AISHealth: Delays in Issuing Reform-Law Regs Start Worrying Insurers as Much as Regs’ Content

Delays in Issuing Reform-Law Regs Start Worrying Insurers as Much as Regs’ Content

Reprinted from AIS’s HEALTH REFORM WEEK, the nation’s leading publication on the business implications of the massive changes for the health industry mandated by reform.

By James Gutman, Managing Editor

October 10, 2011Volume 2Issue 33

The delays in issuing final regulations about several key aspects of health reform — especially, but not limited to, the rules governing benefits and operations in exchanges — are beginning to worry health plans perhaps more than the regulations’ contents themselves. Insurers point to the long time it takes to design, gear up to operate and get regulatory approvals for products as factors making it imperative that federal regulators firm up rules quickly.

But the subject matter of those rules is so complex and important that regulators want to make sure they get input from all stakeholders before finalizing rules, which may wind up substantially different from preliminary ones — as occurred this year with the appeals and grievances regulations (HRW 6/27/10, p. 3). In that case, the changes worked generally in favor of the industry.

Favorable changes notwithstanding, some insurers clearly are exasperated by the collapsing timeline. The Blue Cross and Blue Shield Association (BCBSA), in perhaps the foremost example, told Kaiser Health News last month that it wants HHS to issue all regulations related to the health insurance exchanges by the beginning of 2012. That’s a tall order, even BCBSA admitted. “Given the range of things that have to be put out for comment, I’m worried they won’t be able to do that,” said Kris Haltmeyer, executive director of legislative and regulatory policy for BCBSA, according to Kaiser Health News.

Among the specific concerns raised by Haltmeyer in the article are delays in finding out what “essential health benefits” must be included in plans offered in the exchanges (see story, p. 1), how the low-income tax credits used by purchasers in the exchanges will be administered, how the transfer of funds will occur among plans to account for health differences of people who apply to be insured via the exchanges, and what rules will apply for selling health coverage outside the exchanges starting in 2014.

These indeed are key concerns, David Tuomala, director of actuarial consulting for OptumInsight, a unit of UnitedHealth Group, tells HRW. “Every client we talk to raises the same issues….The problem is a lack of clarity” that threatens to leave insufficient lead time for both product-design and structural needs, he says.

One major issue, according to Tuomala, is that even well-run insurers might have an 18-month product development cycle. Therefore, if HHS comes out with its essential-benefits regs in December, the earliest time seemingly possible, “that’s cutting it close,” he asserts. Tuomala explains that plans really have only until the middle of 2013 — not the Jan. 1, 2014, start of the exchanges — to get everything finalized. This is because they must get approval of their offerings from the exchanges as well as have their administrative systems ready to cover new benefits and products before they can enter the marketing season for the 2014 effective date, he says.

And there are a lot of decisions — some of them at least partly dependent on not-yet-issued other rules — that need to be made between now and then. He cites, for instance, a Medicaid plan deciding whether to enter the commercial market through the exchanges (or vice versa), or a group insurer determining whether to offer an individual-market product via the exchanges. If the answer is yes, continues Tuomala, there is a whole range of systems requirements to be met.

Contents of Gold, Silver Plans Aren’t Known

Moreover, there are still uncertain network-adequacy requirements for “qualified” health plans in the exchanges. Among other outstanding questions, Tuomala adds, are whether sponsors, for instance, can have more than one “silver” plan (i.e., a middle kind of plan to be used in the exchanges) and how they determine actuarially what meets the requirements of a silver plan. He notes that the reform law requires a sponsor to offer a “gold” (i.e., a high benefit level) and silver plan but doesn’t say what constitutes those plans. This will be one key aspect the HHS regulations are expected to clarify.

Once those regs are out, Tuomala explains, plan sponsors will have to decide what size and kind of provider network they will need to deliver the products required under the rules. Then they’ll need to decide on benefit options, figure out how risk adjustment and risk corridors will work on the products, and only then determine product pricing, he says. And all this takes a lot of time.

There is a related unknown that is another time-consuming complication. The transfer of funds among plans required under the reform law to account for health differences among applicants for coverage through exchanges is both an operational and actuarial issue, according to Tuomala. The feds have not yet fully specified how information on this will go back and forth or how the financial transactions related to it will occur. While there are regulations out on this, he acknowledges, “they leave a lot of blanks.” It is not clear, for example, what risk-adjustment mechanisms exchanges would use for this, he says.

Nor are the lingering time-consuming questions related just to exchange participation. If insurers want to market individual coverage outside the exchanges and escape tax penalties for offering products that have benefits too much below the actuarial value required in the exchanges, they need to know the precise requirements soon, suggests Tuomala. Again, he adds, this is a systems as well as a financial issue.

IT issues related to the delay in issuance of the rules are a “legitimate concern,” agrees Tom Bixby, a Madison, Wis.-based attorney who represents health insurers. He tells HRW that one of his clients already had such issues about the summary-of-coverage documents that insurers will be required to furnish consumers starting next March under the reform law (HRW 8/8/11, p. 5). While the National Association of Insurance Commissioners has issued its recommendations on the contents of those documents, and HHS accepted them in proposed rules Aug. 17 (HRW 8/22/11, p. 8), there is an ongoing 60-day comment period, after which the rules could be revised. So insurers, which must meet the deadline, are wondering if they should rely on the proposed rule, Bixby explains.

Sometimes, he recalls, the feds recognize there isn’t enough time to meet requirements in the law and allow a delay, as occurred with the appeals-and-grievance regulations. However, he theorizes that the Obama administration would be “very reluctant” to allow a delay in the start date on such “major aspects” of the reform law as the exchanges, although it might allow delays on certain details of the implementation.

To further complicate the time situation, there are issues related to uncertain state policies that will affect the marketplace in 2014, notes Bixby, who is a former Missouri state regulator. He says state actions are “inhibited” by not knowing yet what the federal rules will say.

Kevin Wrege, Esq.

Founder & President

Pulse Issues & Advocacy LLC

Office: 202-625-1787

Mobile: 202-253-4929

4410 Massachusetts Ave., NW, #150

Washington, DC 20016

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