Since the passage of the Affordable Care Act (the “ACA”) in 2010, Texas has deferred to the federal government with respect to certain aspects of health plan rate review. That’s about to change.
On October 19, 2021, the Texas Department of Insurance (the “TDI”) released an informal working draft of a rule establishing a comprehensive state-based rate review process for individual and small group health plans with respect to premium rates for major medical coverage. To date, individual and small group rate review has been bifurcated: the Centers for Medicaid and Medicare Services (“CMS”) has reviewed rates for compliance with federal law and the TDI for compliance with state law. The new process, which would be effective for the 2023 plan year, would have the TDI review for compliance with federal, in addition to state, requirements. It also includes a “Geographic Rating Areas” provision, which assigns every Texas county into one of twenty-seven rating areas, meant to “better align rates in rural areas with nearby metropolitan areas.” The new provisions are intended to implement Texas Insurance Code Chapter 1698, Subchapter N.
Under the proposal, major medical premium rates for the individual and small group market must comply with both Texas and federal law and must not be “excessive, unjustified, or unfairly discriminatory.” The proposed rule includes definitions and detail with respect to each of these terms. Foley recommends that health plans review the proposed rule carefully, including these definitions in particular, as they will ultimately form the basis for the TDI’s ability to challenge or reject future rate filings. Importantly, the proposed rule not only requires the publication of rate increases greater than or equal to 15%, but it provides a mechanism for the submission of public comment on rate increases. Given that rating is central to a health plan’s financial viability, any proposed changes to rating regulations should be carefully considered.
Fortunately, the TDI has opened an early comment period with respect to its informal working draft, available here. The comment period will remain open until 5pm CT, on November 18, 2021. Foley’s Austin office, with its combination of Insurance, Healthcare, and Government Solutions expertise and a deep understanding of the local and national health plan landscape, is well-positioned to work with clients to discuss the TDI’s proposal and to draft comments. We invite you to reach out if you’re interested in learning more.