Executive Summary
Obamacare is enrolling too many sick people and too few healthy ones to prevent a death spiral. The Centers for Medicare & Medicaid Services (CMS), a unit of the U.S. Department of Health & Human Services (HHS), has proposed a new rule to stabilize the Obamacare markets for individual health insurance. This was the first rule issued since Dr. Tom Price was appointed HHS secretary. The proposed Market Stabilization rule includes a number of measures to prevent people from entering the market when sick and exiting when healthy.
There is an urgent need for immediate action. It is increasingly likely that many Americans who have been forced to get coverage in the exchanges will have one or zero health plans in 2018. Insurers are unwilling to continue losing money in the exchanges. The proposed rule cannot rescue Obamacare, but it can buy some time for Americans who are suffering from dwindling choices in the exchanges.
The proposed rule addresses the Obamacare death spiral through a number of fixes in the areas of open enrollment period, special enrollment period, nonpayment of premiums, network adequacy and actuarial value. Specifically, the proposed rule would:
- Reduce the annual open enrollment period from 60 days to 45 days.
- Tighten the rules for special enrollment by requiring timely verification of qualifying events, such as marriage, change of employment or a long-distance move.
- Replace the three-month grace period for nonpayment of premiums with a 12-month look-back to prevent people from gaming the system.
- Allow insurers to reduce the number of “essential community providers” included in their networks from 30 percent to 20 percent.
- Broaden the range of actuarial values insurers must cover based on projected costs.
While the rule moves in the right direction, CMS should consider strengthening it with the following changes:
- Reduce open enrollment to 29 days, as in the Federal Employee Benefits Health Program.
- Require continuous coverage with no gap longer than 30 days for special enrollment periods when people change jobs or marry, as in the employer-based market.
- Require state-based exchanges to enforce the same regulations on special enrollment as Federally Facilitated Marketplaces (that is, healthcare.gov).
- Clarify the exact legal basis in the Affordable Care Act for requiring enrollees who are delinquent in their premium payments to pay up to 12 months of overdue premiums before being enrolled in the next year’s plan.
- Limit the Secretary’s authority over network adequacy to ensuring that health plans adhere to standards established by the states.
- Recognize that minor changes to actuarial value (AV) standards cannot change the fundamental problem of AV as defined by the ACA.
The proposed Market Stabilization rule is an improvement over the previous administration’s ACA regulations. Further rulemaking is to be expected; however, it is not possible to fix Obamacare by rulemaking alone. New legislation is required.