A leaked draft rule from HHS intended to help stabilize the individual insurance market highlights the narrow limits of what President Donald Trump's administration can do without action by a deeply polarized Congress.
HHS submitted a proposed rule to the Office of Management and Budget, but no details of the rule have been disclosed by either agency. Politico, however, obtained two different draft versions. The provisions are consistent with some of the changes sought by insurers to get a balance of healthy and sick people in the risk pool, bring down costs and premiums, and make the individual market a more profitable business.
Those elements “are hopeful for us,” said Daniel Hilferty, CEO of Independence Blue Cross, board chairman of the Blue Cross and Blue Shield Association, and a member of the executive committee of America's Health Insurance Plans. He added that the reported rule, which he has not seen, suggests that “the administration is listening and our message is getting through.”
But the changes would not address what insurance industry leaders say are their most important needs if they are going to remain in the individual market in 2018. Those include congressional funding for the Affordable Care Act's cost-sharing reductions, preservation of generous premium subsidies to keep coverage affordable, and restoration of risk payments to protect insurers that sign up disproportionately sick members.
“The small nature of these changes shows that real reform has to come through legislation, because none of this will fundamentally change the market,” said Craig Garthwaite, a health insurance expert at Northwestern University. “And it's not even legally clear they can do this.”
Time is another challenge for the Trump administration. Even if HHS issued a notice of rulemaking tomorrow, soliciting and considering public comment, and drafting and publishing a final rule could take at least two to three months. But insurers have to file their 2018 plan offerings and rates for 2018 by April and May, and they need to know the insurance market rules before they make their final decisions.
“It will be tight,” Hilferty said. “We'll already be modeling what we think the rule changes will be, based on the components that could be included in the rule.”
Meanwhile, consumer advocates say the proposed changes would make insurance less affordable and less accessible for older and sicker people and those who face unexpected life changes, financial problems or illnesses.
According to the leaked drafts, HHS wants to let insurers charge older enrollees premiums 3.49 times as much as they charge younger enrollees, up from the ACA's maximum permitted age-rating band of 3-to-1. In addition, the agency would cut the length of open enrollment from three months to six weeks, extending from Nov. 1 to Dec. 15.
People needing coverage outside of open enrollment would have to provide documentation of the qualifying life change such as divorce or a lost job before coverage would become effective.
Insurers also could cut off coverage after 30 days if enrollees failed to make a premium payment, rather than giving them the current 90-day grace period.
The most controversial provision is widening premium differences between younger and older people. Insurers argue they need more flexibility to set lower premiums for younger, healthier people to lure them into the insurance market and offset the cost of older, sicker people. Insurers would prefer at least a 5-to-1 age-rating band.
Asked how much difference a 3.49-to-1 rate band would make in reducing rates for younger people, Hilferty said “any little bit helps.”
But it's not clear the administration can legally use rulemaking to change the age-rating band, which Congress explicitly set at “no more than 3-to-1 for adults.” According to the Huffington Post, HHS officials thought they could justify 3.49 because that rounds down to 3 and would comply with the statute.
“Agencies have lots of room to interpret ambiguous statutes,” wrote University of Michigan law professor Nicholas Bagley in a blog post. “But there's no ambiguity here. The statute says no more than 3, period.”
AARP, the advocacy group for older Americans, called letting insurers charge older consumers higher rates “a bad deal for Americans” and said it would consider a lawsuit if the Trump administration issues such a rule.
Bagley said it's nearly certain the courts would block this change, and that protracted litigation would only heighten the uncertainty that's roiling the individual insurance market.