HHS revises interpretation of Obamacare in territories

In response to growing concerns about the effect of the Affordable Care Act on health insurance markets in the territories, the U.S. Department of Health and Human Services has reviewed and revised its legal interpretation of the applicability of the federal law to the territories.

The July 16 letter from the Centers for Medicaid and Medicare under HHS, addressed to CNMI Insurance Commissioner Sixto K. Igisomar, states: “After careful review of…the relevant statutory language, HHS has determined that the new provisions of the PHS act enacted in title I…do not apply to the territories.”

While this reinterpretation does not release the territories from all provisions of the ACA, it determined specifically that individual or group health insurance issuers in the U.S. territories need not comply with the guaranteed availability, community rating, single risk pool, rate review, medical loss ratio, and essential health benefits provisions of the ACA.

Igisomar hopes this new flexibility with the law will make it easier for local health insurance issuers to accept new applicants for health insurance as soon as possible.

CNMI health insurance providers stopped accepting new applicants this January to avoid having to comply with the strict market reforms, which came into effect on Jan. 1, 2014, especially the “guaranteed availability” provision that prohibits issuers from denying coverage to anyone.

Though the revised legal interpretation does release health insurance issuers from many of the provisions, the law remains intact for employers sponsoring group health plans.

In a footnote, the letter from CMS Administrator Marilyn Tavenner states: “Group health plans remain subject to the provisions of the PHS act that were enacted in the Affordable Care Act.”

These provisions include, among others, the prohibition on annual and lifetime limits, the prohibition on rescissions, the coverage of preventive health services, and the revised internal and external appeals process. This means that health insurance issuers selling policies to employers in the CNMI will still want to make sure their products comply with the provisions applicable to group health plans.

While the letter assures that the Centers for Medicaid and Medicare Services will issue regulations to affirm this interpretation, it remains unclear when these regulations will be released.

“HHS has really changed their tune from last July,” according to Gov. Eloy S. Inos. “Although this letter is welcome news as this will now give us the opportunity to alleviate the additional local government cost to fund this unfunded ACA mandate—outside of rate review and consumer assistance grants, I am very much perplexed that they did not look into ways to fix or mitigate the one-legged-stool and instead took the entire stool back.”

“We knew that something is coming down the wire. The President directed HHS to assist the territories during the last NAIC [National Association of Insurance Commissioners] – POTUS meeting, but this was definitely unforeseen,” added Inos.

The CNMI and other territories have requested several exemptions and delays to the law in the past, but these requests were always met with the same answer: that HHS simply does not have the authority to choose which provisions apply to the territories. In a July 12, 2013, letter, Gary Cohen, then-director of the Center for Consumer Information and Insurance Oversight within HHS, responded to the request made by Igisomar to exempt the territories from the volatile “guaranteed availability” provision by stating “HHS does not have the authority to grant your request.”

The CNMI has already received grant funding to support the implementation of the ACA in the territory, specifically rate review and consumer assistance grants awarded to the CNMI Department of Commerce. The letter from Tavenner addresses this issue and clarifies that this interpretation applies prospectively, so while money spent will not be returned, all unspent grant funding must be returned to CMS.

The effects this news will have on the existing Rate Review Office and Consumer Assistance Program at Commerce is still unclear; however, these programs are exclusively funded by the federal grant money that must be returned.

The CNMI RRO Project Manager, BJ Sers Nicholas stated: “This recent development is devastating news to the Rate Review Office as CNMI Public Law 18-34 was recently signed into law. Now the CNMI no longer has funding to oversee and regulate the health insurance market in the CNMI.”

The future of the newly established CAP office is uncertain as well.

“I just hope the work we have done over the past year to establish the CAP as a health care consumer advocate in the CNMI doesn’t go to waste,” said CAP advocacy officer Kaitlyn Neises.

Igisomar is already communicating with the National Association of Insurance Commissioner and the local insurance carriers to address other concerns brought forth from the letter.

“Although the letter may be clear, we now have to back-step and realign pre-ACA statutes versus what may still be applicable to the CNMI,” added Igisomar.

The branch manager for StayWell Saipan responded on behalf of health carriers in the CNMI and Guam, saying, “The health insurance industry is very pleased with the recent letter sent by HHS to the insurance commissioners informing us that the 2014 provisions of the ACA will not apply in the territories. As a result, we will likely be able to start selling new small group policies to organizations with less than 51 employees, and new individual policies. As for government individual policies, we will work with the Insurance Commissioner to iron out the regulatory requirements mandated by PHS Act, but outside the ACA. I understand our Insurance Commissioner, Secretary Igisomar, and Guam Insurance Commissioner Art Illagan, through the NAIC, brought this issue up with the U.S. President during the last POTUS meeting. We are grateful and truly appreciate the efforts of the commissioners and most especially our CNMI Gov. Inos and U.S. Delegate Kilili [Sablan] as they took the lead to continuously work with HHS and congressional colleagues to find a remedy for the unintended challenges caused by the ACA in the CNMI and Guam.” (Office of the Governor)