Centers for Medicare & Medicaid Services (CMS): Private Health Insurance Protections and Programs
The Centers for Medicare & Medicaid Services ensures availability of effective, up-to-date health care coverage and promotes quality care for beneficiaries.
CMS Private Health Insurance Protections and Programs Budget Overview
(Dollars in millions)
|Affordable Insurance Exchange Grants /1
|Early Retiree Reinsurance Program
|Consumer Operated and Oriented Plan Program
|Pre-Existing Condition Insurance Plan Program
|Rate Review Grants to States
|Transitional Reinsurance Program /2
|Risk Adjustment Program /2
|Risk Corridors (non-add) /3
|Total Outlays, Current Law
|Transitional Reinsurance Program, Receipts
|Risk Adjustment Program, Receipts
|Risk Corridors Program, Receipts (non-add) /3
|Total Receipts, Current Law
Note: Totals may not add due to rounding.
1/ The Affordable Care Act appropriates such sums as necessary for the Secretary to award grants to states for certain activities to fund their Marketplaces.
2/ Outlay amounts for Transitional Reinsurance and Risk Adjustment reflect sequestration of 7.3 percent in FY 2015, and that sequestered amounts become available in the following fiscal year.
3/ Risk Corridors outlays are part of the Program Management account.
CMS Private Health Insurance Protections and Programs
The Affordable Care Act provides vital new protections for consumers receiving or shopping for private health insurance. New reforms ensure that essential care is becoming a standard part of most private health insurance plans, and that consumers can continue to rely upon their insurance when they become ill. Consumers receive more value from their health insurance coverage due to rate review and medical loss ratio protections. Furthermore, millions of Americans now have access to affordable coverage as a result of the Health Insurance Marketplaces which began coverage in 2014.
Marketplaces: The Affordable Care Act provides access to improved insurance coverage for millions of Americans through qualified health plans offered in the Marketplaces. By providing one stop shopping, Marketplaces have helped individuals better understand their insurance options and assisted them in selecting and enrolling in high quality private health insurance plans. From the beginning of open enrollment for 2015 through January 16, 2015, more than 7.1 million consumers selected a plan or were automatically re-enrolled through the Healthcare.gov platform. In addition, during the first month of open enrollment over 600,000 people selected 2015 Marketplace plans in the 14 states that are using their own Marketplace platforms. The Marketplaces have made purchasing health insurance more transparent and easier to understand, providing individuals and small businesses with more options and greater control over their health insurance purchases.
State Work to Implement Marketplaces: Currently, 16 states and the District of Columbia operate State-based Marketplaces, and 7 states partner with HHS to operate some functions in State Partnership Marketplaces. HHS is operating Federally-facilitated Marketplaces in the remaining 27 states. In addition to enrolling individuals, Marketplaces also determine eligibility for advance payment of the premium tax credits and cost sharing reductions, or Medicaid and CHIP in some states; ensure health plans meet certain standards; operate a hotline and website to provide consumer assistance; and assist individuals in locating and obtaining affordable health coverage.
Marketplace Establishment Grants: The Affordable Care Act provides grant funding to enable states to plan for and establish Marketplaces. The final round of grants was awarded to states in December 2014. Overall, 37 states and the District of Columbia have received over $5.5 billion in grants to establish and build Marketplaces since 2011. States may use Establishment grants to fund their start-up costs, whether for State-based or State Partnership Marketplace functions, or to support the Federally-facilitated Marketplaces, but ongoing operations are self-funded through user fees or other funding.
Basic Health Program: The Affordable Care Act included a state option to provide affordable health benefits coverage to low-income residents otherwise eligible for reduced-cost coverage through the Marketplaces. Minnesota is the first state to establish a Basic Health Program with coverage beginning January 1, 2015.
Consumer Operated and Oriented Plans (CO-OPs): The CO-OP loan program fosters the creation of new, private, qualified nonprofit, member-governed health insurance issuers to offer qualified health plans in the individual and small group markets in the states in which the issuers are licensed. The Affordable Care Act required that any profits a CO-OP makes must be used to lower premiums, improve benefits, or improve the quality of health care delivered to plan members. CO-OPs will contribute to the success of the Marketplaces by offering more choices to consumers and increasing competition in state insurance markets.
Currently, 23 CO-OP loan recipients are licensed and have enrolled members in 25 states, which CMS anticipates will increase to 26 states in 2016. CO-OPs offer coverage both inside and outside of the new Marketplaces. CMS has approved four CO-OP loan recipients to expand operations into additional states. Loan awards as of December 31, 2014 total $2.5 billion. Of the total loans awards, $1.09 billion is from the direct appropriation loan subsidy and the remaining $1.4 billion is from Treasury borrowing. For 2015, many CO-OPs are offering the lowest-cost silver plans in several states. The Affordable Care Act appropriated $6 billion for the program. In FY 2011, Congress rescinded $2.2 billion; in FY 2012 Congress rescinded an additional $400 million; and the American Taxpayer Relief Act rescinded $2.3 billion, leaving $253 million in a contingency fund for oversight and assistance to existing loan entities.
Each of the CO-OP awardees underwent a thorough application review loan negotiation process. Loans were made only to CO-OPs that demonstrated sustainability, viability, and the ability to fully repay their loans. CMS closely monitors CO-OPs to ensure they are meeting program goals and will be able to repay loans.
The Affordable Care Act is Working: Increasing Insurance Coverage
The Affordable Care Act is making comprehensive health coverage available to millions of Americans who previously lacked access to or could not afford health insurance. As a result, the rate of uninsured adults fell by more than a quarter (26 percent) in the first full year of Affordable Care Act implementation - from 20.3 percent to 15.1 percent.1
This means that 10.3 million more Americans gained coverage of essential health benefits, could access recommended preventive care with no cost sharing, and enjoyed the financial protections of health insurance, all due to the Affordable Care Act.
1 Source: HHS Assistant Secretary for Planning and Evaluation Issue Brief, “Survey Data on Health Insurance Coverage for 2013 and 2014,” October 31, 2014.
Private Insurance Market Reforms: Many important Affordable Care Act protections took effect on January 1, 2014. For example, non-grandfathered health plans in the individual and small group markets now have to offer a comprehensive package of items and services, known as essential health benefits. Essential health benefits must include items and services within at least the following 10 categories: ambulatory services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Offering essential health benefits ensures that plans cover a core set of items and services, giving consumers a consistent way to compare plans. The law also prohibits most plans from putting an annual dollar limit on the essential health benefits.
In addition, non-grandfathered plans may no longer deny coverage or charge more based on a person’s health status, gender, or any factors outside of age, tobacco use, family size, and geography. That provision means women can never be required to pay higher premiums just because they are women. Further, the law limits the amount these issuers can vary premiums based on tobacco use and age. This protection means that under these plans, nobody has to worry that they will lose their insurance, or have to pay more, just because they have a pre-existing condition or if they get sick.
A number of consumer protections in the Affordable Care Act were already in effect prior to 2014. For example, more than three million young adults have gained coverage by being able to stay on their parents’ health plans until age 26.
The law also put a ban on lifetime benefit limits, ensuring that patients can use their insurance coverage when they are sick and need it most. In addition, 76 million Americans are receiving expanded coverage through their private insurance plan for preventive services without cost sharing such as copays or deductibles, including colonoscopy screenings, Pap smears and mammograms for women, well child visits, and flu shots for all children and adults. Moreover, the Affordable Care Act builds on the Mental Health Parity and Addiction Equity Act of 2008 to extend federal mental health parity protections to 62 million Americans.
Medical Loss Ratio: The Affordable Care Act required private insurers in the individual and small group market to spend at least 80 percent of collected premium revenue on clinical expenses and activities that improve consumers’ health. This requirement is 85 percent for the large group market. Insurers who do not abide by this requirement must issue rebates to consumers. In 2013, consumers received $250 million in rebates through this provision, and consumers received additional value through lower premiums overall.
Insurance Premium Rate Review: Private insurers must submit to relevant state offices or HHS justification for any premium increase greater than ten percent prior to implementation of the increase. This information is then made publicly available, increasing transparency for consumers. Since the enactment of the Affordable Care Act, consumers have saved approximately $9 billion in unnecessary healthcare costs due in part to the premium rate review and the medical loss ratio provisions, and received $2.8 billion in rebates in 2011 and 2012.
Through the end of 2014, HHS has awarded nearly $250 million to states and the District of Columbia to support their premium rate review programs. These grants support the hiring of new staff, improved communication with consumers about rate review, the creation of data centers that analyze health costs, and the enhancement of existing infrastructure required to operate an effective rate review program. In FY 2015, HHS may use remaining funds to support state implementation of consumer protections and insurance reforms.
Premium Stabilization Programs: The Affordable Care Act included two temporary and one permanent program to mitigate volatility of insurance premiums in the individual and small group markets beginning in 2014 when Marketplaces and new market rules take effect. The transitional reinsurance program provides protection to plans in the individual market when enrollees experience high claims costs for plan years 2014 through 2016. The temporary risk corridors program protects qualified health plans from uncertainty in rate setting from 2014 through 2016 through shared risk in losses and gains. The permanent risk adjustment program transfers funds from plans with relatively lower risk enrollees to plans with relatively higher risk enrollees to protect against the potential effects of adverse selection inside and outside the Marketplaces. The Notice of Benefit and Payment Parameters published each year outlines specifications for these programs, and transfers resulting from these programs first occur in FY 2015 for the 2014 plan year.
- Program Integrity
- Children’s Health Insurance Program
- State Grants and Demonstrations
- Private Health Insurance Protections and Programs
- Center for Medicare and Medicaid Innovation
- Program Management