[authors: Gary Bacher and Joshua Booth]
The Centers for Medicare & Medicaid Services (CMS), the Department of Labor (DOL), and the Department of the Treasury (Treasury) recently released two proposed rules and a notice of proposed rulemaking (NPRM) addressing some of the most fundamental reforms of the Affordable Care Act (ACA): essential health benefits, health insurance market reforms, and wellness program incentives.
Health Insurance Market Reforms
The reforms addressed in this widely anticipated rule include:
Guaranteed availability and renewability. This rule requires insurers in the individual and small group markets to accept all applicants, regardless of health status or other factors.
Fair health insurance premiums and rating reforms. These reforms restrict an insurer’s ability to vary premiums based on individual characteristics. Individual premiums may only be varied based on four characteristics—geographic area, age, smoking/non-smoking status, and family size. For each of these characteristics, the rule outlines a standardized methodology that insurers must use in calculating premium variations.
Single risk pool. In determining rates, health insurers are required to consider all enrollees in a state’s individual market as part of a single risk pool.
Catastrophic plans. The ACA allows issuers to offer catastrophic plans—which are required to meet some but not all of the ACA’s requirements—to individuals under age 30 or individuals who cannot afford other coverage.
Amendments to the rate review process. The proposed rule also amends previous rules regarding the process by which states and the federal government will review premium increases. CCIIO also released a proposed template by which insurers will submit rate increases for review.
CMS also released technical fact sheets describing the market reforms and the changes to rate review in more detail.
Essential Health Benefits
The ACA requires that all health insurance plans in the individual and small group markets cover a certain set of benefits—“essential health benefits.” The proposed rule builds on an approach outlined in a December 2011 bulletin under which each state selects a plan currently offered in that state to use as a “base benchmark” for essential health benefits. The rule expands on the bulletin, describing in more detail how states can add additional benefit requirements to supplement the benchmark benefits and how a “default” benchmark will be assigned if a state fails to choose a benchmark plan. In conjunction with the rule, CMS also released additional information about the proposed benchmark plans in each state.
The rule also describes how a plan’s “actuarial value”—an estimate of the percent of enrollees’ health care costs that are covered by the plan after cost sharing—will be calculated. In addition, CMS released an actuarial value calculator and a description of the actuarial value calculator methodology.
Finally, the rule discusses the process by which health insurance issuers become accredited to participate in health insurance exchanges. The rule recognizes the National Committee for Quality Assurance as the initial accrediting agencies.
In coordination with the rule, CMS also sent a letter to state Medicaid directors providing guidance on the essential health benefits that must be provided to newly eligible Medicaid beneficiaries.
Wellness Program Incentives
The NPRM issued jointly by DOL, Treasury, and HHS deals with wellness incentive programs offered by employer health plans. Existing law imposes standards on employer wellness programs in order to prevent discrimination based on health status. The proposed rule amends these standards.
Although these are the highlights, the proposed rules and NPRM contain significant guidance relating to other aspects of the ACA’s reforms. We will be providing more detailed analysis on the implications of these effects of these proposals on insurers, providers, and beneficiaries in the coming weeks.