Proposed Rules Give States Flexibility to Change Essential Health Benefits, and More

The US Department of Health and Human Services (HHS) recently released proposed changes in its annual the rule that governs standards for issuers and the health insurance marketplaces. The annual notice is one of the most significant tools the Administration wields in shaping the health insurance markets and this proposed notice carries significant implications for markets and states.

Below, the National Academy for State Health Policy (NASHP) reviews the changes that will have the greatest impact on state policymakers and consumers. Comments responding to the notice are due to HHS by Nov. 27, 2017.

What states need to know about proposed changes to insurance plan design and oversight:

  • Grants greater flexibility to states to set benchmarks for their essential health benefits (EHB).
    • It allows states to adopt EHB benchmarks of another state, either in their entirety or for any of the 10 EHB categories defined in the Affordable Care Act (ACA).
    • It also redefines the definition of “typical employer plan” by which benchmarks are set, as a small group, large group, or self-insured group plan that has an enrollment of at least 5,000 enrollees.
    • Additionally, it mandates that a state’s benchmark must provide an “appropriate balance of coverage” across the EHB categories and allows issuers to substitute benefits between and within benefit categories.
    • The notice suggests HHS may establish a federal default definition for EHB in the future.
  • Increases a state’s responsibility to perform plan certification and oversight.
    • In states that use the federally-facilitated marketplace (FFM), the proposed plan would continue to allow states to conduct network adequacy review and data review for QHP certification.
    • It would allow states to maintain oversight over accreditation, compliance reviews, compliance with geographic area standards, and reporting on quality improvement strategies. States operating state-based marketplaces (SBMs) already maintain this authority.
  • Facilitates ability to change the medical-loss ratio (MLR) in states.
    • Streamlines the processes that enable states and HHS to reduce the MLR from the current threshold that requires that 80 percent of premium dollars get spent on medical services or quality improvement efforts.
    • Sets an automatic calculation that 8 percent of spending be counted toward quality improvement for the purposes of MLR calculation.
  • Eliminates certain plan standards.
    • It eliminates actuarial value requirements in place for stand-alone dental plans offered on the exchanges.
    • It eliminates the requirement that an issuer’s offerings must be “meaningfully different” from each other in order to be offered through a marketplace.
    • It eliminates standard plan design (also known as simple choice options) on the FFM.
  • Redefines certain Children’s Health Insurance Program (CHIP) coverage.
    • It proposes to include CHIP buy-in coverage as minimum essential coverage.
    • It would allow mothers who lose CHIP coverage obtained during pregnancy to qualify for a special enrollment period (SEP). (CHIP coverage is considered to cover the child, so would not normally qualify the mother for a SEP triggered by loss of coverage)

Proposed changes to rate review and filing standards:

  • It increases the rate review threshold, and streamlines the rate review process. The proposal would raise the threshold at which a reasonable increase review is triggered from 10 percent to a 15 percent, limiting the plans that would require submission of justification for rate increases. States may submit a proposal to increase the threshold. It continues to allow states to evaluate rate increase outliers and may eliminate CMS rate review that is duplicative of states’ processes. It also eliminates requirement to publish state thresholds publicly, and exempts student health plans from rate review.
  • It increases state flexibility on rate filing and posting deadlines. The proposal reduces advance notice states must provide to CMS prior to posting rates from 30 to 5 days, and permits states with effective rate review programs to post rates on a rolling bases and to set different rate submission deadlines for QHP and non-QHP products.

Proposed changes to eligibility and verification processes:

  • It eliminates self-attestation of income for individuals. It would require a data match for any consumer between 100 to 400 percent of the federal poverty level (FPL) who reports a higher income level than federal data may indicate. Currently, marketplaces can accept self-attestation for any individual who reports a higher income than is indicated by federal data.
  • It enables denial of tax credits due to failure to reconcile. It eliminates noticing requirements that prohibited marketplaces from issuing tax credit denials to consumers that may not have reconciled discrepancies in their tax information filed during previous years.

Proposed changes to enrollment programs:

  • It streamlines requirements for Navigator programs. It eliminates the requirement that marketplaces include at least two Navigator entities, and that at least one of these includes a community and consumer-focused nonprofit group. It also mandates that Navigators maintain a physical presence in the exchange service area it serve, and seeks comment on accessibility requirements currently in effect for Navigators and assisters.

Proposed changes to the Small-Business Health Options Program (SHOP)

  • It eliminates operational requirements for SHOP. It would no longer require SHOPs to perform premium aggregation, online enrollment, and employee-specific eligibility functions. Participating employers would be responsible for collecting relevant information and premiums from employees to send to issuers. Changes will be implemented on the federal SHOP as soon as Jan. 1, 2018. States operating their own SHOP may maintain currently mandated operations.
  • It imposes new requirements and grants new flexibility on SHOP issuers. Issuers would be required to maintain greater responsibility to facilitate enrollment in SHOP plans. It allows issuers to base premiums based on enrollee averages, and permits issuers to restrict SHOP annual enrollment periods. Issuers would have broadened ability to apply group participation rules to SHOP plans such as rating standards, and notification and termination requirements.

Beyond these proposed programmatic changes, the notice also invites state officials to comment on several areas where the Administration may provide greater flexibility or guidance in the future. These include:

  • How HHS can support the ability of SBMs to leverage commercial platforms;
  • How HHS can make the SBM-FP model, by which states operate as an SBM but leverage technology from, more attractive to states; and
  • How HHS can foster insurance innovation and reform including value-based coverage, cost-effective drug tiering (pricing by drug category), innovative network design, person-centered coverage, high-deductible health plans paired with health savings accounts, and policies that promote use of preventive care and wellness.

In the coming weeks, NASHP will continue to analyze how the proposals may impact states and their insurance markets and track state responses to the rule as they rapidly approach the comment deadline on Nov. 27, 2017.