The Centers for Medicare & Medicaid Services (CMS) has finalized new rules that will weaken Obamacare and potentially harm people with pre-existing conditions. Insurance companies will gain while at the same time new barriers will go up to discourage people from enrolling in health coverage.
Rule changes will affect individual and small-group markets. Starting in 2020, states will be given more freedom to set basic health insurance benefits.
• States and insurers will now have a new means to reduce coverage for expensive services. Services that are used by people with serious health care needs.
♦ It will be up to individual states to decide how they want to proceed. Many Republican states that refused to take part in Medicaid expansion are expected to embrace these new rules. Most Democratic controlled states are expected to refuse.
The Affordable Care Act requires insurance companies to provide ten Essential Health Benefits (EHB). These range from paying for hospitalizations to prescription drug benefits.
Current rules were put in place to stop insurance companies from selling skimpy plans that left consumes holding the bag. The Trump administration is working to bring them back.
Consumer protection whittled away
Under the new rules, insurance companies will still need to provide coverage for the same ten category of services as before but now they will be allowed to shift coverage around potentially reducing their exposure to expensive services such as hospital stays.
Insurers could reduce coverage for hospital care or rehabilitative services and increase coverage for outpatient and urgent care to stay within the requirement to maintain some coverage in all ten categories of service.
Insurers are expected to try push the envelope. Some will try to limit or eliminate coverage for many health conditions like autism, bariatric surgery, hearing aids, fertility treatment, or even some transplant related costs.
Weakening ACA’s risk adjustment program
This program was put in place to help reduce the risk to insurers who enrolled sicker people and who incurred higher costs to cover them. Under current rules, insurers pay into a risk adjustment fund that is used help even out costs associated with covering sicker enrollees.
The new rules will permit states to reduce the transfer of funds by up to 50 percent. This action will reduce the incentive for insures to sell plans that cover sick people. Instead, insurers are expected to design their plans to discourage people with serious health issues. They would do this by excluding coverage for certain expensive drugs, charging much higher copays for some services and limiting provider networks.
♦ The winners appear to be the insurance companies. The administration is opening the door for them to scale back what they pay and shift more to the patient.
Premium controls loosening
Insurance companies will be allowed more freedom to raise premiums without justifying their rate increase. Under current law, any premium increase over 10% must be justified. The new rule sets that threshold at 15%.
80/20 rule takes a hit
Under current rules, an insurance company must use at least 80% of premium dollars on pay for health care services. It is 85% for large-group plans. The 20% part can be used for administration, sales and bonuses. If an insurer fails to use 80% of premium dollars on health care services they must return money in the form of a rebate to the consumer.
The new rules are tweaked to allow insurance companies to include something called “quality improvement expenses” along with actual health care expenditures. This essentially carves out something that would have been an administrative cost and shifts it toward the consumer side of the equation. Insures are less likely to have to return money to consumers and instead are expected to increase their profits.
Barriers to enrollment increasing
The Trump administration has already cut funding for consumer assistance programs by 40%. These are programs that help people enroll in Obamacare. The plan is to continue cutting funding for marketplace services like navigators and advertising during open enrollment.
♦ The most significant obstacle the administration is now putting in place is a change to income verification. The change is intended to make it harder for eligible families to enroll in coverage through the Marketplace.
♦ The new rules target people with income near the Federal Poverty Level (FPL). The objective would be to prevent these people from receiving premium tax credits.
New income verification requirements will look at past tax filings. A family whose income was below the poverty level in past years will be open to scrutiny if their Marketplace application estimates their income will be over the poverty level.
♦ These families will be targeted simply because they now have enough income to qualify for premium tax credits and the administration wishes to discourage them.
• The ACA requires everyone to reconcile their premium tax credits when the file taxes for the year. This means anyone who received premium tax credits in 2018 will need to file taxes in the spring of 2019 for tax year 2018. Their 2018 taxes will need to show they had the income they estimated on their marketplace application. Should the actual income come in lower they can receive money but should it come in higher they have to return money.
♦ This method of reporting was designed to help self-employed people and people working multiple part-time jobs.
The administration is now focusing on these people. The Marketplace can ask them to prove their income before approving their application. Of course, most self-employed people like carpenters will not be able to prove they have a certain number of jobs lined up for the year.
Many people who would be eligible to premium tax credits are expected to give-up.
Trip wire in place
Anyone who receives premium tax credits but fails to file taxes to reconcile what they received will be penalized big time. Current rules require the CMS or state marketplace to notify people and remind them to be sure to file taxes even if they don’t owe money.
The new rules require marketplaces to “discontinue” premium tax credits to anyone who did not file a tax return, even if no reminder notice was ever sent.
Advocates are crying foul and get tough conservatives are clapping.
The truth is the vast majority of people who have received premium tax credits do file taxes. A small number simply forget but many just don’t understand they are required to do so.
For some reason, the Trump administration believes these few people are "bad guys" that need to be stopped.