Final regulations issued by the Department of Health and Human Services (HHS) are intended to provide stability to the individual health insurance marketplaces around the country. The regulations make a number of changes intended to give insurance companies more flexibility and to encourage people to keep coverage in place, rather than having it intermittently.
- Allow insurance companies to deny enrollment to any individual who has outstanding debt for coverage under any of its products (or products of affiliates) from the previous 12-month period
- Shortens the open enrollment period to 45 days
- Imposes restrictions on special enrollment periods
- Increases the allowable variations in the actuarial value of products
- Shifts the determination of network adequacy to state regulators or to an accreditation body in states that do not have this function.
The final regulations generally are the same as proposed regulations issued earlier this year. Importantly, HHS issued the regulations before the deadline for insurance companies to file their plans and premiums for 2018.
Insurance companies can now collect certain past-due premiums from people who terminate coverage and re-enroll within one year. The Centers for Medicare & Medicaid Services (CMS), which is part of HHS, has cited data showing that 21% of individuals stopped paying premiums during 2015 and that almost half of those individuals re-enrolled in the same plan in 2016. This regulatory change aims to promote more continuous coverage of individuals, particularly healthier individuals.
Under the final rule, the annual open enrollment period for individuals is shortened from Nov. 1, 2017-Jan. 31, 2018 to Nov. 1, 2017-Dec. 15, 2017. This change in duration of the open enrollment had been scheduled to take effect for 2019 and the final regulations move this up by a year. This change makes the length of the individual health insurance marketplace open enrollment period more like that of open enrollment periods for Medicare and group health plans.
The rule addresses complaints by insurance companies about potential abuse of special enrollment periods by requiring people to submit documents proving they qualify for changes to their coverage.
Under prior rules, the allowable variation in actuarial values was 2%. For example, a bronze plan could have an actuarial value of between 58% and 62% (that is, on average, the plan would reimburse 60% of essential health benefits, plus or minus 2%, considering the effect of deductibles, co-payments, coinsurance and out-of-pocket limits). Now, bronze plans can have a value of 56% to 65%, silver plans can vary from 66% to 72%, gold plans can vary from 76% to 82% and platinum plans can vary from 86% to 92%. By allowing policies that are a few percentage points less than what is now permitted, those policies should be less expensive.
The Trump Administration has been sending mixed messages about the stability of the individual health insurance marketplace. While these regulations are designed to stabilize the market, the administration has not clearly indicated whether it will continue to make cost-sharing reduction payments to insurance companies. If it does not, the individual market will destabilize quickly. There have also been indications that the administration will not enforce the individual mandate requirement, which would also destabilize the market. Even though the individual health insurance market only covers about 1/10th as many people as the group health insurance market, destabilization of the individual market will affect the group market, first by increasing cost shifting to group plans and leading more people to seek group coverage and ultimately leading to legislative fixes that could significantly impact group plans.
With a number of insurance companies considering withdrawing from the exchanges, the rule can be seen as an attempt to shore up the exchanges. It is not clear that the changes will be enough to shore up the exchanges, particularly if the individual mandate penalty is repealed, as is proposed by the American Health Care Act passed by the House of Representatives and currently being considered by the Senate. CMS acknowledges that the net effect of the proposed rule is uncertain and may not have the desired effect on enrollment, premiums or overall health care spending.