The Trump administration has unveiled a sweeping set of regulatory proposals that will substantially change health plan offerings in the Affordable Care Act marketplace next year, with the goal, it says, of providing more choice and lower premiums. But it also proposes to raise some annual out-of-pocket costs sharply — more than $27,000 for one type of coverage — and could leave 2 million people uninsured.
The changes come as affordability is a major concern for many Americans, some of whom are struggling to pay their ACA premiums after enhanced subsidies ended late last year. Initial enrollment for this year fell by more than 1 million.
Health care coverage and affordability have become politically potent issues in the run-up to November’s midterm elections.
The proposed changes are part of a longer rulemaking that addresses a broader set of standards, including benefit packages, out-of-pocket costs, and health care provider networks. Insurers refer to these criteria when setting premium rates for the coming year.
After the 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,” Medicare and Medicaid Services Administrator Mehmet Oz said in a Feb. 9 press release.
One way to do that is to focus heavily on the type of coverage — catastrophic plans — that attracted only 20,000 policyholders last year, according to the proposal, though other estimates put it closer to 54,000.
“To me, this proposal looks like the administration has found their next big thing in catastrophic plans,” said Katie Keith, director of health policy and law initiatives at Georgetown University Law Center’s O’Neill Institute for National and Global Health Law.
Such plans have much higher 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 allowed seniors who lost subsidy eligibility to enroll in them this year. It is not yet known how many have chosen to do so.
The payment rule cements the move by qualifying people with incomes below the poverty line ($15,650 for this year) and earning more than 2.5 times that amount to lose access to ACA subsidies that have reduced their out-of-pocket costs. It also notes that a person who meets these criteria will qualify in any state — an important point because this coverage is currently only available in 36 states and the District of Columbia.
Additionally, the proposal would require out-of-pocket maximums on such plans to hit $15,600 a year for an individual and $27,600 for a family, Keith wrote in Health Affairs this week. (The current out-of-pocket maximum for catastrophic plans is $10,600 for an individual plan and $21,200 for family coverage.) That spending target must be met before the policy’s other coverage begins, not counting preventive care and three covered primary care doctor visits.
In the rule, the administration wrote that the proposed changes would help insurers encourage more enrollment in “bronze” plans, the next level up, and, possibly, earlier. Currently, the proposal states, if the premiums are the same there may not be a significant difference. Raising the out-of-pocket maximum for catastrophic plans at those levels would make up that difference, the proposal said.
“When there is such a clear difference, then healthy consumers who are generally eligible and eligible 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 on catastrophic premiums, which may limit shoppers’ interest.
Enrollment in bronze plans, which currently have an average annual deductible of $7,500, more than doubled from 2018 to nearly 5.4 million last year. This year, this number is likely to be higher. Some states’ sign-up data indicate a shift toward bronze as consumers ditch higher-premium “silver,” “gold,” or “platinum” plans after more generous subsidies expired late last year.
The proposal would allow insurers to offer bronze plans with cost-sharing rates that are higher than the ACA law currently allows, but only if that insurer also sells other bronze plans with lower cost-sharing levels.
Called a “novel” approach, the proposal would allow insurers to offer multi-year catastrophic plans, in which people could enroll for up to 10 years, and their out-of-pocket maximums would vary over that time. Costs may be high, for example, in the early years, then the policy declines over time. The proposal specifically solicits comments on how such a plan might be structured and what effect a multi-year plan might have on the overall market.
“As we understand it so far, insurers can offer policies for one year or for 10 consecutive years,” said Zach Sherman, managing director for coverage policy and program design at HMA, known as Health Management Associates, a health policy consulting firm that works for states and insurance plans. “But the details of how it works, we’re still unpacking.”
Matthew Fiedler, a senior fellow at the Brookings Institution’s Center on Health Policy, said the proposed rule includes several provisions that “could expose enrollees to very high out-of-pocket costs.”
In addition to the planned changes to bronze and catastrophic plans, he pointed to another provision that would allow plans to be sold on the ACA exchange that do not have health care provider networks. In other words, the insurer has not contracted with specific doctors and hospitals to accept their coverage. Instead, such plans charge medical providers a set amount toward medical services, perhaps a flat fee or a percentage of what Medicare pays, for example. The rule says insurers need to ensure “access to a range of providers” willing to accept payment in full. However, if a physician or facility does not agree and charges the patient a different fee, policyholders may be on the hook for unexpected expenses.
Because the rule is so broad — along 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 would require insurers selling very high-out-of-pocket catastrophic plans to offer other catastrophic plans with lower annual maximums.
Overall, though, the wider range of options can appeal to people at both ends of the income scale, he said.
Some wealthy enrollees, especially those who no longer qualify for any ACA premium subsidies, would prefer lower premiums than expected on catastrophic plans, and could pay bills only up to that maximum, he said.
“They’re worried about a half-million dollar heart attack,” Brooker said. That’s tougher 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 are likely to be uninsured. At least one catastrophic plan, he said, would allow them to get some preventive care coverage and cap their exposure if they end up in the hospital. From there, they may qualify for charity care at the hospital and cover out-of-pocket expenses.
Overall, “putting more options on the market doesn’t hurt, as long as it’s well disclosed and understood by the consumer,” he said.
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