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ACA Health Insurance Market Reforms

On February 22, the Centers for Medicare and Medicaid Services (CMS) published a final rule, CMS-9972-F, on health insurance market reforms. An overview of the final rule has been posted on the Center for Consumer Information and Insurance Oversight (CCIIO) website.

Generally, the rule fleshes out ACA pre-existing condition, guaranteed availability and renewability, risk pooling, rating band, rate review, and catastrophic plan rules. According to CCIIO, the rules are designed to prevent discrimination in the availability and affordability of health insurance.

The rule:

  • Requires that all individual health insurance policies be guaranteed available, without respect to the existence of pre-existing condition. Availability will be year-round on a continuous basis. The policies will be offered during open enrollment periods, but individuals who experience “certain significant life changes” will be eligible for special enrollment opportunities.
  • Mandates that health insurance premiums cannot reflect such factors as health status, claims history, duration of coverage, gender, occupation, employer size/industry, and existence of pre-existing conditions. Health insurance issuers may vary premiums only based on age (within a 3:1 ratio for adults), tobacco use (within a 1.5:1 ratio for adults and subject to wellness program requirements in the small group market), family size and geography.
  • Allows states to enact stronger rules than the “minimum standards” contained in this final rule. In addition, starting in 2017, states may allow health insurers to offer large group plans through the exchange. If a state chooses to do so, these rules will apply to the large group plans offered through the exchange, too.
  • Requires health insurers to maintain a single statewide pool for each of their individual and small employer markets. However, states may choose to merge the individual and small group pools into a single pool. If a state chooses such a single pool merge, premiums and annual rate changes will be based on the health risk of the entire pool.
  • Fleshes out guaranteed renewability requirements, based on the ACA’s mandate that renewal of coverage may not be denied based on an individual or employee becoming sick.
  • Explains how to enroll in an ACA-approved lower-cost catastrophic plan that protects against high out-of-pocket costs and covers recommended preventive services without cost-sharing are also covered in the final rule. These catastrophic plans are generally available to young adults and people for whom coverage would otherwise be unaffordable.
  • Includes standards for assessing premium increases in Effective Rate Review Programs. The rule requires that all rate increases be reported, with those that are 10 percent or higher still subject to review.

Currently, 42 states have age rating bands of 5:1 or higher. An abrupt change to age rating bands of 3:1 could destabilize insurance markets and lead many younger people to drop coverage at the beginning of next year. Under a gradual tightening of the ratio, younger people would see their premiums rise slowly over a number of years. Unfortunately, the final rule does not permit a phase-in of the 3:1 age rating requirements.

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