State-based marketplace (SBM) leaders convened in Washington, DC last week to share experiences and ideas and meet with key Congressional staff in advance of this year’s open enrollment period.
SBMs, which exercise total control over their health insurance marketplaces in contrast to states that use the federal marketplace, are making considerable progress in reaching and serving the uninsured. However, confusion fostered by unclear federal policies — such as the recent public charge rule and the looming decision in Texas v Azar that could strike down the Affordable Care Act – has created a cloud of uncertainty that challenges all states.
Today, 13 states operate SBMs, including Nevada that transitioned to this model for the 2020 open enrollment season. Additionally, four states (ME, NJ, NM, and PA) have announced plans to transition to the SBM model, three of which are currently operating as hybrid SBM models that use the federal platform (SBM-FPs) during this enrollment season.
Officials from the newly transitioning states – New Jersey and Pennsylvania – were welcomed at the meetings. They explained that a desire for stable insurance markets, state sovereignty over their marketplaces, and the potential for financial savings drove enactment of their new laws to transition to the SBM model.
Pennsylvania Democrat Gov. Tom Wolf’s proposal to establish an SBM and a reinsurance program received unanimous support from the state’s Republican-controlled legislature. In New Jersey, the decision to launch an SBM came on the heels of earlier efforts to restore the individual mandate requiring coverage and a successful federal waiver application to begin a reinsurance program.
By “owning” their marketplaces through the SBM model, state officials indicated they believe they will more efficiently and effectively serve their constituencies through implementation of state-focused policies and tailored outreach that were not possible when they used the federally facilitated marketplace (FFM).
Data shared at the meetings underscored the greater success that SBM states have had in serving their populations. (View a slideshow about SBM advantages here.) Unlike states that use the FFM, SBM states have the flexibility to address the health insurance needs of local populations and, as a result, have:
- Maintained steady enrollment steady;
- Been more successful in lowering their states’ uninsured rates; and
- Helped more unsubsidized consumers find coverage.
While SBM states have held down premium cost growth better than FFM states, SBM leaders expressed urgency to do more to make coverage affordable, especially for middle-income consumers. This slide highlights a number of strategies SBM states are pursuing.
Five states are operating reinsurance programs – that subsidize coverage of high-cost enrollees – in partnership with the federal government and five more states will join their ranks in the 2020 plan year. The results officials presented made clear that reinsurance programs do lead to significant premium reductions and provides a tangible initiative for state insurance departments to hold insurers accountable through quantifiable premium reductions. But, state officials were quick to point out, state-run reinsurance programs are time-limited or are simply unaffordable for many states. The need to restore and make permanent a federally funded reinsurance program remains a priority even as states pursue other strategies to address affordability.
The message from SBM leaders who attended the Washington, DC meeting was clear – SBMs are succeeding, sustainable, and growing in number because they are on the ground, fine-tuning their operations, and growing their capacity to address local needs.
Should states integrate their health insurance and human services eligibility and enrollment systems? Some state officials are weighing this question now that their revamped, Affordable Care Act (ACA) health coverage systems have been operational for several years and most of the early, initial glitches have been repaired. However, there are multiple factors to consider, some of which are new now that state health systems are expected to make eligibility determinations for Medicaid, the Children’s Health Insurance Program (CHIP), and marketplace subsidies.
Integration of health and human service systems is not a new concept. Most, if not all, states have used one integrated system to determine eligibility for Medicaid, Temporary Assistance for Needy Families (TANF), Supplemental Nutrition Assistance Program (SNAP), and other means-tested public service programs. Over time, as these programs evolved, some states opted to create separate systems for their health programs.
When faced with implementing the ACA’s requirements for new, streamlined, technology-driven enrollment systems that include health insurance marketplaces and use Modified Adjusted Gross Income (MAGI), a new methodology to determine income eligibility, many states delinked eligibility determination for health coverage from other public programs. For these states, an integrated enrollment system for health coverage programs became the goal to ensure applicants could be screened simultaneously for Medicaid, CHIP, and marketplace subsidies in a way that appeared seamless for consumers.
Today, some state officials who are eager to close the uninsured gap, particularly for children, are considering the value of integrating health with other human services systems as a way to share applicants’ eligibility data across programs. In addition, as states work to address social determinants of health, seamless eligibility screening could help. However, considering many states separated their health programs in order to implement new health eligibility and enrollment systems to meet ACA requirements, most states seeking to integrate must now bring together very separate systems and in some cases very separate infrastructures.
Georgia and Rhode Island officials will attest that integration is challenging, but not impossible. Both have recently launched new, integrated systems that enable individuals to apply for as many as six programs simultaneously. Here are some of the key issues states need to address when developing integrated, eligibility-determination systems.
Tailor applications to enrollees’ diverse needs: Integrating systems to offer families a single application and entry point for all public programs may ensure they enroll and have access to all of the supports for which they are eligible. However, families with slightly higher incomes who seek to enroll children in CHIP and adults in a qualified health plans (QHP) with marketplace subsidies may be deterred by a lengthier application that includes questions for programs for which they know they are not eligible.
States that are integrating health and human services eligibility systems are creating two types of applications to meet applicants’ different needs and allowing them to choose which version to complete:
- One that includes questions to collect data necessary to determine eligibility for multiple programs, and
- One more simplified health coverage application.
Although developing two applications requires extra work for states, officials recognize the importance of designing applications that meet the needs of all individuals applying for these programs.
Prepare to explain notices to enrollees: State officials acknowledge that the “combined notice” created and sent by integrated eligibility systems can be confusing. For example, individuals who apply for QHPs will likely receive notices that they have been denied Medicaid and SNAP though they didn’t apply for or realize they would be screened for those programs. Educating frontline eligibility staff and call center workers who may receive questions about these denial notices can help clear up confusion.
Align policies, processes, and staffing: State officials report the more challenging aspects of integrating eligibility systems for multiple programs, aside from the substantial cost and detailed system programming, is whether a state’s infrastructure supports true integration. Is there an integrated workforce or do health and human service programs have separate eligibility staff? Is there an integrated business management process in place to support the workforce and systems or are there separate processes for each distinct program? Officials caution that without integrating policies, processes, and eligibility staff across public programs, the resulting integrated eligibility system will have limited success providing individuals and families with truly seamless access.
Establish effective IT governance structures: A strong governance structure that oversees and guides the integrated technology for these programs, known as IT governance, is essential. When departments of human services, Medicaid agencies (which may or may not include CHIP), and the health insurance marketplace all use one system, which agency decides on and pays for the priorities for upgrades and repairs? Different programs must collect and report distinct data to different federal agencies – some of that data may align well while other information is program-specific, which inevitably means each program will need its own database. Which program will use which database and how will they share data? What happens when data do not align – which data are used? All of these questions fall within IT governance purview and coordination of these issues is critical if a state is to efficiently and effectively operate an integrated, eligibility-determination system.
Other options to link health and human services eligibility systems: For states committed to streamlining enrollment in both health and human service programs, there are alternatives to fully integrating systems. There are data-sharing and enrollment-simplifying strategies, such as Express Lane Eligibility (ELE) that states can pursue to identify families that are not enrolled in Medicaid but are enrolled in other means-tested programs. Louisiana uses ELE to link SNAP with Medicaid, even though the state’s health and human services systems are separate. Families can indicate interest in Medicaid on their SNAP application and eligible children can be enrolled in both programs. Although ELE is simple for families and, once fully operational, is efficient for a state, implementing this strategy was work-intensive for Louisiana’s state agencies, though not as complicated as integrating their eligibility systems.
There is no correct answer to whether a state should integrate its health and human service programs. However, there are recent state lessons about application and design, policies, and governance for state officials to consider as they seek to share data and simplify eligibility and enrollment across public programs.
The National Academy for State Health Policy will continue researching and reporting case studies to highlight states’ experiences and lessons as they work to improve data-sharing across programs, which may include integrating eligibility systems.
State policymakers spent their summer crafting policies to educate and protect consumers in response to federal actions that threaten to alter state individual insurance markets. In recent months, the federal government issued new rules expanding the availability and sale of association health plans and short-term, limited duration plans and passed legislation effectively eliminating the individual mandate that required all consumers to purchase insurance.
While proponents claim the sale of these new association and short-term plans provide more low-cost choices for consumers, opponents express concerns that the plans do not comply with Affordable Care Act (ACA) mandates and may provide significantly fewer benefits (such as coverage of pre-existing conditions) that could destabilize state’s individual markets. (For more information, read The New Association Health Plan Rule: What Are the Issues and Options for States and Lower-Cost, Short-Term Insurance Plan Approved, But at What Cost to State Markets and Consumers?)
Below is a summary of recent state administrative and legislation actions taken in response to new federal changes:
Short-term Insurance Policies
- California’s legislature passed a bill to prohibit the sale of short-term, limited duration health insurance in the state. The bill is expected to be signed by the governor.
- Iowa issued proposed rules to align Iowa regulations with the new federal regulation granting longer terms and renewability of short-term plans. The regulation adds benefit, coinsurance, and dollar limit, minimum requirements for short-term plans. The rule establishes a 10-day cancellation period during which an enrollee can cancel coverage after enrollment, and it prohibits rescissions (when insurers rescind a plan and don’t have to make payments) and underwriting based on claims made after-enrollment. It also includes explicit language defining the warning information short-term plans must communicate to enrollees about their coverage.
- Washington State’s Insurance Commissioner Mike Kreidler has filed proposed rules to restrict the sale of short-term, limited duration insurance medical plans. The rule outlines specific benefits that must be covered by short-term plans, stipulates that plans can only cover a three-month period, prohibits plan renewals, prevents rescissions except in cases of fraudulent activity by the enrollee, and requires that all short-term plans are filed and approved by the insurance commissioner. The rule also includes specific and comprehensive language that all short-term plan carriers must include in their disclosure notices to all consumers who apply for a short-term plan.
- Connecticut issued a bulletin asserting the applicability of essential health benefits (mandated by the ACA) and pre-existing condition protection requirements to short-term plans as specified under Connecticut law.
- Pennsylvania’s Insurance Commissioner Jessica Altman announced filing requirements for short-term plans, so the state is able to review short-term plans that are offered under the new federal rules. The announcement also included a caution to consumers about the limits of these plans, with links to an educational brochure to help consumers compare short-term plans with other forms of coverage.
- The Colorado Department of Regulatory Agencies issued a consumer advisory on short-term plans, including a comparison of ACA-compliant insurance and short-term plans, an explanation of the risks from out-of-pocket spending that can accompany short-term plans, and resources for consumers to consult to help them understand their insurance options.
- Montana published guidance summarizing the new federal rule on short-term plans, with links to applicable state legislation and regulation governing short-term plans.
- Indiana and South Carolina issued similar educational bulletins, clarifying that federal regulations do not pre-empt existing state laws that regulate short-term plans.
- The Minnesota Commerce Department issued an FAQ for consumers about short-term plans, explaining the new federal rule and Minnesota law.
Association Health Plans (AHPs)
- Vermont issued emergency and proposed rules in response to the new federal AHP. The new rules impose regulations on AHPs, including:
- A prohibition on AHP rating based on demographic, or health status;
- A requirement that AHPs offer coverage to all people and dependents within an association;
- A mandate that AHPs meet Medical Loss Ratio rebate requirements; and
- Minimum benefit offerings.
The rule also extends the authority of Vermont’s insurance commissioner to conduct oversight over AHPs.
- Pennsylvania sent a letter to the US Department of Health and Human Services outlining the state’s interpretation of its authority in governing AHPs given existing state laws under the new federal AHP regulation. The US Department of Labor later affirmed Pennsylvania’s existing authority to regulate AHPs, as interpreted in the letter.
- Iowa issued new rules to assert “membership stability” requirements for associations, intended to protect consumers who participate in an AHP.
- New Hampshire announced plans to convene a working group of stakeholders to develop legislation that will set clear standards for AHPs sold in the state. It also released guidance to clarify the relationship between AHPs and the Employee Retirement Income Security Act (ERISA).
- Connecticut, Idaho, Louisiana, Maryland, and New Hampshire issued bulletins or guidance clarifying how state law works to regulate AHPs in conjunction with the new federal AHP rule, primarily clarifying where state law is not preempted by the new federal AHP rule.
- California’s legislature has passed a bill that prohibits the sale of group health insurance plans (such as AHPs) to a sole proprietorship or partnership without employees, limiting the effects of the new federal regulation which does allow for these sales. SB 1375 now awaits the governor’s signature.
- Washington, DC enacted an individual responsibility requirement, largely modeled after the ACA. The requirement, included as part of its 2019 Budget Support Act, will go into effect in January 2019. (For details, see DC Health Benefit Exchange Authority Executive Director Mila Kofman’s slides from the National Academy for State Health Policy’s (NASHP) 2018 annual conference.
NASHP will continue to track and report on new developments as states continue to weigh options and strategies to stabilize their markets and offer choice and affordable coverage to their consumers.
During NASHP’s 31st Annual State Health Policy Conference last week, experts and state officials assessed the dramatic sea changes that recent federal action has imposed on their individual health insurance markets, what they are doing to stabilize them, and what the future holds.
Below, NASHP summarizes what panelists said about the current state of their markets and how market segmentation – caused by the wider availability of short-term and association health plans — could impact state markets.
Making Waves: How Did the Market Get Here?
The cost of coverage purchased through the individual market has been on the rise. Dania Palanker of the Georgetown Center on Health Insurance Reforms explained that several factors are driving these increases, including:
- Increasing medical and prescription costs;
- Improved data on enrollee utilization of services;
- Adjustments related to the Administration’s elimination of cost-sharing reduction payments that helped reduce insurance costs for some exchange customers;
- Insurer changes in plan benefit or network offerings; and
- State and federal regulatory and policy changes.
Early reports on proposed 2019 rate filings indicate that rates are starting to stabilize. This is especially true in Pennsylvania, explained panelist Jessica Altman, Pennsylvania’s insurance commissioner, where the average increase is projected to be only 0.7 percent in 2019, with increased insurer offerings in most counties.
Panelists suggested that lower 2019 rate increases are in part due to insurers’ improved abilities to calibrate market risk and adequate product design and pricing. According to panelist Weston Trexler, Actuary and Bureau Chief of Product Review at Idaho’s Department of Insurance, premiums have nearly tripled in Idaho since 2011, but some of this increase was an adjustment to ensure insurer solvency after early losses. Where the average medical loss ratio for Idaho’s insurers had been approximately 115 percent in the early years following Affordable Care Act (ACA) implementation (meaning insurers were spending 115 percent of all premiums on medical services) insurers have now returned to more sustainable margins. Altman also suggested that an extension of the federal reinsurance program (which ended in 2016) and reinforcement of the risk corridor program (which was weakened by federal requirements that the program remain budget neutral) could have brought more stability to markets.
Market Segmentation: What States Can Do
Several panelists commented on the effect of increasing market segmentation on their individual insurance markets, including proliferation of coverage alternatives that draw consumers out of the individual market. Segmentation will be exacerbated by the expansion of short-term and association health plans in states due to new federal action, and by the spread of health care sharing ministries in several states.
Most of these lower-cost, coverage alternatives do not have to cover certain, pre-existing conditions. These skimpy products are targeted at young and healthy populations. Collectively, these options are expected to pull individuals out of the overall individual market, shrinking and worsening the risk pool of that market, which leads to premium increases for those that remain. As Trexler noted, there are pros and cons to making these products available, but separating risk from the individual market will drive up rates for those who are not eligible for subsidies through health insurance marketplaces.
Altman noted that these options create choices, but not for everyone, especially those with pre-existing or chronic conditions. She added that these new insurance options may hurt consumers in the long run as segmented risk pools could lead to excessive cost growth in the individual market, with coverage becoming increasingly unaffordable if and when individuals eventually need more comprehensive coverage.
States have broad latitude to regulate these products and may consider a multitude of legislative or regulatory actions to limit their effects based on what is best for their markets. In regards to short-term plans, for example, Jane Beyer, senior health policy advisory to Washington State’s insurance commissioner, acknowledged a legitimate need for short-term plans when individuals need temporary coverage to cover them between coverage programs (such as when the individual is between jobs, or on the cusp of qualifying for Medicare). However, to ensure that these plans are only available as a temporary solution, Washington has proposed regulations to limit the term of short-term plans to three months and to prohibit renewability of these plans. Altman noted recent action that Pennsylvania’s insurance department has taken to spell out the tight restrictions the department will impose on the newly-expanded association health plans.
Several panelists acknowledged that these insurance alternatives were not new, and some have existed in their states for decades. However, they cautioned these plans are being promoted as affordable alternatives to consumers, without clear mention of their limited coverage and financial protections. Panelists cited several actions states can take to mitigate these risks, including:
- Requiring that these “thin” coverage alternatives meet coverage or consumer protection requirements similar to those required of ACA regulated individual market plans; and
- Ensuring that consumers have adequate access to information about coverage alternatives, either by imposing transparency requirements (e.g., understandable explanations of benefit offerings and risks) on insurers and brokers who sell these plans, or by investing in state agency and local-community resources to help promote consumer education about these options.
Other panelists raised concerns about the growth of direct-to-provider payments (e.g., consumers paying providers directly for services, without insurance) in their markets. While providing an attractive alternative to consumers who can afford and are in need of only specific services, panelists noted this is also taking individuals out of their markets, especially in rural communities and communities with transient populations (e.g., ski towns in Colorado). Panelists had few strategies to address these arrangements, but reported they are monitoring trends to better understand their growth and impact on state markets.
Ultimately, state officials affirmed their commitment to ensure that their consumers are not put in a position of having to choose between adequate coverage and affordability. Panelists shared a number of strategies to stabilize markets, fill coverage gaps and address affordability.
Next week, NASHP highlights more strategies that state officials shared during the session: State Efforts to Stabilize the Individual Market.
Nevada’s marketplace is poised to become the first to transition from the federal platform to an entirely state-run exchange. Its director explains how the move will save millions and improve residents’ health insurance.
Under the Affordable Care Act, states can either administer their own health insurance marketplaces as state-based marketplaces (SBMs), or default to the federally-run marketplace. Nevada is one of five states that operate a hybrid model – a state-based marketplace that uses the federal platform. These hybrid states are responsible for plan management and outreach and recruitment, which includes marketing activities, running local call centers, and coordinating with the state insurance department, while using the federal government’s technology platform and website to perform eligibility and enrollment functions.
Nevada’s marketplace – Nevada Health Link — is poised to become the first state in the nation to move away from the federal marketplace and transition to a full SBM. By transitioning, Nevada seeks greater flexibility to operate a marketplace tailored for its residents, while enabling the state to save millions in operational costs.
NASHP sat down with Nevada Health Link Executive Director Heather Korbulic to discuss the motivation behind Nevada’s transition, the value of state autonomy, and the future of the marketplaces.
Can you share the history of Nevada Health Link and why you are making this change?
To provide some history, in 2011, Nevada had approved statute to operate an SBM. However, when that SBM launched in 2014, the system did not work, creating significant issues for our consumers and carriers. Nevada had to decide whether to try again or begin using the federal platform—mostly to conduct required eligibility and enrollment functions. The FFM [federally facilitated marketplace] was essentially working at that time, and our board decided to transition to the SBM-FP model [state-based model that used the federal platform].
For the first two years as an SBM-FP, Nevada did not pay to use the federal platform, but in 2015, we were given notice that SBM-FPs would be required to pay a user fee. In 2017, the fee was set at 1.5 percent of premiums of plans sold through the marketplace, going up to 2 percent in 2018, and 3 percent thereafter. For comparison, the FFM collects a 3.5 percent assessment from insurers who offer coverage in FFM states.
In total, Nevada charges insurers in our state an assessment rate of 3.15 percent of premiums to [sell plans and] operate the marketplace. With the planned increases to the user fee, in 2019, Nevada would be left with only 0.15 percent of the assessment to conduct all of the functionality required of the SBM-FPs. We believe this would make the marketplace insolvent and unable to adequately perform its required functions.
Could you help us understand what these functions are—what distinguishes you from the FFM?
SBM-FPs operate local consumer assistance centers and conduct plan certification. We do stakeholder engagement in coordination with sister agencies like Medicaid and the state health department. As a state agency, we comply with all state oversight requirements along with federally-required oversight requirements for the marketplace. We operate the state navigator program, and do all our own marketing and outreach. A significant portion of our budget goes to outreach, as we have seen this as key to generating robust enrollment [which helps drive competition and affordability]. The federal government is responsible for the Healthcare.gov website and operating the integrated eligibility system for the state. (See Table 1 for a comparison of marketplace models.)
I think the role of the SBM-FPs is overlooked in discussions of the marketplace. The Nevada exchange has really honed in on our capabilities as a resource for Nevadans. We have become an important part of our community and have demonstrated success. Our consumers, carriers, state agencies and lawmakers have come to depend on us to answer their questions. Nevada lawmakers and our governor have shown commitment to the value that our marketplace has brought to our state.
This past year has given us some of the best insight into the value of having some state authority over our functionality. The national cuts to marketing and outreach this open enrollment period, and the confusion surrounding the existence of financial subsidies led to enrollment declines in many FFM states. By contrast, Nevada saw an increase in enrollment this year of 2.2 percent. We believe it had everything to do with our marketplace being a resource for Nevadans to connect to subsidies, and our work with our navigators and stakeholders to hammer the message of this year’s shortened enrollment period through focused marketing.
|Table 1. State or Federal Authority over Marketplace Functions in Different Marketplace Models|
|Marketplace Functions||State-Based Marketplaces (SBM)||State-Based Marketplaces Using the Federal Platform
|Federally Facilitated Marketplaces (FFM)|
|Set and collect plan assessments||State||Both*||Federal|
|Qualified health plan review and certification||State||State||Federal**|
|Outreach and Marketing|
|Marketing and advertising||State||State||Federal|
|Integrated eligibility system||State||Federal||Federal|
|Online consumer tools (e.g., calculators, provider directories, formularies)||State||Federal**||Federal|
|Set special enrollment periods||Both***||Federal||Federal|
*Plan assessments are fees paid by insurers to sell their insurance product through a marketplace. In SBM-FP states, the FFM collects a portion of assessments, known as a user fee, to operate the FFM. The SBM-FP user fee was 1.5% of premiums in 2017, 2% in 2018, and will be 3% in 2019.
** While the federal government has primary responsibility for these functions, many states also perform these functions to assure compliance with state standard or to ensure consumers have access to resources tailored to state-specific needs.
*** The parameters for special enrollment periods (SEPs) are defined by federal statute and regulation, but SBMs have flexibility to institute SEPs responsive to exceptional circumstances identified by the SBM.
What sort of improvements and savings do you anticipate after moving to the SBM model?
Nevada is in a good position to negotiate, we are essentially asking vendors for a “marketplace in a box” with all the pieces we need to make this work. We are a state agency with finite resources and want to clearly understand the costs of this packaged system — including technology and call center operations — so we can assess if it is affordable and whether it will be at a lesser cost than the FFM. Many vendors have now developed tested and proven products in this regard, with a limited market to sell them to—it is a win-win for them to work with us. Together, we will find savings and efficiencies to offer a better user experience and help our consumers.
From our initial research, we have found that Nevada could save significantly by moving to a fully functional, demonstrated product. In 2020, the 3 percent user fee will be approximately $12 million for our state, but we estimate that with our own platform operational costs will be closer to $6 million — a savings of 50 percent!
We also believe this is a chance for us to control our own destiny by managing our own marketplace. Having been an SBM-FP for several years now, we have seen the limitations that come with working with the FFM. There is very little flexibility given to states — any small change we request to try to tailor the system is almost impossible to accomplish.
There is also a lack of insight into our own state’s data. Without data, we have no sense of who our consumers are at any given moment. We are periodically provided zip code-level data breakdowns from CMS [Centers for Medicare & Medicaid Services] during the year but, for the most part, we do not know who is actively engaged in the system during the open enrollment season or other detailed information necessary to conduct truly targeted outreach. We think there are budgetary efficiencies to be found by having access to our own data — it will enable us to potentially increase enrollment and gain efficiencies from more direct consumer targeting.
What have you learned from other SBMs that helped guide Nevada’s approach?
I have learned a tremendous amount from my colleagues across the country as far as the technical components of how an SBM operates, however, what I have really walked away with is that no two SBMs are alike. There are so many differences in the ways that SBMs operate depending on how the marketplace fits in the state. This has been a helpful observation for Nevada because we know how we operate now, and we want to bring on a system that can accommodate what we want to do and will work with our state’s insurers and agencies like Medicaid.
|“What I have really walked away with is that no two SBMs are alike. There are so many differences in the ways that SBMs operate depending on how the marketplace fits in the state.”|
What advice do you have for states that are exploring a transition to an SBM?
Potentially, a state would need to pass some enabling legislation. Then they would need to invest in state agency staff and a small budget to operate the marketplace before it can begin collecting revenue. In Nevada, we have set aside $1 million for design, development, and implementation of our marketplace. Ultimately, it is a matter of investing and committing to the values that a SBM brings to a state and finding long-term savings.
There are many pending federal policy changes that bear national significant implications for health insurance coverage and marketplaces. What could these changes mean for consumers in Nevada?
In 2017, and continuing into 2018, we have seen uncertainty related to the ACA. We have come through the legislative endeavors to repeal the ACA last year, and now we are looking at executive rulemaking processes that could create disruption for our markets in Nevada.
I am concerned about rule-making related to Association Health Plans and what ability the state has to regulate those plans. I am also concerned about the Short Term Limited Duration Insurance proposed regulation. There is a time and place for short-term plans — for when consumers are between jobs or if they missed the open enrollment period — but these plans are not long-term solutions. We are concerned that consumers who do not qualify for premium subsidies will see these short-term plans as viable alternatives to qualified health plans, even though they do not offer the same level of benefits or consumer protections. We have seen some brokers try to game the system by directing consumers to enroll in a string of short-term plans, so that they can gain commissions for each enrollment, but ultimately that is not in the best interest of the consumer [who will have limited coverage, and have to manage constant shifts in benefits and networks].
During this upcoming open enrollment period, our marketplace will be focused on education campaigns to make sure we demonstrate to our consumers the value of having continuous coverage that meets the standards required for qualified health plans.
Is there anything else you feel it is important for leaders and consumers to know about your transition?
Everything that Nevada has had control over has been a demonstrable success. We have successfully made ourselves known as a resource in our community and for our consumers; we really are an important institution in our state. I believe the investments we are making in our new platform and the resulting savings we will achieve should be of interest to every state that wants to bring value to their insurance landscape.
View Nevada’s Request for Proposal for a technology vendor to help the state become a fully state-operated program.
Thank you to Heather Korbulic and Janel Davis of Nevada Health Link for their time and contributions to this article. Thank you to Christina Cousart, Trish Riley, Chris Kukka, and Rohan Narayanan for their critical support and feedback to this blog.
NASHP supports the State Health Exchange Leadership Network that provides a platform for state health insurance marketplaces staff and leaders to participate in peer-to-peer dialogue, discuss emerging issues, and share best practices. To learn more about the Network or NASHP’s work with the state-based marketplaces, contact Christina Cousart (firstname.lastname@example.org)
Last week, the US Department of Health and Human Services (HHS) released rules governing Affordable Care Act health plans in 2019 that give states the flexibility to revise what insurance plans are sold through their individual and small group marketplaces, and give consumers the option to buy “thinner” plans at lower prices.
The long-awaited final 2019 Notice of Benefit and Payment Parameters is significant for the immediate and longer-term changes it makes to state insurance markets. Initial filing deadlines for 2019 insurance rates are rapidly approaching in May and June, so states must act quickly if they want to implement any of the options granted to states under the rules, options that could affect rates for 2019. Generally, the new rules would:
- Grant states greater insurance plan management authority. States could adjust risk and rating rules and establish new essential health benefit (EHB) benchmarks that all plans sold through their marketplaces must comply with;
- Change the parameters for some products sold through the insurance marketplaces; and
- Allow states to make changes to enrollment, verification, and outreach requirements for the health insurance marketplaces.
Below are some of the significant changes that could impact states and consumers.
New Flexibility and Options for States as Regulators
In its release, the Administration touted the rules’ efforts to increase state oversight and flexibility. The rule allows states to significantly change the composition of plans sold in the individual and small group markets. States now have the ability to:
- Raise rate review thresholds. Current rules mandates an automatic review of any requested rate increases of more than 15 percent. The new rule reinforces that this is a minimum threshold and specifies that states must request permission from HHS if they wish to establish a higher review threshold. This would apply to states that expect justifiable increases above 15 percent and want to avoid the administrative burden of reviewing these increases.
- Change the standard 80-20 medical loss ratio (MLR). MLR changes could provide more flexibility to insurers to apply premium dollars toward administrative costs versus directly on coverage. While the changes may allow for better allocation of premium dollars based on actual cost of administering coverage, it also could promote system gaming for insurers who use MLR changes to finance larger profit margins.
- Set filing deadlines for non-qualified health plan-compliant products, separate from deadlines established for qualified health plans (QHPs).for QHPs , potentially giving non-QHPs a competitive advantage by allowing them to file rates for products after rates are filed for QHP.
- Adopt a new essential health benefit (EHB) benchmark plan in plan year 2020. The rule permits states to:
- Adopt the EHB of another state in its entirety or adopt the benchmark for any of the 10 specified EHB categories from another state;
- Maintain the state’s prior benchmark;
- Adopt a new benchmark that is no more generous than benchmarks used in 2017; and
- Allow insurers to substitute benefits between EHB categories.
The rule intends to allow for greater innovation in health insurance benefit design. Every state’s new benchmark must still include benefits across all 10 EHB categories and benefits must be balanced between categories. It prohibits states from increasing the scope of their EHB to be more generous than what existed in 2017.
- Modify risk adjustment payment transfers. The rule permits states to adjust payments made to insurers under the risk adjustment program. Currently, the federal government provides payments to insurers under a standard national formula, but states may seek to adjust how payments are distributed to its insurers in a way that is more reflective of the state’s unique market conditions. States may request that payments be adjusted by up to 50 percent. Adjustments would be applicable to payments beginning in 2020.
The rule also gives greater authority to states to conduct oversight for products sold in their marketplaces, including review of:
- Insurers who request rate increases that are outside of acceptable thresholds;
- Network adequacy standards; and
- Essential community provider requirements.
While many states already review their insurance marketplace products, some may need to adjust resources to ensure that their insurance agencies can conduct adequate plan oversight to ensure that they meet federally-designated standards for these requirements.
Changes to Products Sold by Health Insurance Exchanges
The rules make several changes to the markets and their products, which could have direct impact on consumers. For example, they:
- Eliminate meaningful difference standards. Prior regulation prohibited insurers from selling health plans that were not “meaningfully different” from other products sold on the exchange. The intent was to reduce consumer confusion by making it easy to compare plans without too many duplicative options. . The new regulations eliminate this requirement, potentially increasing the number of products sold. States with state-based exchanges may continue to prohibit the sale of “meaningfully different” plans through their exchanges.
- Eliminate standard plan designs. Standard plans were designed to provide consumers with a choice of insurance products with nearly identical benefit offerings, allowing consumers to comparison shop between plans based on other factors such as provider networks or estimated out-of-pocket costs. These plans received a prioritized display through the federally-facilitated exchange (FFE). The FFE will no longer encourage or prioritize the display of these plans. State-based exchanges may continue to offer standard plan designs and promote these plans through their exchanges.
- Eliminate actuarial value requirements for stand-alone dental plans. While the change could reduce the value of dental plans sold through exchanges, it could result in dental plans with lower benefits and higher out-of-pocket risk, though plans would be sold at lower cost. Dental plans are required, at minimum, to provide coverage in compliance with minimum EHB benchmarks for pediatric dental;
- Reduce the maximum annual cost-sharing limit for households earning between 100 to 250 percent of the federal poverty level (FPL). Current rules mandate a maximum limit on the amount of cost-sharing benefits provided under plans eligible for cost-sharing reductions (CSR). This maximum limit is intended to ensure that CSR-eligible plans will not exceed their designated actuarial value. Specifically, the rule would reduce the maximum limit by one-fifth for individuals earning between 200 to 250 percent of FPL, and by two-thirds for individuals earning between 100 to 200 percent of FPL. HHS acknowledged concerns that the changes could result in higher costs for enrollees.
Changes to Outreach, Enrollment and Verification Processes
The rules could alter enrollment and verification standards for consumers who enroll in coverage through the health insurance exchanges. The rules also make significant changes to outreach and enrollment tools such as the Navigator Program. Changes include:
- Elimination of enrollment functionality for Small Business Health Options Program exchanges (SHOP). They would institute significant changes to eliminate SHOP as an enrollment mechanism for small group health insurance. Businesses may instead enroll directly with insurers or through brokers. SHOPs must still perform certain functions, including plan certification, maintenance of shopping tools, and a call center, and conduct eligibility determinations for employers. States may opt to maintain their own state-based SHOPs than can perform enrollment functions.
- Requirements for stricter income verification for self-attesting individuals earning between 100 to 400 percent of FPL. The changes mandate that exchanges conduct stricter review when federal data sources indicate that an individual’s income may be below 100 percent of FPL even when the individual attests to having income above 100 percent of FPL. This change is intended as a program integrity measure to ensure that consumers do not overestimate income to reach the 100 percent of FPL threshold at which point they qualify for tax credits to purchase insurance. However, stricter guidelines may cause enrollment and verification challenges for individuals whose income is inconsistent and near the 100 percent of FPL threshold, at which the consumer qualifies for APTC. In this situation, it is difficult to apply strict verification standards in ways that do not inadvertently prohibit the individual from acquiring coverage.
- Reductions in requirements for Navigator entities. The rules no longer require exchanges to maintain at least two Navigator entities, including one that must be a community and consumer-focused nonprofit group. They also eliminate the requirement that Navigators have a physical presence in the region serve.
- Restrictions over the types of plans consumers may enroll in during special enrollment periods (SEPs). To promote consistency for insurers and markets, the rules require individuals to only enroll in plans in the same metal tier as the plan the individual was previously enrolled in, when the SEP is triggered by the addition of a dependent.
- Allowances for a SEP to be triggered by loss of unborn child Children’s Health Insurance Program (CHIP) coverage. States can opt to provide pregnancy-related coverage through the “unborn child” option that includes a limited benefit package that may not meet ACA’s minimum essential coverage (MEC) criteria. Because the coverage may not qualify as MEC, women seeking insurance after either the loss or birth of their child have experienced issues qualifying for a SEP and may have to go uninsured until the next open enrollment period. This change allows the once-pregnant woman to qualify for a loss of coverage SEP when CHIP’s unborn child coverage has expired.
- Flexibility in oversight over direct enrollment (DE) entities. Allows DE entities to choose their own auditors and outlines the process for conducting readiness-reviews for DE entities. States may consider additional regulation if they wish to impose stricter oversight requirements over DE entities.
Implications for States
States must carefully weigh potential tradeoffs in adopting any of the changes under the rule. While the flexibilities given to states are designed to equip states with more tools to promote affordability and choice in their markets, any change could also significantly alter market risk, or prompt perverse market outcomes. For example, states that seek to alter EHB benchmarks to limit benefits as a means of reducing plan costs, put consumers at risk of increased out-of-pocket spending if the consumer is in need of benefits that are no longer required under the new plans. Changes to the risk adjustment payments could undermine how insurers are currently protected from taking on risk, making them more adverse to offering products to populations who are most in need of services.
Where the new rules eliminate existing standards, state regulators may consider establishing their own requirements in lieu of what had previously been established. This option may especially apply in states that operate their own state-based exchange and have more authority over how plans are presented and sold through their exchanges. States may also consider developing new resources or changing their outreach strategies to ensure that consumers have resources to understand changes — like those made to enrollment processes — so they will enroll in appropriate plans. NASHP will closely monitor and report on how states’ are responding to these rules in the coming months.
State health policymakers are eagerly waiting to see if Congress’ omnibus budget bill released this week will attempt to stabilize Affordable Care Act (ACA) insurance markets by reinstating ACA’s cost-sharing reduction (CSR) payments. An early proposal by US Sen. Lamar Alexander would fund the cost-sharing subsidies, which reduce a family’s out-of-pocket health care costs, retroactively from 2017 through 2021.
While this is a potential solution to how the federal government can subsidize health insurance for some consumers who purchase insurance through ACA markets, data collected by the National Academy for State Health Policy (NASHP) illustrates the complex interplay between marketplace subsidies and consumer decisions that states face.
States and insurers demonstrated incredible dexterity in quickly redesigning insurance plans in response to the Administration’s late-in-the-game decision to end CSR payments in October 2017. The result was that consumers faced new confusion as insurance plans were revamped and repriced in 2018, resulting in major enrollment shifts both off and within health insurance marketplaces. Below, NASHP presents 2018 enrollment data collected by state-based marketplaces (SBMs), which closely manage their own exchanges, highlight how state actions to address the loss of CSR funding influenced market decisions in 2018. Key findings indicate:
- Decreased enrollment in marketplace silver plans, especially among consumers who no longer had access to CSR subsidies and who did not qualify for tax credits;
- Enrollment growth in marketplace bronze plans;
- Mixed enrollment growth or declines in gold plans; and
- Mixed growth, and some declines in the total number of subsidized enrollees in the marketplaces.
The findings do not provide a complete picture of what has occurred in markets nationwide, as the data represent only 10 states and do not include complete information about off-marketplace enrollment patterns or full consideration of other factors that may have influenced enrollment during the 2018 enrollment period, including shortened enrollment periods and other factors influencing premium costs. However, they provide a glimpse into how states’ markets reacted to federal policy shifts and the serious ramifications of CSR changes wrought by Washington on consumer purchasing behaviors.
Under the CSR program, insurers are required by federal law to cover certain out-of-pocket expenses (e.g., deductibles, copayments, coinsurance) for enrollees with incomes below 250 percent of the federal poverty level (FPL). CSRs are only available through silver-level health plans purchased on the state or federal health insurance marketplaces. Typically, silver-level plans have an actuarial value (AV) of 70 percent, meaning that the plan must cover in aggregate at least 70 percent of the health care costs received under the plan. CSRs change the AV of plans by varying amounts depending on the income of the qualifying consumer (see Table 1).
|Table 1. Qualifying for CSRs|
|To qualify for the ACA’s CSR program, consumers must purchase silver-level health plans and have incomes between 100 to 250 percent of FPL, which in 2018 ranged from $16,642 to $30,150 for individuals and from $33,948 to $61,500 for a family of four.|
|CSR-Eligible Plan||Standard Silver||Silver 73||Silver 87||Silver 94|
|Income||Any||200-250% FPL||150-200% FPL||100-150% FPL|
The ACA designed the CSR program so that insurers would be reimbursed for expenditures incurred under the program, and would be paid back whatever costs were charged to ensure that consumers who received services were only paying out-of-pocket expenses in line with the AV of their CSR-eligible health plan.
Questions about the exact language of the CSR law spurred litigation over whether it was legal for the government to issue reimbursements without an explicit appropriation for the program. Pending the outcome of this litigation, the Administration stopped issuing CSR reimbursements.
Response to Elimination of Federal CSR Reimbursements
After the Administration stopped CSR payments last October, most state regulators directed their insurance carriers to adjust their 2018 premium rates to account for CSR losses. Not responding to the issue would have left insurers exposed to the lost federal funding, possibly resulting in insurers opting to not participate in markets. As CSR payments most directly affected silver-level plans sold on the marketplaces, most states and carriers opted to load premium increases onto silver-level plans offered through their insurance marketplaces. The Congressional Budget Office (CBO) estimated that silver plan premiums increased by 10 percent on average in 2018 in response to elimination of CSR funding. Among the states that operate their own marketplaces, only three did not load the increases onto their silver plans. These included:
- Colorado, which advised its insurers to distribute premium increases across all metal levels to mitigate the effect on silver-level plans;
- Vermont, which similarly distributed premium increases across all metal levels due to uncertainty over the effects of the changes on its uniquely-merged individual and small group markets; and
- Washington, D.C., which calculated that elimination of the CSR payments would have minimal effect on its market due to low enrollment of CSR-eligible individuals.
CSR Loading Had Differing Impacts on Subsidized and Non-subsidized Consumers
Silver-loaded premiums shifted the affordability and value of plans offered through marketplaces, distorting costs and participation in the markets. For consumers who were eligible for premium tax credits to subsidize their coverage (82 percent of marketplace consumers in 2017), some coverage options became even more affordable. This is because the tax credit is calculated based on the second-lowest-cost silver plan available to a consumer. As a result, as silver premium costs increased in response to CSR elimination, so did the total amount of tax credit a qualifying consumer could receive. This increase in tax credits — combined with more marginal increases in premiums for bronze- and gold-level plans than for silver plans — meant that both bronze and gold plans became more affordable for these consumers. Availability of these more affordable plans may have attributed to the enrollment increases seen in some states’ marketplaces.
While the silver-loading strategy served the important purpose of insulating lower-income consumers from CSR losses, it resulted in increases costs for consumers who were ineligible for tax credits. The increased premiums escalated affordability concerns and forced many of these consumers to seek cheaper options, either by enrolling in lower-value bronze plans or by disenrolling from marketplace coverage entirely. These changes had important repercussions for both consumers and insurers participating in the markets.
- Distorted market competition and enrollment. CSR payment elimination had disproportionate effects on marketplace insurers as they adjusted premium rates differently based on the proportion of CSR-eligible consumers enrolled in their plans. Insurers with a greater proportion of CSR-eligible individuals increased premiums by a higher amount than those with fewer CSR-eligible enrollees. In California, for example, CSR-induced premium rate increases ranged from 8 percent to as much as 27 percent. This lead to a distortion of premium prices between insurers and generated shifts in market share as consumers switched to insurers whose plans had smaller premium growth.
- Increased consumer susceptibility to out-of-pocket spending. The lower-cost bronze plans, which offer less coverage, enticed more consumers to purchase them. While this lowered consumers’ annual spending on premiums, the lower AV of bronze plans means that these consumers are at greater risk of higher out-of-pocket spending. This is especially true for consumers who were once CSR-eligible but switched from silver to bronze plans without considering the resulting out-of-pocket costs.
- Complete disenrollment from individual market coverage. While the total impact of CSR changes on enrollment cannot be known without additional data about off-marketplace enrollment, it is highly probable that premium increases and confusion over the changes in premium costs spurred some non-subsidized consumers to drop insurance coverage altogether. These drops in coverage led to altered market risk pools and premium increases.
Consumers Shifted Purchasing Patterns in 2018
While it is not possible to determine the absolute effect of CSR elimination on consumers’ behavior, initial data collected by the 10 SBM states indicate that state and insurer decisions to silver-load influenced consumers’ choices in 2018. Key patterns that emerged include:
- Disenrollment in silver-level health plans, especially among unsubsidized consumers: While the majority of consumers from these states continued to select silver-level health plans, there was an almost a universal drop in the proportion of enrollees selecting silver-level plans (exceptions include Colorado and Vermont, which did not silver-load, and Minnesota, whose Basic Health Program for consumers earning up to 200 percent FPL offset the effect of CSR losses.) As expected, shifts away from silver plan selections were more common among individuals who did not receive tax credits.
- Growth in enrollment in bronze plans: There was almost universal growth across all states in the proportion of enrollees who selected bronze plans, with the exception of Minnesota and Vermont, which only saw marginal reduction in bronze plan selections.
- Varied growth or disenrollment in gold plans: Changes in gold selections vary across states, from Colorado where the proportion of gold enrollments dropped by nearly one-third to Maryland where gold enrollments increased nearly four-fold.
Different trends in enrollment among subsidized and unsubsidized consumers in these states indicate that CSR policies did not by themselves drive shifts in enrollment. It is also likely that the total effect of the CSR issue varied greatly across all states, depending on several factors including:
- The proportion of unsubsidized marketplace consumers in the state — especially those enrolled in silver plans who were most susceptible to silver-loaded premiums; and
- Baseline premium prices of bronze or gold alternatives for consumers seeking to shift away from silver plans.
Investments in education and outreach also affected how consumers responded to CSR-loading in various states. The Massachusetts’ Health Connector, for example, was among several states that took extensive steps to urge its unsubsidized silver-plan enrollees to seek more affordable options either on or outside the marketplace. Connector officials reported that they were successful in moving 82 percent of affected enrollees into new coverage plans. This meant that 18 percent of unsubsidized consumers remained in silver plans, despite its aggressive outreach efforts to inform consumers about the availability of more affordable options.
Outlook for States and Markets Pending Federal Action
While this information provides a snapshot of enrollment patterns in 2018 from 10 states, it indicates that responses to the CSR funding elimination had diverse effects on states’ markets and consumers. Similarly, if CSR funding is reinstated, the effect will reverberate differently across states’ markets and consumers. Significant changes could mean another year of disruption for insurers, who will need to adapt products and rates based on shifting federal policy, and consumers, who may need to once again actively shop around and switch plans next year. The CBO estimates that 500,000 to 1 million consumers would become uninsured from 2020 to 2021 if CSR funding was reinstated. These would mostly impact consumers with incomes between 200 to 400 percent FPL who would no longer would benefit from tax credits, which are larger than CSR subsidies.
While states and insurers rapidly responded to the Administration’s decision to end the CSR program in 2017, an absence of clear policies and continuous last-minute changes will spur unrest in markets. Without sustainable policies to stabilize the individual market, consumers will face higher costs, confusion, and anxiety about whether insurance coverage will be available when they need it.
While CSR funding remains a concern to some states, states are also seeking solutions that could bring immediate stability to markets, such as federal reinsurance funding. Whatever policies are implemented this spring, time is of the essence as state regulators are already in active negotiations with their insurers for 2019 offerings, with rate filings expected in some states as early as May. Ideally, future federal policies will grant states sufficient time and flexibility to respond to policy changes in a manner most appropriate for their markets.
Click here to view a chart comparing marketplace enrollment by metal level in California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Rhode Island, Vermont and Washington State.
Last month, the departments of the Treasury, Labor, and Health and Human Services released a proposed rule that changes the definition of short-term, limited-duration insurance (STLDI) plans to make it easier to sell the plans, which do not have to adhere to Affordable Care Act (ACA) requirements, such as covering people with pre-existing conditions.
This proposed rule is the latest federal action to implement President Trump’s Executive Order promoting “health care choice and competition” in the United States. The cumulative effect of this proposed rule plus elimination of the individual mandate penalty and increased availability of association health plans under another pending rule is expected to significantly affect states’ insurance markets in 2019.
STLDI is insurance that individuals can purchase on a short-term basis, particularly consumers who need to fill a gap in coverage — such as when they change jobs and need interim coverage until their new employers’ insurance kicks in. Short-term plans are largely unregulated and exempt from many federal regulations, including several enacted under the ACA, including:
- Guaranteed issue: Requires insurers to cover individuals regardless of pre-existing conditions;
- Community rating: Prohibits insurers from charging consumers more for coverage based on their health rating;
- Annual and lifetime limits: Prohibits insurers from setting annual and lifetime dollar limits on the amount of their plans’ coverage;
- Medical-loss ratio: Requires insurers to spend at least 80 percent of premium dollars received on health care services; and
- Essential health benefits: Requires all plans to cover certain benefits within 10 defined categories, including hospitalizations, maternity care, mental health and substance use disorder services, and prescription drugs.
Often, short-term plans are designed as low-cost, low actuarial value products targeting healthy individuals. States can impose their own laws and regulations over STLDI policies – even stricter than federal regulations. However, currently states have differing levels of regulatory oversight over STLDI. Given the federal government’s proposal to enhance the sale of these plans, some states are now reviewing and tightening their legislative reach over these short-term plans to make sure the consumer protections they want are in place in their markets.
Major Rule Changes Proposed
The proposed rule includes several changes aimed at expanding the availability and access to STDLI plans. The rule:
- Allows for short-term plans to be sold to consumers covering a period of less than 12 months;
- Allows for individuals to reapply for short-term plans, which had been prohibited under prior federal regulation;
- Stipulates that consumers who purchase these plans must be informed that these short-term plans may not comply with ACA requirements; and
- Continues to allow federal and state governments to not enforce STLDI regulations codified in 2016 insurance regulations.
The rule would be effective 60 days after enactment of the final rule, meaning that short-term plans meeting these parameters could be sold as early as this year.
This rule contrasts with a 2016 rule that stipulated that short-term plans could only be sold for a period of three months and limited consumer’s ability to renew STLDI coverage. The 2016 rule was designed to limit any negative impact that short-term plans could have on premium costs and risk mix of plans sold by state ACA marketplaces.
Effect of STDLI on State Insurance Markets
There is no question that the proposed rule will have a significant impact on most state markets. While short-term plans provide consumers with low-cost insurance options, the coverage is expected to provide limited benefits with high deductibles, putting consumers at risk of large out-of-pocket costs if they need to use comprehensive health services. Moreover, increasing the availability of short-term plans will draw consumers out of the individual market risk pool and could raise the risk of adverse selection—or unhealthy risk mix-in other individual market plans, including plans offered by state and federal health insurance marketplaces.
If enacted this year, the rule could lead to insurer instability in 2018. These carriers are locked into contracts and pricing that depended on a defined risk mix of customers – including a mix of healthy individuals and those with costly health care needs. Insurers could experience financial losses if healthy consumers leave these plans and enroll in STLDI plans this year. The rule will also lead to premium increases for individual market coverage offered in 2019 and beyond. The proposed rule estimates that 100,000 to 200,000 individuals will drop out of marketplaces to enroll in short-term plans in 2019.
Enrollment in short-term plans will be exacerbated by the elimination of the individual mandate penalty passed in the December 2017 Tax Reform Bill. Without a mandate requiring people to purchase “minimum essential coverage” (insurance that meets federal regulatory standards), consumers will be free to purchase de-regulated coverage options like STLDI. A recent Urban Institute analysis estimated that 4.2 million individuals would enroll in STLDI plans in 2019 if the rule were enacted as proposed. The report also estimates that individual market premiums will increase by an average of 16.4 percent in 2019 due to the cumulative effect of the loss of the individual mandate penalty and the enactment of the STLDI rule. See The Potential Impact of Short-Term Limited-Duration Policies on Insurance Coverage, Premiums, and Federal Spending for state-by-state estimates.
State Actions to Address STLDI
States have authority to impose their own regulations over short-term plans sold in their markets. Some have explicitly exempted short-term policies from benefit and other requirements imposed on other health insurance products. This enables issuers to offer low-cost options in certain states that serve as insurance protection against catastrophic events, but do not provide comprehensive coverage. Others have heighted restrictions over the sale of short-term plans in order to:
- Preserve a healthier risk mix in their individual markets; and/or
- Protect consumers against misleading marketing tactics practiced by some STLDI issuers and exorbitant out-of-pocket costs that might result.
As described in the Urban Institute’s report, Massachusetts, New Jersey, New York, Oregon, Vermont, and Washington currently have laws that would prevent an expansion of STLDI. Michigan and Nevada have laws to “limit STLD policy expansion.”
A few state legislatures have taken up STLDI insurance legislation during their current sessions. Proposed legislation in Missouri (HB 1685) and Virginia (SB 844) will conform state STLDI policies with those under the proposed federal rule, specifically to allow the sale of short-term plans that cover up to 364 days. Additional legislation is pending in Missouri (SB 860) to exempt STLDI from meeting requirements imposed on other health insurance products while also enforcing specific disclosure notices that STLD issuers must provide to consumers to inform them about the limited scope of this coverage.
Legislation in New Jersey and Vermont would state tighten regulation over STLDI. New Jersey’s (S 1210) legislation would require STLDI policies to meet the standards of other health insurance products. Vermont’s (H 892) would institute the 2016 federal regulation requirements by restricting the sale of products to only three months and limiting the renewability of short-term plans.
The release of this proposed rule carries additional weight for states that are currently in the midst of negotiating 2019 health insurance rates with their carriers. Absent strong state regulations, some states may have to set rates without knowing what will be enacted in the final rule.
The National Academy for State Health Policy (NASHP) will continue to monitor state actions during the current legislation session and rate-filing season to share critical information about the impact of these policies on states. Comments on the proposed rule are due April 23.