CMS cracks down on abuses to risk pool to strengthen the marketplace

CMS Headquarters-Windsor Mill, MD.

The Centers for Medicare and Medicaid Services is cracking down on  short-term plans that keep healthy consumers out of the Affordable Care Act's risk pool.

In a new rule issued Wednesday, CMS is shutting down loopholes that allow short-term plans to operate outside the policies governing the ACA's single risk pool.

Currently, the short-term plans can be priced based on health status and be medically underwritten; they can discriminate against consumers with pre-existing conditions and do not have to cover essential health benefits, CMS said.

Some issuers are now offering short-term limited duration plans to consumers as their primary form of health coverage for periods that last nearly 12 months, allowing them to target only the healthiest consumers, CMS said.

The new rule limits short-term policies to three months and coverage cannot be renewed at the end of the three-month period, CMS said.

[Also: CMS awards 30 states to fund expanding high-risk pools]

The proposed rule also requires issuers to provide notice to consumers that the coverage is not minimum essential coverage, does not satisfy the health coverage requirement of the ACA, and will not prevent the consumer from owing a tax penalty.

The proposed change ensures that short-term limited duration plans are used only as intended to fill temporary gaps in coverage for people who are between jobs, experiencing life transitions, or otherwise need coverage for part of the year, CMS said.

CMS also announced two additional changes to risk adjustment that it intends to propose in future rulemaking.

Beginning in the 2017 benefit year, the risk adjustment model will  more accurately account for the costs of short-term enrollees in the ACA-compliant risk pool.

Secondly, CMS intends to propose that, beginning in the 2018 benefit year, prescription drug utilization data will be incorporated in risk adjustment, as a source of information about individuals' health status and the severity of their conditions.

[Also: CMS finalizes rules for Shared Savings ACOs, will account for regional benchmarks]

Many early retirees access marketplace coverage until they become eligible for Medicare when they turn 65. CMS is encouraging  individuals who turn 65 to end their marketplace coverage and switch to Medicare.

Continued enrollment by individuals who are eligible for Medicare can raise costs for other consumers, CMS said.

CMS plans to help consumers who are turning 65 - estimates are this is 10,000 people daily  - make the transition to Medicare.

This summer, CMS will start contacting enrollees as they near their 65th birthday and give them information on Medicare coverage.  

[Also: CMS plans Hospital Improvement and Innovation Networks]

This builds off the changes made to the Healthcare.gov application this year which included new pop ups with reminders for consumers who are about to turn 65 that they may be eligible for Medicare.

To avoid misuse, earlier this year CMS eliminated seven special enrollment periods.

Starting June 17, individuals enrolling in coverage through special enrollment periods will be asked to provide certain documents. Consumers who do not provide the necessary information will have their coverage or financial assistance ended or modified.

This has resulted in an almost 40 percent year-over-year increase in the number of documents consumers have submitted to resolve these issues. CMS has improved the data matching process  for enrollment.

CMS is also improving the risk adjustment program to more accurately reflect the cost of partial-year enrollees and to incorporate prescription drug utilization data that provides a more complete picture of enrollees' health status.

"These improvements will ensure that the program continues to work as intended to compensate issuers with higher-risk enrollees and thereby help issuers sustainably serve all types of consumers," CMS said.

The fourth open enrollment begins November 1.

Twitter: @SusanJMorse