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Business and Policy Areas
Business and Policy Areas

HHS Proposes Regulations Implementing Affordable Care Act

December 17, 2012

The Department of Health and Human Services released three proposed regulations in late November and early December implementing various provisions of the Affordable Care Act (ACA) affecting small and individual plans. Student health insurance plans offered by colleges and universities are considered a type of individual plan under the ACA, although such plans are seldom addressed specifically in the proposed rules.

Two notices of proposed rulemaking were published on November 26. The first sets forth health insurance market reforms, including the prohibition of discrimination against individuals on the basis of a pre-existing or chronic condition. The second outlines guidelines for essential health benefits in order to provide greater flexibility across states, as well as calculation of actuarial values (AVs). Comments on both proposals are due December 26. The third notice, published on December 7, addresses benefit and payment parameters, including premium tax credits and cost sharing to make insurance coverage more affordable, and premium stabilization programs to protect against adverse selection among plans. Comments are due December 31 on this proposal.

Health Insurance Market Reforms for Individual and Small Group Plans

The proposed rule would prohibit health insurance companies from discriminating against individuals with pre-existing conditions. The proposal also provides for:

  • Guaranteed availability of coverage. Health insurance issuers will be prohibited from denying coverage due to a pre-existing health condition.
  • Fair premiums. Issuers in both the individual and small group markets would only be allowed to vary premiums (within limits) based on age, tobacco use, family size, and geography.
  • Single risk pool. Issuers will be required to maintain a single statewide risk pool for each of their individual and small employer markets.
  • Guaranteed renewability of coverage. The proposed rule reiterates existing protections with respect to renewability of coverage for individuals and employers, and prohibits issuers from refusing to renew coverage if an individual or employee becomes ill or has a pre-existing condition.
  • Catastrophic plans. These ensure affordable coverage options for young adults, and individuals for whom coverage would otherwise be unaffordable.

The proposed rule also amends the standards for the rate review program to streamline data collection for health insurance issuers and states.

Student health insurance plans would be exempt from the guaranteed availability and renewability of coverage for individuals who are not, or are no longer, students or dependents of students. The proposal would require issuers to include student health coverage in their individual market single risk pool which, since are students are generally younger and healthier than other people with individual coverage, is likely to increase premium levels for students. HHS specifically asks for comments on whether the rules should allow issuers to maintain separate risk pools for student health insurance coverage. 

Update: On December 21, the American Council on Education, along with NACUBO and six other higher education associations, submitted comments objecting to the proposed requirement that student health insurance coverage be rated and priced as part of each state's individual market single risk pool." 

Essential Health Benefits, Actuarial Value and Accreditation Standards

Policies and standards for coverage of essential health benefits (EHBs) and the determination of AV are addressed by the second proposed rule, which also gives states flexibility in determining to determine how EHBs are defined.

Essential Health Benefits.The ACA requires health plans offered in the individual and small group markets to offer a core package of EHBs that are equal in scope to benefits offered under a typical employer plan. The proposal outlines standards related to coverage of EHBs and actuarial value, including the following mandatory categories:

  • ambulatory patient services;
  • emergency services;
  • hospitalization;
  • mental health and substance use disorder services, including behavioral health treatment;
  • prescription drugs;
  • rehabilitative and habilitative services and devices;
  • laboratory services;
  • preventive and wellness services and chronic disease management; and
  • pediatric services, including oral and vision care.

States are required to create EHB benchmark plans from their default benchmark state health plans by added any mandatory categories that are not in their default plans. The proposed rule includes an appendix listing proposed EHB benchmarks.

Actuarial Value. In an effort to standardize the calculation of AV, HHS is providing a calculator which can be used to determine a health plan's AV based on a national, standard population. Under this rule, beginning in 2015, HHS will accept state-specific data for the standard population if states choose to submit alternate data for the calculator. Additionally, the proposed rule contains standards and considerations for plans with benefit designs not easily accommodated by the AV calculator.

The rule also proposes a timeline for health plans to be accredited in federally-facilitated exchanges and an application process for accrediting agencies for certification purposes.

Benefit and Payment Parameters

Under ACA, individuals who enroll in health plans through Affordable Insurance Exchanges may receive premium tax credits to help make insurance more affordable and financial assistance to cover cost sharing for health care services. The December 7 notice proposes standards for advanced payments of the tax credits, and cost-sharing reductions, which will be managed through the Exchanges. It also would set up the methodology for the risk adjustment program, which seeks to even out the impact to issuers of uneven enrollment of individuals with greater health needs in certain plans by providing for inter-plan transfers. The proposed rules single out student health plans, saying that because such plans will have relatively uniform actuarial risk, they would not be included in the risk adjustment program.
2014 Implementation Date

As the 2014 rollout of many of the key provisions of the ACA approaches, HHS is pushing to get necessary guidance out to states that are responsible for setting up Exchanges. It is not clear how or if student health plans would be subject to these rules, where participation in the state-level Exchanges is a key component. When the final rules on student health insurance coverage were issued last March, HHS said that it would address issues concerning Exchanges, market requirements, minimum essential coverage, tax credits, and other 2014 issues in conjunction with the final rules in those areas. 


Anne Gross
Vice President, Regulatory Affairs

Mary Bachinger
Director, Tax Policy