United States: Market Stabilization: To Be Or Not To Be?

The Centers for Medicare and Medicaid Services (CMS) published a Final Rule intended to stabilize the individual and small group insurance markets on April 18, 2017. Reflecting the urgent need to address the uncertainty afflicting the markets, CMS advanced the rule from proposed to final form in just two short months despite receiving more than 4,000 comments. Not surprisingly, the Final Rule does not differ substantially from its proposed version. The critical questions are whether the Final Rule can produce stability in the markets and prompt issuers to offer products on the Exchanges established under the Affordable Care Act (ACA) and whether a significant relaxation in the rules concerning network adequacy and the inclusion of essential community providers (ECPs) ensure that the right mix of hospitals, physicians and other providers are available to those purchasing insurance products on the Exchanges.

The Final Rule amends standards relating to special enrollment periods, the timing of open enrollment beginning in 2018, guaranteed availability, network adequacy, inclusion of the ECPs and actuarial value requirements. As noted in the preamble, the purpose of the Final Rule is to address the stability and competitiveness of the Exchanges as well as the individual and small group markets that have been "threatened by issuer exits and increasing rates in many geographic areas" of the country. Thus, the intention is to encourage issuers to join the market, assure a stable risk pool, incentivize individuals to maintain continuous coverage and deter adverse selection. Unless otherwise stated, the Final Rule is effective on June 19, 2017. 

Open enrollment; special enrollment

First, CMS focused on shoring up the open enrollment periods. Recall that upon taking office, the Trump administration canceled funding for advertising aimed at encouraging consumers to sign up for Exchange plans through the 2017 open enrollment period that ended Jan. 31, 2017. In evaluating the proposed rule, CMS considered holding open enrollment for 2018 from Nov. 1 through Jan. 31 and then tightening this period for 2019 from Nov. 1 to Dec. 15. The Final Rule accelerates the narrowing of the open enrollment period for 2018 from Nov. 1 to Dec. 15, 2017.

Such changes, while reducing the burden on insurers, could also reduce the number of individuals receiving coverage through the Exchanges. Critics argue that the healthy and young, whose participation is critical to a well-functioning market, will often wait to sign up for coverage until the end of the enrollment period. The November/December time frame is also when insurance brokers, navigators, individuals, government and technology are most pressured with Medicare and commercial insurance enrollment and juggling employee schedules for the winter holidays. Thus, while it is intended to address the needs of the issuers, the timing of open enrollment for the Exchanges could result in the participation of fewer enrollees.

Another significant change is the requirement that 100 percent of new consumers seeking to enroll in an Exchange plan due to special circumstances, such as a job change or for financial reasons, will undergo pre-enrollment verification. Commenters were concerned that the verification process could pose an additional barrier to enrollment and deter consumers (especially the healthy and young) from maintaining coverage through the Exchanges. The preamble to the Final Rule indicates that CMS intends to exercise "reasonable flexibility" with respect to the documentation needed to verify eligibility. As a result, CMS intends to permit consumers to provide additional details explaining why they are unable to meet one or more of the pre-enrollment verification requirements. The agency says it will conduct robust training programs on this issue and will take such letters into consideration when deciding whether to exercise its discretion.

Guaranteed availability of coverage/continuous coverage

One of the hallmark provisions of the ACA – guaranteed availability of coverage – addresses consumer protections involving the maintenance of insurance. However, insurers have complained that individuals are "gaming" the system by failing to make premium payments but signing up for new insurance coverage or switching plans, leaving other insurers "high and dry" with regard to their debt.

The Final Rule provides insurers with new tools to reduce this abuse. For example, an issuer may attribute any past-due premium amounts owed to that issuer for up to the past 12 months. Additionally, the insurer could refuse to commence coverage until the outstanding debt is paid. Going further than what was outlined by the proposed rule, the Final Rule allows insurers in the same "controlled group" to apply past-due premium payments to current obligations once a new enrollment year begins. The interpretation applies both outside and inside the Exchanges.

This effort by CMS to tighten up guaranteed availability of coverage appears fraught with operational confusion that will most likely lead to breaks in coverage and barriers to obtaining insurance. And the bureaucracy associated with applying this provision seems mind-boggling, especially given that past-due amounts cannot be applied if there is a change in insurer. The provision is confusing, and notices to consumers are not separately required.

With respect to continuous coverage, the proposed rule contained several suggestions to curb abuses by individuals, including requiring proof of coverage for the past six to 12 months, a 90-day waiting period before enrollment is effected or payment of a late enrollment penalty. In response to these proposals, CMS received a significant number of comments arguing that such policies violate the core principles of the ACA, which included guaranteed availability. As a result, the Final Rule does not implement any of these provisions. However, CMS has indicated that the agency will continue to explore ways to promote continuous coverage.

Network adequacy/essential community providers

The advent of narrow networks and the exclusion of quaternary or other so-called high cost providers will be critical to the development of all insurance networks and issuer options in the future. For the Exchanges, the issue becomes magnified, as issuers seek to lower their costs and reduce premiums by creating very narrow networks. These networks have made headlines, both because certain significant traditional providers are left out (requiring patients to seek critical care outside the network) and because patients do not have access to their provider of choice due to the financial limitations associated with the health plan's network.

The network adequacy provisions in the Final Rule loosen the reins on insurers with regard to the requirements or administrative burdens associated with having to prove network adequacy. Under the Final Rule, state regulators will ensure network adequacy in accordance with their own state rules, insurer accreditation (Medicaid or commercial) from a body accredited by the U.S. Department of Health and Human Services or, for non-accredited insurers or stand-alone dental plans, in accordance with the network adequacy standards set forth under the National Association of Insurance Commissioners (NAIC) Health Benefit Plan Network Access and Adequacy Model Act. In essence, CMS has deferred to the NAIC Model Act standards and will rely on the states to either establish more stringent provisions or adopt the NAIC Model Act requirements.

The ACA requires that any qualified health plan sold on an Exchange have within its network "essential community providers," which are defined as entities that "serve predominantly low-income, medically-underserved individuals." Typically, ECPs are entities such as family planning clinics, community health centers, Ryan White HIV/AIDS Program providers and entities that qualify under Section 340B of the Public Health Service Act, such as children's hospitals.

For plan year 2018, the threshold of ECPs that must be maintained in a network offered on an Exchange is reduced from 30 percent to 20 percent by the Final Rule. The primary justification for relaxing the 30 percent requirement is to reduce the administrative burden that the higher threshold imposed on insurers, according to CMS. However, many commenters to the proposed rule expressed concerns that reducing the threshold could limit an individual's access to specialty care, safety net and children's hospitals, HIV/AIDS clinics, and other high-intensive medical services.

The Final Rule also continues the write-in process for providers to submit an ECP petition to CMS in plan year 2018 allowing them additional time to petition for application as an ECP and enabling issuers to be "better recognized" for the ECPs with which they contract. In addition to the write-in option, insurers that cannot meet even the 20 percent threshold may provide a narrative explanation to CMS justifying their network configuration and obtaining approval for inclusion on the Exchange.

Conclusion

The reaction of insurers to the Final Rule has been less than enthusiastic. Many have expressed concern that increasing barriers to coverage for consumers could nullify any advantages that CMS intended for insurers, thus advancing the decline in the individual and small group insurance markets. If healthy and young consumers are not incentivized to join the market, the pool of covered lives will continue to require higher levels of medical care, driving up premiums and costs and hastening the departure of Exchange plans from the markets that the rule was intended to stabilize. Moreover, the new enrollment limitations may only increase the odds that individuals who can forgo signing up for coverage will do so. Additional concerns include the challenges associated with enrolling all plans simultaneously and the bureaucratic infrastructure required for administering the pre-enrollment verification process.

For providers, the struggle to remain price competitive will continue amid tightening market forces. Consumers, the intended beneficiaries of the ACA, will have to become more savvy purchasers of healthcare insurance so they can ensure that the networks providing their coverage are adequate for their healthcare needs.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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