Trick or Treat: New Grants Position States to be More Assertive Regulators

On October 31, 2016, the Centers for Medicare and Medicaid (CMS) awarded $25.5 million to 22 states to enhance their enforcement and oversight of health insurers with select Affordable Care Act (ACA) regulations and reforms. These awards speak to long-standing concerns from patient advocacy organizations that many states are unable to enforce particular health insurance benefit requirements established by the ACA. This announcement completes a six-month process during which the agency announced the funding opportunity, received and reviewed applications, and determined the award recipients.

The awards provide states, and their Departments of Insurance, the opportunity to bolster their capacities to assure that health insurance products in their states fully align with ACA requirements specifically with regard to:

• Non-discrimination in coverage regarding essential health benefits 
• Coverage of preventive health services
• Medical Loss Ratio requirements
• Appeals Process
• Parity in mental health and substance abuse benefits

Interestingly, two of the hottest topics in health insurance oversight—provider network adequacy review and review of drug formularies—are not named as focus areas of the grants. However, it is easy to see how these reviews could be bolstered under the categories listed above. Grant funds may be used for form review, market conduct examinations, market analysis, financial examinations, and consumer complaint investigations with respect to the pre-selected market reforms and consumer protections.

Eligible states must already be enforcing ACA market reforms and consumer protections, or prove that, with the funding under this grant, the state will transition to active enforcement within 1.5 years of receiving the grant. Five states do not presently enforce the ACA and are therefore ineligible for these grants. Most of the awards were in the neighborhood of $1 million for a 24-month grant period, though the smallest award was $250,000, provided to Maryland. Over $9 million of the grant funds went to enhance mental health parity benefit reviews.

Administratively, these grants are an extension of the Effective Rate Review (ERR) program through which CMS awarded grants to states, after the passage of the ACA. ERR grants were issued to ready Departments of Insurance to tackle responsibilities—such as the review of rate “reasonableness,” Medical Loss Ratio and Essential Health Benefits—that many states did not perform prior to the ACA.

Although the grants are discussed as “Cycle I,” there is no known funding source to continue these grants on an ongoing basis. More likely, these grants use up undrawn funds from the original ERR grants, and CMS will only issue a second cycle of grants if undrawn money remains into next year or a new appropriation is made. Yet, even as a one-time boost, these grants give states funds to make investments in competencies—i.e., geo-mapping, clinical—that many Departments of Insurance currently lack. It remains to be seen whether these grants are a trick or treat for the patient advocates clamoring for more assertive regulation of health insurance benefits.