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OMB to Review Final Rule on Whether Association Health Plans Are Subject to Rate Review

By John Reichard, CQ HealthBeat Editor

August 18, 2011 -- A final Centers for Medicare and Medicaid Services (CMS) regulation that determines whether association health plans are subject to rate review under the overhaul law is at the White House Office of Management and Budget for review, according to a notation on its Web site.

Consumer advocates fear that the plans, which pool together individuals or small employers to buy coverage, will not be subject to such reviews, exposing “AHP” enrollees to unnecessarily large rate hikes.

CMS said in its final rule on insurance rate disclosure and rate review issued in May that it wasn’t making a final decision on AHPs at that time. Instead, it sought comment on the issue.

CMS said in issuing the final rule that several of those who commented expressed concern that rate reviews would not apply to association health plan coverage sold to individuals and small employers in some states. They urged that the final rule include such coverage in requirements as planned rate increases be disclosed and reviewed by state or federal officials before they take effect.

But the final rule did not resolve the matter. CMS said in that document that “we are seeking comments and additional data on the definitions of ‘individual market’ and ‘small group market’ in . . . this final rule, in relation to whether to provide that individual and small employer policies sold through associations are to be included in the rate review process, even if the state excludes such coverage from its definitions of individual and small group market coverage.”

CMS added that “given the comments received and our policy goals with regard to rate review, we are inclined to amend the definitions of individual market and small group market . . . to include coverage sold to individuals and small groups through associations in all cases.”
Consumer advocates urged CMS to follow its inclination, and said the stakes are much larger than the issue of rate reviews.

A Texas-based organization called the Center for Public Policy Priorities said that “nearly 13 percent of the individually underwritten health insurance” policies sold in Texas is sold through AHPs.

The group said in a July 13 comment that unless HHS “explicitly ensures that association plans sold to individuals are regulated as part of the individual market and small group association plans are regulated as part of the small group market, loopholes and inconsistencies in regulations will mean that many Texas consumers and consumers across the nation will have coverage that does not have to comply with rate review regulations intended to help bring down costs for consumers.”

The letter added that if AHPs “are not appropriately considered individual or small group coverage under [the health care law], not only would AHP coverage evade rate review protections, it may also escape critical 2014 reforms, such as the requirement to cover the essential benefits package and the elimination of health status underwriting.”

OMB can take anywhere from days to months to complete its review of a final regulation before it is made public.

John Reichard can be reached at [email protected].

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