Illinois: Premium Misalignment Study
Upshot
·H.B. 836 was passed and enacted on May 26, 2022, and requires a study on possible misalignment between premiums and generosity of coverage for each metal tier in Illinois’s health insurance Marketplace. The study is due January 1, 2024 and would inform potential health reforms in 2024.
·The legislation is intended to address this misalignment between premiums and actuarial value that resulted from silver loading after federal cost sharing reduction payments were discontinued.
Background
Illinois runs a federally-facilitated Marketplace called Get Covered Illinois that covers over 320,000 individuals in 2022 – an 11 percent increase from 2021. In 2022, there are 11 insurers offering coverage.
This proposal aims to address misalignment in health care premiums that result from a practice called “silver loading,” which the sponsors note was adopted by many states when the federal government discontinued cost-sharing reduction payments. The practice is also called “cost sharing reduction uncertainty cost.” In brief, it allows issuers to increase their silver plan baseline premiums to make up the losses from the missing federal cost-sharing reduction payments. The increased baseline premiums are commonly offset by higher advanced premium tax credits, but members of the legislature are concerned that the changes to premiums mean that some Illinoisans are paying more than they should for low-value plans and less than they should for high value plans. In the bill, the legislature notes that the federal government discontinued cost-sharing reduction payments to issuers from the ACA which prompted Illinois, like most states, to begin silver loading.
Summary
HB 836 requires the Illinois Department of Insurance (IDOI) to study “possible misalignment” between premiums and actuarial value (or generosity) of coverage for each metal tier in the health insurance Marketplace. IDOI would determine if the approaches for setting premium rates across different metal tiers yield rates that are commensurate with their actuarial value. The study would consider best practices of other states to address metal-level premium misalignment and analyze the following:
The number of consumers in Illinois eligible for a premium subsidy under the ACA and the relative affordability of plans;
·The relation of the premium amount for silver plans compared to premiums charged for QHPs offering different levels of coverage, taking into account any funding or lack of funding for CSRs and covered benefits; and
Whether the issuer utilized the “induced demand factors” developed by CMS for risk adjustment, which reflect the anticipated induced demand associated with a plan's cost sharing (metal) level.
The analysis would inform the development of a policy proposal to address metal-level premium misalignment, including the design and implementation of such a policy and projected costs and outcomes for consumers. IDOI is required to submit the policy proposal in a report to the Illinois General Assembly and Governor by January 1, 2024.
Another bill (HB 1465) that did not pass included the same language requiring the premium misalignment study but would have gone further by also authorizing the Director of the Illinois Department of Insurance (IDOI) to disapprove rate filings with an “unreasonable rate increase,” defined as a “rate increase the Director of the Department of Insurance determines to be excessive, unjustified, or unfairly discriminatory.”