixed stipend or voucher from the federal government to purchase health care from either traditional Medicare plans or private health insurance plans. To further lower costs, this type of program would move away from a defined benefit set and towards a narrower provider network and potentially expose the senior population to higher out-of-pocket costs as a result. For the time being, Washington, D.C., is staying silent on Medicare reform proposals, giving the health care industry no guidance for this sizable segment of health care beneficiaries moving ahead.
2. Will payments for current premium stabilization programs still be funded by the federal government? While the new, proposed HHS rule offers ideas to aid in further stabilizing the insurance markets, the HHS proposed rule and GOP outline do not address funding for current premium stabilization program payments currently guaranteed under the ACA. One important type of premium stabilization program is cost-sharing reduction ("CSR") payments via advanced premium tax credits. Without tax credits, many people who qualify would not receive help paying for their insurance premiums. This is clearly important in Minnesota, where the legislature and governor passed a measure this legislative session that gives Minnesotans who purchase individual market coverage a premium rebate due to the steep increases in premiums across the state this year. Insurers and consumers alike need an infusion of money, at least in the short term, until more stabilization is actually achieved in these markets. Otherwise, many consumers will opt-out of purchasing coverage, especially given the Internal Revenue Service's recent announcement that it will discontinue enforcing reporting of purchase of health insurance. Inevitably, Minnesota and other states would consequently see an increase in the uninsured rate, impacting not just people’s access and utilization of healthcare, but also on hospitals and medical providers in the form of increased charity care, transferring the costs and burdens to another segment of the health care industry. Another important premium stabilization category that insurers rely on is the ACA's risk corridor program. A recent case in Oregon awarded a health insurer $214 million owed to it by HHS under this program. Health insurers have long counted on this federal money when establishing rates for their plans; many insurers leaving the individual market cite the lack of federal money as a primary reason for needing to withdraw from the market. Without this money, other insurers in Minnesota and nationwide may be unable to sustain significant losses coming from the individual market and withdraw.
3. How much money will states receive towards new policy proposals? Missing from the proposed rule and the GOP’s outline of ACA reform is anything regarding federal spending towards new health reform efforts. For example, one of the key policy proposals in the GOP's outline is establishing state-based, high-risk pools. In Minnesota, this program was costly, requiring significant subsidization from the insurance industry to fund the high utilization of health care the participants in the high-risk pool needed. If the insurance industry was expected to subsidize the high-risk pool in a new iteration, this would likely be a significant drain on the industry, one that is already reporting substantial losses in the individual market in Minnesota and struggling to bring in enough premium dollars to cover the claims it pays out.
