The other shoe drops: the Market Stabilization rule

The other shoe drops: the Market Stabilization rule

Despite over 4,000 posted comments, many of which raised significant concerns, the U.S. Department of Health and Human Services finalized the Market Stabilization rule described in our blog last month. The rule, issued seemingly in response to carriers’ complaints about profitability of individual and small-group plans offered on the exchanges, includes a range of measures that may dampen enrollment and leave many consumers both puzzled and poorer.

While the rule will have a major impact on all states, it offers flexibility that Colorado could use to its residents’ advantage. The question will be how our state exchange and Division of Insurance respond to opportunities to tailor the rule to our state specifics.

The main areas of concern are outlined here, along with opportunities for flexibility (in italics):

Under the rule, open enrollment will run only from Nov. 1 to Dec. 15 for the 2018 plan year, requiring Colorado’s sludgy eligibility systems to do 12 weeks of work in six weeks’ time. No additional funds have been provided to states to get out the word about the abbreviated enrollment period, or to beef up IT systems to process enrollment more quickly. As a result, we anticipate lower insurance enrollment. Those who sign up may tend to be sicker, since young healthy Coloradans typically procrastinate, signing up in higher numbers in January. Finding a way to bring those healthier people into the risk pool would translate into lower costs for everyone.

Colorado could lessen the effects of the short open enrollment period by taking advantage of the opportunity to supplement it with a Special Enrollment Period (SEP). This would allow our exchange, Connect for Health Colorado, to bring in those people who were held up by technological glitches or inadequate information. We strongly support their doing so.

The actuarial value (AV) of plans will slide, with carriers permitted to issue plans at each metal level that cover 2 percent less of consumers’ costs. When the carrier covers less, costs shift to the consumer. The change could lower premium costs but those who already struggle with high deductibles may face even higher ones, and copays and coinsurance are apt to rise as well.

The second-lowest premium for a silver-plan in a region is the basis for the amount of premium tax credits an enrollee can receive.  When plans are designed to cover less of a consumer’s cost and premiums dip, the amount of premium assistance goes down as well. That means that Coloradans between 133 and 400 percent of the federal poverty level will get less help than they did in 2017.

Because deductibles and cost-sharing will be higher on those lower-AV plans, having access to cost-sharing (CSR) assistance will be especially important. CSR can significantly lower deductibles, copays and coinsurance, but not for Coloradans who make over 250 percent of the federal poverty level.

Colorado could opt against the actuarial slide, ensuring that bronze, silver, and gold plans have the same value in 2018 that they’ve had in prior years. If the Division of Insurance maintains those standards, we would support the state exploring ways to allow carriers to offer plans of different AV levels, without the metal level labels.  

Coloradans who enroll through a special enrollment period (SEP) because of marriage, birth, adoption, a loss of coverage, or a move, for example, could have to show proof of eligibility for a SEP. While it’s understandable that carriers would want to make sure that SEPs were justified, and that enrollees were not just signing up after getting sick, the new requirements may deter healthier people from going through the hassle of signing up. Studies have shown that few who are entitled actually take advantage of SEPs, and these measures would leave more people uninsured.

The federal rule gives Colorado the option to postpone these changes and move forward on a plan to assess eligibility for SEPs by auditing enrollees who apply for them. At the very least, Connect and the Colorado Division of Insurance would be wise to limit the burden on consumers by only asking for documentation of certain SEPs, like a move or loss of coverage, and pinging available databases instead of demanding documentation.

Some SEPs will also be harder to qualify for, and Colorado must comply with those changes.  For example, couples seeking a SEP for marriage will have to show that one of the two already had coverage.

A last area of concern involves potential erosion of guaranteed availability, the requirement that carriers offer plans to all who apply, regardless of age or health status. The final rule would allow carriers to apply a premium payment to an individual’s past debt, instead of applying payment to the new year and effectuating coverage.

We believe state law would prevent carriers from instituting that practice.  In addition, requirements in the rule that consumers get notice in enrollment application materials would seem to bar carriers from taking this step until farther down the road.

Colorado is in excellent shape regarding network adequacy. The federal rule allows states with demonstrated capacity to regulate plans’ provider networks, and the Division of Insurance did comprehensive work with stakeholders during 2017 to create clear network standards. The DOI has the tools to determine whether plans have enough providers to meet consumers’ needs, and it would make little sense to defer to weak federal standards.

At the end of it all, we have serious doubts that the rules will help with market stability, as the administration alleges. A recent Standard & Poor’s analysis suggests that more carrier experience in this nascent, post-ACA market – rather than playing loose with the rules – is what will lead over time to more predictable behavior and predictable profits.  In the meantime, the federal rule threatens that stability by erecting obstacles to enrollment, and in particular to enrollment of younger and healthier residents. Connect for Health and our Division of Insurance should use the flexibility allowed by the rule to keep more Coloradans covered and to ensure that high out-of-pocket costs don’t result in worse access to care.

By Bethany Pray

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