Trump Team’s Planned ACA Rule Offers Its Answer to Rising Premium Costs: Catastrophic Coverage

The Trump administration unveiled a sweeping set of regulatory proposals next year that would significantly change health plan offerings in the Affordable Care Act marketplace, aiming, it says, to offer more choices and lower premiums. But it also proposes dramatically raising some annual fees — to more than $27,600 for one type of coverage — and could cause as many as 2 million people to drop their insurance.

These changes come as affordability is a top concern for many Americans, some of whom have struggled to pay their ACA premiums since enhanced subsidies expired late last year. The initial number of registrations for this year fell by more than a million.

Health care coverage and affordability have become politically salient issues as the November midterm elections approach.

The proposed changes are part of a 577-page rule that addresses a wide range of standards, including employee benefits, out-of-pocket expenses and health care provider networks. Insurers refer to these standards when setting premium rates for the coming year.

After a comment period, the rule will be finalized this spring.

It “puts patients, taxpayers and states first by reducing costs and increasing accountability for taxpayer dollars,” Mehmet Oz, administrator of the Centers for Medicare and Medicaid Services, said in a Feb. 9 news release.

One way to do that focuses primarily on one type of coverage — catastrophic plans — that last year attracted only about 20,000 policyholders, according to the proposal, although other estimates put it closer to 54,000.

“To me, this proposal makes it seem like the administration has found its next big goal in doomsday plans,” said Katie Keith, director of health policy and legal initiative at the O’Neill Institute for National and Global Health Law at Georgetown University Law Center.

Such plans carry very high annual fees for the policyholder, but often lower premiums than other ACA coverage options. Previously reserved for people under 30 or facing certain difficulties, the Trump administration allowed elderly people who were no longer eligible for subsidies to register this year. It is not yet clear how many people have chosen to do so.

The payment rule reinforces this development by making eligible anyone whose income is below the poverty line ($15,650 for this year) and those who earn more than 2.5 times that amount and who have lost access to an ACA subsidy that reduced their out-of-pocket costs. It also notes that a person meeting these standards would be eligible in any state – an important point because this coverage is currently only available in 36 states and the District of Columbia.

Additionally, the proposal would require maximum out-of-pocket expenses for these plans to reach $15,600 per year for an individual and $27,600 for a family, Keith wrote this week in Health Affairs. (The current spending limit for catastrophic plans is $10,600 for an individual plan and $21,200 for family coverage.) Not counting preventative care and three covered primary care doctor visits, this spending goal must be met before a policy’s other coverage takes effect.

In the rule, the administration wrote that the proposed changes would help differentiate catastrophic plans from “bronze” plans, the higher tier, and, potentially, spur more enrollment in the former. Currently, under the proposal, there might not be a significant difference if the premiums are similar. Raising the maximum amount payable for catastrophic plans to those levels would create that difference, the proposal says.

“When there is such a stark difference, healthier consumers who are generally eligible and best positioned to enroll in catastrophic plans are more motivated to choose a catastrophic plan over a bronze plan,” the proposal notes.

However, ACA subsidies cannot be used to fund catastrophic premiums, which could limit buyer interest.

Enrollment in Bronze plans, which currently have an average annual deductible of $7,500, has doubled since 2018 to about 5.4 million last year. This year, that figure will likely be higher. Enrollment data from some states indicates a shift toward bronze as consumers dropped out of higher-premium “silver,” “gold” or “platinum” plans after more generous subsidies expired late last year.

The proposal would also allow insurers to offer Bronze plans with higher cost-sharing rates than the ACA currently allows, but only if that insurer also sells other Bronze plans with lower cost-sharing levels.

In what she calls a “novel” approach, the proposal would allow insurers to offer multi-year disaster plans, in which people could stay enrolled for up to 10 years, and their maximum out-of-pocket expenses would vary over that period. Costs may be higher, for example, in the first few years, then decrease as the policy is in effect. The proposal specifically seeks comment on how such a plan could be structured and what effect multi-year plans could have on the overall market.

“From what we understand so far, insurers could offer the policy for one year or for consecutive years, up to 10 years,” said Zach Sherman, managing director of policy and coverage program design at HMA, also known as Health Management Associates, a health policy consulting firm that works for states and insurance plans. “But we’re still unpacking the details of how that would work.”

Matthew Fiedler, a senior fellow at the Brookings Institution’s Center on Health Policy, said the proposed rule included numerous provisions that could “expose enrollees to significantly higher fees.”

In addition to the planned changes for bronze and catastrophic plans, it highlights another provision that would allow plans that do not have defined health care provider networks to be sold on the ACA exchange. In other words, the insurer has not contracted with specific doctors and hospitals to accept their coverage. Instead, such plans would pay medical providers a fixed amount for medical services, possibly a flat amount or a percentage of what Medicare pays, for example. The rule states that insurers should ensure “access to a range of providers” willing to accept such amounts as payment in full. However, policyholders may face unexpected expenses if a clinician or facility disagrees and charges the patient the difference.

Because the rule is so broad – with many other elements – it is expected to generate hundreds, if not thousands, of comments by early March.

Pennsylvania insurance broker Joshua Brooker said one change he would like to see would be to require insurers that sell sky-high catastrophic plans to offer other catastrophic plans with lower annual maximums.

Overall, though, a wider range of options could appeal to people at both ends of the income scale, he said.

Some wealthier enrollees, particularly those no longer eligible for any ACA premium subsidies, would prefer a lower premium like those expected in catastrophic plans, and could simply pay bills up to that maximum, he said.

“They’re more worried about the half-million-dollar heart attack,” Brooker said. It’s tougher for people below the poverty line, who don’t qualify for ACA subsidies and, in 10 states, often don’t qualify for Medicaid. They therefore risk not being insured. He said at least one disaster plan could give them some preventive care coverage and limit their exposure if they end up in the hospital. From there, they could qualify for charity care at the hospital to cover out-of-pocket expenses.

Overall, “putting more options on the market doesn’t hurt, as long as it’s disclosed properly and the consumer understands it,” he said.