New Federal Insurance Rules

Now that the election is over, the Administration feels freerer to issue regulations implementing the health reform law; before it wanted to avoid reminding people of the immense tangle this law has created.  A KFF brief discusses three of the recently released rules, giving an excellent summary of their provisions.   (Kaiser Brief)  The first of the rules implements the “market reforms” which limit certain insurer behavior.  Insurers would basically have to take all individual and small group applicants and to renew those policyholders indefinitely except for limited reasons like non-payment.  These provisions alone will dramatically raise premiums for these policyholders.  Premiums would be fully state-rated, meaning the entire experience for individual policyholders or for small groups is all that could be considered, not the claims experience of the individual or small group.  This rule also will result in large premium increases.  Premiums can be adjusted within limits for age and tobacco use, and geography within a state if the state establishes sub-areas.  A second rule deals with the basic benefit package required and its actuarial value; meaning how much of the cost of those benefits must be covered by the premium as opposed to cost-sharing.  Ten categories of mandated benefits are set forth, but not detailed.  States would select “benchmark plans” and the benefits of those plans would supply the details, which seems quite odd.

Some greater flexibility applies to prescription drugs, plans have to cover the greater of one drug per therapeutic class or the number of drugs per class covered by the benchmark plans.  There is a great deal of ambiguity in the benefit definitions.  Insurers have to design benefits in a non-discriminatory manner and have to “balance” them across categories.  The plans must have an actuarial value ranging from a minimum of 60%, 70%, 80% or 90%.  This could prompt a race to the bottom which results in substantially greater cost-sharing for many enrollees than currently exists and at the same time will likely raise premiums in the individual and small group market, where benefits often do not meet this standard today.  For in-network cost sharing their are out-of-pocket maximums; those will be about $4500 for an individual policy in 2014 and about $13,000 for a family policy.  Finally, the wellness rule basically re-codifies the existing rules for these programs, and does allow a reward of up to 30% of plan costs for wellness achievement, or 50% in regard to tobacco use.  It is unclear, however, how the wellness provisions will interact with other limitations in other rules on cost-sharing and other plan features.  Those of us who think this whole exercise a disaster await with glee the 2014 implementation of all these brilliant provisions.