What’s in the Final Rule? The Final Rule aims to stabilize the health insurance marketplace by shortening the Annual Open Enrollment Period, tightening rules governing special enrollment periods (SEPs), allowing insurers (subject to applicable state law) to apply a premium payment to an individual’s past debt owed for coverage within the prior 12 months before applying the payment toward a new enrollment, increasing the de minimis variation in actuarial values used to determine metal levels of coverage for the 2018 plan year and beyond, and affirming the traditional role of states in overseeing their insurance markets while reducing the regulatory burden for participating plans. CMS believes that the package of changes described below will improve the risk pool and promote a more competitive market with more consumer choice.

Shortened Open Enrollment Period: In the first four years of open enrollment in ACA marketplace plans, consumers have had three full months to select plans (November 1 to January 31). HHS finalized its proposal to cut the 2018 enrollment period in half to 45 days (November 1 to December 15). As a result, consumers will be required to select a plan by mid-December 2017 in order to obtain coverage in 2018. CMS believed this change was necessary to encourage continuity of full-year coverage, increase access for patients and simplify operational processes for issuers and reduce opportunities for adverse selection by individuals learning about health problems during the end of the calendar year. State-based exchanges will still have the discretion to use SEPs to supplement the regular enrollment period.

On April 13, HHS finalized its market stabilization rule,1 less than two months after the proposed rule was released. The Final Rule received over 4,000 public comments,2 however, it is not a significant departure from the proposed rule. The Final Rule aims to “stabilize the individual and small group markets and affirm the traditional role of State regulators.” Although Congressional leaders and the White House will likely continue to push for more comprehensive reforms to the Affordable Care Act (ACA) through legislation and regulation, this Final Rule is intended to signal to insurers that the Administration hopes to lessen the regulatory burden and promote issuers' participation to stabilize the individual market and ensure continued access to affordable, quality coverage for millions of Americans for the 2018 plan year and beyond.

HHS final rule to stabilize the marketplace...Is it enough?

ACA reform focus

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1 Department of Health and Human Services. Centers for Medicare and Medicaid Services. Patient Protection and Affordable Care Act; Market Stabilization. Federal Register 82(73): 18346. Available at: https://www.gpo.gov/fdsys/pkg/FR-2017-04-18/pdf/2017-07712.pdf

2 Docket ID: CMS-2017-0021. Patient Protection and Affordable Care Act; Market Stabilization. Available at: https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&dct=PS&D=CMS-2017-0021

2 ACA reform focus

Tightening special enrollment periods: In addition to the annual open enrollment period, the ACA established special enrollment periods (SEPs) to provide an opportunity for people who lose health coverage during the year due to non-voluntary loss of coverage or who experience other qualifying events such as a marriage or birth of a child to enroll in new coverage or make changes to existing coverage outside the annual enrollment period. The Final Rule makes a number of changes to SEPs, including requiring pre-enrollment verification for all applicable SEPs, which HHS estimates may increase verification procedures for up to 650,000 individuals; limiting the ability of existing enrollees to change from one metal level to another during a coverage years using an SEP; and placing more requirements on the use of SEPs for qualifying life events such as getting married or gaining access to a new QHP by making a permanent move. CMS believes these changes together will “improve the risk pool, improve market stability, promote continuous coverage, and increase options for patients.”

Collection of unpaid premiums and denying coverage: The Final Rule allows insurers to use premium payments from a consumer or employer reenrolling with the insurer to cover outstanding premiums that may be owed to the insurer from the past 12 months. The Final Rule also allows an insurer to refuse to continue coverage during open enrollment or an SEP until outstanding premiums are paid; this includes insurers that are members of the same controlled group. These provisions apply to all individual market and small group employers both inside and outside of the ACA marketplace. A state does, however, have the discretion to override this federal approach and prohibit denial of coverage for outstanding premiums; and insurers are not required by law to apply the policy. Insurers are also allowed to accept installment payments or set a payment threshold they will accept, so long as their policies are clearly described and applied uniformly to all enrollees.

Additional flexibility to insurers: The Final Rule also adjusts the minimum standards used to set the actuarial value of “metal levels” of coverage. The ACA established an acceptable band of “de minimis” variation at each metal level of -/+2 percent recognizing that getting an exact value of 60, 70, 80, or 90 percent (for a bronze, silver, gold or platinum plan, respectively) can be challenging. The Final Rule expands the variation band from -4 to +2 percent (except for bronze plans, which can vary -4 to +5 percent) beginning in the 2018 plan year. As a result, silver plans, used as the benchmark plan for determining subsidies, could have an actual actuarial value as low as 66 percent, down from 68 percent under current law. Plans will be able to offer plans with lower premiums, but higher consumer cost sharing, than permissible today.

The Final Rule also reduces the percentage of essential community providers—which serve predominantly low-income, medically underserved individuals—that plans must have in their networks from 30% to 20% beginning in plan year 2018.

Additionally, CMS finalized key dates for 2017 to participate in the 2018 plan year:3 initial qualified health plan applications are due June 21; final QHP agreements must be signed by September 27; states must post proposed rate increases by August 1; and final rate filings must be posted by November 1. CMS believes the additional time will help plans to betterintegrate benefit changes and make final decisions about participation for the 2018 plan year.

Additional flexibility to states: CMS finalized its proposal to rely on state reviews for developing and enforcing network adequacy standards, provided sufficient processes are in place and authority is granted. Beginning in plan year 2018, CMS will defer to state reviews in States with authority that is at least equal to the “reasonable access standard” for network adequacy. In states that lack the authority or capability to perform this function, HHS will rely on an insurer’s commercial or Medicaid accreditation from an HHS-recognized accreditation body.

3 Centers for Medicare and Medicaid Services. Key Dates for Calendar Year 2017: Qualified Health Plan Certification in the Federally-facilitated Exchanges; Rate Review; Risk Adjustment, Reinsurance and Risk Corridors. Available at: https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-Revised-Key-Dates-for-Calendar-Year-2017-4-13-17.pdf

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ACA reform focus 3

How is industry responding to the rule? Health plan industry leaders have expressed overall support for the Final Rule, including Marilyn Tavenner, President and CEO of America’s Health Insurance Plans (AHIP), who said it “adopts important changes that have been needed for some time in order to improve the functioning of the individual market.”4 However; industry leaders believe more work needs to be done to further stabilize the market, most notably Congress and the Trump Administration acting quickly to guarantee funding for cost-sharing reduction (CSRs) subsidies. AHIP believes without CSR funding, “millions of Americans who buy their own plan will be harmed…plans will likely drop out of the market, premiums will go up sharply…costs will go up for taxpayers…doctors and hospitals will see even greater strains…”5 Seven other industry groups, including the AMA, AHA, and the Chamber of Commerce joined AHIP in telling the Administration the CSR program is a “critical priority” to stabilize the insurance market.6 When pressed on the issue at a meeting with several health plan leaders, CMS Administrator, Seema Verma, did not assure future funding of the CSRs, instead punting the issue to Congress on whether to appropriate the money.7

What’s Next? The Final Rule released by CMS is but one step in an ongoing policy and regulatory discussion about marketplace stability and fixing the ACA markets. Insurers continue to push for certainty around whether the CSR program will continue to be funded and greater assurance from the federal government that it supports the long-term sustainability of their businesses. This uncertainty is further complicated by the complex political environment in which the ACA marketplaces will now operate.

Although the Final Rule gave insurers a bit more time to decide whether they plan to participate in the exchanges in 2018, there are increasing signs that plans are reaching a breaking point. Indeed, a growing number of insurers have announced plans to withdraw from certain markets8 in 2018 as a result of uncertainty about CSR funding and long-term market stability. The final market stabilization rule has been largely positively received by insurers, but the continuing uncertainty around the CSRs and whether or how the ACA may be repealed and replaced will likely continue to destabilize the marketplace until resolved. Only time will tell what impact these Final Rule changes will have on insurer participation, as well as on enrollment and premiums in the short and long term.

What’s not included: Although the Final Rule asked for comments on establishing

continuous coverage requirements, such as those included in the AHCA, CMS did not finalize any policies on the

issue. It is likely that a continuous coverage provision will be included in future Republican legislative efforts as a

replacement to the current ACA individual mandate, although the specifications of such a policy will likely continue

to be debated. Many commenters on the proposed rule discouraged CMS from imposing a continuous coverage

requirement, arguing that it would discourage healthy individuals from enrolling, unnecessarily penalize vulnerable

populations, and further worsen the risk pool. Future ACA repeal and replace efforts may also seek to extend the

age-band ratio which establishes the magnitude of premium variation between older and younger enrollees.

4 AHIP Comments on Final Individual Market Rule from CMS. April 13, 2017. Available at: https://www.ahip.org/ahip-comments-on-final-individual-market-rule-from-cms/

5 Ibid

6 America’s Health Insurance Plans, et al. Letter to Donald J Trump. April 12, 2017. Available at: https://morningconsult.com/wp-content/uploads/2017/04/Joint-CSR-Letter-to-President-Trump-04.12.2017.pdf

7 Abelson, Reed. Health Insurers Make Case for Subsidies, but Get Little Assurances From Administration. The New York Times. April 18, 2017. Available at: https://www.nytimes.com/2017/04/18/health/health-insurers-make-case-for-subsidies-but-get-little-assurance-from-administration.html?ref=politics&_r=1

8 Mathews, Anna Wilde. Anthem’s Exit From Ohio Exchange Ups Ante for GOP Health Overhaul. Wall Street Journal. June 6, 2017. Available at https://www.wsj.com/articles/anthem-to-pull-out-of-ohio-affordable-care-act-exchange-1496767753; Haeyoun Park and Audrey Carlsen, For the First Time, 45 Counties Could Have No Insurer in the Obamacare Marketplaces. New York Times, June 9, 2017. Available at https://www.nytimes.com/interactive/2017/06/09/us/counties-with-one-or-no-obamacare-insurer.html?_r=1

Seven other industry groups, including the AMA, AHA, and the Chamber of Commerce joined AHIP in telling the Administration the CSR program is a “critical priority” to stabilize the insurance market.

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