A proposed HHS/CMS rule on governance of state and federal Obamacare exchange health plans offers payers some breaks in a contentious insurance environment.
The 2018 proposed rule, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters,” came out on August 29, much earlier than usual – last year’s edition, for example, came out on December 2 – fueling speculation that it had been pushed out quickly to address major insurer rebellions, such as Aetna’s pullout from the exchanges in several states.
There are several features of the rule that seem designed to accommodate the insurance community. For example:
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Easing a five-year ban on insurers that discontinue all health insurance coverage in the individual or group market in a state is prohibited from re-entering the applicable market for at least five years. HHS says it recognizes “that interpreting certain issuer transactions or reorganizations to be withdrawals from the market,” and therefore proposes using a more forgiving IRS definition to judge them.
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Adjustments to the high-risk pool. Acknowledging that its risk adjustment model “may underpredict costs for extremely high-cost enrollees,” HHS proposes “to alter the risk adjustment methodology to better account for high-cost enrollees” in such a way as to “allow us to better assess total actuarial risk for each risk adjustment eligible plan, and thereby to ensure that risk adjustment is appropriately compensating issuers.”
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Deferred reporting of policy changes. Current medical loss ratio (MLR) regulations allow insurers to defer reporting of new policies that have been issued with less than 12 months of experience but not those with a full 12 months of experience. HHS proposes to allow this.
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Rebate liability change. Currently insurers’ MLRs are calculated as an average of three consecutive years of experience. HHS acknowledges that this “can lead to distorted MLR calculations and could be a barrier to the entry of new issuers into a market,” and can also adversely affect “established issuers that experience rapid growth.” CMS proposes to “mitigate the impact of [three]-year averaging” with technical changes
One potentially fundamental change is the institution of a “'hybrid’ drug-diagnosis risk adjustment model” that would impact the risk tables that determine how much insurers can charge. HHS speculates that health demographics may be skewed due to missing diagnosis information, but “even in these cases, prescriptions may be filled, providing information on health status.”
Further, says HHS, “drug utilization patterns can also provide information on the severity of the illness.” So the agency proposes “to incorporate a small number of prescription drug classes as predictors in the HHS risk adjustment methodology for the 2018 benefit year to impute missing diagnoses and to indicate severity of illness.”
To this end HHS proposes the creation of “Prescription Drug Categories (RXCs)” to be used in “drug-diagnosis pairs (RXC-HCC pairs)” and “severity-only RXCs” that would affect payouts. Whether or how these new categories could or would affect the HCCs (hierarchical condition categories) used by Medicare Advantage and other plans was not mentioned.
Comments will be taken on this rule until 30 days after its official publication, expected later this week.