Implementing Health Reform. On January 27, 2016, the Centers for Medicare and Medicaid Services (CMS) issued a couple of guidances affecting insurers issuing coverage under the Affordable Care Act (ACA). The first is a set of frequently asked questions (FAQs) regarding the Consumer Operated and Oriented Plan (CO-OP) program. The second is a report of CLAS (culturally and linguistically appropriate services) county level data for 2016.
The CO-OP program was created by the ACA to offer consumers an alternative choice to traditional commercial insurance and to introduce additional competition into individual and small group insurance markets. The CO-OPs were hobbled from the beginning by restrictions in the legislation and funding for the program was cut before it was fully implemented. A number of the CO-OPs seem to have made poor choices in offering and pricing their products. As of the beginning of 2016, 12 of the 23 CO-OPs have failed.
CMS is taking corrective action in an attempt to secure the remaining CO-OPs. The FAQs are part of this effort. First, the FAQ clarifies that CO-OPs are not limited to selling qualified health plans in the individual and small group market in the marketplaces. As long as two thirds of their policies are sold through the marketplaces, they can also sell large group, Medicaid managed care, Medicare Advantage, dental or vision care, or other products.
Second, the FAQ defines what is meant by the conversion of a loan to a surplus note. The federal government has made two kinds of loans to CO-OPs: start-up loans and solvency loans. The solvency loans have always been considered to be surplus notes, which is to say that payment is not due until the relevant state department of insurance determines that the note can be repaid without adversely affecting the solvency of the CO-OP. The start-up loans, on the other hand, are general obligations to be repaid by a specific time.
In 2015, CMS converted some CO-OP start up loans on a case-by-case basis to surplus notes to allow the CO-OPs greater flexibility and the possibility of borrowing in private financial markets. This means that the CO-OPs are not required to repay the notes, and interest will not accrue on them, unless the state insurance commissioner determines that repayment will not lead to distress or default. Surplus notes are comprehensively subordinate to claims of policy holders, beneficiaries, and other creditors.
Third, the FAQ clarifies that a CO-OP is not automatically in default if its risk-based capital level falls below 500 percent. Risk-based capital (RBC), according to the National Association of Insurance Commissioners:
. . . is a method of measuring the minimum amount of capital appropriate for a reporting entity to support its overall business operations in consideration of its size and risk profile. RBC limits the amount of risk a company can take. It requires a company with a higher amount of risk to hold a higher amount of capital. Capital provides a cushion to a company against insolvency.
In most states, RBC levels of 200 to 300 percent are considered adequate. However, CO-OPs are required under the business plans referenced in their loan agreements to maintain RBC levels of 500 percent. Failure to maintain a RBC level within 10 percent of this level is a potential event of default under the loan agreement. The mere fact that a CO-OP’s RBC falls below 500 percent, however, does not automatically mean that it is in default, or even that it needs to be in a corrective action plan, unless there are other concerns. CMS will deal with each case on a case-by-case basis.
Finally, the FAQ is exploring whether changes can be made in the CO-OP board membership requirements to diversify board membership. Under current regulations all board members must be elected by the majority vote of a quorum of CO-OP members and a majority of voting directors must be covered by policies of the CO-OP. Representatives of pre-existing insurance companies or state government may not serve on the board.
The ACA internal and external appeal regulations require non-grandfathered health plans and insurers offering non-grandfathered health coverage to make appeal notices available in a culturally and linguistically appropriate manner. This requirement also applies to summaries of benefits and coverage (SBC). Under federal regulations, appeal notices and SBCs must be made available to residents of a county in languages other than English in which at least 10 percent or more of the residents of that county are literate. There are four languages that meet this threshold, which are listed in the guidance: Chinese and Navaho, each in one county, Tagalog in two counties, and Spanish in about 270 counties.
The guidance notes that qualified health plan insurers are also required to meet other CLAS standards, including oral interpretation, written translation, and website translation for the top 15 languages spoken by limited English proficiency populations in the state. Summaries of benefits and coverage must include an addendum with language taglines in these 15 languages. CMS will issue a guidance in February listing these languages.
The CLAS guidance notes that the language tagline addendum will not count toward the eight-page SBC maximum page limit. The Department of Health and Human Services (HHS) has been taking a hard line that SBCs may not exceed eight pages, so this is a curious development.
Additional Updates
Although enrollment information will not be available for the close of the 2016 open enrollment period until the end of the first week in February, CMS released a little information on February 1 about the final days of open enrollment.
In the last days of open enrollment, activity surged as expected. At 11:00 pm on the night of January 31, 80,000 individuals were shopping for coverage on the federal marketplace. Because of the high call volume on January 31, the marketplace call center had to take numbers for some applicants and was calling back these applicants on February 1. The HealthCare.gov website was able to keep up with traffic throughout the end of open enrollment.
During the final three days of open enrollment, 49 percent of visitors to Healthcare.gov were using phones and tablets, compared to 37 percent throughout the rest of the open enrollment period. This would seem to indicate a younger population and bode well for the risk pool.
CMS has recently released a Marketplace Assisters’ Standard Operating Procedures Manual. The 117-page manual covers a wide variety of topics including privacy and security; fraud prevention; complaint and grievance processes; and procedures for assisting consumers with account creation, identity verification, eligibility determinations, appeals, individual responsibility exemption applications, and account updates and changes. The manual contains a number of appendices with further information on the Medicaid and CHIP programs, exemptions, and other topics.
Finally, the Internal Revenue Service has recently published a guidance on the handling of expatriate coverage for purposes of the annual fee imposed on insurers under section 9010 of the ACA. Section 9010 imposes a fee on insurers based on the amount of premium that they write.
The Expatriate Health Coverage Clarification Act of 2014 provides that expatriate coverage is generally not subject to the ACA, including section 9010. Premiums written for expatriate health plans are excluded before the total amount of premiums to which the 9010 tax applies is determined.
The guidance clarifies that for purposes of 2016 (while further regulations are being developed) the definition of expatriate plan used for medical loss ratio reporting purposes will also be used for reporting premiums under section 9010.
from Health Affairs Blog http://ift.tt/1VDJCQD
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