Final rules implementing individual and group insurance market reforms under the healthcare reform law were issued Friday.
The highly anticipated regulations generally will bar insurance companies from charging higher rates or denying coverage to applicants with pre-existing conditions. The final rules for insurance plans providing coverage in 2014 were little changed from a proposed rule published Nov. 26 in the Federal Register
The final rules allow insurance companies to vary premiums within limits based on age, tobacco use, family size and geography—not factors such as pre-existing conditions, health status, claims history, gender and occupation as reasons to increase premiums
One change was the creation of a new definition of “tobacco use” that insurers can utilize to vary premium rates by a potentially costly 1.5:1 ratio. The final rule capped the look-back period for insurers assessing premiums to any tobacco product used four times a week within the previous six months. But states can further restrict that timeframe or frequency definition.
The final age-rating restrictions drew sharp criticism from the nation's largest health insurer advocacy group.
“The new restrictions on age rating will result in an overnight increase in health care costs for people in their 20s, 30s, and early 40s,” Karen Ignagni, president and CEO of America's Health Insurance Plans, said in a written statement. “This increases the likelihood that younger, healthier people forgo purchasing insurance until they are sick or injured. When this happens, costs go up for everyone, young and old.”
The final rules also require 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 will be based on the health risk of the entire pool.
“Health insurance companies will no longer be able to charge higher premiums to higher cost enrollees by moving them into separate risk pools,” HHS noted in a news release
Another change from the proposed rule was to exempt student health insurance coverage from the single risk pool requirements for individual and small group market plans.
Such separate pools were needed due to “differences between the student health insurance market and other forms of individual coverage,” Ivy Baer, an attorney for the American Association of Medical Colleges, wrote in a Dec. 26, 2012 letter to the CMS.
Other changes included clarification of the cap on the number of children that insurers can take into account when computing family premiums. The cap applies to the three oldest “covered children” under age 21.
The final rule also gave states additional flexibility to establish geographic rating areas that would be presumed adequate. Default rating area standards were modified to establish one rating area for each metropolitan statistical area and one rating area comprising all non-metropolitan statistical areas in states.
Also included were provisions for enrollment in a catastrophic plan in the individual market for young adults and people who otherwise would find coverage unaffordable. The final rules also included changes to an existing health insurance rate review program, including the addition of a requirement that insurance companies in every state report all rate increase requests.
The change drew fire from employer groups. Officials at the U.S. Chamber of Commerce criticized the broadened rate reporting in a Dec. 24 comment letter to the CMS as “overreaching” and an attempt to “advance ideological goals.” “While the statute does include a provision requiring the review of unreasonable premium increases prior to implementation of the increase, it does not require health insurance issuers to report all rate increases as the Proposed Rule suggests,” they wrote.
A new HHS report credited the healthcare overhaul's rate-reporting provisions with a drop in insurer filings for double-digit premium increases (PDF)
The Labor Department also published an interim final rule implementing provisions aimed at protecting employees from retaliation if they receive subsidized coverage through one of the health insurance exchanges that launch next year. Certain employers face extensive fines if an employee receives such assistance.