Overview: Final Rule for Health Insurance Market Reforms

The Centers for Medicare & Medicaid Services (CMS) is publishing a final rule to implement several key provisions of the Affordable Care Act to prevent insurance companies from discriminating against people with pre-existing conditions and protect consumers from the worst insurance company abuses. Today, as many as 129 million-or 1 in 2-non-elderly Americans have some type of pre-existing health condition, ranging from life-threatening illnesses like cancer to chronic conditions like diabetes, asthma, or heart disease¹.   In most states, these consumers can be denied individual health insurance coverage, charged significantly higher rates, or have benefits for medical conditions excluded by insurance companies.  In addition, individuals and small employers often find that they have few protections against premiums increases.  To address these problems starting in 2014, CMS issued a final rule that contains:

Guaranteed Availability of Coverage

Health insurance issuers will be prohibited from denying coverage to people because of a pre-existing condition or any other health factor.   All policies in the individual market will be guaranteed available and will be offered during open enrollment periods.  All policies in the group market will be available continuously year-round.  In addition, individuals will have special enrollment opportunities in the individual market when they experience certain significant life changes, similar to those in the group market today.

Fair Health Insurance Premiums

Health insurance issuers in the individual and small group markets will no longer be able to use factors -- such as pre-existing conditions, health status, claims history, duration of coverage, gender, occupation, and small employer size and industry - to charge consumers greater premiums.  Health insurance issuers may vary premiums only based on age (within a 3:1 ratio for adults), tobacco use (within a 1.5:1 ratio for adults and subject to wellness program requirements in the small group market), family size, and geography.  

States can choose to enact stronger consumer protections than these minimum standards.  In addition, starting in 2017, states have the option of allowing health insurance issuers that offer coverage in the large group market to offer such coverage through the marketplace.  For states that choose this option, these rating rules also will apply to all large group health insurance coverage.  These rules standardize how health insurance issuers can price products, bringing a new level of transparency and fairness to premium pricing.

Single Risk Pool

The single risk pool provision prevents insurers from segmenting enrollees into separate rating pools in order to increase premiums at a faster rate for higher-risk individuals more than lower-risk individuals, as is often the practice today.   Health insurance issuers will maintain a single statewide risk pool for each of their individual and small employer markets, unless a state chooses to merge the individual and small group pools into one pool. Premiums and annual rate changes will be based on the health risk of the entire pool.  

Guaranteed Renewability of Coverage

The final rule reaffirms existing protections that individuals and employers have with respect to coverage renewal.  For example, these protections will prohibit issuers from refusing to renew coverage because an individual or employee becomes sick or has a pre-existing condition.
In addition, the final rule includes some additional provisions to protect consumers and increase choice for small employers.

Catastrophic Plans

The final rule also includes provisions for enrollment in catastrophic plans. Catastrophic plans generally will have lower premiums, protect against high out-of-pocket costs, and cover recommended preventive services without cost sharing-providing affordable individual coverage options for young adults and people for whom coverage would otherwise be unaffordable.

Updating Rate Review

Finally, in preparation for the market changes in 2014 and to streamline data collection for insurers and states, the rule amends certain provisions of the rate review program.  Specifically, it adds standard for assessing premium increases in Effective Rate Review Programs.  And, to monitor rate increases across the markets, all rate increases must be reported with those that are 10 percent or higher still subject to review.

--------------------------------------------------------------------------------

[1] Assistant Secretary for Planning and Evaluation, "At Risk: Pre-Existing Conditions Could Affect 1 in 2 Americans: 129 Million People Could Be Denied Affordable Coverage Without Health Reform," November 2011; http://aspe.hhs.gov/health/reports/2012/pre-existing/index.shtml