Regulation of the health insurance industry for 2014 became clearer yesterday, as the Obama Administration issued a raft of proposed rules that would bar discrimination against those with pre-existing conditions, incentivize wellness with rate reductions, and set standards for state insurance exchanges.
"The proposed rules and guidance we're releasing today would make it illegal for insurance companies to discriminate against the approximately 129 million Americans with pre-existing health conditions," Department of Health and Human Services Secretary Kathleen Sebelius said at the start of a news briefing yesterday.
"These rules will bring even greater scrutiny and transparency to proposed health insurance rate increases, and they'll help employers provide a healthier workplace. And we'll make it easier for consumers to compare health plans while ensuring that families and small business owners who buy their own coverage have access to basic essential benefits that are equivalent to what employers typically provide today," by basing requirements on "benchmark" plans in each state, she said.
Sebelius said the rules "answer many of the states' remaining questions, and will add guidance, as will additional guidance we issue in the days and weeks ahead" as the states decide on the three options for health insurance exchanges. They can create their own exchange, default to a federal exchange, or plan for a federal partnership. While about 18 states are committed to launching their own exchanges and six are planning for partnership, exchanges for 16 states apparently will be run by the federal government. About 11 states remain undecided.
Sebelius used the opportunity to counter arguments from opponents of the Patient Protection and Affordable Care Act, which requires that these rules be set. In the last three years, she said, electronic health record use has doubled, anti-fraud efforts have jumped to “record” levels, and there have been " dramatic cuts to red tape for hospitals."
And, she emphasized, "of all the worst predictions from the law's opponents—from accelerating cost to government getting between patients and their doctors to Medicare crumbling—none have come true. In fact, we've seen premium rate increases well below predicted levels, and some of the lowest increases in private sector spending in decades."
The new rules also changed the minimum number of prescription drugs that must be offered in each drug class. The new proposed rule says that the number of drugs in each class should match that in each state's benchmark plan, but should be at least one.
Prior administration documents suggested that one drug per class would meet the requirement in all states—an issue for some patients who aren't always helped by that drug and require alternatives.
The rules were distributed in three primary documents totaling 334 pages.
The Obama Administration's representatives made clear that it is ready for 2014, and will have plans and states prepared to open up exchanges for consumer enrollment by Oct. 1, 2013.
"Absolutely, we will be ready," said Gary Cohen, director of the HHS's Center for Consumer Information andInsurance Oversight. "There will be an exchange in every state open for business on Oct. 1, whether it's a state exchange or the federal exchange."
But America's Health Insurance Plans (AHIP) President and CEO Karen Ignagni indicated insurers have concerns.
"While additional flexibility on essential health benefits (EHB) is a positive step, we remain concerned that many families and small businesses will be required to purchase coverage that is more costly than they have today,” Ignagni said. That and the gradually increasing rates associated with the new age rating rules "may incentivize young, healthy people to wait to purchase insurance until they are sick or injured, driving up costs for everyone with insurance."
The health plan organization also pledged to appeal to Congress to push back the ACA's $100 billion tax on health insurance "that will further add to the cost of coverage for families, small businesses, Medicare Advantage beneficiaries, and Medicaid managed care plans."
The American Hospital Association was not prepared to give a response to the rules yesterday. But Dan Mendelson, CEO of the Washington, D.C.–based health advisory company Avalere Health, says hospitals should appreciate the new proposed rules because CMS "is trying to create coverage that looks more like the commercial marketplace, and is proceeding more aggressively to make sure these exchanges are ready. A lot of folks in the hospital community might have doubted that, and these rules today show them that they're moving along."
Some consumer groups said the rules don't go far enough to guarantee health plan enrollees access to all the drugs they might need.
"By leaving the decision up to the states of which drugs insurance plans must cover, we fear many patients, particularly those with complex medical conditions, may not have the coverage they need,” said Carl Schmid, executive director of the AIDS Institute.
Here, in a nutshell, is what the three rules would require.
1. Essential health benefits
The administration retained 10 basic categories that each plan in the exchanges must offer, including ambulatory patient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitation services, lab services, preventive and wellness services and chronic disease management, and pediatric services including oral and vision care.
Qualifying exchanges should provide benefits that are equivalent to a "typical employer plan" or benchmark plan, in each state, for which there are four options:
- The largest plan by enrollment in the state's small group market
- Any of the largest three state employee health benefit plan options by enrollment
- Any of the largest three national Federal Employees Health Benefits Program plan options
- The largest insured commercial HMO in the state.
The proposed rule also prohibits benefit designs that discriminate against potential or current enrollees, includes standards and options for benefits not typically covered, such as habilitative services, and includes standards for prescription drug coverage.
The plans will be graded according to actuarial value and named after metals. For example, in a silver plan, which has a 70% actuarial value (the percentage of total average costs for covered benefits that a plan will cover), the enrollee would be responsible for 30% of costs, while in a platinum plan, which has a 90% actuarial value, the consumer would be responsible for 10%.
2. Market reform
The administration said this proposed rule will correct insurance practices today that deny many of 129 million people—or 1 in 2 non-elderly Americans with some form of pre-existing health condition—individual health insurance or exclude their coverage from certain benefits.
Starting in January 2014, the rule would implement five key provisions of the PPACA, Cohen said.
Insurers in the individual and small group markets "will have to sell policies to all consumers regardless of their health status or health history," would not be able to charge more to someone "just because she is sick, or because she used to be sick, or because she's a woman, or because of where she works," will not be able to cancel or refuse to renew coverage because of an enrollee's illness, can't charge enrollees different premiums, and will ensure that young adults and those who can't afford regular coverage would have access to a catastrophic plan in the individual market, Cohen said.
An important element in the proposed rule is the establishment of an age rating, or age bands, system, for people who are older than 20 and younger than 64. Each year (rather than every five years as had been suggested), the allowable health premium rate would be allowed to increase. The difference between the age band rate at 63 would be no more than three times the rate for people who are 21.
3. Wellness incentives
For group health coverage, the proposed rule, which was developed in collaboration with the Department of Labor, would raise the allowable amount of the incentives, and permit incentives of two types for employer-based plans. The first comes without regard to an individual's health status, such as reimbursement for membership in a qualified gym, credit for attending a health education seminar, or a reward for employees who complete a health assessment.
The second type would require individuals to meet certain goals before they could receive the reward. For example, people with high cholesterol or weight issues would receive a credit if they achieved reduction targets.
According to a press statement, the programs "must have a reasonable chance of improving health or preventing disease and not be overly burdensome for individuals." Alternatives to receive rewards would be made available for those "whose medical conditions make it unreasonably difficult, or for whom it is medically inadvisable, to meet the specified health-related standard."
Asked to respond to recent statements from governors of some states that are resisting the exchanges, such as Texas, Cohen emphasized that the federal government will step in if the state fails to act, because that's what the law mandates. It is to the state's benefit to run its own program, however, because the state will then have autonomy to decide how the costs of running the exchange would be distributed.
"If the state is running the exchange, the state gets to decide how those costs will be assessed," Cohen said. "Should it be assessed only on companies that are selling products through the exchange, or assessed on the entire insurance market...that's totally up to the state...as opposed to having CMS [the Centers for Medicare & Medicaid Services] do it."
HHS requests that comments be posted on Regulations.gov within 30 days after these rules are published in the Federal Register over the next several days.