12.19.2012 0

The post-election deluge of Obamacare regulations

ObamaCareBy John Vinci — Despite the states’ multiple requests for answers on Obamacare implementation, from September 2012 through most of November 2012, the Obama Administration published only one Obamacare regulation.

It quickly became clear that Obama was holding back on regulations to avoid any potential pre-election controversy.  Many began predicting a deluge of regulations after the election.

And they were right. Since November 26, 2012, nine Obamacare regulations have been published using a third of a million words on 1,148 pages.

Four of those regulations deal with taxes—taxes on Medicare, health insurance policies, medical devices, and certain investment income.  A fifth regulation proposes rules for health plans that want to create wellness programs for their policy holders.

The remaining four have a comment period of only 30 days.  That means that if you want to tell the Obama Administration what you think of them, you need to act now.

At the very minimum we encourage you to protest these unusually short comment periods.

Here is a brief summary of each of the four regulations:

1. Health Insurance Market Rules; Rate Review

Most people have heard that Obamacare bans insurers from denying coverage based on pre-existing conditions.  Well, it also bans health insurers from basing their premium prices on anything other than age, tobacco use, family size, and geography.

This proposed rule specifies ratios that limit how much a smoker (for instance) can be charged compared to a non-smoker (1.5 times more).1 And despite the fact that the elderly spend five times as much on health care as do young people, the regulation specifies that the elderly cannot be charged more than 3 times the amount of a young person.2

That means that young people will be paying more than their fair share of their health insurance.

And because insurance companies can’t charge more for being overweight, that means that your premiums will rise to pay for the extra medical care those people will need.

2. Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation

Obamacare requires the federal government to define a uniform set of benefits that must be included in all health plans sold in the health insurance exchanges.

But instead of creating a uniform definition, the Obama Administration in guidance published December 16, 2011, allowed the states to each have their own definition using an existing popular health plan as a benchmark.3

Conservative health policy wonks have been waiting for this regulation for a long time.

This regulation was supposed to make the Obama Administration reveal how much more it will cost to force plans to cover new benefits.

But while the regulation admits that there will be new administrative costs and “costs due to higher service utilization,” it only estimates the administrative costs.4

The regulation also details how the “actuarial value” (AV) of each plan will be calculated.  Think of AV as an estimate of the percentage of your health bills that is paid for by the insurance company.  Plans must have at least a 60% AV, and are ranked by metal level: 60% is bronze, 70% is silver, 80% is gold, and 90% is platinum.

High-deductible plans are becoming an increasingly popular option.  The high deductible means lower monthly premiums, plus they are often combined with Health Savings Accounts so that medical expenses under the deductible can be paid for with pre-tax dollars.

Many employers find it advantageous to give their employees a high-deductible plan but then fund an HSAs or Health Reimbursement Accounts for their employees to help them pay for pre-deductible expenses.

One unanswered question was, how would high-deductible plans be treated?

We now know that employer contributions to fund an employee HSA or HRA are counted into the AV calculation (meaning the plan is more likely to meet the 60% AV minimum).5  But even though the statute authorizes them to do so, HHS chose not to raise the $2,000 to $4,000 deductible maximum for small group plans, by the amount employers make available to their employees through flexible spending accounts.6

3. HHS Notice of Benefit and Payment

This 373-page regulation is a hodgepodge of miscellaneous regulatory topics.  It makes changes to the Medical Loss Ratio, gives some details on the Small business Health Option Program (SHOP) in federal exchanges, gives further details on advanced payments of the premium tax credit, and reveals that federal exchanges will charge a 3.5% fee on the purchase of health plans.  (State exchanges are also expected to charge fees.)

Finally, it spells out further rules for what some call the “3 R’s,” risk adjustment, reinsurance, and risk corridors.   When insurance companies are forced to take all comers (regardless of preexisting conditions), some of them are going to have sicker, riskier populations than others.  The 3Rs, then, are mechanisms to balance this risk.  The idea is that health plans with fewer high-risk policy holders will need to give money to plans that have a higher percentage of high-risk policy holders.  When you create an artificial market, artificial balancing mechanisms like the 3Rs are necessary to prevent market collapse.

4. Establishment of the Multi-State Plan Program for the Affordable Insurance Exchanges.

Obamacare requires the federal Office of Personnel Management to find and contract with insurance plans so as to be able to offer at least two multi-state health insurance plans in each state exchange. The goal of creating these “multi-state plans” is to increase competition.

But true competition requires a level playing field, and state insurance commissioners have already expressed their doubts that such a balance will exist. In a letter to OPM, the National Association of Insurance Commissioners wrote that they had

serious concerns about the potential for market disruption and adverse selection, and the resulting negative impact on consumers and health insurance markets, which would arise if Multi-State Plans are allowed to operate under different rules than their competitors.7

In its newly released proposed rule, OPM says that it too is concerned with keeping a level playing field, where the multi-state plans and state plans play by the same rules—that is—as long as the rule fits into one of 13 categories laid out by Obamacare in section 1324(b).8

For legal conflicts outside the 13 categories OPM plans to set up a “dispute resolution process.”9

We will be watching for comments from the NAIC and from small state insurance companies to see how they respond.

John Vinci is a staff attorney with Americans for Limited Government and is the editor in chief for the obamacarewatcher.org website.

1 77 Fed. Reg. 70,584-70,617, 70589.

2 Id.

3 Center for Consumer Information and Insurance Oversight, “Essential Health Benefits Bulletin,” (Dec 16, 2011) available at http://cciio.cms.gov/resources/files/Files2/12162011/essential_health_benefits_bulletin.pdf.

4 77 Fed. Reg. 70,644-70,676, passim.

5 77 Fed. Reg. 70,644-70,676, 70,655-56.

6 77 Fed. Reg. 70,644-70,676, 70,654.

7 Letter from Susan E. Voss, NAIC President and Iowa Commissioner of Insurance, et al., to Ms. Cheryl D. Allen, United States Office of Personnel Management (Aug. 10, 2011) available at http://www.naic.org/documents/committees_b_110810_naic_comments_msp_to_opm.pdf.

8 77 Fed. Reg. 72,582-72,609, 72,584.

9 77 Fed. Reg. 72,582-72,609, 72,586.

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