States could play with fire by changing essential benefits

For a moment, forget about short-term plans, association health plans, and other efforts to chip away at the Affordable Care Act.

The final 2019 payment notice from the U.S. Department of Health and Human Services could lead to drastic changes in exchange markets. The notice outlines changes for 2019, and there is a bundle, mainly loosening previous ACA requirements. Making changes through rule-making is easier than passing bills in Congress, so big changes sometimes happen quickly.

The end of the individual mandate, repealed in the Republican tax bill, takes effect in 2019. Some people will get other mandate relief - those who live in counties with zero or one health exchange insurer are now eligible for hardship exemptions. With 49 percent of U.S. counties having only one option for 2018 (almost of those counties are rural), that could have broad impact.

Another item could have far-reaching implications for those who want coverage at a lower price: The rule gives states latitude to pick their own essential benefits. That could open a new frontier of skimpy insurance options that make association health plans look like platinum-level coverage.

Giving states wider latitude to determine essential benefits could lead to a proliferation of bare-bones coverage and consumers buying cheap plans that don’t come close to covering their healthcare needs.

The ACA is clear about its 10 essential health benefits that plans must cover—outpatient services; emergency services; inpatient hospitalization; maternity and neonatal services; behavioral health and substance use disorder services; prescription drugs; rehabilitative and habilitative services; laboratory services; wellness and chronic disease management; and pediatric services, including oral and vision care.

The 10 essential benefits could always use some tweaking—the maternity coverage requirement never made sense for older enrollees. Why would anyone consider prescription drug coverage, behavioral health services or ER coverage inessential? It’s hard to argue these items are not essential pieces of healthcare. States running their own exchanges are unlikely to make changes (Idaho excepted). But for lawmakers who’ve spent years opposing the ACA, it might not be hard at all.

Other states could rush to make changes. Idaho’s push to allow non-compliant plans, which HHS rejected a few months ago, could suddenly pass muster.

Want to sell cheap plans without prescription drug or emergency services coverage? Come on down.

Is that overstating the impact? To a degree. But the Trump administration has delivered dozens of paper cuts to the exchanges and ACA coverage, and sooner or later that bloodletting will deepen its impact on the exchanges and individual insurance markets. The end of cost-sharing reduction payments already caused premium spikes for 2018 policies, but these changes could lead the markets closer to the long-feared death spiral.

If a state prunes its essential benefits, carriers could offer plans that cover a few physician visits and a prescription drug card for a tiny premium. People bought junk coverage before the ACA. If this type of plan—the old mini-medical plan—has an avenue to return to the market, people will buy them anew in pursuit of lower premiums.

A state would not have to eliminate an essential benefit to alter it significantly. Essential benefits also required that plans must cover at least one drug in every therapeutic class, and that drug costs count toward out-of-pocket maximums. Making changes here could lead to generics-only formularies or even slimmer coverage.

If people pay less on premiums, the price cut could be short-lived—the new rules also bump out the out-of-pocket maximum. The limits will rise to $7,900 for individuals and $15,800 for families. It’s also unlikely that premiums of plans hewing to the ACA are dropping for 2019. The default premium rate increase that triggers review will increase from 10 percent to 15 percent, cutting the number of reviews.

What’s billed as a cost-saving measure will just lead to costs at other points in the healthcare system. More people access care at the most expensive point in the healthcare system. More people skip necessary coverage because their new skinny plan does not cover what an ACA plan did.

Will this fragment the risk pool further? Healthy people might opt for plans with fewer benefits, further depleting the healthy population in the exchange risk pool. People with health conditions will continue to buy coverage where they can receive the most comprehensive benefits. Adverse selection will grow.

Will these moves save money? On the front end, the sticker shock might diminish, especially for people who earn too much to receive any premium subsidy help.

But let’s say that enrollee winds up in the emergency room. Let’s say the enrollee is covered by a plan without emergency services because a state dropped ER services as an essential benefit That would leave the enrollee on the hook for a pricey ER visit with no relief from their plan’s skinny coverage. Then the enrollee might adopt new views about savings.

Follow Bill Melville @BillMelvilleDRG