Better late than never: I finally respond to HHS's proposals for NEXT year (UPDATED)

Yeah, yeah, I know; the HHS Dept. issued a list of proposals for the 2016 Open Enrollment Period like 3 weeks ago, but I've been a wee bit busy with this year, y'know?

Anyway, let's take a look at them (there's 35 in all, I'm not gonna get into all of them but will provide commentary on selected proposals):

Bringing Transparency and Fairness to Health Insurance Rate Increases: Issuers seeking rate increases of 10 percent or more (or above a state-specific threshold) in the individual or small group market are required to publicly disclose the proposed increases and the justification for them, and the increases are reviewed by the state regulator or HHS to determine whether they are unreasonable. Currently, we determine which increases must be reviewed at the “product” level. An example of a “product” would be an issuer’s individual market PPO product, which could include many plans at many metal levels. We propose instead to trigger a review at the “plan” level by requiring disclosure and review whenever a plan within a product experiences a rate increase that meets or exceeds the applicable threshold. An example of a “plan” would be an issuer’s particular silver level plan. We also propose an approach to ensure that issuers submit, and states with Effective Rate Review Programs display on their websites, information about all rate increases in the individual and small group markets for both QHPs and non QHPs on a uniform timeline, though states would have the flexibility to establish earlier submission and posting timeframes.

This is excellent. Throughout the fall, the states started publishing the "average rate increases" (or "average rate decreases" in a few fortunate cases) for the insurance policies operating on the ACA exchanges. However, most of these were completely unweighted--they just lumped together the average changes for every policy they sold altogether, then lumped together every company, regardless of how many people were actually enrolled with each company, or within each plan within that company.

Even when weighted by company market share (which I tried to do with as many states as possible), it was still misleading, since a single company could have 10,000 people enrolled in a Silver plan that went up 5%, plus 200 people in a Platinum plan that went up 15%. Unweighted, that would look like an "average increase" of 10%...but the actual weighted average would only be 5.2%.

Annual Open Enrollment Period: We propose to set the open enrollment period for non-grandfathered policies in the individual market, inside and outside the Marketplace, for all benefit years beginning on or after January 1, 2016, so that it begins on October 1 and runs through December 15 of the year prior to the benefit year.

The first year of the ACA exchanges, of course, the open enrollment period ran for a full 6 months (10/1/13 - 3/31/14), plus an additional 15-day "extension period". Due to the completely new process and confusion over how it all works, this would have made complete sense even without all of the technical problems so many of the exchanges experienced. When you add the website headaches, it was an absolute life saver (literally) to have that extra 3 months (not to mention the 2-week "overtime" period at the end).

This year the timeframe has been cut in half, to a flat 3 months (93 days, to be precise), from 11/15/14 - 2/15/15, which is fine and is much closer to how Open Enrollment typically works in large corporations, Medicare enrollment and so on. Still, it does cause confusion for people who don't understand the "rolling timelines" (ie, enrolling in this window starts your coverage on January 1st; enrolling in this window starts you on February 1st and so on). In addition, from a pure actuarial perspective, it becomes tricky as well since you have different "chunks" of people starting on different dates.

Pushing the entire period back so that it ends before New Year's Eve makes sense for several reasons...most notably, it's a much simpler marketing push: Sign up before 12/15 if you want coverage next year, period. No having to include the "...or you can enroll awhile later but your coverage won't start until Feb/March..." Whatever number is on the books in time for New Year's Day is the number (notwithstanding the smaller number who will enroll/drop out throughout the year due to major life events, of course). In addition, it would certainly be nice if they stopped pushing the start/stop dates around every year and just settled on a regular time window. Finally, this schedule would also guarantee that just about everyone would have the full year to use up their annual deductible, which, after all, won't be reduced just because you were only enrolled for part of the year (ie, deductibles aren't generally "pro-rated" to my knowledge).

There are 2 downsides to this schedule, however: First, it's even shorter still (just 76 days instead of 93); second, a lot of people have suggested that having the "overtime period" end on April 15th is something which should be done every year, because that's also Tax Day. The idea is that people would be able to do their taxes, see what their tax refund is and utilize that as part of their insurance enrollment decision for the rest of the year.

I don't have a solution to the Tax Day issue, but the 76-day limit is easy enough to lengthen: Either bump the final deadline out to 12/23 or move the start date back to September 15th (or both). Whatever the end date is, though, could we please have all of the exchanges make it consistent going forward?

Pediatric Age: We propose that pediatric benefits be provided until the end of the plan year in which the enrollee turns 19.

I assume that the current cut-off is 18, so this would bump that out a year, which is fine with me, although I don't know of anyone who defines "pediatric" as "over 18..."

UPDATE 12/14/14: Thanks to Esther F. for providing what sounds like a more reasonable explanation of what the "pediatric/19" point refers to:

Your text sounds like they added a full year (“bumped out a year”) of coverage, which would defeat the purpose of the change. But the provision, instead, sounds like an attempt to provide consistent coverage for the full policy year, so that a person who’s turning 19 does not lose many of their benefits (perhaps not knowing this in advance) on their actual birthday, but instead has uniform, predictable coverage for the year, dropping the additional pediatric benefits on the January 1 after their birthday. Otherwise, you’d be sure to have people who had a procedure that had to be rescheduled, perhaps through no fault of their own, and suddenly didn’t have coverage for it because it was rescheduled after their birthday.

Mathematically, it means this change bumps out the coverage only for the months are needed to complete the policy year, which I assume would be an average of six months — unless there are some policies that ALREADY follow this rule, and this just brings the others in line (I don’t know if that’s true). In that case, it would have even less impact to insurers’ bottom line.

 

In other words, if your kid turns 19 in, say, May or October, you'd still have pediatric coverage until that New Year's Eve. Fair enough.

Formulary Drug List: We propose to clarify that a health plan must publish an up-to-date, accurate, and complete list of all covered drugs on its formulary drug list, including any tiering structure and any restrictions on the manner in which a drug can be obtained, in a manner that is easily accessible to plan enrollees, prospective enrollees, the state, the Marketplace, HHS, OPM, and the general public. We seek comment on the best way to make this information available in standard machine-readable formats.

Um, yes. Seems like a no-brainer to me: You should know exactly which medications aren't covered on your policy before you enroll.

Determination of Minimum Value: Consistent with our recently published guidance, we propose that, in order to provide minimum value, a plan must not only cover a predicted 60 percent of the allowed costs under the plan, but must also provide a benefit package that reflects benefits historically provided under “major medical” employer coverage. Specifically, to satisfy the minimum value requirement, coverage must include substantial coverage of both inpatient hospital services and physician services.

OK, I'm confused by this one...I kind of thought this was already a requirement under the ACA? Wasn't that supposed to be one of the main points of the law in the first place?

UPDATE 12/14/14: I received the following explanation from someone who claims to be an actuary:

On the Minimum Value question, there is a slight difference between 'Minimum Value' and 'Actuarial Value'. When the law refers to 'Minimum Value' (MV) it is generally specific to large group products. Small group and individual policies all fall into some metal level based on Actuarial Value (defined as the average percentage of cost that a plan will cover). For these small group plans, there are Essential Health Benefits that need to be covered.

On the large group side, there is no concept of 'Essential Health Benefits' and no concept of 'metal level'. Instead, the law just requires that large groups cover at least 60% of all expected costs. This concept is referred to as the 'Minimum Value' of the plan. Before this clarification, it was possible for an insurer to cover all benefits in full and leave inpatient costs as not covered. This would, in theory, cover 60% of a person's expected costs (inpatient costs make up about 30-40% of costs). There were no regulations that prevented an insurer or group from offering a plan like this.

With this clarification, the feds are saying that not only do you need to cover 60%, but you have to offer at least substantial coverage for inpatient and physician. They haven't defined 'substantial' yet.

 

Default Re-Enrollment: Under current rules, consumers who do not take action during the open enrollment window are re-enrolled in the same plan they were in the previous year, even if that plan experienced significant premium increases. We are considering alternative options for re-enrollment, under which consumers who take no action might be defaulted into a lower cost plan rather than their current plan. We are considering allowing states to pursue these sorts of re-enrollment alternatives for coverage in 2016. The FFM is exploring such an approach for coverage in 2017.

Hoo, boy. I completely understand why they're thinking about doing this; a lot of healthcare wonks are already wringing their hands (myself included) over the possibility that millions of people who "auto-renew" 3 days from now without bothering to visit their exchange website and shop around will wake up to sticker shock when they receive their first 2015 premium bill in the mail. Defaulting them into a lower-cost policy makes sense on paper, since it's to their own benefit and avoids the enrollee being outraged over a price spike.

However, it also presents a different problem: Big Gub'mint Mucking Around With My Healthcare®, etc, etc. Basically, this plays into every cliche that right-wingers have about "Government Takeover of Healthcare" and "The Nanny State treating grown adults like children" and so forth. That's how you get essays like this one from the CATO Institute:

Under Proposed Rules, Government Could Choose Insurance Plans for Millions of People

The administration is considering a rule change that would allow the government to automatically change some people’s exchange plans to a cheaper alternative.

...For people that chose this option, the government would be effectively choosing their insurance plan, a far cry from the “if you like your plan you can keep it” pledge.

The thing is, they kind of have a point...look at how much hollering the Obama administration heard over the "OMG!! GAZILLIONS OF POLICIES CANCELLED!!" issue last year, even though the insurance companies had over 3 years to get their policies up to snuff (and already have a long history of dropping them without notice anyway).

Plus, this wouldn't even really solve the "rude awakening" problem anyway. Instead of having "sticker shock" they'd have "provider change shock" or whatever. The ones who are responsible enough to understand why they were switched are likely to also have been wise enough to actually actively decide whether/how to renew in the first place anyway.

Network Adequacy (Provider Directories): We clarify that a QHP issuer must publish an up-to-date, accurate, and complete provider directory, including information on which providers are accepting new patients, in a manner that is easily accessible to plan enrollees, prospective enrollees, the state, the Marketplace, HHS, and OPM. As part of this requirement, we propose that a provider directory is easily accessible when the general public is able to view all of the current providers for a plan in a provider directory on the plan’s public website through a clearly identifiable link or tab and without creating or accessing an account or entering a policy number. We also seek comment on the best way to make this information available in standard machine-readable formats.

Yup, this was a big problem last year, especially in California as I understand it.

2016 User Fees: HHS collects a user fee from participating issuers to fund FFM operations. For 2014 and 2015, the user fee rate was set at 3.5 percent of the monthly premium charged by the issuer. Based on enrollment and premium projections, we estimate that to cover total costs, the 2016 user fee rate should also be set at 3.5 percent of the monthly premium charged by the issuer.

So basically, HealthCare.Gov will not be increasing the fee they charge to the insurance companies participating; it'll still be 3.5% next year, which is good to hear.

As an aside, this is actually the first knowledge I have of just how HC.gov is actually being funded. Sounds like after throwing gobs of money at it last year, it's stabilized going forward.

  • Premium Adjustment Percentage Index
  • Maximum Annual Limitation on Cost Sharing
  • Reduced Maximum Annual Limitation on Cost Sharing
  • Required Contribution Percentage

If I'm reading these correctly, this is basically HHS telling insurers what the maximum premium hikes and enrollee cost sharing caps will be next year. Again, I kind of thought that this was already baked into the mix but I guess they have to publish revised versions each year.