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A Closer Look at New Rules for Health Insurance Exchanges

For the millions of Americans who use the health insurance exchanges set up by the Affordable Care Act, more commonly known as Obamacare to obtain health coverage, any changes to the rules could dramatically alter how their health insurance works.  That is why you should know that the Centers for Medicare and Medicaid Services (CMS), the federal agency that administers the health insurance exchanges, has issued new rules that will make it more difficult to enroll again after a lapse in coverage, among other changes.

According to the Department of Health and Human Services, almost 9.2 million Americans enrolled in a health plan found on the federal health insurance exchanges during the 2016 open enrollment period. Another 2.8 million enrolled using state-sponsored health exchanges, bringing the total to almost 12 million.  This is slightly lower than the year before because of anticipation of a repeal of the Affordable Care Act by the Trump administration.

Problems with Health Insurance Marketplaces

Despite widespread participation by consumers, there have been some major problems with Obamacare.  In recent years, there has been dwindling insurer participation which has contributed to rising premiums. In just the past year, the number of insurers in the health insurance marketplaces has dropped 28 percent, leading to a 25 percent rise in premiums on average.

Insurers like UnitedHealth Group and Aetna are leaving the exchanges for many reasons but primarily because they are not profitable for them.  For example, UnitedHealth Group sponsored 795,000 health insurance policies through the health exchanges and expects to lose $650 million on them in 2017.  This is due to the high costs of insuring these particular policyholders, who tend to be sicker.

Furthermore, there are not enough enrollees who are young and healthy to help offset the high costs of sicker enrollees. Despite the Individual Mandate which financially penalizes Americans without health coverage, many healthy people refuse to enroll. This is partially due to the fact that it is so easy to enroll in an Obamacare health plan, that many wait until they become ill.

Enrollment Rule Changes

In an effort to make it more difficult for people to leave a health plan and re-enroll upon getting sick, the Centers for Medicare and Medicaid Services issued a new enrollment rule in April 2017.  The new rule consists of a number of components:

  • Shortened enrollment period—instead of the 12 week enrollment period in prior years, there will only be a 6 week open enrollment from November 1 through December 15.
  • Anti-fraud measures—to prevent fraud, prospective enrollees must now provide documentation when signing up during special enrollment periods.  Applicants must now prove that legitimate life changes like the following occurred:
    1. Marriage
    2. Relocation
    3. Divorce
    4. Loss of employment
  • Continuous coverage—to help insurers evaluate the ongoing health of policyholders, CMS now requires that enrollees must pay for the premiums missed during any lapses in coverage before re-enrolling.  This is intended to make sure that policyholders don’t let their policies lapse when they are healthy and re-enroll upon becoming ill.
  • More plan options—insurers will now be allowed to sell low cost premium plans.
  • State regulatory oversight—in addition to the federal oversight provided by the Centers for Medicare and Medicaid Services, states may now also regulate health insurance exchanges through the National Association of Insurance Commissioners (NAIC).

The new rules will not go into effect until the enrollment period for 2018 begins.

Additionally, CMS is also instituting new procedural changes that will enable consumers who use insurance brokers like Boost Health Insurance to shop for and sign up with ACA-sponsored health plans online. In the past, shoppers could start on the website of an insurance broker, but had to visit to actually enroll; now the entire process can occur on the broker’s website. This should make it easier for consumers to find the ideal health plan for them as well as health insurance agents to facilitate the sales of Obamacare health plans. This new procedure will go into effect in more than 30 states during the 2018 open enrollment period. 

Potential Benefits to Rule Changes

While these rule changes may appear to make enrollment in Obamacare health plans more difficult, they may actually prove quite beneficial in the long run.  If Congress and the Trump administration are unable to pass a repeal and replacement of the Affordable Care Act, then it will be incumbent upon CMS to implement such changes to ensure the ongoing viability of the health insurance marketplaces.

The primary benefit of the new rule changes is that it will encourage more insurers to participate in the health exchanges.  This is critical to reducing the costs of health plans found on these exchanges. Increased participation leads to more competition among a larger pool of insurers which, in turn, will help drive down premium and out-of-pocket costs.  Where there is only one or a handful of insurers offering health plans, prices inevitably go up.

Another important benefit—and one that also helps reduce premiums—is that continuous coverage will help insurers maintain profitability. If people are only enrolling in health plans when they need coverage, the costs for insurance companies skyrocket. Ongoing enrollment ensures that policyholders pay into the system enough that there is something to draw upon when they do need to utilize benefits.

Finally, a wider array of plans should help enrollees who only want minimal, catastrophic coverage without many of the unnecessary benefits that might bloat other policies putting them out of reach for more impoverished enrollees. This greater flexibility in plan design should also help encourage more insurers to remain on the exchanges.

Many of the benefits and drawbacks of the new rule changes may only become obvious once they are implemented.  They are also contingent upon the actions of Congress and the Trump administration which are currently engaged in efforts to reform the health care system.  To learn more about how these rule changes may affect your health plan, please speak with an insurance expert at Boost Health Insurance.

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