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State Regulation of Insurance Markets Can Alleviate Administration Proposals, Report Says

Allison Inserro
A new report from the Commonwealth Fund says the Trump administration’s proposed regulations encouraging the sale of various health insurance plans that are noncompliant with the Affordable Care Act (ACA) is likely to leave the marketplaces with a smaller group of enrollees who are sicker, unless states step in to consider “regulatory options” to protect the individual insurance market.
A new report from the Commonwealth Fund said the Trump administration’s proposed regulations encouraging the sale of various health insurance plans that are noncompliant with the Affordable Care Act (ACA) is likely to leave the marketplaces with a smaller group of enrollees who are sicker, unless states step in to consider “regulatory options” to protect the individual insurance market.

The problem is likely to get worse in 2019 when the individual mandate ends next year, the report said.

The report, from both the Commonwealth Fund and Georgetown University’s Health Policy Institute, looked at short-term health plans, association health plans (AHPs), and healthcare sharing ministries (HCSMs), and the actions states have taken to regulate them.

These plans don’t have to meet many—or, sometimes, any­—of the ACA’s federal consumer protections. These plans may appeal to healthy consumers because of their low upfront costs. But they often cover fewer services and expose people to high out-of-pocket costs when they get sick.

The report said some options also increase consumers’ risk of being defrauded or enrolling in a financially unstable plan. In addition, the report said state oversight is weak. Although states have broad authority to regulate these other types of plans, most do not.

The ACA did not limit states’ power to regulate above these minimum standards, the authors of the Commonwealth Fund report said. Nor did the ACA limit states’ capacity to regulate health coverage that falls outside the scope of federal insurance law.

While no state fully protects its individual health insurance market from the effects of these skimpier plans, the report said, it called out Massachusetts and New York as two examples that have  taken steps to limit their availability and protect their ACA marketplaces. They have restricted the availability of underwritten short-term policies that don’t meet comprehensive benefit standards, such as coverage for mental health services, prescription drugs, and maternity care. Several other states tightly restrict the duration of such plans.

Decisions like these will likely have a significant effect on the accessibility and affordability of individual health insurance and the stability of markets.

The new health insurance options being proposed by the administration include:
  • Short-term plans, which were designed to fill temporary gaps in coverage. Recent proposed regulations by the administration would allow short-term plans to be extended for up to 12 months and make them easier to renew or extend. Enrollment in short-term plans is projected to expand to more than 4 million people if most states allow these plans to be sold.
  • AHPs: AHPs are formed when small businesses and self-employed individuals band together to purchase coverage across state lines. 
  • HCSMs: Members of these entities share a common set of religious beliefs and contribute funds to pay for medical expenses of other members. The arrangements are not regulated as insurance under federal law and do not comply with the ACA’s consumer protections, despite their resemblance to traditional insurance. Membership in HCSMs has spiked since the ACA’s enactment, growing from fewer than 200,000 members prior to 2010 to about 1 million currently.
Reference

Lucia K, Giovannelli J, Corlette S, et al. State regulation of coverage options outside of the Affordable Care Act: limiting the risk to the individual market. The Commonwealth Fund. http://www.commonwealthfund.org/publications/fund-reports/2018/mar/state-regulation-coverage-options-outside-aca. Published March 29, 2018. Accessed March 29, 2018.

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