Last week the California Chamber of Commerce formally objected to a proposed emergency regulation that may jeopardize the quality and value of health insurance offered in the state by making mid-year changes to the rules governing health insurance policies.
The California Department of Insurance (CDI) filed the emergency regulation on provider network adequacy with the Office of Administrative Law (OAL) on January 20, and the public had five calendar days to provide comments.
Network adequacy refers to whether there are enough providers (hospitals, doctors, specialists, etc.) in the network associated with a particular health plan such that people can get in to see an in-network provider within a reasonable amount of time, without having to travel an unreasonable distance.
Depending on how CDI chooses to enforce the emergency regulation, it could expose insurers to substantial penalties because their 2015 plans are now out of compliance even though insurers acted in good faith and complied with the former regulatory requirements. The CalChamber is concerned this will unnecessarily drive up premiums for employers in 2016.
CDI argued that emergency action was necessary to prevent physical and financial harm because inadequate networks can act as a denial of care for some individuals, or force enrollees to take on debt to pay for the services of an out-of-network provider. While the department acknowledged that it was aware there might be issues with the network adequacy of some plans last year, the number and nature of complaints and stories that rolled in during the final months of 2014 made it clear that the problems were more serious than the department originally had believed.
It is unclear whether CDI intends to enforce these new provisions against health insurance contracts that are already in effect or that will take effect during 2015, or if CDI merely wishes to ensure these provisions are taken into account by the handful of CDI-regulated insurers that will be submitting polices to Covered California for possible inclusion on the health care exchange in 2016.
As purchasers of insurance, CalChamber members’ most immediate concern is that insurers might be subject to significant fines because current offerings do not meet the new requirements imposed by the proposed emergency regulation, even though the plans do comply with the prior regulations governing provider network adequacy. If that does happen, those costs will likely be passed on to employers in the form of higher premiums next year.
Depending on how CDI chooses to implement and enforce the new rule, there could be considerable upheaval in the marketplace in 2015 and 2016. This disruption would be even worse if the permanent regulation later adopted through the formal rulemaking process differs substantially from the emergency one.
Employers are very concerned about this possible market disruption and with the possibility that their premiums in 2016 could increase if insurers are penalized for noncompliance with requirements adopted after their 2015 offerings were prepared and approved.
Although applying the proposed emergency regulation prospectively to 2016 plans would be less problematic for employers, it is unclear how use of the emergency regulatory process actually addresses the issue CDI raised as the primary justification for use of the emergency rulemaking process.
After all, even if insurers design their 2016 policies for the Covered California exchange according to the guidelines in the proposed emergency regulation, those policies will still be out of compliance with the final regulation to the extent that it differs from the emergency one.
For these reasons, the CalChamber does not believe the use of the emergency regulatory process is appropriate in this case, and asked that OAL reject the proposed emergency regulation so that the issue of provider network adequacy could be addressed properly under the regular rulemaking procedure. Unfortunately, OAL approved the emergency regulation on January 30, and it went into effect immediately.
An emergency regulation remains in effect for 180 days (in this case, July 30, 2015) unless the agency submits a revised, final regulation adopted through the regular rulemaking procedure within that period, or the agency requests readoption of the emergency regulation for another 90 days. An agency may request readoption twice.