New Rule Could Increase Premiums and Out-of-Pockets

The Wall Street Journal recently reported on proposed changes by the Trump Administration “that could raise health insurance costs for millions of Americans who get coverage on the job or receive subsidies under the Affordable Care Act.” As they explain, the two sides continue to bicker about the Affordable Care Act: “Republicans say subsidies for consumers are inflated; Democrats see another effort to sabotage the health law.”

The proposed changes they are referring to are found in the Notice of Benefit and Payment Parameters for 2020. This is an annual notice released by the Centers for Medicare and Medicaid Services (CMS) that sets the standards for issuers and exchanges for the coming year.

In this year’s proposed Notice of Benefit and Payment Parameters published in the Federal Register January 24, 2019, is 95 pages long. The Notice includes a few new rules that could increase premiums and out-of-pocket costs for both individual and group enrollees.

Higher Premiums Due to Formula Change

The Center for Children and Families at Georgetown University’s Health Policy Institute has an article summarizing the proposed rule. As they explain, the Department of Health and Human Services “is proposing to change the formula for determining the ACA’s premium adjustment factor,” which “HHS uses to determine the annual adjustment in the amount subsidized marketplace enrollees contribute to plan premiums, the cap on annual out-of-pocket spending, the amount insurers pay via the health insurance tax, and the fine for employers who fail to offer affordable coverage to their employees.”

HHS believes the proposed formula change “will result in net premium increases of over $180 million per year and a decline of approximately 100,000 marketplace enrollees in 2020.”

Increase in Out-of-Pocket Limit

HHS is also proposing an increase in the out-of-pocket maximum for people with single coverage from $7,900 in 2019 to $8,200 in 2020. For people with family coverage, the limit will be twice that amount, $16,400; that’s up from $15,800 in 2019. This change will affect not only individual health plans but group plans as well. In 2014, the out-of-pocket limit for people with single coverage was $6,350. If this rule is approved, the cost-sharing limit will have increased by 29% in just six years.

Some Good News

As the Georgetown University article points out, there are two things missing from the proposed rule:

1. NO Ban on Silver Loading: Prior to the release of the proposed notice, HHS had indicated that it might put an end to “silver loading,” the practice of increasing the premium on silver-level plans to compensate carriers for the cost-sharing reductions that the federal government is no longer reimbursing them for. Increasing the price of the silver-level plans results in higher premium tax credits for those who qualify, and that ends up costing the government more money. The more expensive silver-level plans and resulting increase in the tax credit may actually lower the net premium that people with a tax credit pay for bronze- and gold-level coverage.
2. NO End to Auto Re-Enrollment: HHS has decided not to end auto re-enrollment for marketplace enrollees, as it had suggested it would prior to the release of the proposed rule. For 2019, 1.8 million marketplace enrollees, including enrollees eligible for a premium tax credit, were auto re-enrolled if they “did not actively dis-enroll or switch plans.” Without auto re-enrollment, many of these individuals would have failed to act and would have become uninsured. Instead of ending auto re-enrollment, HHS is asking for input for the rules that will apply in 2021.

Reduction in Marketplace User Fee

As the Center for Children and Families explains, HHS is proposing a reduction in the Marketplace User Fee, a fee charged to insurers to help pay for the operation of the marketplace which is ultimately passed on to the consumer. In states that use the federally-facilitated marketplace (FFM), the fee will decrease from 3.5% to 3%. For state-based marketplaces (SBMs) that use Healthcare.gov as their  IT platform, the fee will decrease from 3% to 2.5%.

This happens every year

The Notice of Benefit and Payment Parameters is released annually and there are always some changes. While nobody likes the increase to the out-of-pocket limits and premium increases, they continue to increase annually. The good news for 2020 is that some of the more harmful proposals, specifically a ban on silver-loading and an end to auto re-enrollment, are not included in the proposed notice for another year. While you may want to mention some of these changes in a client newsletter, if you have one, there are no major changes that would require an urgent email to your clients.