Proposed Regs Issued On Premium Stabilization Programs And Adjustments For Recent Transitional Relief

The Centers for Medicare and Medicaid Services (CMS) has issued proposed regulations that include a number of approaches to mitigate the effects of a recently-announced transitional policy for certain individual and small group health plans that may have been canceled because they did not comply with requirements of the Patient Protection and Affordable Care Act (ACA). The proposed regulations contain an assortment of other provisions, including proposals on FF-SHOPs and dental plans. The proposed regulations were published in the December 2 Federal Register.

Mitigating effects of recent transitional relief. On Thursday, November 14, the federal government announced that, in order to address situations in which some individuals and small businesses have been notified by their health insurers that their plans are being terminated, (often because they no longer meet the ACA’s requirements to cover basic benefits like prescription drugs or doctors’ visits), the Administration is instituting a transitional policy whereby health insurance issuers may choose to continue coverage that would otherwise be terminated or cancelled, and affected individuals and small businesses may choose to re-enroll in such coverage. Under this transitional policy, health insurance coverage in the individual or small group market that is renewed for a policy year starting between Jan. 1, 2014, and Oct. 1, 2014, and associated group health plans of small businesses, will not be considered to be out of compliance with certain ACA market reforms, but only under specified conditions. The Administration requested that states adopt a similar policy.

The CMS has stated that, because health insurance issuers’ premium estimates were based on assumptions that individuals currently enrolled in such transitional plans would participate in the single risk pools applicable to all non-grandfathered individual and small group plans, it realizes that the Administration’s transitional policy may lead to unanticipated changes in premium revenue for issuers of plans that comply with the 2014 market rules. The approaches that the CMS is considering to mitigate those effects include a proposal for state-by-state adjustment to how administrative costs and profits are calculated under the risk corridors program, with the adjustment being larger in states with greater numbers of enrollees in transitional plans. The temporary risk corridors program provides for the sharing in gains or losses resulting from inaccurate rate setting from 2014 through 2016 between the federal government and certain participating plans. The CMS is seeking comments and alternative ideas on the approaches set forth in the proposed regulations.

Change to open enrollment period. The CMS also has proposed to change the annual open enrollment period to Nov. 15, 2014, through Jan. 15, 2015, for the 2015 benefit year, in order to give health insurance issuers necessary time to set 2015 rates and submit qualified health plan applications. It also would give states and the HHS more time to prepare for open enrollment, and give consumers more time to shop for coverage.

Premium stabilization programs. In 2014, HHS will begin to operate the premium stabilization programs established by the ACA, which are the risk adjustment and reinsurance programs, along with the above-mentioned risk corridors program. These programs are intended to mitigate the impact of possible adverse selection and stabilize the price of health insurance in the individual and small group markets.

The CMS proposes that a plan be classified as a small group plan for purposes of risk adjustment using the employee counting method applicable under state law, as long as the state law accounts for part-time employees. If it does not, the CMS will use the full-time equivalent method of Code Sec. 4980H(c)(2)(E), which also is used for the federally-facilitated Small Business Health Options Programs (FF-SHOPs). Even if a state does not take non-full-time employees into account, the CMS is proposing that a plan be classified as a small group plan for purposes of risk corridors according to the state’s applicable employee counting method.

The ACA’s transitional reinsurance program provides payments to insurance companies to help offset high-cost enrollees in the individual market from 2014 through 2016. A permanent reinsurance program will provide increased payments to health insurance issuers that attract higher-risk populations. The CMS is proposing to decrease the reinsurance attachment point (the point at which reinsurance begins) from $60,000 to $45,000 for the 2014 benefit year, and it is proposing a $44 per enrollment 2015 annual reinsurance contribution rate for to be paid by health insurance issuers and certain self-insured group health plans, down from the previously-reported $63 per enrollment. For 2015, the CMS is proposing the following uniform reinsurance payment parameters: an attachment point of $70,000, a reinsurance cap of $250,000, and a coinsurance rate of 50 percent.

FF-SHOPs and dental plans. The CMS also is proposing that, for FF-SHOPs, groups would only be charged for the portion of the month for which they are enrolled and that FF-SHOP issuers must effectuate coverage for a group unless the FF-SHOP sends a cancellation notice to the issuer. The CMS also proposes allowing employers in the FF-SHOPs to offer employees either a single stand-alone dental plan or a choice of all stand-alone dental plans available in the FF-SHOP. Employers would be allowed to contribute differently to the premiums of full-time and non-full-time employees. Composite rating would not be allowed when an employer elects to offer employees a choice of plans at one actuarial value (AV) level because having employees spread across multiple plans would make composite rating complex, the CMS noted.

The CMS also has proposed setting a national stand-alone dental plan maximum out-of-pocket at $300 for one covered child and $400 for two or more covered children. The AV standard would be removed for stand-alone dental plans.

Visit our News Library to read more news stories.