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CMS Proposes Health Insurance Market Rules and Rate Review Amendments
December 20, 2012
On Nov. 20, 2012, the Centers for Medicare and Medicaid Services (CMS) proposed a rule to implement the Affordable Care Act’s (ACA) fair health insurance premium (adjusted community rating), guaranteed availability (issue), guaranteed renewability, and rate review provisions. The rule is subject to the notice and comment process,and the final rule may vary significantly.
These provisions are effective for plan years (group market) and policy years (individual market) starting on or after Jan. 1, 2014.
A summary of the major provisions of this proposed regulatory action include:
- Single risk pool. Issuers are required to establish a single risk pool in each state where they offer coverage for each of their non-grandfathered individual (one pool) and small group markets (separate pool).
- Index rate. Each plan year (group market) or policy year (individual market), issuers are required to establish an index rate for each state risk pool based on the total combined claims costs for providing essential health benefits within the pool. The index rate must be adjusted on a market-wide basis with additional adjustments made related to risk adjustment and reinsurance programs.
- Plan level adjustments to index rate. Plan level adjustments to the index rate are limited to the following: (1) actuarial value and cost sharing design of the plan; (2) provider network, delivery system characteristics and utilization management practices; (3) benefits provided that are in addition to the essential health benefits (subject to certain conditions); and (4) specific eligibility for catastrophic plans.
- Fair health insurance premiums. Issuers offering non-grandfathered health insurance coverage in the individual and small group markets are limited when varying specific premium rates to using age, tobacco use, individual or family coverage, and geographic area as rating factors. No other rating factors will be allowed, including health status, claims experience and gender. Starting in 2017, these limits will apply to the large group market in a particular state if large group coverage is available through an exchange in that state.
- Guaranteed availability of coverage. Issuers offering coverage in a particular state must, with limited exceptions, offer any individual, small or large group all products that are approved for sale in the market, and accept any individual or employer that applies for any of those products.
- Guaranteed renewability of coverage. Issuers will renew coverage at the option of the plan sponsor or individual, with certain exceptions.
- Catastrophic plans. The proposed rule provides access to a catastrophic plan for young adults and people who cannot otherwise afford health insurance. The catastrophic plan will have a lower premium, protect against high out-of-pocket costs and cover recommended preventive services without cost sharing.
- Rate increase review and notice provisions. The proposed rule modifies the existing rate review requirements in three ways: (1) reduces the reporting thresholds to zero from 10 percent rate increase; (2) modifies data collection requirements; and (3) modifies state requirements to maintain an effective rate review program.
Visit the United for Reform Resource Center for additional Adjusted Community Rating information, including reform guide materials and frequently asked questions.
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2014 Fully Insured and Self-funded PDL Updates
The Traditional and Advantage PDL changes for fully insured and self-funded plans that will take effect Jan. 1, 2014 are now available. Learn more