CMS Moves to Shore Up Marketplace; Will Adjust for Drug Costs in 2018

CMS' new proposal to shore up the Affordable Care Act (ACA) marketplaces signals that federal officials have heard concerns that not enough has been done to prevent adverse selection or share risk for the sickest patients who gained coverage under the ACA.

After 2 national insurers largely retreated from the health insurance marketplaces set up under the Affordable Care Act (ACA) in the past year, CMS issued new payment parameters for 2018, more than 2 months before its typical November release. The announcement is a signal that federal officials are listening to concerns that not enough is being done to compensate insurers for very sick patients who have gained coverage under the ACA.

The most eye-catching change for 2018 would allow health plans to add prescription drug claims data to their calculations on the health status of enrollees. CMS uses this to distribute government assistance under its risk adjustment programs.

“We are proposing today a set of critical actions based upon our first 3 years’ experience that, if finalized, would improve how consumers and health plans interact with the Marketplace,” Andy Slavitt, acting administrator of CMS, said on August 29, 2016. “These proposals help fulfill the promise that affordable, quality health coverage can be provided to everyone who needs it.”

Insurers have repeatedly complained that not enough young consumers are signing up for health plans on the exchanges, and when they do, it’s often because they are already sick. Then, once their medical issue is resolved, many drop their coverage, thus burdening the plan with costs and no more premium dollars to cover them. While the administration has insisted recently that the risk profile on the exchanges is improving, Slavitt said the changes in the proposed new rule are designed to address these problems:

  • First, the rule proposes updates that will start in 2017 to better reflect the risk that comes from those who do not stay on their plans for a full 12 months.
  • Second, starting in 2018, health plans can add prescription drug data to the risk adjustment models.
  • Third, the proposal seeks to better spread the risk of those who use the most healthcare. Specifically, it would create a pool of high-cost enrollees, where an adjustment to issuers’ transfers would fund 60% of medical costs that rise above $2 million.

For consumers, the proposal includes additional changes to make it easier to compare plans. The proposal promotes the use of simplified plan options, while incorporating changes to reflect rules passed in several states that limit cost sharing.

The proposal also calls for smoothing premium increases that occur as children transition from adolescence to young adulthood, which would avoid premium spikes that can occur when an adult child reaches age 21.

Finally, the proposal seeks to codify special enrollment periods, “to ensure the rules are clear and limit abuse,” according to a CMS fact sheet. The agency invites ideas on how to prevent abuse by those who are ineligible for mid-year enrollment, to avoid the adverse selection that experts say has led to losses.