The Centers for Medicare and Medicaid Services (CMS) has released its final rules on giving states more power to regulate individual and small group health insurance markets.
The new rules are part of the Trump administration’s effort to dismantle the Affordable Care Act after numerous GOP efforts to repeal the law failed in 2017.
The rules give states more control over which essential health benefits plans must offer, scrap rules that require all rate hikes to be reviewed by regulators, and allow exchanges to grant more waivers for having to purchase health coverage.
The move will have varying effects depending on the state, but the end result will mean more lax regulation of the ACA for individual and small group plans.
Power to the states
The new regulations allow states to determine which essential health benefits individual and small group plans must offer, effective 2020.
Plans will still have to offer the 10 essential health benefits required by ACA, such as maternity care or mental health coverage, but a new rule expands the essential health benefits to 50 options, allowing states to “build their own set of benefits” that could become the benchmark plan.
Rate hike reviews scaled back
Currently, insurers that plan to increase rates by more than 10% are required to submit the change for review with regulators. That threshold increases to 15% starting with the 2019 policy year.
More ways to avoid individual mandate penalty
If an individual lives in a county with no or one insurer offering coverage on the individual exchanges, they will be allowed to forgo the penalty for not being insured this year.
Another carve-out has been made in circumstances when the only insurance available covers abortions and the procedure is against an individual’s belief. In that case, they don’t have to pay the penalty for not buying insurance.
These provisions are only for 2018, as the individual mandate has been repealed for 2019 onwards.
The new rules also eliminate standardized options from marketplaces and will instead allow insurers to innovate. Standardized options currently include cost-sharing structures and benefit designs, so it will be easier to shop for coverage.
The new rule will allow insurers to think outside the box when it comes to how the plans are offered to people buying coverage on exchanges.
Reducing regulatory burden with looser MLRs
The new regulations also have loosened medical loss ratio (MLR) requirements, which under the ACA means that insurers have to spend 80% of premium on medical care rather than on other overhead.
Under the new rule, the CMS will also allow states to adjust the MLR standard for the individual market, if the state can prove a lower standard could help stabilize the market.