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HHS releases proposed ACA insurance regulations

Posted: November 20, 2012 - 12:30 pm ET

(Story updated with comment at 3:20 p.m. ET.)

HHS on Tuesday issued highly anticipated regulations to implement provisions of the 2010 healthcare reform law related to health insurance market reforms.

Starting in 2014, the Patient Protection and Affordable Care Act will make it illegal for health insurance companies to discriminate against people who have pre-existing conditions, which HHS estimates affect some 129 million nonelderly Americans. In the proposed rule, health insurance issuers would generally be barred from denying coverage for such conditions, and individuals would have new special enrollment opportunities in the individual market when they have certain losses of other coverage. Under the regulation, insurance companies will be permitted to vary premiums within limits based on age, tobacco use, family size and geography. Health insurance companies will no longer be able to use factors such as pre-existing conditions, health status, claims history, gender and occupation as reasons to increase premiums.

The market-reforms proposed regulation (PDF) also requires health insurance issuers to maintain a single, statewide risk pool for each of their individual and small employer markets, unless a state decides to merge the individual and small-group pools into one pool. Premiums and annual rate changes would be based on the health risk of the entire pool. And it includes provisions for enrollment in a catastrophic plan in the individual market for young adults and people who otherwise would find coverage unaffordable.

HHS also issued a proposed rule that maps out health insurance issuer standards related to essential health benefits and the determination of actuarial value. The Affordable Care Act requires that health plans in the individual and small-group markets—both inside and outside the health insurance exchanges—include a core package of essential services.

Essential health benefits must include products and services in 10 categories, such as emergency services, hospitalization, maternity and newborn care, prescription drugs, mental health and substance-abuse disorder services, and pediatric services that include oral and vision care. The proposed rule prohibits benefit designs that could discriminate against potential or current enrollees, and includes special standards for health plans related to benefits that are not typically covered by individual or small-group plans, such as habilitative services.

The proposed rule also includes an appendix with the proposed list of state-selected essential health benefit benchmark plans and the default benchmark for a state that didn't select a benchmark plan. Comments for the essential health benefits rule are due by Dec. 26.

Meanwhile, the actuarial value component of essential health benefits is determined as the percentage of total average costs for benefits that a plan would cover. In 2014, nongrandfathered health plans in the individual and small-group markets must meet certain levels, depending on whether they are a bronze (60%), silver (70%), gold (80%) or platinum (90%) plan. Under the new regulation, HHS proposes that a plan could meet a certain level if its actuarial value is within 2 percentage points of the standard. “For example, a silver plan may have an AV of between 68% and 72%,” HHS noted in a summary.

HHS, along with the Labor and Treasury departments, also released proposed rules related to employment-based wellness programs. The regulations Tuesday outlined amended standards for nondiscriminatory “health-contingent wellness programs” that usually require individuals to meet certain health-related standards in order to qualify for a reward.

During a conference call with reporters, HHS Secretary Kathleen Sebelius touted the effects of the Affordable Care Act, calling the law's provisions to establish insurance exchanges, to reward for quality over volume, and to invest in prevention all “common-sense reforms.”

“Unlike three years ago, we can see a path forward to the kind of health system America needs to be globally competitive,” Sebelius said.

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