The Trump administration has unveiled a sweeping set of regulatory proposals that would substantially change health plan offerings in the Affordable Care Act marketplace next year, with the goal, he says, of providing more choice and lower premiums. But it also proposes to drastically raise some annual out-of-pocket costs — to more than $27,000 for one type of coverage — and could cause up to 2 million people to drop insurance.
The changes come as affordability is a major concern for many Americans, some of whom are struggling to pay their ACA premiums since enhanced subsidies expired at the end of last year. Initial registration numbers for this year are down by over a million.
Health care coverage and affordability have become politically charged issues in the run-up to November’s midterm elections.
The proposed changes are part of a long rule that addresses a wide range of standards, including benefit packages, out-of-pocket costs, and health care provider networks. Insurers refer to these standards when setting premium rates for the coming year.
After a comment period, the rule will be finalized this spring.
It “puts patients, taxpayers and states first by reducing costs and strengthening accountability for taxpayer dollars,” Centers for Medicare and Medicaid Services Administrator Mehmet Oz said in a Feb. 9 press release.
One way to do this focuses heavily on a type of coverage – catastrophic plans – that last year attracted only about 20,000 policyholders, according to the proposal, although other estimates put it closer to 54,000.
“To me, this proposal reads like the administration has found the next big thing in catastrophic plans,” said Katie Keith, director of the Health Policy and Law Initiative at the O’Neill Institute for National and Global Health Law at Georgetown University Law Center.
Such plans have very high annual out-of-pocket costs for the policyholder but often lower premiums than other ACA coverage options. Previously restricted to those under the age of 30 or who are facing certain hardships, the Trump administration has allowed elderly people who have lost subsidy eligibility to enroll in them for this year. It is not yet known how many people have chosen to do so.
The payment rule strengthens this move by making eligible anyone whose income is below the poverty line ($15,650 for this year) and those who earn more than 2.5 times that amount who lost access to an ACA subsidy that reduced their out-of-pocket costs. You also note that a person who meets these standards will be eligible in any state – an important point because this coverage is currently only available in 36 states and the District of Columbia.
In addition, the proposal would require out-of-pocket maximums on such plans to hit $15,600 a year for an individual and $27,600 for a family, Keith wrote this week in Health Affairs. (The current out-of-pocket maximum for catastrophic plans is $10,600 for an individual plan and $21,200 for family coverage.) Not counting preventive care and three covered primary care physician visits, that spending target must be met before other policy coverage begins.
In the rule, the administration wrote that the proposed changes would help differentiate catastrophic plans from “bronze,” the next level up, and, possibly, spur more enrollment in the first. Currently, the proposal said, there may not be a significant difference if premiums are similar. The proposal said raising the out-of-pocket maximum for catastrophic plans to those levels would make up that difference.
“When there is such a clear difference, the healthier consumers who are generally eligible and most suited to enroll in catastrophic plans are more motivated to choose a catastrophic plan instead of a bronze plan,” the proposal noted.
However, ACA subsidies cannot be used toward catastrophic premiums, which can limit buyer interest.
Enrollment in bronze plans, which currently have an average annual deductible of $7,500, doubled from 2018 to about 5.4 million last year. This year, that number will likely be higher. Some states’ enrollment data indicate a shift toward bronze as consumers ditched higher-premium “silver,” “gold” or “platinum” plans after the expiration of more generous subsidies at the end of last year.
The proposal would also allow insurers to offer bronze plans with cost-sharing rates that exceed what ACA law currently allows, but only if that insurer also sells other bronze plans with lower levels of cost-sharing.
In what it calls a “new” approach, the proposal allows insurers to offer multi-year catastrophic plans, in which people can stay enrolled for up to 10 years, and their out-of-pocket maximums vary during that time. Costs may be higher, for example, in the early years, then fall the longer the policy is in place. The proposal specifically asks for comments on how such a plan might be structured and what effect multiannual plans might have on the overall market.
“As we understand it so far, insurers can offer the policy for one year or for consecutive years, up to 10 years,” said Zach Sherman, managing director for coverage policy and program design at HMA, also known as Health Management Associates, a health policy consulting firm that works for states and insurance plans. “But the details of how that works, we’re still unpacking.”
Matthew Fiedler, a senior fellow with the Center on Health Policy at the Brookings Institution, said the proposed rule included many provisions that could “expose enrollees to much higher out-of-pocket costs.”
In addition to the planned changes to bronze and catastrophic plans, he points to another provision that would allow plans to be sold on the ACA exchange that do not have established networks of health care providers. In other words, the insurer has not contracted with specific doctors and hospitals to accept their coverage. Instead, such plans pay medical providers a set amount for medical services, possibly a flat fee or a percentage of what Medicare pays, for example. The rule says that insurers would need to ensure “access to a range of providers” willing to accept such amounts as full payment. Policyholders may be on the hook for unexpected costs, however, if a clinician or facility disagrees and charges the patient the difference.
Because the rule is so big — with so many other parts — it’s expected to draw hundreds, if not thousands, of comments between now and early March.
Pennsylvania insurance broker Joshua Brooker said one change he would like to see is requiring insurers that sell high out-of-pocket catastrophic plans to offer other catastrophic plans with lower annual maximums.
In general, however, a wider range of options can appeal to people on both ends of the income scale, he said.
Some wealthier enrollees, especially those who no longer qualify for some ACA premium subsidies, prefer a lower premium like those expected in catastrophic plans, and may simply pay bills up to that maximum, he said.
“They’re more worried about the half-million dollar heart attack,” Brooker said. It’s harder for people below the poverty level, who don’t qualify for ACA subsidies and, in 10 states, often don’t qualify for Medicaid. So they are likely to go uninsured. At least a catastrophic plan, he said, could allow them to get some preventive care coverage and limit their exposure if they end up in a hospital. From there, they can qualify for charity hospital care to cover out-of-pocket costs.
In general, “putting more options on the market doesn’t hurt, as long as it’s properly disclosed and the consumer understands it,” he said.
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