ACA rule comments

The Department of Health and Human Services (HHS) just released their final rule for the 2018 Exchange parameters. There are not too many surprises.  The theme is consistent.  Premiums are reduced for people who make more than 400% FPL by cutting benefits for people who make under 400% FPL.  It is a slight transfer of income upwards and risk downwards.

The big items are the same that we thought they would have been:

• Increasing the AV band spread
• Shorter open enrollment period
• More validation of special enrollment periods
• Premium collection for people in arrears before effectuating a new policy

The AV spread increase is interesting as it is giving a lot of space for Silver Gap games.  In regions where there is a single carrier, the optimal strategy is to price a cheap 66% AV plan and then use a 72% AV plan as the benchmark to get an 8% pricing advantage.

 We are amending the de minimis range included in §156.140(c), to a variation of -4/+2 percentage points, rather than +/- 2 percentage points for all non-grandfathered individual and small group market plans (other than bronze plans meeting certain conditions) that are required to comply with AV for plans beginning in 2018. We are also amending the expanded de minimis range for certain bronze plans from -2/+5 percentage points to -4/+5 percentage points to align with the policy in this rule for the same timeline. While we are modifying the de minimis range for the metal level plans (bronze, silver, gold, and platinum), we are not modifying the de minimis range for the silver plan variations (the plans with an AV of 73, 87 and 94 percent) under §§156.400 and 156.420….
Taking into account limits on design flexibilities for bronze plans and related to State limits on flexibility, the Office of the Actuary analysis estimated that the change in AV will lead to a 0.75 percent reduction in total premiums.

Open Enrollment will be shorter. It will go from November 1, 2017 to December 15, 2017;

For the benefit years beginning on or after January 1, 2018, the annual open enrollment period begins on November 1 and extends through December 15 of the calendar year preceding the benefit year.

The theory of change is that this will scoop up a lot of people who would have bought in the last week of January 2018 for a March 1, 2018 start date and move them to a buy-in right before December 15, 2017 for a January 1, 2018 start date.  We know the late buyers are the healthiest/cheapest buyers so the objective is to increase the number of healthy/low cost member months possible from 10 to 12 and convert a percentage of those months into premiums.

Adriana McIntyre notes a major monkey wrench though:

The end of the new open enrollment period—Dec 15 instead of Jan 31—is going to coincide with the most financially insecure time of the year. pic.twitter.com/mzFYpoG0V6

— Adrianna McIntyre (@onceuponA) April 13, 2017

CMS is committing to outreach. We saw what outreach cut-offs did in 2017 when the Trump administration went radio silent in the last eleven days of open enrollment. At least 4.25% of enrollment that we expected to have occurred never occurred.

We believe that shifting the open enrollment period end date to December 15,2017, for the 2018 benefit year provides sufficient time for all entities involved in the annual open enrollment process to conduct outreach, provide assistance, or enroll in coverage. We intend to conduct outreach to consumers to ensure that they are aware of the newly shortened open enrollment period in advance of the November 1, 2017, start date and are prepared to enroll or re-enroll in 2018 coverage.

I have low expectations on the quality of outreach as the messaging out of HHS is extremely negative, but there will be outreach of some sort.

Special enrollment verification will be universal:

we proposed to increase the scope of pre-enrollment verification of special enrollment periods to all applicable special enrollment periods in order to ensure complete verification of eligibility. We proposed to begin to implement this expanded pre-enrollment
verification starting in June 2017…

This and other tightenings on the special enrollment periods will cut out some of the expenses by creating hassle barriers. However it is not large savings:

Office of the Actuary analysis of the net effect of pre-enrollment verification and other special enrollment period changes estimated that premiums will be approximately 1.5 percent lower.

Early speculation on SEP verification was that it would reduce expenditures by roughly 3%. I am curious what the actuaries found.

Update 1:  HHS assumes that Cost Sharing Reduction subsidies will be paid;

@TopherSpiro In the rule they predicate several cost estimates on fact that CSRs are being paid. So in their math at least, the HHS is assuming payment.

— Alex Ruoff (@Alexruoff) April 13, 2017