Administration Lays Down Rules For Future Health Insurance

Nov 20, 2012
Originally published on November 20, 2012 6:14 pm

You've got questions about the health law? The Obama administration has some answers. Finally.

Now that the Supreme Court has found the Affordable Care Act constitutional and the president's re-election made clear that big chunks of the law will take effect Jan. 1, 2014, the administration is finally releasing rules of the road that states and insurance companies have been clamoring for.

The big one makes clear how companies will have to comply with anti-discrimination requirements starting in 2014. The law requires that health insurance be made available to everyone regardless of health status and that people with pre-existing conditions not be charged higher premiums.

Premiums are allowed to vary according to certain factors, including age, smoking status, location and family size. But, and it's an important but, coverage can't be cancelled because of an illness.

"The proposed rules and guidance we're releasing today would make it illegal for insurance companies to discriminate against the approximately 129 million Americans with pre-existing health conditions," Health and Human Services Secretary Kathleen Sebelius told health reporters on a conference call.

The rules could still change some, but there's not much time for people to complain or ask for tweaks. The comment period ends Dec. 26.

A second rule lays out more detail on how states and insurance plans will have to determine which benefits to offer. This is the third iteration of the rule regarding so-called essential health benefits. The department said it received more than 11,000 public comments on the first two documents it published on the subject.

This rule continues to stipulate that every health plan for individuals and small businesses offer a core package of benefits. The requirements are grouped into 10 separate categories, including inpatient and outpatient care, maternity care, prescription drugs and laboratory services.

The rule also seeks to establish that the minimum benefits "be equal in scope to benefits offered by a 'typical employer plan.' " The precise plan, however, will vary by state, since generosity of benefits tends to vary by state.

The rule allows states to pick an existing plan as a benchmark for measure new plans. The yardstick plan can be:

(1) the largest plan by enrollment in any of the three largest products in the state's small group market; (2) any of the largest three state employee health benefit plans options by enrollment; (3) any of the largest three national Federal Employees Health Benefits Program (FEHBP) plan options by enrollment; or (4) the largest insured commercial HMO in the state.

If a state doesn't select a benchmark plan, HHS will use option 1, the largest plan for small groups in the state.

The National Retail Federation was generally pleased with the administration's action. "We appreciate the Administration's outreach and general restraint in these proposed regulations," said NRF's Neil Trautwein in a statement. "It is important that essential health benefits echo available market coverage today. More extensive but unaffordable coverage would help no one in the end."

The rule also lays out a complex formula to help consumers figure out how much each plan (labeled a little like Olympic medals) will cover in medical bills. Generally, bronze plans will cover 60 percent of costs, silver plans 70 percent, gold plans 80 percent and platinum plans 90 percent.

Finally, the administration is laying out rules to govern the use of employer-provided "wellness programs." These popular programs encourage employees to meet certain health goals, such as losing weight, quitting smoking, or lowering cholesterol.

The rules spell out that programs must not be "overly burdensome" and must provide a "reasonable alternative means of qualifying for the reward" for individuals whose medical conditions "make it unreasonably difficult, or for whom it is medically inadvisable, to meet the specified health-related standard."

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And I'm Audie Cornish.

Federal officials today began addressing several key questions about how the federal health law will work when it takes effect just over a year from now. Among them, how will health plans sell policies to people with pre-existing health conditions? And what kinds of benefits will have to be offered?

Joining us in the studio with some answers is NPR health policy correspondent Julie Rovner.

And, Julie, what exactly did the Department of Health and Human Services release today and why does it matter?

JULIE ROVNER, BYLINE: Well, that's a good question and it's more than 300 pages of regulation. Most of the time we don't pay attention to the reams and reams of stuff that the department issues, even on the big health law. But there are two reasons to pay attention to what's come out today. One is that these are actually some of the most important aspects of the law itself; the parts that ban insurers from discriminating against people with pre-existing conditions, and against charging those people higher premiums.

These new rules also lay out what kinds of benefits have to be offered and the policies that will be sold in these new marketplaces called health exchanges, and how that can vary from state to state. But the other reason is that states and the insurance industry have been complaining that they can't make some key decisions that they need to get ready to roll out the law, until they have more guidance from federal officials. So these rules are that guidance.

CORNISH: So let's get into some of the specifics. What will be the rules for people with pre-existing health conditions?

ROVNER: Well, first I should say these are still proposed rules and they are subject to change; but they're not likely to see major change at this point. So generally, starting January 1st, 2014, health insurers will no longer be allowed to deny coverage because someone has an existing medical condition. Nor will they be allowed to refuse to renew coverage because someone has developed an illness.

There are also rules limiting how much premiums can vary. In general, the only variations that will be allowed will be based on age, on tobacco use, family size and geography. And in the case of age, older people can only be charged three times more than younger people, and tobacco users can only be charged one and a half times more than non-tobacco users.

CORNISH: OK, so that's who they have to cover and what they can charge. What about what they have to cover?

ROVNER: Well, this document dump, if you will, also includes another round of what's called the Essential Health Benefits List. It's a list of 10 categories of benefits - things like hospital, outpatient, prescription drug care - that every plan in these new health exchanges has to offer.

The trick here is to make sure every plan offers comprehensive coverage, but that the plans don't get so loaded down with bells and whistles that they become unaffordably expensive. And also, to make sure they don't get out of line with community standards. So the rules let each state set a benchmark plan that's equal to one of several popular plans available in that state.

CORNISH: And finally, there's something about employer wellness programs?

ROVNER: That's right. This is an increasingly popular way employers are trying to hold down health costs, by giving their workers incentives to quit smoking or lose weight or lower their cholesterol. And the rules say that these programs are OK, but they can't discriminate against people who have medical conditions that make reaching those goals impossible or medically inadvisable. Those people would have to be given other ways of getting lower premiums or whatever incentive is being offered by the employer.

CORNISH: That's NPR health policy correspondent Julie Rovner. Julie, thank you.

ROVNER: Thank you. Transcript provided by NPR, Copyright NPR.