When President Barack Obama announced that health plans not compliant under the Affordable Care Act could be extended through 2014, carriers participating in government exchanges called foul. Having planned on additional revenue and a more diverse risk pool, carriers expressed angst over the unintended consequences of the rule change.
Now, the Health and Human Services Department is seeking to remove some of the increased risk from carriers through adjustments to one of three of its risk management mechanisms—called the “three Rs.”
One of their proposed regulations may even benefit producers: allowing agents and brokers registered with a state-based or HHS-run SHOP exchange to sell SHOP plans through their own websites.
The HHS cannot change the rules itself, as they are established by law, but it can change certain definitions in the law.
One proposal for changing the definition of “allowable costs,” for example, would be compensating carriers for the lost revenue from the sale of ACA-compliant and small-group policies by increasing the program’s profit margin floor from its current 3% of after-tax profits. That would mean carriers that earn decent profits would end up subsidizing cash to those who earn profit margins of less than 3%—or a potentially higher figure—due to the President’s rule change.
Because the impact of 2014 policy extensions will vary state to state, the HHS noted that the profit margin floor may vary state to state as well. Determining these rates would mean asking carriers to submit member-month enrollment counts for both ACA-compliant and non-compliant plans.
Other ways of managing carrier risk could include increasing the administrative charge for the risk adjustment program to $1 per person in 2015—up from 96 cents per person in 2014—or cutting the ACA temporary reinsurance program deductible from $60,000 in 2014 to $45,000. However, this would increase the deductible to $70,000 the following year.
The department indicated it may also adjust the medical-loss ratio, though did not specify how.
The HHS said it is seeking public comment on its plans.
“We request comment on all aspects of these potential approaches to mitigate any potential impact of the transitional policy,” officials said.
