Update: Health Care For Rural Americans. It has been widely reported that the ACA has now covered about 20 million non-elderly adults and that the uninsured rate is, at 9.1 percent of the total population, the lowest it has ever been. The office of the HHS Assistant Secretary for Planning and Evaluation (ASPE), however, continues to examine how the ACA is affecting various population subgroups.  On June 10, ASPE published a new report focusing on health care for rural Americans.

Surveys have found that coverage rates among non-elderly adult rural Americans increased at rates equal to or greater than coverage rates for urban Americans between 2013 and 2015—about 8 percentage points.  This equals an approximately one-third reduction in the uninsured rate. Growth in coverage was significantly greater in states that have expanded Medicaid: 9.1 percentage points to 5.7 percentage points. A total of 1.71 million consumers living in rural areas enrolled in marketplace coverage for 2016, an 11 percent increase over 2015, compared to an 8 percent increase for urban consumers. 88 percent of rural consumers received premium tax credits.

Surveys also show that rural consumers have experienced improved access to care since the ACA took effect. Between 2012 and 2015, the share of individuals living in rural areas who report that they are without access to a personal physician has dropped 3.4 percentage points, while the share who report that they are unable to afford needed care has dropped 5.9 percentage points

Original post. On June 8, the federal departments tasked with implementing the Affordable Care Act (ACA) released a barrage of regulatory issuances, including fact sheets, guidances, a blog post, and a notice of proposed rulemaking (NPRM). These issuances serve two major purposes.

First, several of them, as summarized in a press release and fact sheet released by the Centers for Medicare and Medicaid Services (CMS), are intended to stabilize the marketplace risk pool. They are, that is, intended to draw healthy as well as unhealthy enrollees into the market and to discourage potential gaming on the part of insurers or enrollees that might affect the risk profile of those enrolled. Ultimately the goal of these actions is to make the risk pool more predictable and manageable for insurers and thus to stabilize marketplace rates.

Second, the notice of proposed rulemaking (NPRM) released jointly by the Departments of Labor, Treasury, and Health and Human Services (HHS) is primarily directed at implementing the Expatriate Health Coverage Clarification Act (EHCCA) of 2014, which was a part of the Consolidated and Further Continuing Appropriations Act of 2014. The NPRM also, however, addresses excepted benefit and short-term limited duration plans, the sale of which has threatened to undermine the marketplace risk pools, and clarifies issues arising under the annual and lifetime limit prohibition. This post will first address the market stabilization initiatives, then turn to the expatriate health coverage NPRM.

Marketplace Stabilization

Short-Term, Limited Duration Coverage

The news release identifies five actions that CMS is taking to stabilize the risk pool.

First, it describes the proposed changes in the NPRM in the rules governing short-term, limited-duration coverage. The ACA’s insurance reforms, including its prohibitions on health status underwriting and preexisting condition exclusions and its essential health benefit and actuarial value requirements, do not apply to “short-term, limited duration” individual coverage, a category created under the earlier Health Insurance Portability and Accountability Act (HIPAA). Short-term coverage is also not considered to be minimum essential coverage (MEC); thus, an individual who has only short-term coverage will still have to pay the individual responsibility penalty.

Short-term coverage is not defined in the statute, but is defined under current regulations to be coverage:

provided pursuant to a contract with an issuer that has an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder without the issuer’s consent) that is less than 12 months after the original effective date of the contract.

Because short-term coverage often has limited benefits and is medically underwritten, it can cost much less for healthy individuals than ACA-compliant coverage. It is also available year round and not just during open enrollment periods, but it can be subjected to preexisting condition exclusions and other limits not allowed by the ACA.

Some insurers have been marketing short-term coverage to consumers for periods of coverage lasting nearly the entire year as a primary form of coverage. Insurers can thus cherry pick the healthiest consumers while avoiding the ACA’s consumer protections. Healthy consumers are purchasing short-term coverage at low prices, not necessarily realizing that coverage under the policies is very limited and that they will still end up having to pay the individual responsibility penalty. Recent news coverage documents that sale of these policies is surging, potentially undermining the individual market risk pool and leaving consumers with inadequate coverage.

The proposed rule would amend the definition of short-term coverage. Under the revised definition, insurers would only be able to offer short-term policies for periods of less than three months, and coverage could not be renewed at the end of the three-month period. This time limit accords with the amount of time that individuals may be without minimum essential coverage without paying the individual responsibility penalty and would ensure that short-term policies are used for true gap coverage and do not become a substitute for ACA-compliant coverage. The NPRM also requires insurers to provide notice to consumers in the policy contract and in application materials that the coverage is not minimum essential coverage, does not satisfy the health coverage requirement of the ACA, and will not prevent the consumer from owing a tax penalty.

Excepted Benefits

The proposed regulation would limit other forms of ACA non-compliant coverage as well. HIPAA and the ACA recognize a category of “excepted benefits,” which are health and health-like benefits that do not offer comprehensive medical coverage. They include, for example, limited scope dental and vision, workers compensation, automobile medical payment, or long-term care insurance.

Excepted benefit coverage was exempt from regulation under HIPAA and is exempt from the requirements of the ACA. It also, like short-term coverage, does not qualify as “minimum essential coverage.” Thus, an individual who has only excepted benefit coverage must pay the individual mandate penalty and an employer who offers only excepted benefit coverage to its full-time employees will have to pay the employer mandate penalty. An individual can have excepted benefit coverage and still qualify for a premium tax credit for purchasing coverage through the marketplaces.

Most forms of excepted benefits are unlikely to be mistaken for medical coverage. Some categories, however—including hospital or other fixed indemnity coverage, specified disease policies, travel insurance, and supplemental coverage—resemble major medical coverage sufficiently that there is a risk of consumer confusion or of consumers purchasing this coverage in lieu of major medical coverage.

In 2014, HHS issued regulations requiring insurers selling fixed indemnity coverage in the individual market to provide a warning to applicants that it was not a substitute for major medical coverage and that an individual who purchased only fixed indemnity coverage could have to pay the individual mandate penalty. The rule further required insurers or agents marketing fixed indemnity policies to obtain an attestation from applicants that they already had ACA-compliant minimum essential coverage. The attestation requirement was struck down by a federal district court, which held that HHS lacked the authority to impose it; that decision is now on appeal. The NPRM does not propose changes in the rule governing individual hospital and fixed indemnity coverage.

The NPRM does propose clarifications of the rules governing group fixed-dollar indemnity coverage. First, fixed-dollar indemnity group coverage must pay a fixed amount per day or other time period of service without regard to the cost of the service or the type of items or services provided. As examples in the rule make clear, a policy that pays different amounts for hospitalization and physicians’ services, or that pays a fixed percentage of the cost of a service, does not qualify.

Second, fixed-dollar indemnity coverage must include in application, enrollment, and reenrollment materials a warning that the coverage is not major medical coverage and is not minimum essential coverage for the purposes of the individual responsibility requirement. There is no requirement, as there is in the individual market, that an individual sold indemnity coverage must already have minimum essential coverage and attest to this fact.

The NPRM would also clarify that “similar supplemental coverage” group excepted benefits must either be designed to fill gaps in cost-sharing (such as deductibles and coinsurance) of primary coverage or to provide benefits that are not essential health benefits in the state in which the supplemental coverage is offered. Supplemental coverage cannot become supplemental merely through coordination of benefit requirements.

The NPRM would define travel insurance to mean coverage for personal risks incurred during planned travel including, for example, trip interruption or cancellation, loss or damage to luggage, or damage to accommodations or rental vehicles. It can also include sickness, accident, disability or death coverage during travel, but only if the health benefits are not offered on a comprehensive, standalone basis and are incidental to other coverage. A travel insurance policy cannot cover trips in excess of six months and is not intended to cover people employed overseas, such as expatriates or the military.

Finally, the NPRM does not propose any immediate changes in specified (critical) disease policies, such as cancer coverage, but the preface does express concern about this coverage being marketed as a substitute for comprehensive medical coverage and suggests that further regulatory action may be needed to, for example, limit the number or breadth of diseases covered by a policy or to warn consumers that specified disease coverage is not minimum essential coverage.

Risk Adjustment Improvements

A second initiative to stabilize the market described in the news release will consist of improvements to the risk adjustment program. CMS released together with the NPRM and news release a series of questions and answers discussing further potential risk adjustment program changes. The risk adjustment program is intended to move funds from insurers that cover healthier populations to those that cover less healthy, higher-cost enrollees, and thus to stabilize the risk pool. CMS held a forum at the end of March to discuss a White Paper on possible adjustments to the program, and the Q&A addresses issues raised at the forum.

The Q&A announces two changes to the risk adjustment program that CMS intends to make in the future. First, CMS intends to propose that, beginning in 2017 the risk adjustment program include an adjustment factor to account for partial-year enrollees. It is believed by insurers that short-term enrollees are more costly than long-term enrollees, but consumers often need short-term transitional coverage, for example when they are between jobs. The modification would add 11 monthly indicator variables to reflect additional predicted risk for enrollees with different enrollment durations beginning with one month. This factor would allow insurers to serve short-term enrollees.

Second, CMS intends, beginning in the 2018 benefit year, to incorporate prescription drug utilization data into risk adjustment, as a source of information about individuals’ health status and the severity of their conditions.

The risk adjustment Q&A discusses a number of other program issues, such as the incorporation of preventive services as a factor in the risk adjustment methodology, the potential use of EDGE server data to better calibrate the risk adjustment factors, and the possible incorporation of a high-risk pool into the program. CMS again rejects any changes in the transfer formula, including capping transfers.

Transitioning Consumers From The Marketplaces To Medicare

In a third marketplace stabilization initiative, the news release announces that CMS is taking further steps to transition consumers from the marketplaces to Medicare as they turn 65. While consumers who turn 65 are not barred from the marketplaces, they may incur higher Medicare premiums if they remain in the marketplace and defer Medicare enrollment. The presence of older consumers in the marketplace risk pool also tends to increase the cost of coverage for everyone.

CMS will begin contacting marketplace enrollees about to reach their 65th birthday this summer to advise them to enroll in Medicare. This step supplements pop-ups that have been added to HealthCare.gov to remind enrollees about to turn 65 of the Medicare option.

Limiting Special Enrollment Period Access

Fourth, CMS is taking further steps to limit access to special enrollment periods (SEPs). SEPs allow consumers to enroll in coverage outside normal open enrollment periods because of changes in life circumstances such as births, marriages, moves, or loss of coverage. Insurers have been complaining that consumers are taking advantage of SEPs to avoid enrolling during open enrollment periods and to delay enrollment until they encounter medical costs, thus driving up costs for the entire risk pool.

CMS recently limited the use of SEPs, eliminating some SEPs, changing the requirements for the permanent move SEP, and tightening up definitions and procedures. The news release states that as of June 17, SEP applicants will be asked to provide documents to evidence their eligibility for SEPs, such as birth or marriage certificates.

CMS has released the notices that applicants will receive. These notices list documents that will establish SEP eligibility; they will need to be provided by a stated deadline (not specified in the published notices) to avoid termination of marketplace coverage and revocation of premium tax credits and cost sharing reduction payments. But CMS has apparently rejected for now insurance industry requests that SEP eligibility be established prospectively by documentary evidence rather than retrospectively.

Data Matching Improvements

Finally, the CMS news release announces that the agency’s efforts to improve the data matching process, through which consumers are required to provide documents to establish their eligibility for marketplace coverage when eligibility cannot be confirmed through electronic sources, are bearing results. In the past, large numbers of consumers have lost marketplace coverage because they failed to provide requested documents. This has not only harmed consumers who have lost coverage, but has also negatively affected the risk pool since those who have lost coverage have tended to be younger and likely healthier.

Initiatives to improve data matching, including joint outreach efforts, are working, CMS claims, with a sharp reduction in total data-matching issues generated and an almost 40 percent year-over-year increase in the number of documents consumers have submitted to resolve these issues.

Expatriate Coverage

The NPRM also, as noted at the outset, proposes regulations necessary to implement the EHCCA. The insurance reform provisions of the ACA did not initially provide any special treatment for expatriate health coverage (although certain of its fee provisions applied only to coverage of “United States health risks.”) Early on, however, expatriate health plans asked for and got special treatment, for example in the application of medical loss ratio provisions.

In 2013 the federal government went further, essentially exempting expatriate health plans that complied with pre-ACA insurance reforms from most ACA insurance reform requirements. Additional FAQs issued in early 2014 exempted expatriate plans from the essential health benefit requirements of the ACA as well.

In the 2014 EHCCA, Congress explicitly defined expatriate coverage and set out the basic requirements with which expatriate coverage must comply to be free from ACA regulation. The EHCCA generally applied to expatriate plans issued and renewed after July 1, 2015. In July of 2015, the IRS published guidance promising tri-department rulemaking implementing the EHCCA and requiring in the interim “reasonable good faith” compliance with its provisions. The NPRM provides the promised regulation.

The EHCCA states that expatriate health plans, employers as sponsors of expatriate health plans, and expatriate health plan insurers are exempt from all of the requirements of the ACA (including medical loss ratio requirements) except for ACA’s large employer and minimum essential coverage provider reporting requirements and—for employer plans that cover expatriates assigned (rather than transferred) to work in the United States—the high-cost (Cadillac) plan excise tax. It also provides, as already noted, that expatriate coverage qualifies as minimum essential coverage and that qualified expatriates, their spouses and dependents, will not be considered as United States health risks and are thus exempt from calculations of the ACA section 9010 insurance provider fee. Expatriate plan coverage is also exempt from ACA limits on the deductibility of compensation for highly paid insurance company executives.

Expatriate health plans are group health plans or group or individual health insurance coverage for which substantially all primary enrollees are qualified expatriates, and that meet certain other requirements. The proposed regulation defines primary enrollee as the individual covered by the plan other than as a dependent, spouse, or beneficiary and “substantially all” as 95 percent. Qualified expatriates are individuals who fall into one of three categories:

  • Individuals who because of their skills, qualifications, job duties, or experience are transferred or assigned to the United States for a specific and temporary employment purpose and who are reasonably determined to require health insurance and other related services in multiple countries (that is, are expected to travel out of the United States at least once per year) and who are offered multinational benefits beyond one-time, de minimis benefits;
  • Individuals who work outside the United States for at least 180 days in a consecutive 12-month period that overlaps with a plan year; or,
  • Individuals who are members of a group 1) formed for traveling or relocating outside the United States for an educational or service purpose (such as students or missionaries) and 2) not formed primarily for the sale of health insurance, and who are determined by the departments to require access to health insurance in multiple countries. An individual must travel or reside outside the United States for at least 180 days during a 12-month period (or if the coverage is for less than a year, for at least half the period), but may not be expected to travel or reside outside the United States for more than 12 months, and may not be traveling or residing outside the United States for employment purposes.

In addition to covering qualified expatriates, expatriate plans must:

  • cover benefits that are not substantially all excepted benefits;
  • cover inpatient hospital services, outpatient facility services, physician services, and emergency services in the United States and in the country from which the qualified expatriate was assigned or in which he or she is employed, and in countries designated by the departments;
  • provide at least minimum (60 percent actuarial) value;
  • if the plan provides dependent coverage, cover adult children up to age 26;
  • be issued by an insurer or administered by a plan administrator that is licensed to operate in more than two countries, has provider networks in eight or more countries, maintains call centers in three or more countries and in eight or more languages, processes at least $1 million in claims a year, makes available global evacuation/repatriation agreements, maintains legal and compliance resources in three or more countries; and offers reimbursement for items and services in the local currency of eight or more countries;
  • satisfy health reform requirements of federal law that applied before the ACA, including the pre-existing condition exclusion limitations imposed by HIPAA;
  • if an insured plan, be offered by a U.S.-licensed health insurer. The term “United States” as used in the EHCCA includes the 50 states, the District of Columbia, and Puerto Rico but not the other territories.

Lifetime And Annual Limits

A final provision of the NPRM defines “essential health benefits” for the purposes of the ACA requirement that annual and lifetime limits cannot be imposed on essential health benefits (EHB) by large group health plans. EHB are defined as benefits covered by the benchmark plan of a state, including state-mandated benefits considered to be EHB, or benefits covered by one of the three Federal Employee Health Benefit program plans that may be used as benchmark plans by the states as supplemented to meet EHB requirements.

Marketplace Forum

Finally, also on June 8, CMS published a blog post by Marketplace CEO Kevin Counihan announcing CMS’ June 9 forum on marketplace success stories. The forum will feature health plans that have achieved success in the marketplaces, using strategies such as value-based payment design, coordinated care, or the use of data analysis to improve patient care. It is hoped that insurers can learn strategies beyond raising premiums or narrowing networks for dealing with the unique challenges presented by the marketplaces.