White House Proposes New Rules to Steady Insurance Markets Under Health Law

By Robert Pear
Feb 15, 2017

WASHINGTON — The Trump administration proposed new rules on Wednesday to stabilize health insurance markets roiled by efforts to repeal the Affordable Care Act, by big increases in premiums and by the exodus of major insurers.

The move came a day after Humana announced that, starting next year, it would completely withdraw from the public marketplaces created by former President Barack Obama’s signature domestic achievement.

The proposed rules, backed by insurance companies, would tighten certain enrollment procedures and cut the health law’s open enrollment period in half, in hopes that a smaller but healthier consumer base will put the marketplaces on sounder financial footing and attract more insurance companies in states with limited choices.

But part of the market’s problem stems from President Trump’s determination to repeal the health law while the White House and Congress struggle to find a politically acceptable replacement. Even as the Department of Health and Human Services worked to answer insurance company concerns, the Internal Revenue Service and Congress were taking steps that could add uncertainty to the jittery insurance economy.

On Capitol Hill, conservatives declared that they are not about to accept a health law replacement that remotely resembles the Affordable Care Act. And the I.R.S. adopted a policy for the coming tax season that could weaken the requirement for people to have insurance. The tax agency said it was reversing one aspect of an Obama administration plan after Mr. Trump, on his first day in office, issued an executive order instructing agencies to reduce burdens imposed by compliance with the Affordable Care Act wherever legally possible.

The proposed rules signal the Trump administration’s urgency in trying to keep other insurers from fleeing the market after Humana’s departure. The company said on Tuesday that it was losing money by insuring too many sick people without enough healthy ones enrolling. Humana had already scaled back its participation to 11 states this year, from 19 in 2016.

Mark T. Bertolini, the chief executive of Aetna, said Wednesday that the marketplaces were in “a death spiral,” and at a conference sponsored by The Wall Street Journal, he declined to say if his company would participate next year. And Molina Healthcare, one of the few insurers that seemed to be financially successful under the health law, reported on Wednesday that it was losing money in the marketplaces. It threatened to drop out if its concerns about a risk-sharing program requiring the company to pay hundreds of millions of dollars to other insurers were not addressed.

Dr. Patrick H. Conway, the acting administrator of the Centers for Medicare and Medicaid Services, said the rules proposed on Wednesday “will help protect Americans enrolled in the individual and small group health insurance markets while future reforms are being debated.”

But Democrats and consumer groups denounced the proposed rules, saying they would make it more difficult for people to enroll and increase costs for some consumers.

Senator Ron Wyden of Oregon, the senior Democrat on the Finance Committee, said the rules sent “a clear message to the American people: Patients are not a priority, and insurance companies are back in charge.”

Under the proposed rules, the annual open enrollment period would be reduced to about six weeks from two months. The shorter time frame would be similar to the open enrollment periods for Medicare and for many employer-sponsored health plans.

But the administration acknowledged that the shorter sign-up period “could lead to a reduction in enrollees, primarily younger and healthier enrollees” who often sign up near the deadline.

Other parts of the rules would limit opportunities for people to hold off on buying insurance until they get sick, a phenomenon that has loaded many health plans offered under the Affordable Care Act with more expensive, sick customers than they expected. By manipulating a system that now precludes insurers from rejecting customers with pre-existing medical conditions, consumers are avoiding the purchase of insurance when they are healthy and rushing in when they need it, insurers say.

The rules also would require consumers to provide “supporting documentation” to prove they were eligible to enroll in health plans through HealthCare.gov outside the standard open enrollment season. The administration estimated that 650,000 people annually could have their enrollment delayed because of the new requirement to verify eligibility.

People can sign up after the deadline if they experience certain “life changes” like having a baby, getting married or losing employer-sponsored insurance. Insurers have told the government for several years that people who sign up in a special enrollment period use up to 50 percent more services than those who sign up in the regular enrollment season.

Insurers and Republican members of Congress welcomed the proposed changes, which will be published in the Federal Register on Friday, giving the public until March 7 to comment. Final rules are likely to be issued in March or April. Insurers must decide by early May what kinds of health plans they will offer in 2018.

Senator Lamar Alexander, Republican of Tennessee and chairman of the Senate health committee, said the proposals were “important first steps to rescue a collapsing Obamacare individual market.’’

But insurers cautioned that the proposed rules, while helpful, would in no way provide a solution if, in a few weeks, Republicans introduce legislation to repeal major provisions of the Affordable Care Act, such as the requirement for most Americans to have coverage.

Christopher W. Hansen, the president of the advocacy arm of the American Cancer Society, said the tighter restrictions on special enrollment periods could “cause problems for cancer patients,” delaying treatment and reducing their chances of survival.

Changes being made by the I.R.S. could weaken incentives for people to obtain insurance. The tax agency said it would accept and process tax returns even if taxpayers failed to indicate whether they had coverage, qualified for an exemption or were paying the penalty for going without insurance.

The individual mandate, requiring most Americans to have insurance, was to be enforced through the tax system. The I.R.S. said the requirement was “still in force until changed by Congress.” The government can deduct the amount of any penalty from refunds that would otherwise be sent to taxpayers. But it is unclear how it will use this authority.

In the rules proposed Wednesday, the Trump administration said that it would generally allow states to determine whether insurance plans had enough doctors, hospitals and other health care providers to serve patients. The hope is that would lure more insurers into the market. Additionally, insurers could refuse to provide new coverage to consumers who failed to pay premiums owed in the previous year. If an insurer terminates coverage for nonpayment of premiums, it could require consumers to pay all past-due premiums owed to that insurer before restarting coverage.

And insurers would be allowed to sell health plans covering a smaller share of expected costs. The administration said consumers would have “more coverage options” as a result, but it acknowledged that some consumers could see increases in their deductibles and other out-of-pocket costs.