United States: Final Market Stabilization Rules – How Stable Is Stable?

The Department of Health and Human Services released the final Affordable Care Act marketplace stabilization rules ("Final Rule") on April 13, 2017. The Final Rules become effective on June 19, 2017 and will, accordingly, apply to the 2018 state and federal Affordable Care Act health insurance exchanges. The Final Rule is available here.

The Final Rule is substantially the same as the proposed rules that were released on February 10, 2017 (available here), and are intended to, as the name of the rules suggest, "stabilize" the federal and state health insurance exchanges for the 2018 calendar year and going forward.

The press release accompanying the Final Rule cites the following evidence to support the government's view that the federal and state health insurance exchanges require intervention to stabilize the exchanges (reprinted from the press release, available here):

  • Approximately one-third of the counties in the United States had only one insurer participating in their exchange for 2017.
  • Five states have only one insurer participating in their exchange for 2017.
  • The premium for the benchmark second-lowest cost "silver plan" on Healthcare.gov increased by an average of 25 percent from 2016-2017.
  • Approximately 500,000 fewer Americans selected a plan in the exchange open enrollment in 2017 than in 2016.
  • Many states saw double digit increases in their insurance premiums including: AZ -116%; OK – 69%; TN – 63%; AL – 58%; PA – 53%.

The press release further makes clear that the Final Rule is not indicative of an evolution of the Trump administration's view of the Affordable Care Act. The press release quotes Ms. Seema Verma, the Administrator of the Centers for Medicare and Medicaid Services (CMS), as saying: "While these steps will help stabilize the individual and small group markets, they are not a long-term cure for the problems that the Affordable Care Act has created in our healthcare system."

The most notable provisions of the Final Rule include the following:

Guaranteed Availability

The Affordable Care Act includes a mandate guaranteeing the availability of insurance products to consumers—specifically that insurers must offer coverage to any consumer during the open enrollment period or any special enrollment period for which the particular consumer qualifies based on life events.

Under the pre-Final Rule regulations ("Former Regulations") that give definition to this mandate, a health insurer is required to give a consumer a three-month grace period to pay past due premiums prior to terminating the consumer from an insurance product.

Further, the Former Regulations require that an insurer cannot deny a consumer coverage during an enrollment period solely because the consumer owes a debt of past due premiums to an insurer for health insurance, provided that the consumer is not re-enrolling in the same product in respect of which the consumer owes a debt.

Insurers have claimed that, because of the Former Regulations, some consumers stopped paying premiums late in the year because the consumers knew that he or she could, first, assure himself or herself of eligibility for insurance the succeeding year and, second, pay past insurance premiums during the three-month grace period in the event the consumer incurred meaningful healthcare costs.

The Final Rule addresses this issue by allowing insurers to deny enrollment to any consumer who has outstanding debt for coverage under any of its products (or that of its affiliates) during the previous twelve-month period. Nevertheless, the Final Rule allows insurers to deviate from their newfound right to deny enrollment if they decide to compromise overdue premium debts, such as accepting an installment payment plan for past due premiums while enrolling a consumer for an insurance product for the successive year.

It is important to note that state-specific laws and regulations may have more restrictive requirements relating to an insurer's ability to deny coverage due to a default on overdue payment obligations. In that case, the more restrictive state law or regulation will govern. However, the Final Rule includes language encouraging state lawmakers to adopt law or rules that are comparable to the Final Rule.

Open Enrollment Period

The Final Rule shortens the open enrollment period for 2017 to 45 days, which will run from November 1, 2017 to December 15, 2017.

The shortening of the open enrollment period has been discussed and debated since the first year the Affordable Care Act exchanges opened. In 2014, the first year of the exchanges, when the need for enrollment was arguably the most critical, the open enrollment period lasted six months, from October 1, 2013 to March 31, 2014. In the second year of the exchanges, the open enrollment period was shortened compared to the first year, and lasted from November 15 to February 15. In each year since through 2017, the open enrollment period began on November 1 and ended on January 31.

The shortening of the open enrollment period is intended to mitigate opportunities for consumer gamesmanship:

  • Consumers are required to enroll for the entirety of 2018 rather than a stub year period, thus increasing the aggregate premiums paid to the insurers for 2018.
  • The shorter enrollment period reduces the opportunities for adverse selection by consumers who would otherwise not enroll, but enroll in January because the consumer learns of an adverse health event in late December or January.
  • The shortened enrollment period encourages continuity of insurance care by requiring that the new exchange insurance policy be effective immediately following the expiration of the coverage period of a previous calendar year end policy.

Some commentators have asserted that the shortened enrollment period may result in reduced enrollment, in particular with respect to young consumers and generally healthier consumers, given a constrained period and consumer distraction during the end of the calendar year (in the midst of the holidays).

Special Enrollment Periods

The Final Rules impose additional restrictions on special enrollment periods, which are periods of time other than the open enrollment period, prompted by certain life events of the consumer, during which a consumer may enroll in an exchange insurance product. Common examples of such life events are the loss of insurance coverage due to the loss of a job, the birth of a child or relocation.

Insurers have complained over the last number of years that consumers have fraudulently claimed qualifying special circumstances and accessed insurance products through special enrollment periods when they were not eligible to do so. The result, according to insurers, is that the risk pools acquire through the special enrollment process a disproportionately sick and costly patient mix.

To address these concerns, the Final Rule includes the following changes:

  • Beginning in June 2017, in states served by the HealthCare.gov platform, all consumers enrolling in a special enrollment category will be required to be verified as eligible for special enrollment prior to the effectiveness of the insurance coverage. Consumers will be given 30 days from the date of the insurance application to provide requested verifying information. Eligibility will then be verified using the information provided and existing electronic government records wherever possible. Once approved, the insurance coverage will be retroactive to the initial application date. If verification takes two or three months, the consumer will not be required to pay the insurance premium for the first month of coverage.
  • The Final Rule further limits the ability of exchange plan enrollees to change from one metal level—i.e., the platinum, gold, silver and bronze levels—to another metal level. For example, if the event resulting in special enrollment eligibility is a new dependent for an existing enrollee (i.e., the birth of a child), the existing enrollee can only enroll the dependent in the level of plan in which the primary enrollee is then enrolled.
  • Consumers enrolling in respect of a special enrollment period will no longer have the option to choose a later effective date if the enrollment is delayed due to verification issues. Instead, the consumer is required to pay the insurance premiums for the retroactive coverage period of the plan (subject to, in some circumstances, not paying for the first month of coverage, as discussed above).
  • The Final Rule imposes substantive limitations on special enrollment categories. For example, consumers who are eligible for a special enrollment due to loss of insurance are ineligible if the enrollee loses his or her coverage due to non-payment of premiums unless and until the past due premiums are paid in full.

The tightening of the verification requirements and substantive special enrollment criteria are intended to diminish fraudulent enrollment and adverse selection for the exchange plans.

Actuarial Value

As is well known, the Affordable Care Act requires that the exchange plans issued by insurers fit into four categories identified by metal—platinum, gold, silver and bronze.

One distinguishing criteria for each category is the required "actuarial value" for each metal level. The actuarial value refers to the percentage of healthcare expenses for a population that are paid by the insurance as compared to the consumers. For example, the required actuarial value for a platinum plan (the highest level plan) is generally 90, which means that the insurer must pay 90% of the health care expenses for the relevant population.

Recognizing that it is difficult to target an exact actuarial value, the Former Regulations allow de minimis variations from the target actuarial value. Through 2017, the allowable de minimis variations have been +/-2 percent, meaning that the insurance plan complies with the actuarial value requirement so long as the plan remains within +/-2 percent of the required actuarial value with respect to the relevant population.

The Final Rule increases the allowable de minimis variations effective for 2018 to -4 to +5 percent for bronze plans and -4 to +2 percentage points for all other plan levels (with exceptions with regard to certain silver plans, which are not changing under the new stabilization rules).

The intent of this rule change is to enhance the ability of the insurers to design a greater variety of products that can be offered on the exchanges, thereby enhancing patient choice on the exchanges. Critics contend, however, that increasing the allowable de minimis variations will result in increased out of pocket costs for the consumer.

Network Adequacy

The Affordable Care Act includes a variety of rules to ensure physician network adequacy for each health plan offered on the exchanges, including rules intended to ensure a sufficient choice of physicians and current information available to consumers about in-network and out-of-network providers. Historically, these rules have been established and monitored by federal government agencies, which have used quantitative metrics to assess compliance. The Final Rule shifts the authority to state regulators and, where a state does not have such a function under applicable state law, the insurer's accreditation body to establish network adequacy rules and monitor compliance with those rules.

Reactions to the Final Rule

All-in-all, the reactions to the Final Rule have not been uniformly positive (read as understatement). For example, many in the insurance industry expressed immediate and significant concerns regarding the instability – not stability – that may be instigated by the Final Rule. Some insurers have said that the Final Rule will result in lower enrollments and, in turn, lower revenue as people confront the Final Rule's additional hurdles to enrollment – hurdles which may turn people away from the exchanges and plan coverage altogether. This result, many surmise, could result in participating plans becoming non-participating plans due to increasing financial distress caused by decreasing enrollment. In addition, others have conjectured that the Final Rule's implementation will leave hospitals on the hook for more uncompensated care.

From the consumer perspective, many consumer advocates have said that the negative impacts of the Final Rule will fall squarely on the low-income population. As recently noted in a Modern Healthcare article,1 Emily Evans, a health policy analyst at Hedgeye Risk Management, has said that, of the 9.2 million people who selected plans on Healthcare.gov during the most recent enrollment period (2016-2017), 6.5 million had incomes between 100% to 250% of the federal poverty level. Therefore, the Final Rule provisions that make enrollment more challenging will disproportionately hit the low-income population and will result in lower enrollment levels – a significant stressor on participating plans and the Affordable Care Act program as a whole.


1. "Market stabilization rule could collapse the ACA exchanges," by Virgil Dickson, Modern Healthcare, April 14, 2017

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
17 Oct 2017, Seminar, California, United States

Please join us for Sheppard Mullin's Labor & Employment Law Update & Happy Hour Seminar Series. 2017 presents significant developments in California labor and employment laws that will affect the way you run your day-to-day business operations. We will provide analysis and insight on these new laws, as well as offer practical advice and helpful tools for employers to protect their organizations from liability in the workplace.

17 Oct 2017, Seminar, California, United States

Covering topics such as promotions and sweepstakes, mobile advertising challenges, privacy considerations, claim substantiation and more, this expansive program will equip you with the tools you need to practice advertising law today.

18 Oct 2017, Seminar, Santa Clara, United States

The All Hands Meeting is a unique, multifaceted and affordable annual event tailored to the special needs of in-house professionals whose companies rely upon intellectual property. Scores of cutting-edge CLE presentations address the spectrum of legal, regulatory and ethical issues this community faces on a daily basis.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.