CMS moves to shore up ACA insurance markets

By Bob Herman
August 29, 2016 - Modern Healthcare

(Updated at 6:15 p.m. EDT)

The CMS proposed rules Monday afternoon that would make several changes to the Affordable Care Act marketplaces and refine the law's risk adjustment, heeding calls from the health insurance industry.

The proposed rules (PDF), which normally are released in November, come after weeks of intense scrutiny and uncertainty about the viability of the new ACA insurance exchanges. Aetna, Humana and UnitedHealth Group, which have bigger footprints in the employer and Medicare Advantage markets, all have announced major retrenchments for the 2017 season, which begins Nov. 1.

One of the biggest changes involves the ACA's permanent risk-adjustment program. Lawmakers created risk adjustment to compensate plans for taking on sicker enrollees who have higher healthcare costs, thereby attempting to eliminate the incentive to cherry-pick healthier people.

Starting in 2018, risk adjustment would factor in prescription drug data in addition to all the normal conditions and illnesses that are factored into someone's risk score. Health insurers have argued their members look healthier than they actually are because the program doesn't account for the medicines people are taking. But some risk-adjustment experts believe using drug data could create perverse incentives for doctors to write unnecessary prescriptions.

The CMS said the change was worth pursuing while considering those concerns. “We sought to strike a reasonable balance between increasing predictive accuracy and reducing incentives for overprescription,” the agency said. “One way we sought to do so was by focusing on drugs for which guidelines on when they should be prescribed are clear.”

Conditions that involve drugs that would be used for the updated risk adjustment include hepatitis C, HIV/AIDS, end-stage renal disease, diabetes and inflammatory bowel disease.

Risk adjustment in 2018 also would account for “partial-year” members who enroll outside of open enrollment. Insurers have said people who enroll mid-year have higher healthcare costs and therefore are riskier to cover.

The CMS' proposals would alter several areas within the 2018 exchange plans as well. For example, the agency proposed three additional sets of standardized plans, called “simple choice” plans.

Last year, the CMS proposed six standardized health plan options as a way to simplify shopping for consumers on the federally run marketplaces. For instance, each plan in each tier level has the same deductible and same annual limit on cost-sharing. However, plans are not required to offer standardized options. Insurers fought aggressively against the Obama administration's proposal, saying those types of plans would “stifle” their ability to create new benefits and products.

The new standardized options for 2018 mostly were proposed to adapt with existing state cost-sharing laws, the CMS said.

The rule also proposed that insurers must offer at least one silver-level and at least one gold-level health plan if they sell on the exchanges, which cater to individuals and small businesses. Premium and cost-sharing subsidies are tied to silver plans and pay 70% of medical costs on average. Gold plans are more comparable to employer-based health coverage, paying about 80% of costs on average.

The CMS has already made several changes to the exchanges in the past year, notably to tighten up when people can enroll outside of open enrollment. Insurers have said people are gaming the special enrollment periods—reserved for when people get married or move to a new residence, for instance—and the CMS has repeatedly asked for data to prove that gaming exists.

Comments on the 2018 exchange proposals are due Oct. 6.