CMS rejects Idaho’s plans to expand non-ACA-compliant insurance

Idaho’s plan to allow health insurers to offer coverage which doesn’t comply with the Affordable Care Act (ACA) would result in CMS fining insurance companies and taking over the state’s role in enforcing the law, essentially denying the state’s proposal to violate the ACA—but also offering the state some guidance on how it could approve the plans in the future.

In January, Idaho Gov. Butch Otter and the state’s department of insurance issued a bulletin saying if insurers offered ACA-compliant plans on the Idaho insurance exchange, they could offer “state-based plans” that brought back elements of pre-ACA insurance design—like charging more or denying coverage based on pre-existing conditions, excluding certain services the ACA requires to be covered or placing lifetime or annual caps on benefits.

Blue Cross of Idaho was to offer five of these plans, keeping the ACA’s essential benefits (with the exception of one plan which would have excluded maternity care) but charging more based on pre-existing conditions and have a $1 million annual limit on claims. Premiums would’ve been less than half what would be charged for similar ACA plans. HHS Secretary Alex Azar had met with Otter and Idaho insurance officials about the proposal.

In a March 8 letter to Otter, CMS Administrator Seema Verma, MPH, said while it appreciates the state’s “efforts to address the damage caused” by the ACA, the Idaho policy would mean that the state is failing to “substantially enforce” existing law. This would mean CMS would take over enforcement typically reserved for the state’s insurance department as well as fining insurers offering the plans up to $100 each day for “each individual affected by the violation.”

“If a state fails to substantially enforce the law, (CMS) has a responsibility to enforce these provisions on behalf of the State,” Verma wrote. “This is certainly not our preference; we believe that Idaho has options within the law to meaningfully implement many of the policy proposals contained in the Bulletin, to address the crisis facing the state's individual health insurance market. I outline a few of those options below.”

One of those options is HHS’s recently proposed rule to expand the availability of short-term plans. This coverage also wouldn’t be required to comply with ACA regulations. The proposed rule would remove a three-month limit on the plans imposed by the Obama administration and make the non-ACA-compliant coverage last as long as 364 days.

While CMS has said these plans would have “virtually no impact” on the ACA-compliant individual market, other researchers have disagreed. An Urban Institute analysis said the short-term plans could siphon away millions of younger, healthier customers from the ACA exchanges, increasing premiums on exchange plans and potentially raising uncompensated care costs as buyers of short-term plans may not know about gaps in their coverage.

Verma ended her letter by encouraging Idaho to consult with the agency so its “state-based plans” could be allowed under the short-term plans proposed rule.

“I look forward to working closely with you and your staff on these matters, as well as on other ways we can support Idaho's efforts to repair its health insurance markets, including with respect to the state's section 1115 demonstration waiver and section 1332 state innovation waiver applications,” she wrote.