Rate Increase Disclosure and Review Rule Could Have Significant Impact on Association Health Plans

May 23, 2011, HHS issued the Rate Increase Disclosure and Review Final Rule. This outlines the proposed oversight of health plan rate setting under the Patient Protection and Affordable Care Act (PPACA). The new rule requires states to review individual and small group rates filed or effective after September 1, 2011. The new rules do not apply to grandfathered health plans as defined under PPACA.

Apart from the new rate increase summary that carriers must prepare for consumer disclosure, HHS plans to address the status of plans issued by associations.

HHS noted the comments related to the regulatory treatment of association health plan rates. HHS chose not to define the market status of association plans, however, and instead has requested comments by July 18, 2011 regarding the definitions of “individual market” and “small group market” in relation to coverage obtained through associations.

“We generally deferred in the proposed rule to the State definitions of individual and small group markets. In response to the proposed rule, we received comments indicating that, in some States, association coverage is considered to be large group coverage, resulting in individual and small group coverage sold through associations not being subject to the rate review process… However, since including all individual and small group coverage sold through associations in the rate review process could have a large impact on the markets in some States, we are incorporating the proposed definitions of individual market and small group market into the final rule and solicit additional comments on this issue, with the possibility of amending the final rule after receiving comments in order to include coverage sold through associations in the rate review process.” [Fed. Reg. Vol. 76, No. 99, page 29984]

Although HHS is seeking public comment, they have indicated a predisposition to include association health plans in the rule and override state treatment of associations as “large group” plans:

“Given the comments received and our policy goals with regard to rate review, we are inclined to amend the definitions of individual market and small group market in § 154.102 to include coverage sold to individuals and small groups through associations in all cases… If we were to amend the definitions of ‘‘individual market’’ and ‘‘small group market’’ in § 154.102 to include individual coverage and small employer coverage sold through associations in the rate review process, the amendment will only be applied prospectively.” [Page 29965-66]

Comments must be received by 5 p.m. EST on July 18, 2011.