President Trump has promised to repeal and replace the Affordable Care Act without taking insurance away from the millions of people who gained coverage under the law.
The proposed rules aim to keep insurers in the market during a transition to a new system. One way is to tighten up when people can sign up for coverage.
Insurers like Aetna. The company's CEO, Mark Bertolini, said Wednesday that Obamacare is failing.
"It's in a death spiral," he said at a conference sponsored by The Wall Street Journal. "And in the first look at this quarter it's not going to get any better. It's getting worse."
Bertolini hinted that Aetna may follow insurance giant Humana, which said Tuesday it was dropping out of the ACA exchanges altogether because not enough healthy people are buying insurance.
HHS's proposed changes are designed to make the individual health care market less vulnerable to gaming by consumers. Insurance companies have complained that many people delay signing up until they're sick and then drop coverage after getting care.
The administration's proposals include cutting the annual open enrollment period to about six weeks instead of three months — to reduce the number of people who buy a policy because they find out about a health issue during that time.
HHS will also require people who want to sign up for coverage during so-called special enrollment periods to first prove they qualify because of a life change like losing a job or getting divorced.
"The overall effect of many of the policies here would actually, over time, I think, actually shrink enrollment, not grow enrollment," says Sabrina Corlette, a research professor at Georgetown University's Center on Health Insurance Reforms.
The rules would make it harder to enroll, and adding more paperwork will just turn off more people, she says, citing research into Medicaid and other public benefit programs.
And the people who leave are likely to be the healthier ones, making the situation even worse for insurance companies. "Your healthy people are the ones who are going to be more likely to say, 'Oh, this is too much of a pain in the neck. I'm not going to go through with this,' " Corlette says
Her research shows that people who buy insurance during special enrollment periods incur a disproportionate share of money spent on health care.
The HHS proposal also allows insurers to increase deductibles and copayments, by loosening the standards of coverage. Right now plans are rated in terms of what proportion of the costs a customer pays. The new rules would widen the band by 2 percentage points, so that a plan that's marketed as covering 60 percent of health costs could actually pay for as little as 56 percent of those.
The proposal also says insurance companies can demand consumers pay off any missed premiums before they get a new policy.
Today, a consumer can enroll in a plan, pay for just one month and then continue coverage for 90 days before getting cut off. The following year, the insurance company has to write a new policy even if the person hasn't paid for those three months.
"In total, I think that the rule is helpful for insurers but probably not enough to change plans' minds in how to approach the exchange markets," Pearson says. "Plans that were going to leave the market will probably still leave the market and plans that were inclined to stay in will probably stay in, albeit a little happier."
Humana is, therefore, unlikely to rethink its decision because of these changes.
As HHS tried to stabilize Obamacare while Congress debates its ultimate fate, the IRS is relaxing its plans to enforce the ACA's tax penalty.
The agency had planned to reject tax returns of people who didn't say whether they had health insurance during the tax year. But the IRS changed that policy in response to Trump's executive order directing all federal agencies to ease the burden of the health care law.
Taxpayers may still owe the penalty if they don't have coverage, however.
"Legislative provisions of the ACA law are still in force until changed by Congress, and taxpayers remain required to follow the law and pay what they may owe," the IRS said in an emailed statement.
Pearson at Avalere says the combined actions by HHS and the IRS could lead healthy people to drop their insurance coverage.
"In total, I actually think the exchange market is going to shrink in size, dramatically, as a result of both the rule and the IRS move."