Those who want to keep their health plans that don’t comply with the Affordable Care Act scored a win Wednesday when the administration decided to extend them another two years. But the administration also handed out less-noticed Obamacare victories and defeats in yesterday’s wide-ranging rule.
The losers: Unions, which pushed for an exemption to a health-care law fee that they said unfairly penalizes their health plans. The winners: Insurers, who helped save the rocky health-care law's rollout.
Another loss for unions
The extension of non-compliant plans grabbed all the headlines Wednesday. Tucked in a 335-page rule, though, was the administration's decision not to broaden a proposed exemption on the health-care law’s transitional reinsurance program.
It marks the second recent Affordable Care Act defeat for unions. Over the summer, the administration rejected unions’ pleas to allow their health plans to access federal subsidies.
The three-year, $25 billion reinsurance program is meant to stabilize the individual market if there’s an early rush of sick insurance customers between 2014 and 2016. It’s funded by fees charged to the health plans themselves.
The unions say they're being unfairly forced to pay into a program that their members will never benefit from. For what it's worth, large businesses have also backed repeal of the reinsurance fee for the same reason.
The Obama administration first floated the idea of an exemption for self-funded, self-insured plans a few months ago through a passing reference in a separate rule. At the time, health-care experts said they weren’t quite sure who’d benefit from the exemption, but their best guess was it would be the union health plans.
The administration later followed that up with a regulatory proposal to exempt those self-insured, self-administered plans, with certain qualifications. As I reported for Politico Pro earlier this year (subscription required), the unions said the exemption was so narrowly defined that just a very small sliver of their plans would meet the definition.
As the administration reviewed the proposed rule, union groups pushed for two major changes: broaden the scope of the exemption and extend it for all three years of the program – not just for 2015 and 2016. In the end, the administration chose neither.
The Health and Human Services Department said that extending the exemption for 2014 at this point “would be disruptive to plans and issuers that have already set contribution rates and premiums.” It added: "Based on comments received, our understanding is that relatively few plans will be eligible for the exemption."
Gretchen Young of the Erisa Industry Committee also told my colleague Amy Goldstein that just a fairly small number of unions would qualify for the exemption.
Insurers get a small victory
You may have heard of the health-care law’s 80/20 rule. The administration has repeatedly touted it as a consumer-friendly provision that limits how much insurers can spend on administrative costs. Generally speaking, insurers have to refund customers if they spend on average less than 80 percent of premiums on actual care provided.
HHS says the "medical loss ratio" provision saved consumers $3.9 billion in premium costs in 2012. That included a combined $500 million that was rebated to health plan customers.
HHS now says insurers' costs stemming from the Affordable Care Act's early tech problems won't count toward their MLR. Wednesday's rule didn't appear to offer specifics on the new carve out, aside from saying that more details are coming.
“We intend to propose standardized methodologies to take into account the special circumstances of issuers associated with the initial open enrollment and other changes to the market in 2014, including incurred costs due to technical problems during the launch of the State and Federal Exchanges," HHS wrote.
One industry consultant points out that insurers could have worse loss ratios than expected because of lower-than-expected enrollments.
"The issuers will likely have lower than normal loss ratios than their actuaries were estimating – fewer policyholders and maybe lower claims because of lack of enrollees, so they could incur 'rebate' obligations if something isn’t taken into account for the 'dead' time that was assumed to be active with purchases of health insurance," the consultant e-mailed.