Potential impact of new ACA rulemaking

Politico evidently got their hands on a leaked draft rule making document for the insurance exchanges. There are a couple of significant tweaks in the rules. The most important thing so far is that the draft document accepts the ACA as it is and works on the margins. It is not an attempt to blow things up. But let’s look at the details:

The administration is also looking to slash the 2018 enrollment period in half. It would run from Nov. 1 to Dec. 15, rather than through the end of January 2018 as the Obama administration had proposed.

The logic of this rule is that a December 15th end date means every policy starts on January 1st. This will do two things. First it will add more paid member months in the pool as the current open enrollment period has both February 1 and March 1 start dates. Secondly and more subtly, it will shift the enrollment of the healthiest cohort on average from a March 1 start date to a January 1 start date. The paid premium pool will be slightly healthier.

This is not a bad idea. It would be similar to what happens in Medicare. I would tweak it slightly. I would try to line up the ACA open enrollment period with the Medicare open enrollment period so that we develop a national window where everyone worries about next year’s healthcare at the same time.

HHS is also considering tough new rules around special enrollment periods, which insurers complain have allowed some Obamacare customers to wait until they get sick before signing up for coverage. All individuals who sign up outside the standard enrollment window will be required to provide documentation proving they’re eligible before coverage takes effect.

The logic of this change is that there are some people who have attempted to go off-Exchange to get a policy during a Special Enrollment Period and were denied because they could not document the qualifying event. They then went on-Exchange and attested to their qualifying event and got covered. Insurers in Covered California believe that the higher cost SEP enrollment added two to three points of cost to their base policies. Some of that makes sense as it is a narrowly self-selecting pool of very motivated buyers. It is much like COBRA in that regard. But this is an anti-gaming rule.

The aim of the rule is to drive more healthy people into the pool during open enrollment and make the cost of going uncovered higher. It will lead to fewer people getting enrolled during a SEP.

These two rules could probably go into place without significant opposition. The other proposals below the fold will face significant public, political and legal opposition.

The Trump administration is also proposing more flexibility on out-of-pocket costs. In a “silver” plan, for example, insurers must cover between 68 percent and 72 percent of medical expenses. HHS is proposing to expand that range by another 2 percentage points. So for that same silver plan, insurers could cover as little as 66 percent of medical costs.

Using the 2017 Actuarial Value calculator, a Silver plan with only deductible cost-sharing (no co-pays, no co-insurance) can have anywhere from a $3,600 (72%) to $4,400 (68%) deductible. All else being equal the $4,400 deductible will have the lower premium. Using the same calculator the deductible ranges from $3,175 (74%) to $4,850 (66%). Standard silver will overlap with low tier Silver Cost Sharing Reduction Subsidies. Standard Platinum will overlap with both medium and high CSR. This is a confusing mess.

A 56% Bronze can not be built given current out of pocket maximum constraints.

The draft documents show the Trump administration may loosen an Obamacare provision barring insurers from charging older customers more than three times as much as their younger enrollees. It may allow health plans to expand this ratio to 3.49:1, which would let insurers boost prices for older customers, who tend to be more expensive to cover.

Three is three. Pi is 3.14 not 3.2. I have a hard time seeing a court buy this argument that 3.49:1 is really 3:1 or at least within administrative discretion of 3:1. An older individual who is offered insurance at a 3.49:1 ratio will have immediate standing to sue and I would imagine could probably succeed. Insurers want certainty. A pricing model based on 3:1 is a different pricing and marketing strategy when it is based on 3.49:1. I don’t see this going anywhere.

I was most disappointed at the Health Wonk Community for the lack of embedding the following clip:

About David Anderson
I am a research associate at the Margolis Center for Health Policy. I've written about health policy at Balloon-Juice.com as Richard Mayhew where I've enjoyed explaining the logic behind why an insurance company is behaving the way it is as there is almost always a reason besides pure spite or evil.

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