Filed Under:Health Insurance, Individual Health

Hey, Marilyn: Make PPACA work

Marilyn Tavenner, the acting CMS administrator (Photo courtesy of CMS)
Marilyn Tavenner, the acting CMS administrator (Photo courtesy of CMS)

Regulation decisions that seem minor could lead to major Patient Protection and Affordable Care Act (PPACA) compliance headaches.

Megan Grover Howell, a policy specialist at Group Health Cooperative, talked about one of those decisions -- on how groups should administer coverage billing -- in her company's response to a major batch of PPACA regulation proposals that the Centers for Medicare & Medicaid Services (CMS) published in November.

Howell noted that CMS, an arm of the U.S. Department of Health and Human Services (HHS), has proposed having employers pay for health coverage using the kind of employee-by-employee, list billing approach that worksite insurance programs often employ, rather than the traditional group plan approach.

"If a list billing structure is implemented as the proposed rule suggests, group premiums, and employer contributions, can fluctuate throughout the year, making the process of maintaining health coverage for a small group overly complex," Howell wrote. "Many small employers do not have the robust human resource department required to manage such fluctuation."

Shifting to mandatory list billing -- and having each worker pay a separate, age-based rate, rather than a composite group rate -- could hurt older workers, Howell added.

"An employer contribution may be less for an older employee than for a younger one," Howell said. "The result may be that coverage offered through small group health plans will become unaffordable for many older employees, causing a migration of older employees to the health insurance exchanges where they will be eligible for federal tax credits."

Howell is one of hundreds of commenters who responded to the proposed regulations that were published under the heading "PPACA: Health Insurance Market Rules; Rate Review" (CMS-9972-P) in November. 

At press time, CMS had posted 289 of the 465 letters it had received in response to the market and rate review rule proposal packet.

Scores of commenters said Marilyn Tavenner, the acting CMS administrator, and other CMS officials should have given members of the public more time to go over the proposed regulations.

Many other commenters talked about how they think CMS should apply PPACA to the student health insurance market.

Commenters from organizations such as the American Academy of Actuaries, the New York Health Benefit Exchange and the Wisconsin Association of Health Plans joined Group Health Cooperative in providing specific questions about what the regulations mean or detailed suggestions for ways to handle risk outside the student health insurance market.

Health policy watchers are hoping to reduce the risk that PPACA will cause the sickest consumers to flock to certain health plans, or certain types of plans, and capsize those plans.

Commenters also talked about ways to help people with serious health problems who now get coverage from state risk pool programs move into ordinary individual health insurance policies once PPACA underwriting rules take full effect.

PPACA and the CMS-9972-P regulations
PPACA opponents are still trying to block implementation of PPACA.

If PPACA takes effect on schedule and works as drafters expect, it will give individuals and small groups the ability to buy coverage through new exchanges, or Web-based insurance supermarkets, by late 2013. The coverage would start taking effect in 2014.  

PPACA also is imposing many other new requirements, such as requirements that each exchange plan offer a standardized "essential health benefits" (EHB) package, and that each exchange plan cover enough of the actuarial value of the EHB package to fit in one of four actuarial value "metal levels"  -- platinum, gold, silver or bronze.

PPACA will not let health insurers take an individual's health problems into account when deciding whether to issue coverage or to set rates -- unless the insurers are using certain types of health information in wellness programs. But insurers can charge the oldest insureds up to 3 times as much as they charge the youngest insureds, and the proposed regulations would set the rules for that "age banding" process. 

CMS posted the health insurance market and rate review regulation drafts around the same it was unveiling a test version of an actuarial value calculator and proposing regulations to implement PPACA EHB  provisions and PPACA group health plan wellness provisions.

The health insurance  market and rate regulation proposals deal with matters such as how much insurers can use sales rules, such as enrollment periods, to guard against the risk that consumers will pay for health coverage only when they are sick.

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Michael Abroe and Karen Bender, health policy specialists with the American Academy of Actuaries, gave CMS many ideas about specific mechanisms for managing risk.

The actuaries emphasized the need for regulators to think about the possible costs and side effects of proposals as well as the anticipated benefits.

Simply enrolling workers at small employers in health coverage automatically could dramatically increase the overall percentage of workers -- and the percentage of relatively healthy, low-claim workers -- who have coverage and pay health insurance premiums, but it also could impose new administrative burdens on the small employers, Abroe and Bender wrote.

Regulators also could reduce the risk that younger, healthy workers will continue to avoid buying coverage by finding a way to lower the younger workers' premiums, but that "would increase premiums for older individuals," the actuaries said.

Similarly, some regulators have suggested reducing PPACA-related adverse selection risk by taking a slow approach to shifting consumers with health problems from special "high-risk pool" pool programs into guaranteed-issue individual health plans, the actuaries said.

In the real world, shifting high-risk consumers into ordinary plans slowly "would not resolve any problems associated with these higher risks," the actuaries said. "It would only delay the problems."

Another problem is that PPACA has provided substantial reinsurance funding for 2014 but much less reinsurance funding for later years, the actuaries said.

"If the movement of individuals from [high-risk pools] is delayed, there will be a mismatch in the need for reinsurance subsidies to cover these individuals and the availability of these subsidies," the actuaries said.

One CMS proposal would limit a state from breaking itself into more than seven "rating regions" without HHS approval.

The Wisconsin Association of Health Plans was one of a number of commenters that talked about the rating region rules.

The association "recommends permitting health plans in states with competitive markets to have the flexibility to use rating areas defined by zip codes or counties to allow for greater accuracy in pricing," the association said. "The association opposes using a single rating area for the entire state."

If HHS has to set a single rating region rule for all states, or all states with federally run PPACA exchanges, the Wisconsin association would prefer to see HHS have the rating areas be counties, the association said.

Officials at the New York Health Benefit Exchange -- one of the organizations responsible for implementing the PPACA health insurance supermarket provisions -- also objected to the default limit on the number of rating regions.

"We encourage CMS to allow a state to establish more than seven rating areas if the state determines it is necessary for the integrity of its markets without having to propose more regions to CMS," New York exchange officials said. "Due to severely restrictive time periods to make this decision, states do not have the luxury to request CMS approve more than seven regions and will be tied to seven or less regions even if they are detrimental to their markets."

New York exchange officials also asked about how they should handle a number of instances in which existing state rules would be tougher on health insurers than the federal rules would appear to be.

Next week: We'll cover the consumer group comments on the market regulation proposal packet and comments on how the proposals in the packet might affect the student health insurance market.

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