Introduction

It took longer than originally expected, but the White House has published its first substantive change to the Affordable Care Act. The new proposed regulations are aimed at stabilizing the individual and small group health insurance marketplace (and their publication is timely, given that on the same day they were released, Humana, one of the nation’s largest health insurance carriers, announced they are completely withdrawing from the Exchange/Marketplace for 2018 and beyond). As such, its impact on employers subject to the employer mandate is minimal. However, all employers need to be aware of these rule changes as they could affect their employees decisions as to whether to elect employer coverage.

There are five primary rule changes addressed in the proposed regulation, as follows:

  1. Changing the open enrollment dates for individual coverage through the Marketplace
  2. Increasing the verification of eligibility for special enrollment periods (times when individuals can apply for Marketplace coverage outside of the normal timeframe)
  3. A revision to the guaranteed availability provisions in instances where an individual drops and then reapplies for coverage from the same insurance carrier
  4. Tweaks to the Actuarial Value definitions used to rate plans as Bronze, Silver, Gold or Platinum
  5. Tweaks for insurance carriers with smaller networks and who serve rural counties

Open Enrollment Dates

This new rule would change the open enrollment period for Marketplace coverage for 2018. It's currently scheduled to open November 1, 2017 and last until January 31, 2018, but under this new rule, it would open November 1, 2017 and close December 15, 2017. The idea is this would require individuals to make decisions more in line with their long-term needs, not just what coverage they may need for December and January. Interestingly, this change in the open enrollment dates is already scheduled to go into effect for the 2019 plan year – this proposed rule simply accelerates that timetable by one year.

Increase Verification of Eligibility

One of the major concerns insurance carriers have with the individual market is the ability for people to apply mid-year for any of a myriad of “special enrollment” opportunities, which can lead to people enrolling for coverage only when they need it. The Obama administration implemented some rules to reduce this potential abuse of the system, and the new proposed rule takes that one step farther. In addition to narrowing the list of events that would lead to a special enrollment right in the Marketplace, the new rule would also require that 100% of all special enrollment applications be thoroughly reviewed to ensure the individual is actually qualified for the special enrollment, up from the 50% mark being used currently. The idea here is to make it harder to get coverage “off cycle,” and therefore make it more appealing to enroll in coverage timely as required by law, and not just when someone has medical expenses.

Changes to Guaranteed Availability

Perhaps the most direct change to the current rules – and the one that will be of most interest to employers subject to the employer mandate – this new rule would allow insurance carriers to require individuals who drop, and then reapply, for coverage in the same year to pay for any months of coverage the individual did not make a payment for previously. For example, an individual purchases coverage and pays for January and February, but fails to make a payment for March or April, and then is termed from coverage due to non-payment. The individual later qualifies for a special enrollment in August, and reapplies for coverage from the same carrier. The carrier will now be allowed to condition the availability of that coverage upon back payment for March and April coverage – if the individual fails to make those payments, coverage would not be available for them in August. It is noted that States might have laws forbidding this practice, so it remains to be seen whether this rule will work universally.
Of more interest to employers subject to the employer mandate, the commentary for this proposed rule also discusses the potential of bringing back the concept of HIPAA’s “creditable coverage” rules that were eliminated with the implementation of the ACA. Prior to the ACA, carriers were allowed to issue coverage with pre-existing condition exclusions unless the applicant could prove that they had prior creditable coverage, and no more than a 63 day gap in coverage, for the pre-existing condition. While this new rule doesn’t incorporate the return of the creditable coverage system, comments are being requested on the viability of bringing this rule back. This could be an indication of things to come: Speaker of the House Paul Ryan’s ACA replacement plan, as well as other Republican replacement plans, generally embraces the creditable coverage system as a way to guarantee access to healthcare while making sure individuals maintain constant coverage.

Metallic Plan Tweaks

Health insurance plans sold on the individual and small group markets are defined by their “metallic” plan status – Bronze, Silver, Gold, or Platinum – which are further defined by the plan’s “actuarial value”. A 60% actuarial value plan, for instance, meets the Bronze definition, 70% Silver, and so on. HHS has allowed a de minimis variation to these definitions of +/- 2% of the actuarial value. Under the new proposed rule, the range would now be -4 to +2%. Note that actuarial value is not the same thing as “minimum value,” a different definition used to determine whether a plan meets the requirements of the employer mandate. Minimum value is not addressed in this new rule set.

Carrier Network Tweaks

Finally, the new rules tweak requirements carriers have to comply with regarding network availability in rural areas, and other specific situations. This new rule would relax certain aspects of the current requirements, allowing carriers to operate in additional areas with reduced networks.

Conclusion/Action Steps

Employers have no action steps with respect to these proposed rules now. Indeed, these regulations are focused squarely on the individual market (and the small group market to a much smaller extent). However, employers should be aware of the changes made, as these are the first concrete steps the government is taking in its revisions to the Affordable Care Act. Humana’s exit from the Marketplaces, and other carriers who are considering a similar move, will make it harder for individuals to get coverage on their own, and could have the effect of increasing enrollment in employer plans. It is also interesting to see the government looking for the return of the creditable coverage requirements – this has been discussed repeatedly as part of the repeal and replacement of the ACA. While no concrete replacement plans have been agreed upon by Congress or the Administration, this move seems to be part of a common theme – transitioning from “guaranteed coverage” to “guaranteed access to coverage.”

With the confirmation of both the Secretary of HHS (Tom Price) and of Treasure (Steven Mnuchin), the Administration has the leaders it needs to start making regulatory changes to the ACA, so we do expect that activity to start picking up now. However, Congress controls the actual ACA “repeal and replace” efforts of the Republicans, and their work has not been progressing as quickly as originally anticipated. As always, Assurance will continue to monitor and communicate developments as they occur.

Information contained herein is not intended to constitute tax or legal advice and should not be used for purposes of evading or avoiding otherwise applicable regulatory responsibilities as issued by the federal or state government(s) and/or taxes owed under the Internal Revenue Code. You are encouraged to seek advice from your legal or tax advisor based on your circumstances.