CMS Issues Final Rule on Health Insurance Market Reforms Under ACA

On February 22, 2013, the Centers for Medicare & Medicaid Services (CMS) announced a final rule on five major health insurance market reforms mandated by the Affordable Care Act (ACA).  The rule is published in the February 27 Federal Register.

The five areas of reform covered by the final rule are as follows:

GUARANTEED AVAILABILITY OF COVERAGE:  The rule will prevent insurance companies from discriminating against people with pre-existing conditions.  According to a fact sheet accompanying the rule, 129 million Americans that have some type of pre-existing health condition, e.g., cancer, diabetes, asthma, or heart diseases, currently can be denied individual health insurance coverage or have benefits for medical conditions excluded by insurance companies.  Under the final rule, all policies in the individual market will be guaranteed available and will be offered during open enrollment periods, and all policies in the group market will be available year round. 

AIR HEALTH INSURANCE PREMIUMS:  Health insurance issuers in the individual and small group markets will be allowed to vary premiums based on age (within a 3:1 ratio for adults), tobacco use (within a 1.5:1 ratio and subject to wellness program requirements in the small group market), family size, and geography.  Basing premiums on other factors, such as health status, past insurance claims, gender, occupation, how long an individual has held a policy, or size of the small employer, will no longer be allowed.

SINGLE RISK POOL:  The final rule prevents insurance companies from charging higher premiums to higher-cost enrollees by moving them into separate risk pools.  Instead, insurers will be required to maintain a single, state-wide risk pool for the individual market and a single, state-wide risk pool for the small group market.

GUARANTEED RENEWABILITY:  The rule prohibits issuers from refusing to renew coverage because an individual or an employee becomes sick or has a pre-existing condition.

CATASTROPHIC PLANS:  Under the final rule, young adults and those for whom coverage would otherwise be unaffordable will have access to a catastrophic plan in the individual market, which generally will have lower premiums, but protect against high out-of-pocket costs and cover recommended preventive services without cost sharing.
In addition, the fact sheet notes that the final rule amends certain provisions of the rate review program “in preparation for the market changes in 2014 and to streamline data collection for insurers and states.”