The ACA and New Private Health Insurance Market Rules

The Patient Protection and Affordable Care Act (ACA) includes changes to the rules that govern private health insurance. The rules were changed in an effort to promote broader pooling of risk, ban discrimination on the basis of health status and pre-existing conditions, promote competition with an eye toward increasing the efficiency and affordability of health insurance, encourage wellness and emphasis preventive medicine services, and provide increased protections for consumers.

In the January 2013 edition of the Henry J. Kaiser Family Foundation publication Focus on Health Reform, the authors highlighted 3 proposed regulations issued by the federal government that outlined specifics for how some of the new rules would operate beginning in 2014. The regulations are related to (1) private insurance market reforms; (2) essential health benefits and actuarial value; and (3) standards for wellness programs offered or required by employers who sponsor group health plans.

According to the report's authors, the set of proposed rules related to private insurance market reforms govern the sale, pricing, and renewability of health insurance. Key provisions include (1) definition of group and individual health insurance markets; (2) guaranteed availability and renewability; and (3) premium rating and rate review. The definition of group and individual markets would be based on the ultimate purchaser of health insurance, a change that would affect the treatment of association coverage. Under the proposed new regulation, associations providing health insurance coverage for individuals and small employers would be subject to the same market rules that would otherwise apply to the individual and small group markets.

Guaranteed availability and renewability regulations would require insurers to accept all applicants for all individual and small group market policies, without regard to health status, occupation, or other risk factors. There are only limited exceptions to the guaranteed issue requirement, the authors noted.

The proposed rule related to premium rating and rate review sets new standards that would change rating practices for individual and small group insurance, including requiring insurers to consider the claims experience of all enrollees in all of its individual market health plans in a state as a single risk pool. The rule also bars insurers from utilizing varying rates based  pre-existing conditions, occupation, gender, duration of coverage, credit worthiness, or most other factors for individual or small group coverage.

The proposed regulations relating to essential health benefits and actuarial value set standards for covered benefits and cost sharing. The ACA does not enumerate specific essential health benefits (EHBs), but does specify 10 categories of EHBs that must be covered (Table). In addition, the ACA applies 2 general EHS standards to qualified plans: (1) plans must not design covered benefits in ways that discriminate against individuals based on age, health status, or related factors and (2) plans must ensure an appropriate balance among the categories of EHBs so that benefits are not unduly weighted toward any category.

The ACA also requires plans to be designated according to categories, based on their actuarial value (AV), defined as a measure of the overall level of cost sharing required under a plan. The AV categories specified in the ACA would reflect whether plans require low (bronze; AV 60%), medium (silver; AV 70%), highgold; AV 80%), or very high (platinum; AV 90%) levels of cost sharing.

In conclusion, the report authors said “reform rules would likely lead to significant changes in private health compared to how it is sold today."