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Flurry of new ACA rules adds to insurers' uncertainty


By Paul Demko
Posted: March 17, 2014 - 7:00 pm ET
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Hundreds of pages of proposed federal rules and guidances for insurers seeking to participate in the state and federal exchanges in 2015 are raising questions among insurance experts about whether they add to the regulatory and market uncertainty surrounding the healthcare reform law.

Insurers are worried about potentially tougher federal regulation of plan provider networks under the administration's new guidance, which was issued late Friday.

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The Obama administration has faced a backlash from consumers and providers over patients losing access to their preferred doctor or hospital under narrow network plans sold on the exchanges. Proposals to require broader networks have surfaced in several states, sparking memories of the “any willing provider” legislative backlash against HMOs in the 1990s.

Under the proposal, the CMS would no longer defer to the states on certifying adequate provider networks. Instead it would establish its own process for making sure that networks include a sufficient number of hospitals, mental health professionals, oncology experts and other medical providers.

“If CMS determines that an issuer's network is inadequate under the reasonable access review standard, CMS will notify the issuer of the identified problem area(s) and will consider the issuer's response in assessing whether the issuer has met the regulatory requirement and prior to making the certification or recertification determination,” the letter to issuers reads.

The CMS and HHS said the proposed rules and draft standardized notices that issuers would be required to use when renewing or discontinuing plans would help to ensure consumers understand the changes and choices in the individual and group market.

The government said the proposed rules would “encourage improved consumer protections regarding essential community providers, network adequacy, access to needed prescription drugs, and coverage of care during transitions.” While they are mainly aimed at insurers offering plans on the federally operated HealthCare.gov exchange, the rules were written to influence state-run exchanges and insurers in general.

Under the rules, federal officials will scrutinize plans offered on the federal exchange to see whether they have enough hospitals and specialists in various fields of practice. Plans generally would have to contract with at least 30% of essential community providers in their market, including community health centers, HIV/AIDS clinics, and children's hospitals.

Dr. Joel Shalowitz, a professor of health industry management at Northwestern University, noted that essential community providers is a term that applies only to a specific group of providers that includes federally qualified community health centers.

“I'm not surprised that this is an area where the administration has decided to go,” said Matthew Eyles, an executive vice president with Avalere Health, a research and consulting firm. “The noise is just out there about people maybe having difficulty getting into certain hospitals.”

But Joel Ario, a managing director at Manatt Health Solutions and former director of the office of health insurance exchanges at HHS, cautioned that narrowing networks and steering patients to higher quality, lower-cost hospitals and physicians is a valuable tool for insurers in keeping premiums affordable. “The market really does need to have some room to innovate here,” Ario said. “It's important not to overreact to some of the narrow network products that are out there.”

The CMS had previously signaled that it planned to take a look at tougher regulation of provider networks in a letter issued last month. In response, the trade association America's Health Insurance Plans warned in comments to the agency that the proposal would have serious negative ramifications for health plans.

“Network development—from creation of the network model to the discussion and negotiation with providers and signing of contracts—is a complex and critical function in the design of any health plan that can take upward of a year or more to complete,” AHIP wrote. “CMS' proposed insertion of oversight late in the process could jeopardize timely finalization of plans and rates.”

Insurers also are likely to be wary of new proposed changes to the “three Rs”—risk corridors, reinsurance and risk adjustment—that are designed to provide financial protections as they wade into a marketplace with a lot of unknown variables. Two of those programs are slated to be hit by sequester cuts that will trim about $1 billion from appropriations in fiscal 2015, which starts Oct. 1.

Anne Hance, co-chair of McDermott Will & Emery's insurance/payers affinity group, said it wasn't immediately clear how the proposed changes from the CMS would affect insurers' bottom lines. “The biggest takeaway is that it just perpetuates the uncertainty,” Hance said. “It doesn't appear to cut exclusively one way for or one way against the issuers.”

Hance and others point out that health plans are in a pivotal period when they're developing products to offer through the exchanges in 2015. They are already dealing with incomplete information about the health status and costs for 2014 enrollees, and these changes will add to that uncertainty.

“They're trying to manage so much right now,” Eyles said. “It's really an additional layer of complexity.”

But groups that support the ACA and want to maximize enrollment were pleased with a proposal to bolster the CMS' new rules for how states can regulate enrollment outreach workers, known as navigators, in-person assisters and certified application counselors. The rule explicitly prohibits states from implementing policies that would hinder implementation of the federal healthcare law.

In a number of Republican-led states, policies have been put in place that make it more difficult for outreach workers to help people sign up for coverage. In January, a federal judge threw out Missouri's regulations because they conflicted with federal law.

Timothy Jost, a law professor and ACA expert at Washington and Lee University School of Law who supports the healthcare reform law, praised the new guidelines governing enrollment activities for 2015. But he argued that such rules should have been in place prior to the current open enrollment period. “That's what's frustrating,” Jost said. “They should have come out with these regulations back in September.”

Late Friday, the CMS and HHS issued wide-ranging proposed rules that also affect consumer access to quality information about plans, selection of plans in the small business exchanges, and medical loss ratios for insurers.

The administration also would require plans to provide easy-to-access online information about the doctors in their network and whether they are accepting new patients.

Plans would not be allowed to discriminate against people with significant health needs. The government would be allowed to challenge any plan that requires prior authorization for drugs used to treat a particular condition.

“We are concerned that some enrollees, particularly those with certain complex medical conditions, are having trouble accessing in a timely fashion clinically appropriate prescription drugs,” read a preamble to the proposed rules.

To help consumers shop for plans based on quality, insurers would have to submit data to support the calculation of their quality ratings. Insurance exchanges would be directed to clearly display the HHS-calculated quality ratings and enrollee satisfaction survey results.

For the Small Business Health Options Program, for 2015 the government would align the start of annual employer election periods in all SHOP exchanges with the start of open enrollment in the individual exchanges to minimize confusion and maximize efficiency.

In allocating reinsurance contributions to stabilize individual market premiums, the government proposed to raise the ceiling on insurers' allowable administrative costs and raise the floor on profits by 2 percentage points in the risk corridors formula. This adjustment would be applied uniformly in all states for 2015 to help with additional transition costs and uncertainty.

The government also proposed various amendments to the medical loss ratio provisions. Included in that were standards that would modify the time frame for which issuers can include their ICD-10 conversion costs in their MLR calculation and account for the special circumstances of issuers during the changes taking place in 2014, such as unanticipated costs due to high call-center volume in January 2014. The core requirements of the MLR program—for example that insurers spend 80% to 85% of premiums on healthcare and quality improvement—are generally not affected by these proposed adjustments.

Follow Paul Demko on Twitter: @MHpdemko


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