The nation's health-care overhaul took another step forward Tuesday when the Obama administration proposed new rules that clarify insurers'...

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ASHINGTON — The nation’s health-care overhaul took another step forward Tuesday when the Obama administration proposed new rules that clarify insurers’ duties and legal responsibilities under key provisions of the Affordable Care Act.

The new rules, once made final, will govern the operation of new health-insurance marketplaces, called exchanges, that will debut in 2014.

Having the federal government set minimum standards for what health insurance must cover is a departure from normal practice. Usually, insurance companies, their state regulators and employers play that role. But the Affordable Care Act, sometimes referred to as Obamacare, requires that Washington establish a baseline for minimum coverage in areas that include inpatient and outpatient care, emergency services, prescription drugs and lab work.

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Insurance companies are rushing to devise plans that comply with the federal standards. Starting in October, people can enroll in the new plans, for coverage that begins Jan. 1, 2014.

Under the new rules, insurers cannot deny coverage or charge higher premiums to people because they are sick or have been ill. They also cannot charge women more than men, as many now do.

“Thanks to the health-care law, no one will be discriminated against because of a pre-existing condition,” said Health and Human Services (HHS) Secretary Kathleen Sebelius.

The first proposed rule is a series of five market revisions that will help implement that part of the law.

The proposal first requires private insurers to sell policies to all consumers regardless of their health status or history, while also banning these insurers from charging more for coverage based on a person’s health, gender or where he or she works. The proposal allows insurers to adjust premiums based only on a person’s age, history of tobacco use, family size and geographic location.

The new rule also reinforces federal guidelines that now forbid insurance companies from canceling or refusing to renew coverage just because a person becomes sick.

To avoid charging different premiums for different groups of people, the proposed rule requires insurers to maintain separate statewide customer pools for the individual and small group markets. These pools will be used to determine risk and premium costs.

“This insures that the cost of coverage will be spread among all the insurers’ customers in the market,” said Gary Cohen, the director of the Center for Consumer Information and Insurance Oversight at HHS.

The rule’s final provision ensures that young adults and people who can’t afford insurance will have access to catastrophic health coverage in the individual insurance market.

Many of Tuesday’s proposed rules will help “ensure that consumers are protected from some of the worst insurance-industry practices,” Cohen said.

The rules lay out 10 broad categories of essential health benefits but allow each state to specify the benefits within those categories, at least for 2014 and 2015. Thus, the required benefits will vary from state to state, contrary to what many members of Congress had assumed when the law was adopted.

The law requires that these essential benefits include: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental-health and substance-abuse services, including behavioral-health treatment; prescription drugs; rehabilitative services and devices; laboratory services; preventive and wellness services; and pediatric services, including oral and vision care.

The proposed rules go beyond informal guidance issued by the administration in December, most notably by requiring more comprehensive coverage of prescription drugs.

Administration officials originally suggested that insurers would have to cover at least one drug in each therapeutic class. The new rules will, in many states, require insurers to cover two or more drugs in each class.

Stephen Finan, a health economist at the lobbying arm of the American Cancer Society, said, “The proposed rule is an improvement over the bulletin issued last year but still does not guarantee that cancer patients will have access to all the major cancer drugs they need.”

The rules limit insurers’ ability to charge higher premiums based on age. Under the rules, the rate for a 63-year-old could not be more than three times the rate for a 21-year-old. Many states now allow ratios of five to one or more, the administration said.

The White House said it wanted to “minimize disruption of rates in the current market.” But the administration decided not to allow a transition to the new age-rating standards, and insurers said that premiums could increase substantially for young adults.

Karen Ignagni, the president of America’s Health Insurance Plans, a trade group, said the White House needed to focus on the affordability of coverage for consumers and employers.

In the 2008 campaign, Obama said he would lower annual premiums by $2,500 per family by the end of his first term. But after a quick look at the proposed rules Tuesday, Ignagni said she was concerned that “many families and small businesses will be required to purchase coverage that is more costly than they have today.”

The rules also give employers new freedom to reward employees who participate in workplace wellness programs intended to help them lower blood pressure, lose weight or reduce cholesterol levels. The maximum permissible reward would be increased to 30 percent of the cost of coverage, from the current 20 percent.

The rules would further increase the maximum reward to 50 percent for wellness programs intended to prevent or reduce tobacco use.

Rewards could amount to several thousand dollars a year, officials said, because total premiums in employer-sponsored health plans now average more than $5,600 a year for individual coverage and nearly $16,000 for family coverage.

All the proposed rules will be published in the Federal Register next Monday. There will be a 30- or 60-day public-comment period. HHS officials will weigh the public comments before issuing their final rules.

Compiled from McClatchy Newspapers, The New York Times and The Associated Press reports

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