The Trump administration has unveiled a sweeping set of regulatory proposals that would substantially change health plan offerings in the Affordable Care Act marketplace next year, with an aim, it said, to offer more options and lower premiums. But it also proposes to dramatically increase some annual out-of-pocket costs — to more than $27,000 for one type of coverage — and could cause as many as 2 million people to drop their insurance.
The changes come as affordability is a key concern for many Americans, some of whom are struggling to pay their ACA premiums since increased subsidies expired at the end of last year. The number of initial registrations for this year fell by more than 1 million.
Health coverage and affordability have become strong political issues in the run-up to November’s midterm elections.
The proposed changes are part of a lengthy rule that addresses a wide range of standards, including benefit packages, out-of-pocket costs and health care provider networks. Insurers refer to these standards when setting premium rates for the following year.
After a comment period, the rule will be finalized this spring.
“It puts patients, taxpayers and states first by reducing costs and strengthening accountability for taxpayer dollars,” Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, said in a Feb. 9 news release.
One way to do that is focusing heavily on one type of coverage — catastrophic plans — that last year attracted only about 20,000 policyholders, according to the proposal, though other estimates put it closer to 54,000.
“To me, this proposal looks like the administration has found its next big thing in disaster plans,” said Katie Keith, director of Health Policy and Legislative Initiatives at the O’Neill Institute for National and Global Health Law at Georgetown University Law Center.
Such plans have very high annual out-of-pocket costs for the policyholder, but often lower premiums than other ACA coverage options. Previously restricted to those under 30 or facing certain hardships, the Trump administration has allowed seniors who have lost subsidy eligibility to sign up for them for this year. It is not yet known how many people have chosen to do so.
The payment rule bolsters that move by making eligible anyone whose income is below the poverty line ($15,650 for this year) and those who earn more than 2.5 times that amount and who lost access to an ACA subsidy that lowered their out-of-pocket costs. It also notes that a person who meets these standards would be eligible in any state — an important point because this coverage is currently only available in 36 states and the District of Columbia.
In addition, the proposal would require maximum spending for such plans to reach $15,600 a year for an individual and $27,600 for a family, Keith wrote this week in Health Affairs. (The current maximum for catastrophic plans is $10,600 for an individual plan and $21,200 for family coverage.) Not counting preventive care and three covered primary care physician visits, the spending goal must be met before the policy’s other coverage kicks in.
Well, the administration wrote that the proposed changes would help differentiate catastrophic plans from “bronze” plans at the next level and potentially spur more premium enrollment. Currently, the proposal says, there may not be a significant difference if premiums are similar. Raising the out-of-pocket maximum for catastrophic plans to those levels would create that difference, the proposal says.
“When there is such a clear difference, healthier consumers who are generally eligible and better suited to enroll in catastrophic plans are more motivated to choose a catastrophic plan over a bronze plan,” the proposal states.
However, ACA subsidies cannot be used for catastrophic premiums, which could limit buyer interest.
Enrollment in bronze plans, which currently have an average annual deductible of $7,500, has doubled since 2018 to about 5.4 million last year. This year, that number will likely be higher. Some states’ enrollment data show a shift toward bronze as consumers left higher-premium “silver,” “gold” or “platinum” plans after more generous subsidies expired at the end of last year.
The proposal would also allow insurers to offer bronze plans with cost-sharing rates that exceed what the ACA currently allows, but only if that insurer also sells other bronze plans with lower cost-sharing levels.
In what it calls a “new” approach, the proposal would allow insurers to offer multi-year catastrophic plans, where people could stay enrolled for up to 10 years and their out-of-pocket maximums would vary during that time. Costs may be higher, for example, in the early years, then decrease as the policy is in force. The proposal specifically requests comment on how such a plan might be structured and what effect multi-year plans might have on the market as a whole.
“As we understand it so far, insurers could offer the policy for one year or consecutive years, up to 10 years,” said Zach Sherman, managing director of coverage policies and program design at HMA, also known as Health Management Associates, a health policy consulting firm that works for states and insurance plans. “But the details of how that would work, we’re still unpacking.”
Matthew Fiedler, a senior fellow at the Brookings Institution’s Center for Health Policy, said the proposed rule includes a slew of provisions that could “expose enrollees to much higher out-of-pocket costs.”
In addition to the planned changes to bronze and catastrophic plans, he points to another provision that would allow plans that do not have established health provider networks to be sold on the ACA exchange. In other words, the insurer has not contracted with certain doctors and hospitals to accept their coverage. Instead, such plans would pay health care providers a set amount for medical services, possibly a flat fee or a percentage of what Medicare pays, for example. The rule says insurers should ensure “access to a range of providers” willing to accept such amounts as full payment. However, policyholders could be on the hook for unexpected expenses if a clinician or facility disagrees and charges the patient the difference.
Because the rule is so comprehensive — with so many other parts — it’s expected to attract hundreds, if not thousands, of comments between now and early March.
Pennsylvania insurance broker Joshua Brooker said one change he would like to see is to require insurers that sell very high out-of-pocket catastrophic plans to offer other catastrophic plans with lower annual maximums.
Overall, though, a wider range of options could appeal to people at both ends of the income scale, he said.
Some wealthier enrollees, particularly those who no longer qualify for any ACA premium subsidies, would prefer a lower premium like those expected in catastrophic plans and could pay bills up to that maximum, he said.
“They’re more worried about the half-million dollar heart attack,” Brooker said. It’s harder for people below the poverty level, who don’t qualify for ACA subsidies and, in 10 states, often don’t qualify for Medicaid. So they will probably remain uninsured. At least a catastrophic plan, he said, could allow them to get preventive care coverage and limit their exposure if they end up in a hospital. From there, they may qualify for charity hospital care to cover out-of-pocket costs.
In general, “putting more options on the market doesn’t hurt, as long as it’s properly disclosed and the consumer understands it,” he said.
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