Breaking down the final rule: CMS gives states ability to limit essential benefits

The federal government is giving insurers and states more flexibility in the Affordable Care Act marketplace. 

The Centers for Medicare and Medicaid Services on Monday posted a final 2019 payment notice designed to increase coverage access in the ACA by offering plans that have lower premiums.

Expanding on an earlier initiative to allow for short-term, limited duration health plans in an effort to lower premiums, the final rule also moves the industry further away from the essential health benefits required under President Obama's signature healthcare law. 

Additionally, the final rule gives states oversight over qualified health plans regarding network adequacy. It eliminates the meaningful difference requirement for qualified health plans, giving insurers more flexibility in designing plans.

The final rule amends the medical loss ratio requirement to reduce regulatory burden to stabilize insurance markets, increase insurer participation and expand consumer choice, CMS said. Specifically, the rule reduces quality improvement activity reporting burdens on insurers.

The rule does not eliminate the individual mandate - the GOP tax bill did that - but under an expanded hardship exemption, individuals who live in counties with no issuers or only one issuer will now qualify for a hardship exemption from paying the ACA's penalty for not having coverage.

America's Health Insurance Plans said it is still reviewing the full rule but, in general, supports the policies that encourage state flexibility, support innovation and promote affordability.

"However, we need to establish a regulatory environment that brings greater long-term stability to the individual and small group markets to drive down premiums and increase choice for tens of millions of Americans. We are concerned that some policies included in the final rule--such as expanded hardship exemptions from the individual mandate--could further destabilize and fragment a market already facing uncertainty," AHIP said. "Moreover, we remain concerned about other regulations being put in place--including expanded association health plans and short-term limited duration plans--will also push up premiums and create affordability problems for millions of Americans purchasing coverage in the individual health insurance market."

Moving forward, insurers need clarity around the "rules-of-the-road" and regulations that promote fair competition and a level-playing field, AHIP said. 

In the rule, CMS has extended the transitional policy for one additional year to allow for the transition to fully ACA-compliant coverage in the individual and small group health insurance markets until 2019.  

It allows states to request reasonable adjustments to the medical loss ratio standard if the state shows it would help stabilize its individual insurance market.

States are being given substantially more options in what they can offer as essential health benefits benchmark plans.

Instead of being limited to 10 options, states will now be able to choose from the 50 EHB-benchmark plans used for the 2017 plan year in other states. Or they may select specific EHB categories, such as drug coverage or hospitalization, from among the categories used for the 2017 plan year in other states. 

States will be able to build their own set of benefits that could potentially become their EHB-benchmark plan, subject to certain scope of benefits requirements, according to the Centers for Medicare and Medicaid Services.

Exchanges will be able to make a determination of lack of affordable coverage based on projected income using the lowest cost exchange metal level plan, when there is no bronze level plan available in the service area.

The final rule amends the Health and Human Services Department-operated risk adjustment data validation program to incorporate new data that reflects the actual experience of individual and small group market enrollees, which should more closely reflect the risk within markets. 

In states where HHS operates the risk adjustment program, CMS will  provide states with the flexibility to request a reduction to the otherwise applicable risk adjustment transfers in the individual, small group or merged market by up to 50 percent, beginning with the 2020 benefit year.

This may be helpful in attracting and retaining insurers and more precisely, accounting for relative risk differences in the state market, CMS said. States requesting such a reduction must provide evidence and analysis that show the state-specific rules or market dynamics warrant the adjustment.

The final rule requires exchanges to implement stronger checks to verify applicants actually earn the income they claim, to qualify for advanced premium tax credits. It also requires exchanges to discontinue tax credits for enrollees who fail to file taxes and reconcile past APTCs, even if the exchange does not first send notice directly to the tax filer.

CMS is aligning the enrollment options for all dependents who are newly enrolling in exchange coverage through a special enrollment period. This is for consumers newly gaining or becoming a dependent and enrolling through the birth, adoption, foster care placement or court order. CMS has standardized the alternate coverage start date options.

The final rule removes several regulatory requirements on the small business health options program and outlines a new enrollment process using the federal platform. 

By January 1, 2017 only 7,600 employer groups, covering 39,000 consumers were in enrolled in the federal SHOP exchange, a number short of the 4 million people the Congressional Budget Office once projected would be enrolled by that time, CMS said, adding that turning over enrollment to qualified agents and brokers would help small business more easily enroll in coverage and lower costs.

What's more, the final rule increases the primary role of state regulators in the rate review process. It exempts student health insurance coverage from federal rate review requirements and raises the default threshold for review of reasonableness from 10 percent to 15 percent.

The rule expands on other efforts such as a proposed rule issued in February to expand the availability of short-term, limited-duration health insurance plans.

CMS also issued the market stabilization rule last year intended to lower premiums and increase consumer choice. 

Between 2013 and 2017, the average premiums more than doubled in the states using the federal health insurance exchange platform and this year, half of the counties in America had only one issuer to choose from, CMS said. 

"Too many Americans are facing skyrocketing premiums that they can't afford and every year consumers are faced with the threat of fewer choices," said CMS Administrator Seema Verma. "This rule gives states new tools to stabilize their health insurance markets and empower citizens to find coverage that fits their families' needs and budgets."

A final annual issuer letter released Monday provides operational and technical guidance to issuers that want to offer qualified health plans in the federal marketplace beginning in 2019.

Twitter: @SusanJMorse
Email the writer: susan.morse@himssmedia.com