HHS Issues Proposed Regulations On Insurance Reforms, EHBs

The Department of Health and Human Services (HHS) has issued proposed regulations implementing provisions of the Patient Protection and Affordable Care Act (ACA) designed to protect consumer from insurance company abuses and containing standards related to the coverage of essential health benefits (EHBs). Both proposed rules were published in the November 26 Federal Register.

Minimum standards set for premium costs. The first proposed regulation would allow health insurance issuers in the individual and small group markets to vary premiums only for age, tobacco use, family size, and geography. The HHS advises that factors such as preexisting conditions, health status, claims history, duration of coverage, gender, occupation, and small employer size and industry may not be used as a basis for increasing insurance premiums. The foregoing are just minimum standards, and individual states are free to enact even stronger consumer protections. Within states opting in 2017 to allow large employers to purchase coverage through state exchanges, the same rules would then apply to all large group health insurance coverage.

Unless a state chooses to merge its individual and small group pools into one pool, health insurance issuers would be required to maintain a single statewide risk pool for each of their individual and small employer markets. Premiums and annual rate change would be based on the health risk of the entire pool, which the HHS says would prevent insurers from using separate insurance pools within markets to get around the market reforms and charge people with greater health problems higher premiums.

Under the regulations, as proposed, health insurance issuers would generally have to guarantee renewability of coverage, so that they would be prohibited from refusing to renew coverage for sick individuals or for those with preexisting conditions. The proposed regulations also contain requirements for catastrophic plans, including the provision that they meet all applicable requirements for health insurance coverage in the individual market, and that they are offered only on the individual market.

Changes to rate review program. Finally, HHS is proposing changes to the existing rate review program, including amending HHS Reg, Sec. 154.200(a)(2) and HHS Reg. Sec. 154.200(b) so that states seeking state-specific thresholds must submit proposals to the Centers for Medicare and Medicaid Services (CMS) by August 1 of each year, that the Secretary of the HHS publish a notice regarding whether a state-specific threshold applies in a state by September 1 of each year, and that any state-specific threshold be effective on January 1 of each year following the Secretary’s notice. Another change would amend HHS Reg. Sec. 154.215, by directing health insurance issuers to submit data and documentation regarding all rate increases on a standardized form in a manner determined by the Secretary of the HHS, thus extending the requirement that issuers report information about rate increases above the review threshold to all rate increases.

A third change would add the following elements to the rate review process for states with Effective Rate Review Programs: (1) the reasonableness of assumptions used by the health insurance issuer to estimate the rate impact of the federal reinsurance and risk adjustment programs; and (2) the health insurance issuer’s data related to implementation and ongoing utilization of a market-wide single risk pool, essential health benefits, actuarial values, and other market form rules as required by the ACA. The 10 percent review threshold of HHS Reg. Sec. 154.200 will remain unchanged.

Standards proposed for coverage of EHB. The second proposed rule would have states select a benchmark plan from among several options, and would mandate that all plans that cover EHB offer benefits substantially equal to the benefits offered by the state’s chosen benchmark plan. Under the proposed rule, if a benchmark plan is missing any of the ten statutory categories of benefits, the state or the HHS would supplement it for that category. The proposed regulation provides, for public comment, a proposed list of state-selected EHB-benchmark plans and the default benchmark plan for state that do not select benchmark plans.

The proposed rule also includes standards for prescription drug coverage and includes options for the inclusion of benefits not typically covered by current policies, including habilitative services.

Help with AV levels. Beginning in 2014, non-grandfathered health plans in the individual and small group markets must meet certain actuarial value (AV) levels, calculated as the percentage of total average costs for a plan’s covered benefits. The AVs are represented by various metal levels: 60 percent for a bronze plan, 70 percent for a silver plan, 80 percent for a gold plan, and 90 percent for a platinum plan. To facilitate the calculation of AV, the HHS has provided a publicly available Coverage Scenarios Cost Sharing Calculator on the CCIIO website, at http://cciio.cms.gov/. The HHS is proposing that a plan will be able to meet a particular metal level if its AV is within 2 percentage points, plus or minus, of the standard, so that a gold plan could have an AV between 78 and 82 percent. Issuers would be permitted to exceed annual deductible limits to achieve a particular metal level.

Visit our News Library to read more news stories.