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HHS Proposes Restricting Short-Term Plans

By Erin Mershon, CQ Roll Call

June 8, 2016—The Obama administration is taking aim at affordability issues in the health law's individual exchange with a series of proposals officials say will help stabilize the markets and premium costs.

The new tweaks focus on restricting the use of limited coverage plans and improving a program that protects insurers with a large number of unhealthy consumers from steep losses. The changes come as the Obama administration faces increasing criticism about the affordability of the insurance plans offered on exchanges established by the 2010 health overhaul.

The announcement comes during a period of tumult and uncertainty for the exchanges. Insurers this summer are proposing average premium increases as high as 50 percent in states like Arizona and Oklahoma. Nationally, proposed hikes so far this year average about 21 percent, according to ongoing calculations by Charles Gaba, an analyst who supports the health law. Those premium increases come as the nation's largest insurer, UnitedHealthcare, is making a dramatic exit from nearly all of the state exchanges in which it was participating.

Department of Health and Human Services Secretary (HHS) Sylvia Mathews Burwell outlined the developments in a webcast meeting with the New York Times editorial board Wednesday, when she was asked what HHS is doing to improve the long-term stability and viability of the marketplaces.

HHS is committed to "closing a loophole" that allows people to buy short-term plans outside of the exchanges. The move is "designed to make sure insurance companies are not cherry-picking healthy people and damaging the risk pool," she said in the webcast portion of the meeting. "You don't want to have people jumping in and out of a risk pool so that when they have health care costs, they burden others because they're not part of the system."

Push for Healthier Consumers in Exchanges

The loophole refers to a type of limited coverage offered outside of the marketplaces that isn't subject to the 2010 law's new coverage requirements or discrimination rules, and which can be cheaper for healthy individuals.

HHS says insurers have been targeting healthy consumers for the short-term plans, keeping them out of the exchanges, which drives up costs for everyone else who buys individual coverage. The agency, along with the departments of Labor and Treasury, proposed in a new rule Wednesday to restrict how long consumers can stay on the plans and eliminate the option to renew them. If more healthy people join the exchanges, the low costs of covering them will balance out the high costs of sicker consumers.

"The proposed changes will help strengthen the risk pool by ensuring that short term limited duration plans are used only as intended, to fill truly temporary gaps in coverage," HHS wrote in a release.

HHS also hopes to tweak its risk adjustment program for insurers, which is designed to mitigate the risks plans face for taking on high-cost enrollees, by making it more accurately reflect partial-year enrollees as soon as next year. Going forward, risk adjustment calculations also will take into account data about patients' prescription drug use. The agency intends to propose both tweaks in future regulations, and cautioned that more changes to risk adjustment could come for the 2018 plan year.

A spokeswoman for the insurance industry's main lobbying arm, America's Health Insurance Plans, said the changes will help improve predictability and stability for both consumers and insurers.

HHS also said it is working to reduce problems that can prevent people from remaining eligible if they do not prove they qualify for coverage. The change is designed to prevent "younger and healthier consumers [who are] less motivated to overcome obstacles such as extra paperwork, from losing coverage mid-year." In 2015, younger people who experienced a data-matching issue were 25 percent less likely to resolve it than older consumers, the agency said.

HHS outlined its implementation plan for new rules surrounding eligibility determinations for its special sign-up periods outside of the normal enrollment window. The agency will begin requiring documentation later this month.

HHS also said it will ramp up its outreach to marketplace enrollees who will soon turn 65 and become eligible for Medicare so the consumers will sign up for the program for seniors and people with disabilities.

The agency will make further announcements this month about improving its work with insurance companies and state regulators, as well as about outreach plans ahead of the fourth open enrollment period that begins in November, officials said.

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