State insurance regulators remain concerned about "rate shock" from the younger and healthier portion of the population leaving the health insurance marketplace and skewering it by taking the penalties in the first years when they are low.
Although there is open enrollment prescribed to discourage adverse selection, the states want more tools and time, and the authority to develop them.
"States need flexibility to develop a regulatory environment that will discourage adverse selection while preserving consumer protections, rather than having the federal government prescribe open enrollment as the tool that states must use," said a recent letter of top state regulators to the implementers of the Patient Protection and Affordable Care Act (PPACA).
They are also concerned about cookie-cutter rating bands that will end up possibly reducing competition, upsetting the issuer market and allow for cherry picking of service areas.
States are requesting as much flexibility as possible under the law to address the problem of expected rate shock with the development of tools such as age bands, rate caps, curves and geographic areas.
So wrote the NAIC leadership just before the holidays in a letter to the Centers for Medicare & Medicaid Services (CMS).
The NAIC leadership team, then headed by immediate past president Kevin McCarty of Florida and including NAIC Health Care Committee Chair Sandy Praeger of Kansas, detailed its many concerns of the impact the market reforms will have on premiums as a response to proposed regulations on the Patient Protection and Affordable Act: Health Insurance Market Rules, and Rate Reviews published in the Federal Register Nov. 26, 2012, echoing concerns the health industry has had as well.
The NAIC recommended, for instance, that CMS provide states with the flexibility to phase in during a transition period of three years the required 3:1 age factor ratio to reduce the rate shock for the younger/healthier segment of the market. With such a transition, younger, healthier individuals will experience more gradual rate increases rather than large one-time rate shocks and will be less likely to drop coverage and further destabilize the market, the NAIC wrote.
The NAIC also told CMS that the designation within a state of no more than seven geographic rating areas, and the definition of rating area by zip code or county–but not both–are potentially detrimental to insurance markets in some states.
Setting geographic rating areas that are larger than service areas may result in reduced competition or consumer access issues in cases where issuers choose to write business only in the lower cost counties within a geographic rating area.
States should have the flexibility to align geographic rating areas with service areas to avoid issuer cherry-picking of service areas where costs are lower, the NAIC leadership wrote.
"Geographic differences in cost structures and provider contracting may not be consistent from issuer to issuer, making consolidation of geographic rating areas difficult for states and creating winners and losers among issuers, potentially reducing competition," the state regulators stated.
The NAIC is also concerned about the hit some families may take with rate hikes if they have four or more children when one of the children reaches age 21.
The NAIC suggests that the definition of minimum category of family members should be decided on a state by state basis, not by the federal government.
State regulators are also concerned over the amount of data requested of issuers and the administrative burden and cost that is being placed on the states, which are struggling with budgets issues and cuts in some cases.
In a separate letter on standards related to required minimum coverage packages, the NAIC team reiterated its concern about the data calls and the cost to state insurance departments.
In that letter, also sent Dec. 19, the NAIC was responding to HHS' request for comment on whether states should make payments for required benefits not included in Essential Health Benefits (EHB) based on the statewide average cost of the benefit, or based on each issuer's actual cost to provide the benefit.
