Insurance antitrust exemption reform clears House

The House passed on March 22, 2017, H.R. 372, The Competitive Health Insurance Reform Act of 2017, with a bipartisan vote of 416 to 7. The Act repeals in part the McCarran-Ferguson Act antitrust exemption for insurers, including price fixing, bid rigging, and market allocation, and retains the exemption for certain collaborative activities. A CBO report projected that the Act would have no significant net effect on the premiums that private insurers would charge for health or dental insurance and that any effect on federal revenue would be negligible.

The report noted that health insurance premiums could be lower to the extent that enacting the bill would prevent insurers from engaging in practices currently exempted from antitrust law. On the other hand, insurers could become subject to additional litigation and thus their costs and premiums might increase. The CBO estimated that both of those effects would be small.

The American Hospital Association had expressed concerns about the abuse of market power by large commercial insurers with the Departments of Justice and Health and Human Services previously.

House Republicans narrow aim to specific provisions in health reform battle

House Republicans introduced four bills as part of a new piecemeal strategy to repeal and redefine the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). The proposed legislation—which will be considered at a February 2, 2017, hearing before the House Energy and Commerce Committee—concerns: (1) special enrollment period (SEP) eligibility verifications; (2) premium rate ratios; (3) grace periods for missed premium payments; and (4) a political promise to continue the ban on preexisting condition exclusions.

SEP

The first bill would require HHS verification of an individual’s eligibility for a SEP before an insurer would be permitted to make coverage effective for that individual. Although HHS has already developed a pilot program for some SEP eligibility verifications, the bill would require HHS to create a verification process, through interim final rulemaking, for plan years beginning on or after January 1, 2018.

Premium variation

The second bill would give insurers more authority to vary the premium rates charged to older enrollees, as compared to younger enrollees, in the individual and small group markets. The bill would permit insurers to raise the current ratio of three-to-one to a ratio of five-to-one, or, to any other ratio established by a state. The greater variation addresses insurer complaints that the three-to-one ratio is not actuarially appropriate.

Grace period

The third bill would reduce the length of the current 90-day grace period afforded to premium tax credit recipients who miss their premium payments. The bill would shorten the grace period to one “provided by law” or one month. Although premium tax credit recipients are, by definition, experiencing financial difficulty, the bill is designed to assuage insurers’ contentions that premium tax credit recipients are using the grace period to skip the last three months of premium payments, catching up only when or if they develop a need for health care. However, HHS noted in the preface of its Notice of Benefit and Payment Parameters for 2018 (81 FR 94058) that such grace period “gaming” claims are unsubstantiated.

Preexisting conditions

The fourth bill, which does not promise a change in policy, is a statement of policy. In essence, the bill is a promise, in the event Congress decides to repeal the ACA, that the health reform replacement will include a provision with an absolute ban on preexisting conditions clauses. The bill establishes Congress’ position that it will not allow a return to a health insurance market where coverage decisions are based upon the status of an enrollee’s health. The bill makes a curious exception, however, for genetic conditions which have not already led to a diagnosis.

Highlight on Arizona: Premiums skyrocketing for Arizonans, Republican governor committed to keeping health protections in place

When it comes to premium increases for marketplace plans, Arizona is one of the hardest-hit states. For the 2017 plan year, reports show that premiums across the country will increase by an average of 22 percent. In Arizona, that number is 116 percent.

According to HHS, Arizona had the lowest rates of the states in 2016. This honor came back to bite marketplace consumers, who will be forced to pay around $422 per month for even the lowest cost plans in 2017. That will come as a blow to the wallet, considering the average of $196 for 2016.

Dr. Robert Tenchsel, CEO of the Yuma Regional Medical Center, admitted that this may cause some consumers to choose to opt out of coverage, because paying the penalty will be cheaper than their premium. Selections for coverage are limited, and consumers must either choose between marketplace plans or Blue Cross Blue Shield of Arizona.

Since the election, Arizona Governor Doug Ducey (R) has drawn attention to the necessity of enacting  new health insurance protections if the new administration follows through with President-elect Trump’s campaign promises to repeal the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). Ducey agreed that the ACA “isn’t working…that it’s badly broken and in need of improvement,” but remains committed to keeping access to affordable care available for his state’s citizens.

Ducey pointed to certain parts of the law that need to be preserved, such as protections for those with pre-existing conditions, prohibitions against lifetime caps, and federal funding for expanded Medicaid programs. Arizona chose to expand Medicaid and accept federal assistance in covering the 400,000 newly eligible. Arizona also restored coverage for single adults living below the federal poverty level, which had been cut years before due to the necessity of finding budget savings. The state received some federal money for this measure, and the rest is funded by assessments on hospitals (which is still in dispute in the state court system).

If the ACA is repealed and the federal funding for Medicaid expansion is revoked, the state will either have to take away health coverage for this part of the population, or find more money in the already stretched state budget. Although during his campaign Ducey stated that the ACA’s Medicaid provisions were an “unacceptable expansion of government,” he said he would veto any attempt by the state legislature to repeal the expanded program now that so many citizens depend on it for coverage.

 

Highlight on Illinois: Exchange rates rise in the Land of Lincoln

Illinois residents purchasing individual health insurance plans through the Patient Protection and Affordable Care (ACA) (P.L. 111-148) could pay rate increases in 2017 as high as 55 percent, according to rate information released by the Illinois Department of Insurance (DOI). The agency submitted rate increases to the federal government ranging from 43 percent to 55 percent, depending on the type of plan—bronze, silver, gold.

Filings

The submitted rates are not final. Although the DOI has submitted the 2017 rate filings to CMS, the rates will not be finalized by federal CMS until October, 2016. Additionally, network and premium information will not be available until that time. The DOI announced that the rate information was published as early as possible to allow Illinois families to make better-informed decisions regarding health care coverage. The DOI acknowledged the rate increases as “a very difficult outcome for consumers.”

Rates

The average rate increase across all ratings areas for the lowest bronze plan is 44 percent. The rate change is lowest in Kane, Du Page, Will, and Kankakee counties, where the rate change is a 10 to 25 percent increase. Counties like Lake and Cook have a 40 to 60 percent increase, whereas counties including La Salle and McLean have a 20 to 40 percent increase for their lowest bronze plans.

The average rate increase across all ratings areas for the lowest silver plan is 45 percent. Counties like Cook and Kendall saw a 40 to 60 percent increase, whereas counties like Du Page, Sangamon, and McLean saw increases of 25 to 40 percent. The average rate increase across all ratings areas for the second lowest silver plan is 43 percent.

The highest average rate increase across all ratings areas is for the lowest gold plan—an increase of 55 percent. Although several counties do not have gold plan offerings, rate increases in some counties, including Peoria County, are as high as 60 to 70 percent. Rate increases for the lowest gold plan in counties like Cook, McLean and Sangamon are 40 to 60 percent.

In practical application, the new rates mean that a 21-year-old nonsmoker who purchases the lowest-priced silver plan in Cook County in 2017 could pay a premium of $221.13 a month—an increase from $152.42 a month in 2016. In Lake and McHenry counties the increases are more dramatic for the same consumer, $268.03 a month in 2017, up from $212.23 a month. However, for some, the rate increase is not as massive as it seems because 75 percent of Illinois exchange enrollees receive tax credits to offset premium costs.

Cause

The DOI attributed the rate increases to several factors, including the federal government’s failure to make payments to insurers promised as part of the ACA and an overall increase in medical and pharmaceutical costs. Additionally, the DOI pointed to the fact that, until 2017, policyholders are permitted to keep non-ACA compliant plans, a factor that the DOI said has harmed insurers’ risk pools and placed upward pressure on plan costs.