A health insurer that gets too creative with updating its major medical products could get itself shut out of a market.

Officials at the Center for Consumer Information & Insurance Oversight (CCIIO) talk about the limits on health insurance product update creativity in a new memo.

What the heck is CCIIO?

CCIIO is part of the Centers for Medicare & Medicaid Services (CMS). CMS is part of the U.S. Department of Health and Human Services (HHS).

HHS and CMS set up CCIIO to oversee the HHS programs created by the Patient Protection and Affordable Care Act of 2010 (PPACA) that affect the commercial health insurance important.

For commercial health insurance agents, brokers and consultants, CCIIO is important because it is, in effect, their federal regulator.

Why did CCIIO put out the memo?

CCIIO officials were answering insurers’ questions about the rules for changing and withdrawing the products they sell. Insurers now have to put rates for individual and small-group major medical products through a rate review process managed by CCIIO for some states and supervised by CCIIO in all states.

See also: Feds firm up health rate filing calendar

CCIIO gave insurers advice on how much they can tweak a 2016 product before it becomes an entirely new product, with 2016 rates that can’t be compared with any other product’s 2015 rates.

What did CCIIO officials say?

CCIIO officials said it defines a product to include a package of plans that all use a particular product network type and are sold within a particular service area.

Changes that don’t turn a product into a new product:

  • Making “uniform changes” to all the plans in a product package, such as updating deductible and co-payment levels.

  • Adjusting covered benefits in ways that increase or decrease the plan’s “index rate,” or standardized plan cost, a total of less than 2 percentage points.

  • Making any other changes in cost-sharing structures that get the blessing of state insurance regulators and look reasonable to CMS.

Where’s the trap?

CCIIO officials note that a health insurer that withdraws from a health insurance market may have to stay out for five years. If an insurer changes all of its products in a market so much that it looks as if the insurer has discontinued all of the old products, “the issuer has effectuated a market withdrawal under federal law,” officials say.

Because the insurer would be treated as having withdrawn from the market, the insurer would be subject to the five-year ban on market reentry, officials say. ”Therefore,” they said, “the issuer will be prohibited from offering the newly filed products.”

CMS will apply that interpretation of the rules for coverage beginning on or after Jan. 1, 2017, officials say.