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Essential debate

As HHS moves forward with regulation proposals, key players fight to understand—and edit—rules


By Jessica Zigmond
Posted: November 24, 2012 - 12:01 am ET
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HHS should brace itself for some grueling days ahead as officials haggle with states, insurers and providers over a new set of draft regulations implementing key insurance provisions of the healthcare reform law and stakeholders pressure the Obama administration to explain how it will help operate insurance exchanges in states that decline to establish their own.

With the presidential election now out of the way, the administration issued a highly anticipated draft rule on the Patient Protection and Affordable Care Act's essential health benefits provision, which describes a set of benefits that all health plans in the individual and small-group markets—both inside and outside of the insurance exchanges—must include. HHS also released a proposed regulation on market reforms that would prevent health insurers from discriminating against people with pre-existing conditions, and a rule for self-insured plans that pertains to employer wellness programs.

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Some advocacy groups, such as the National Health Council and Families USA, praised the rules for broadening coverage to patients and for ensuring that health insurance companies will not deny coverage to people because of factors such as age and health problems. In the market-reforms regulation, HHS outlined factors that insurers in the individual and small-group markets could use to vary premiums.

It also noted that health insurance issuers would be required to maintain a single, statewide risk pool for each of their individual and small-employer markets, unless a state opts to fuse the individual and small-group pools into one. As a result of that provision, premiums and annual rate changes would be based on the health risk of the entire pool.

But it's the essential health benefits proposed regulation that has and will continue to consume the most attention as the healthcare industry attempts to understand and respond to the draft rules in the coming weeks. That's especially true for insurers working to design their benefit packages while playing a game of beat the clock before they market those plans next October.

HHS said it received more than 11,000 comments on the two bulletins it released in the past year, including one on essential health benefits in December 2011 and one last February on the actuarial value component—which is calculated as the percentage of total average costs for benefits a plan will cover.

Hours after the regulations were released, the Children's Hospital Association criticized the take on essential health benefits for lacking a clear definition of pediatric services and said HHS should—at a minimum—add states' Children's Health Insurance Program plans as a benchmark option for children's coverage in a pending final rule. And America's Health Insurance Plans President and CEO Karen Ignagni said in a statement that the essential health benefits rules will coincide with the new restrictions in the law's age-rating rules that will also take effect in January 2014. Both provisions, Ignagni said, could provide incentives for young, healthy people to wait to buy insurance until they are sick or injured, which will increase costs for everyone else.

The argument that coverage will be more expensive for younger Americans is premised on HHS' approach to insulating older enrollees from large rate increases. The proposed rule would limit the increases to one-year “age bands.”

Although the proposed rule on essential health benefits is similar to guidance HHS released in its December bulletin, one major difference is the rule's prescription drug coverage provision.

New landscape for healthcare regulation
HHS intends to require health plans to cover the greater of either one prescription drug in every U.S. Pharmacopeia category and class, or the same number of prescription drugs in each category and class that are covered in the essential health benefits benchmark plan. The guidance a year ago said that if a benchmark plan offers a drug in a certain category or class, then all plans must offer at least one drug in that same category and class.

Ian Spatz, an attorney and senior adviser at Manatt Health Solutions, said HHS stirred a controversy mostly among patient advocates last year by suggesting plans cover only one drug in each category. The change would generally give enrollees the same kind of choices that people have in private-sector plans.

“We'll have to see how this works in real life,” Spatz said. “It's not clear how this is going to work out at all. But it really was a way for CMS to get out of a problem they created, which was to suggest a floor that was too low.”

Meanwhile, the proposed rule gave some flexibility to nongrandfathered health plans in the individual and small-group markets in meeting various thresholds for actuarial levels, which are divided into four categories signifying what percentage consumers are responsible for paying. A bronze plan, for instance, would cover 60% while the consumer would pick up the remaining 40%. The other levels are silver (70%), gold (80%) and platinum (90%). The categories are supposed to help make it easier for consumers to comparison-shop among plans with similar levels of coverage. HHS is proposing that a plan can meet a particular level if it is within 2 percentage points of the standard.

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

—HHS Secretary Kathleen Sebelius, during a media call last week

And to help issuers determine the actuarial value of a plan based on a national, standard population, HHS created an online calculator and made it made available to the public on the website of the Center for Consumer Information and Insurance Oversight.

Spatz said he was pleased that the department created the calculator, but said there's no way the department could create a tool that accounts for all of the variations that health plans have in plan design around cost-sharing. “Benefit design is not simple,” he said.

HHS Secretary Kathleen Sebelius told reporters she's confident that the new rules issued last week—along with a recently extended deadline for states to alert her department if they plan to operate a state-based exchange—will give states what they need to implement the Affordable Care Act. But states and industry stakeholders are still waiting for other key information from the administration, such as guidance on the federally facilitated exchanges, which will be released “in the near future,” said Gary Cohen, director of the Center for Consumer Information and Insurance Oversight.

The administration should expect scrutiny from Congress as the process of implementing the reform law kicks into high gear, Rep. Michael Burgess (R-Texas), a physician, told Modern Healthcare last week. Burgess emphasized that the House Energy and Commerce Oversight and Investigations Subcommittee—on which he serves—will closely examine everything that comes out of HHS and the Office of Personnel Management on the federally facilitated exchanges.

“It should have absolute oversight,” Burgess said. “And there can be no timidity.”

TAKEAWAY: Answers from HHS on key reform questions mean just the beginning of intense preparation for core provisions that go live in less than 14 months.


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