Health and Human Services (HHS) issued a final rule on February 22, 2013.
A summary of the key provision include:- Single risk pool - After January 1, 2014, health insurance companies must have one individual market pool and one small group market pool in each state. States may choose to require issuer merge these pools. This provision prevents insurers from using separate insurance pools with markets to circumvent the market reforms and charge people with greater health problems higher premiums.
- Fair health insurance premiums - Health insurance companies may vary the premium charged to a specific individual or small group from the rate for a particular plan limited to the following factors: family size, geography, age and tobacco use. These rules standardize how insurance companies can price products, bringing transparency and fairness to their pricing methodology.
- Family Rating: Premiums for each family will be calculated by adding the rate for each covered family member over 21 and for the oldest three covered children under age 21. Premiums will be adjusted for age and tobacco use. The final rule recognizes for all states and markets a single age band for children 0 to 20, one-year age bands for adults 21 through 64, and a single age band for adults 64 and older. Age will be determined once a year, at the time of issue or renewal.
- Small group rating: Companies will use a per-member rating methodology in the small group market. States may require companies to base small group premiums on an average amount for each employee in the group, provided that the total group premium equals the premium that would be obtained through the per-member rating approach.
- Geographic rating: Rating areas to be based on counties, three-digit zip codes, or metropolitan statistical areas (MSAs). States may establish more geographic rating areas with HHS approval. The areas my not vary by insurance product.
- Tobacco use: There is concern that the current 1.5:1 rating provision may leave many tobacco users without access to affordable insurance. The final rule attempts to offset the impact of the higher rating by requiring small group plans to offer tobacco cessation wellness-program discounts to reduce the surcharge. This does not help the individual market since cessation programs are not typical for individual insurance policies. Tobacco use is defined as the use of any tobacco product four or more times a week on average within the last six months. States have the flexibility to enact more consumer protective definitions or look-back periods, or even reduce/eliminate the surcharge altogether.
- Guaranteed availability of coverage - Insurers must accept every employer or individual who applies for coverage in the group and individual market. Insurers may limit coverage to 1) open and special enrollment periods, 2) only to those that reside in the service area, and 3) up to the insurer's network capacity. Small and large employers cannot be denied coverage due to failure to satisfy the minimum participation or contribution requirements. To mitigate adverse selection risk, there will be limited open enrollment periods in the individual market. Enrollment for "special" circumstance triggers (e.g., loss of other coverage, birth, marriage, etc.) will be 60 days for the individual market and 30 days for the group market. Future guidance will further address strategies to limit adverse selection related to guaranteed availability. Adverse selection is covering only the unhealthy, instead of a mix of healthy/non-healthy. Purchasing needs to be monitored, so that people will purchase coverage when they are healthy, not only when they are sick and need the coverage.
- Guaranteed renewability of coverage - The insurance company may not cancel coverage with very few exceptions. For instance, an insurer may cancel for non-payment, an insured moving out of the service area, no longer eligible for a particular form of coverage (such as catastrophic) or the exit of the insurance company from a particular market.
- Rate review - Insurance companies are required to submit to HHS all rate increase proposals, not just those exceeding a previously set reasonable threshold. HHS will allow states to make the rate review decisions for states with an "effective rate review program."
- Catastrophic plans - Catastrophic plans will be available to individuals who are certified by the exchange as exempt from the individual responsibility requirement because of affordability, or who are under age 30 at the beginning of the plan year. Catastrophic plans must cover at least three primary care visits in addition to the preventive services that all plans are required to cover.
- Special plan types - The final rule exempts all student health insurance coverage from the single risk pool requirements. Clarification was also issued that student health insurance coverage is not subject to federal rate review requirements at this time. Future guidance will be issued on the applicability of the market reform provisions to expatriate plans.
The Rockwood
Company - Insurance Brokers since 1896 - To find out more about healthcare
reform and how it affects your business, please feel free to contact me at
ddoe@rockwoodco.com or 312-621-2215.
