New Insurance Rules Allow States to Revise Marketplace Coverage as Rate-Filing Deadlines Near

Last week, the US Department of Health and Human Services (HHS) released rules governing Affordable Care Act health plans in 2019 that give states the flexibility to revise what insurance plans are sold through their individual and small group marketplaces, and give consumers the option to buy “thinner” plans at lower prices.

The long-awaited final 2019 Notice of Benefit and Payment Parameters is significant for the immediate and longer-term changes it makes to state insurance markets. Initial filing deadlines for 2019 insurance rates are rapidly approaching in May and June, so states must act quickly if they want to implement any of the options granted to states under the rules, options that could affect rates for 2019. Generally, the new rules would:

  • Grant states greater insurance plan management authority. States could adjust risk and rating rules and establish new essential health benefit (EHB) benchmarks that all plans sold through their marketplaces must comply with;
  • Change the parameters for some products sold through the insurance marketplaces; and
  • Allow states to make changes to enrollment, verification, and outreach requirements for the health insurance marketplaces.

Below are some of the significant changes that could impact states and consumers.

New Flexibility and Options for States as Regulators
In its release, the Administration touted the rules’ efforts to increase state oversight and flexibility. The rule allows states to significantly change the composition of plans sold in the individual and small group markets. States now have the ability to:

  • Raise rate review thresholds. Current rules mandates an automatic review of any requested rate increases of more than 15 percent. The new rule reinforces that this is a minimum threshold and specifies that states must request permission from HHS if they wish to establish a higher review threshold. This would apply to states that expect justifiable increases above 15 percent and want to avoid the administrative burden of reviewing these increases.
  • Change the standard 80-20 medical loss ratio (MLR). MLR changes could provide more flexibility to insurers to apply premium dollars toward administrative costs versus directly on coverage. While the changes may allow for better allocation of premium dollars based on actual cost of administering coverage, it also could promote system gaming for insurers who use MLR changes to finance larger profit margins.
  • Set filing deadlines for non-qualified health plan-compliant products, separate from deadlines established for qualified health plans (QHPs).for QHPs , potentially giving non-QHPs a competitive advantage by allowing them to file rates for products after rates are filed for QHP.
  • Adopt a new essential health benefit (EHB) benchmark plan in plan year 2020. The rule permits states to:
    • Adopt the EHB of another state in its entirety or adopt the benchmark for any of the 10 specified EHB categories from another state;
    • Maintain the state’s prior benchmark;
    • Adopt a new benchmark that is no more generous than benchmarks used in 2017; and
    • Allow insurers to substitute benefits between EHB categories.

The rule intends to allow for greater innovation in health insurance benefit design. Every state’s new benchmark must still include benefits across all 10 EHB categories and benefits must be balanced between categories. It prohibits states from increasing the scope of their EHB to be more generous than what existed in 2017.

  • Modify risk adjustment payment transfers. The rule permits states to adjust payments made to insurers under the risk adjustment program. Currently, the federal government provides payments to insurers under a standard national formula, but states may seek to adjust how payments are distributed to its insurers in a way that is more reflective of the state’s unique market conditions. States may request that payments be adjusted by up to 50 percent. Adjustments would be applicable to payments beginning in 2020.

The rule also gives greater authority to states to conduct oversight for products sold in their marketplaces, including review of:

  • Insurers who request rate increases that are outside of acceptable thresholds;
  • Network adequacy standards; and
  • Essential community provider requirements.

While many states already review their insurance marketplace products, some may need to adjust resources to ensure that their insurance agencies can conduct adequate plan oversight to ensure that they meet federally-designated standards for these requirements.

Changes to Products Sold by Health Insurance Exchanges
The rules make several changes to the markets and their products, which could have direct impact on consumers. For example, they:

  • Eliminate meaningful difference standards. Prior regulation prohibited insurers from selling health plans that were not “meaningfully different” from other products sold on the exchange. The intent was to reduce consumer confusion by making it easy to compare plans without too many duplicative options. . The new regulations eliminate this requirement, potentially increasing the number of products sold. States with state-based exchanges may continue to prohibit the sale of “meaningfully different” plans through their exchanges.
  • Eliminate standard plan designs. Standard plans were designed to provide consumers with a choice of insurance products with nearly identical benefit offerings, allowing consumers to comparison shop between plans based on other factors such as provider networks or estimated out-of-pocket costs. These plans received a prioritized display through the federally-facilitated exchange (FFE). The FFE will no longer encourage or prioritize the display of these plans. State-based exchanges may continue to offer standard plan designs and promote these plans through their exchanges.
  • Eliminate actuarial value requirements for stand-alone dental plans. While the change could reduce the value of dental plans sold through exchanges, it could result in dental plans with lower benefits and higher out-of-pocket risk, though plans would be sold at lower cost. Dental plans are required, at minimum, to provide coverage in compliance with minimum EHB benchmarks for pediatric dental;
  • Reduce the maximum annual cost-sharing limit for households earning between 100 to 250 percent of the federal poverty level (FPL). Current rules mandate a maximum limit on the amount of cost-sharing benefits provided under plans eligible for cost-sharing reductions (CSR). This maximum limit is intended to ensure that CSR-eligible plans will not exceed their designated actuarial value. Specifically, the rule would reduce the maximum limit by one-fifth for individuals earning between 200 to 250 percent of FPL, and by two-thirds for individuals earning between 100 to 200 percent of FPL. HHS acknowledged concerns that the changes could result in higher costs for enrollees.

Changes to Outreach, Enrollment and Verification Processes
The rules could alter enrollment and verification standards for consumers who enroll in coverage through the health insurance exchanges. The rules also make significant changes to outreach and enrollment tools such as the Navigator Program. Changes include:

  • Elimination of enrollment functionality for Small Business Health Options Program exchanges (SHOP). They would institute significant changes to eliminate SHOP as an enrollment mechanism for small group health insurance. Businesses may instead enroll directly with insurers or through brokers. SHOPs must still perform certain functions, including plan certification, maintenance of shopping tools, and a call center, and conduct eligibility determinations for employers. States may opt to maintain their own state-based SHOPs than can perform enrollment functions.
  • Requirements for stricter income verification for self-attesting individuals earning between 100 to 400 percent of FPL. The changes mandate that exchanges conduct stricter review when federal data sources indicate that an individual’s income may be below 100 percent of FPL even when the individual attests to having income above 100 percent of FPL. This change is intended as a program integrity measure to ensure that consumers do not overestimate income to reach the 100 percent of FPL threshold at which point they qualify for tax credits to purchase insurance. However, stricter guidelines may cause enrollment and verification challenges for individuals whose income is inconsistent and near the 100 percent of FPL threshold, at which the consumer qualifies for APTC. In this situation, it is difficult to apply strict verification standards in ways that do not inadvertently prohibit the individual from acquiring coverage.
  • Reductions in requirements for Navigator entities. The rules no longer require exchanges to maintain at least two Navigator entities, including one that must be a community and consumer-focused nonprofit group. They also eliminate the requirement that Navigators have a physical presence in the region serve.
  • Restrictions over the types of plans consumers may enroll in during special enrollment periods (SEPs). To promote consistency for insurers and markets, the rules require individuals to only enroll in plans in the same metal tier as the plan the individual was previously enrolled in, when the SEP is triggered by the addition of a dependent.
  • Allowances for a SEP to be triggered by loss of unborn child Children’s Health Insurance Program (CHIP) coverage. States can opt to provide pregnancy-related coverage through the “unborn child” option that includes a limited benefit package that may not meet ACA’s minimum essential coverage (MEC) criteria. Because the coverage may not qualify as MEC, women seeking insurance after either the loss or birth of their child have experienced issues qualifying for a SEP and may have to go uninsured until the next open enrollment period. This change allows the once-pregnant woman to qualify for a loss of coverage SEP when CHIP’s unborn child coverage has expired.
  • Flexibility in oversight over direct enrollment (DE) entities. Allows DE entities to choose their own auditors and outlines the process for conducting readiness-reviews for DE entities. States may consider additional regulation if they wish to impose stricter oversight requirements over DE entities.

Implications for States
States must carefully weigh potential tradeoffs in adopting any of the changes under the rule. While the flexibilities given to states are designed to equip states with more tools to promote affordability and choice in their markets, any change could also significantly alter market risk, or prompt perverse market outcomes. For example, states that seek to alter EHB benchmarks to limit benefits as a means of reducing plan costs, put consumers at risk of increased out-of-pocket spending if the consumer is in need of benefits that are no longer required under the new plans. Changes to the risk adjustment payments could undermine how insurers are currently protected from taking on risk, making them more adverse to offering products to populations who are most in need of services.

Where the new rules eliminate existing standards, state regulators may consider establishing their own requirements in lieu of what had previously been established. This option may especially apply in states that operate their own state-based exchange and have more authority over how plans are presented and sold through their exchanges. States may also consider developing new resources or changing their outreach strategies to ensure that consumers have resources to understand changes — like those made to enrollment processes — so they will enroll in appropriate plans. NASHP will closely monitor and report on how states’ are responding to these rules in the coming months.