Trump Administration Issues New Regulations for Affordable Care Act Insurance Marketplaces

On February 17^th, the Department of Health and Human Services (“HHS”) released proposed new regulations aimed at stabilizing the individual and small business insurance marketplaces set up under the Affordable Care Act (“ACA”). According to the proposed rule, the marketplaces “have recently been threatened by issuer exit and increasing rates in many geographic areas.” The proposed rule purports to address this volatility by (i) shortening the open enrollment period, (ii) increasing pre-enrollment verifications of individuals that would attempt to enroll during special enrollment periods, (iii) allowing issuers to apply premium payments to an individual’s past debt, and (iv) adjusting the de minimis actuarial value for coverage levels (which allows a slight variation in the percentage of essential health benefits covered at different plan levels).

The first proposed change is to shorten the open enrollment period for 2018 from a period between November 1, 2017 and January 31, 2018 to a period beginning November 1, 2017 and ending December 15, 2017. This shortened open enrollment period would bring the 2018 open enrollment in line with the enrollment period for 2019. The proposed rule states that shortening the open enrollment will reduce volatility in the marketplace by limiting the ability for individuals to obtain coverage upon discovering they need coverage in late December or January, and will encourage healthier individuals who might have opted for partial-year coverage to enroll for full-year coverage.

While the first change addresses the general open enrollment period, the proposed rule also seeks to address special enrollment periods, which are 60-day periods following major events where an individual can obtain coverage outside the open enrollment period. These events include, for example, losing existing health coverage, moving, getting married, having a baby, or adopting a child. Previously, individuals could generally self-attest to their eligibility to participate in a special enrollment period without the necessity of submitting proof to support such attestation. The proposed rule states that this practice undermined the incentives for enrolling for a full year of coverage by allowing individuals to enroll when they become sick and claiming eligibility for a special enrollment period that he or she was not actually entitled to. While in 2016 HHS had phased in post-enrollment verifications in certain situations and established a pilot program for pre-enrollment verification for 50% of would-be marketplace participants in certain special enrollment categories, the proposed rule would do away with the pilot program and require pre-enrollment verification for all special enrollment participants in all categories.

The third proposed change addresses premium payments made for newly-insured individuals. A provision of the ACA requires newly-insured individuals pay the first month’s premium for a new policy in order to have their coverage effectuated. HHS had interpreted that provision to prohibit an insurance provider from applying a premium payment for a new insured to any outstanding debt owed by the insured from previous coverage provided to the insured, and then failing to effectuate the individual’s enrollment for a failure to pay the first month’s premium. The proposed rule would modify that interpretation to allow insurance providers to apply premium payments for newly-obtained insurance to any debt associated with the non-payment of premiums for coverage issued by the same insurer to the enrollee within the last 12 months and refusing to effectuate the new coverage. In short, the new interpretation would require an enrollee that previously had coverage that he or she failed to pay for to pay off his or her outstanding debt to the insurer before obtaining new coverage from that insurer.

The final proposed change goes to the “metal ratings” associated with plans offered on the marketplace – the bronze, silver, gold, and platinum ratings. These ratings refer to the percentage of coverage for essential health benefits for a standard population (essential health benefits are categories of benefits all plans must cover, including inpatient care, outpatient care, emergency services, maternity and newborn care, and mental health and addiction treatment amongst others). A “bronze plan” must cover 60% of the costs of essential health benefits, a “silver plan” 70%, “gold plan” 80%, and a “platinum plan” 90%. However, HHS regulations currently allow a variation of plus or minus two percentage points on each level (with a slight variation for bronze plans), assuming that such a minor variation has a de minimis material impact on the true dollar value of the plans. The proposed rule would expand the variation in the actuarial value to minus four points to plus two points (i.e., a platinum plan could cover anywhere from 86% to 92% of essential health benefits and still be considered “platinum”), and the bronze plan would be adjusted to have a range from 56% to 65%. The proposed rule states that these expanded actuarial values will allow insurers to design new plans, creating more entrants and therefore more competition in the marketplaces.

The proposed rule states that these measures are designed to stabilize insurance marketplaces by promoting insurer participation in the pools and therefore creating more opportunities and confidence for enrollees in the pools. HHS is currently reviewing comments from the public regarding the efficiency and potential modifications to the proposed rule. Thereafter, HHS will issue a final rule or, if it deems necessary, a revised proposed rule that accounts for public comments.