5 takeaways from CMS' final 2019 ACA marketplace rule

The CMS issued a 523-page final rule late Monday that agency officials said is meant to give states more power to regulate their individual and small-group health insurance markets. The rule also furthers the Trump administration's agenda of chipping away at Affordable Care Act rules in lieu of a full repeal, which congressional Republicans haven't been able to pull off.

Here are five highlights:

States' choose-your-own-benefits adventure

The CMS handed states the reins to determine which essential health benefits individual and small-group plans must offer, starting in 2020. States will be able to either adopt another state's 2017 benchmark plan; replace one or more of its benefit categories with that of another state's; or completely build a new essential benefits package from scratch so long as the new plan is not too generous and is in line with a "typical employer plan." The CMS defines a typical employer plan as either one of the state's 10 base-benchmark plan options from the 2017 plan year, or one of the five largest group health insurance products by enrollment, not including self-insured plans.

Even with this extra leeway, plans will still have to offer the 10 essential health benefits required by the Affordable Care Act, such as maternity care or mental health coverage. When the change was proposed in October, policy experts were wary of giving states greater power over essential benefits, saying the move could lead to skimpier coverage in the marketplace. The CMS made adjustments to the proposal, such as tweaking the definition of a typical employer plan, to relieve some of their concerns.

Only rate hikes of 15% or more will get a review

The CMS is upping the rate increase threshold that triggers a review by state regulators to premium hikes of at least 15% for 2019. This is seen as way to reduce states' and insurers' regulatory burden given the significant rate increases over the past few years. Currently, insurers who planned to increase rates by 10% were required to submit their rates to regulators for review. The agency is also exempting student health insurance coverage from rate review requirements, effective July 1.

More 'Get Out of Health Insurance Free' cards

HHS is allowing a big chunk of Obamacare customers to drop their insurance in 2018 without having to pay an individual mandate penalty. The CMS is allowing insurance exchanges to extend exemptions to the penalty based on a lack of affordable coverage available in an area. And additional CMS guidance released Monday allows anyone who lives in a region with just one health insurer or none at all to claim a "hardship" exemption from the penalty for as far back as 2016. Those who only have access to an insurance plan that covers abortion may also get out of the penalty if they object to abortion coverage.

The individual mandate penalty was zeroed out starting in 2019, but the new exemptions would affect all those still subject to the penalty for 2018 if they don't buy coverage. Though there were some close calls leading up to the last open-enrollment period, there are no counties without at least one insurer offering exchange plans in 2018. Still, eight states and about a quarter of ACA enrollees have only one insurer to choose from. Three states—California, Oregon and New York—require nearly all their insurance plans to cover abortion services, according to the National Women's Law Center.

License to innovate

The CMS went ahead with its proposal to promote innovative plan designs by eliminating standardized options from the federal marketplace in 2019. "We believe that encouraging innovation is especially important now, given the stresses faced by the individual market," the agency said in its proposed rule. Standardized options share cost-sharing structures and benefit designs, and were initially proposed as a way to simplify shopping for consumers.

This is a major win for the health insurance industry, which opposed introducing standardized options to the exchanges in 2017, viewing them as stifling competition and creativity. Insurers previously were not required to offer standardized plans, though the CMS encouraged them to do so and displayed the plans on HealthCare.gov.

Loosening up the MLR

Starting next year, the CMS is relaxing the rules surrounding how much of an insurer's premium income must be spent on medical claims and quality improvement activities, a figure known as the medical-loss ratio. Insurers covering individuals and small businesses today must spend at least 80% of their premiums on healthcare and quality improvement.

In 2019, states will be able to request changes to the minimum individual market MLR that insurers must meet if states can demonstrate that a lower MLR would help stabilize their markets. At the same time, to relieve insurers of the burden of identifying, tracking and reporting actual expenses related to quality improvement activities, the CMS will allow insurers the option of reporting a standard 0.8% of earned annual premium for a minimum of three consecutive years.