OVERVIEW. Friday evening, HHS released the CY 2019 Payment and Benefit Parameters for ACA –compliant health plans and proposed changes similar to those sought by the president and members of Congress in their failed ACA repeal and replace legislation. The most critical part of the rule is a proposal to increase the flexibility that States have to define “essential health benefits.”
The likely effect of the rule, if finalized, is less generous benefits especially in states with high premium costs. Taken together with the rules that will soon flow from President Trump’s recent Executive Order, the changes to ACA plans for CY 2019 will limit benefits relative to Obama-era rules but may enhance affordability and thus positively impact the uninsured rate. In other words, as a result of these changes, there may be more insured but there will be fewer benefits.
CHANGES TO ESSENTIAL HEALTH BENEFITS. Friday evening’s proposed rule attempts to address one of the many criticisms of the ACA from state insurance commissioners: as implemented, the law required an overly rich Essential Health Benefits package that has negatively impacted affordability.
The ACA itself is short on the details of exactly what constitutes essential health benefits. The law stipulates that the EHBs include ten categories of health services and that the scope of the EHBs be “equal to the scope of benefits provided under a typical employer plan.”
The ten categories of EHBs are:
- Ambulatory patient services
- Emergency services
- Hospitalization
- Laboratory services
- Maternity and newborn care
- Mental health and substance use disorder services, including behavioral health treatment
- Pediatric services, including oral and vision care
- Preventive and wellness services and chronic disease management
- Prescription drugs
- Rehabilitative and habilitative services and devices
In implementing this section of the ACA, the Obama administration never defined “typical employer plan” but adopted an approach asking states to identify a benchmark plan from a list of options that would serve to define EHBs:
- The largest health plan by enrollment in any of the three largest small group insurance products (HMP, PPO, etc.) by enrollment in the State
- Any of the three largest employee health plan options by enrollment and generally available to State employees in the State
- Any of the largest three national Federal Employees health Benefits Program plan options by aggregate enrollment offered to all health benefits eligible federal employees
- The plan with the largest insured commercial non-Medicaid enrollment offered by an HMO operating in the State
If a State does not select a benchmark plan, the default base-benchmark plan will be the largest plan by enrollment in the largest product (HMO, PPO, etc.) by enrollment in the State’s small group market.
For 2014 to 2016, states used as a benchmark plans offered in 2012. For 2017, the benchmark plan is one offered in 2014.
To enhance affordability of plans, HHS is proposing that, while retaining the benchmark plan system, states be permitted more flexibility in determining what that benchmark is. The Secretary is offering three options:
- Select a benchmark plan that was used by another state in 2017
- Replace one or more of the EHB categories of benefits in its benchmark plan with one or more EHB categories in another State’s 2017 benchmark plan
- Otherwise select a set of benefits that would become the State’s EHB benchmark plan provided that the plan did not exceed the generosity of the most generous among a set of comparison plans
HHS is also proposing to define what is meant by a “typical employer plan” for the purposes of determining whether or not the EHB package complies with the ACA. The proposed definition of “typical” would be an employer plan within a product (HMO, PPO, etc.)with 5,000 enrollees in the individual, small group, large group or self-insured markets or more in one or more states. HHS is also seeking comment on whether or not the “typical employer plan” should reflect a substantial part or all of the plan in question.
This definition defers from that implied by the Obama administration’s approach by dramatically expanding the universe of plans a state can point to meet the EHB mandate. In so do, the Trump administration is offering states another tool – in addition to those included in the Executive Order - to enhance affordability by permitting plans with benefit design that is less generous than what is required under Obama-era rules.
IMPACT ON BENEFIT DESIGN. Because the EHB categories are defined in the ACA, we do not expect the list of covered services in ACA plans to change. Pediatric services and hospitalization, for example, will be retained in all benchmark plans and thus included in ACA Qualified Health Plans sold on and off the exchanges.
However, the benefit design of those plans is sure to change as states hard hit by premium increases seek to control costs. For example, Tennessee has a benchmark plan that covers all well-baby visits. However, Alabama’s benchmark plan covers only nine such visits in two years. Under the Trump administration’s proposal, Tennessee could select Alabama’s pediatric benefit design for its benchmark plan, assuming no other State insurance mandates.
The impact of the rule will differ by geography. States with high premium costs are likely to move quickly to hold down prices any way they can. States, where premiums are affordable in absolute terms and in terms relative to median household income, are not likely to be as motivated.
There are lots of other goodies in the proposed rule including:
- An increase in the user fee charged insurers who sell on the State-based Exchanges on the Federal Platform – a sort of exchange hybrid in Arkansas, Kentucky, Nevada, New Mexico, Oregon – from two percent of premiums to three percent of premiums. The user fee for plans sold on the Federally Facilitated Exchange would remain the same at 3.0 percent of premiums paid.
- An expansion of SEP eligibility to women who lose CHIP coverage after the birth of a child.
- A reduction in the administrative burden of rate review and an increase in the threshold for such review from a 10 percent to a 15 percent increase in premiums.
- Increased flexibility in determining that component of the MLR associated with Quality Improvement Activity. Insurers will have the option of tracking the relevant expenses or using a 0.8 percent default amount.
- Enhanced program integrity with more accurate income verification for people with incomes below 100 percent of FPL and increased scrutiny of availability of employer-based insurance.
Call with questions…even though it is earnings season.
Emily Evans
Managing Director
Health Policy
@HedgeyeEEvans
