Lots of Questions but Few Answers: NAIC’s 2017 Summer Meeting

Originally posted on CHIRblog.

For those who follow the fate of the Affordable Care Act marketplaces, it’s hard to escape the daily reports of the status of federal funding for cost-sharing reductions(CSR), the subsidies that lower out-of-pocket costs for low-income marketplace enrollees. The Trump administration won’t commit to funding the reimbursements to insurers for the rest of 2017 or for 2018. At the same time, the pending lawsuit, House v. Price, remains unresolved.

At the Summer Meeting of the National Association of Insurance Commissioners (NAIC), there was no escaping the CSR funding question and a host of related questions brought about by that uncertainty. State regulators charged with managing their individual markets, including coverage offered on marketplaces, must make decisions, issue guidance, and review rates in the absence of a decision on the fate of CSR funding.

Insurers are on the hook under the ACA to lower cost-sharing for eligible individuals as a condition of participating in the marketplaces, whether they’re reimbursed with federal funds or not.  A mid-year loss of CSR funding might prompt issuers to leave the marketplaces rather than absorb the cost of richer coverage without reimbursement. But it’s even more challenging to try to plan for 2018 without knowing what happens next. NAIC has repeatedly asked Congress and the Administration to ensure funding through 2019, so state regulators and insurers can have some certainty about a critical factor in market participation and rates. So far, their letters have gone unanswered, leaving regulators to largely fend for themselves. Some of the questions raised at the meeting – “questions that no one can answer yet,” in the words of one state representative – include:

  • How should insurers file their rates without a decision on CSR funding for 2018? Some states, like Connecticut, are considering allowing insurers to spread the cost of absorbing the funding cut across all metal levels (bronze, silver, gold, and platinum). Other states, like Florida, directed insurers to load the full cost onto silver marketplace plans only.
  • How much of a rate hike should regulators expect based on the funding uncertainty? Experts have estimated rates would climb, on average, about 20 percent to account for the loss of CSR funding, but state experiences will vary depending on various factors. For example, a state that did not expand Medicaid likely has more low-income people enrolled in marketplace coverage than a state that did expand. A regulator from Utah, which has not expanded Medicaid, said their rate hikes are likely to be closer to 33 percent; a Colorado regulator said that state, which expanded Medicaid and has a low percentage of enrollees who get financial assistance in the marketplace, will have increases of about 6 percent.
  • Is there anything to be gleaned from the current status of the lawsuit that would provide an answer to the funding question? Regulators wondered if they could see a more certain outcome in the court case than in the Administration’s approach and base their decisions on that.
  • Would a state violate the ACA’s single risk pool provisions if it requires insurers to offer off-marketplace coverage with rates that differ from CSR-loaded marketplace plans? California and Florida are both requiring insurers to offer an off-marketplace plan that doesn’t include the rate hike associated with loss of CSR funding, in order to keep premiums more affordable for those who don’t qualify for premium tax credits.
  • If insurers set rates assuming no CSR funding, and then funding comes through, what happens next? Florida anticipates telling their insurers to turn away federal CSR funding in 2018 once rates assume loss of funding, in order to avoid a rebate process that would be “really sloppy and messy and expensive.”

Beyond CSRs, regulators heard presentations on 1332 state innovation waiversfrom 2 states: Hawai’i, which was approved for a waiver to be exempt from the requirement to offer a SHOP for small businesses and to use what would have been provided in small business tax credits to fund a state program for small business health care costs, and Minnesota, which has submitted a waiver application to use federal pass-through funds for a state-administered reinsurance program, following Alaska’s successful application to do the same.

In discussing their waiver approach, Minnesota representatives noted their 2015 claims data showed that 50 percent of their individual market claims were incurred by just 2.2 percent of enrollees. They also talked about the need to identify state funding in their enabling legislation (using legislative “contingency” language CCIIO helped draft) and whether to establish reinsurance funding based on designated health conditions (as Alaska did) or based on a claims cost threshold (as the ACA temporary program did). Minnesota has opted, for now, to use the latter approach as it was more familiar to insurers.  State representatives also said the work the state did with CCIIO to answer questions and identify steps in the application helped inform the guidance and checklist issued by CCIIO to encourage and help other state interested in a waiver to fund a state-administered reinsurance program.

In the discussion that followed the presentations state regulators discussed the legal and regulatory requirements for waiver applications and some of the perceived hurdles to pursuing a waiver, including the need to pass authorizing legislation for all applications and to identify state funding for reinsurance programs. The NAIC and some advocates, such as the Council for Affordable Health Coverage have called on the Administration to grant more flexibility under the waivers, both on the process for submitting them and in meeting statutory guardrails.

The Senate HELP committee has announced hearings on stabilizing the individual market when Congress returns from their August recess, giving stakeholders an opportunity to offer their proposals to shore up the marketplaces and stabilize premiums. If the Trump administration doesn’t commit soon to CSR funding through at least 2018, that will surely be on the NAIC’s list of suggestions, along with changes to the 1332 waiver process.