Original post by Timothy Jost on HealthAffairsBlog
On November 21, 2015, the Centers for Medicare and Medicaid issued a notice of proposed rulemaking (NPRM) for the 2017 Benefit and Payment Parameters (BPP), the annual rule through which it sets out Affordable Care Act policy for the coming years. This is the second of two posts analyzing this proposed rule. The first post summarized the provisions of the rule of most interest to a broader audience. This post will drill down into the details of the rule.
One note to begin: throughout, the rule uses the legally precise term “exchange” rather than the more recent term “marketplace.” This post will use the term exchange rather than marketplace throughout (and federally facilitated exchange or FFE rather than federally facilitated marketplace, or FFM), but it should be understood that both terms mean the same thing.
Definitions
The NPRM begins with a definitional section. The first definition mentioned in the preface is one that the rule in fact does not change—the definition of “plan year.” The plan year of a plan is generally designated by the plan documents, but when it is not, a series of rules of thumb apply, such as the plan year is the period of time for which the deductible or out-of-pocket limit applies, an employer’s tax year, or the calendar year. The NPRM stresses, however, that for both grandfathered and non-grandfathered plans, the plan year can never exceed 12 months.
The NPRM goes on to redefine large and small employer as required by the recently enacted Protecting Affordable Coverage for Employees (PACE) Act, which provides that a large employer is an employer that employs an average of at least 51 employees during the plan year and at least one employee on the first day of the plan year, and a small employer is an employer that employs an average of at least one but not more than 50 employees during the plan year. States may elect to define large employers as employers employing more than 101 employees and small employers as employing not more than 100. In the case of new employers, the determination is based on reasonable expectations as to the average number of employees.
Rating Issues
Under the current rule, the rating area for determining health insurance rates for a business is the area that contains the group policyholder’s principal place of business. If the group plan, however, is a network plan, as most are, the plan’s service area must cover the business’s employees. If the principal place of business is merely an address registered with the state for service of process, there may be a disconnect between the rating area on which premiums are based and the service area in which services are delivered.
The proposed rule, therefore, would generally define the principal place of business for rating purposes as the area where the greatest number of employees work or reside. The SHOP marketplace will use the place of business address used to qualify the employer for SHOP coverage for rating purposes.
The preface raises several other questions for comments respecting rating, although they are not actually taken up in proposed rules. The first is whether there should be some limit on how many rating areas states may have, or how small the rating areas may be. Some states have many small rating areas, which raises concerns about inadequate risk spreading. Second, CMS asks for comments on whether insurers should be required to make their rating areas generally consistent with their service areas to avoid discrimination. Third, CMS requests comments on whether its child age rating factors adequately address different health risk for children of different ages.
Guaranteed Availability And Renewability
The ACA’s guaranteed availability requirement requires insurers in all markets to guarantee the availability of their non-grandfathered products to all applicants subject to exceptions. The NPRM proposes an additional exception to this rule, under which insurers that have given 90 days notice that they are discontinuing a product or 180 days notice that they are leaving a market would not have to accept applicants for coverage under the product. Insurers are already not required to guarantee renewability in this situation, but states may still require availability. Insurers that apply this exception must apply it uniformly regardless of health status or claims experience.
The current rules allow insurers to refuse to cover small groups if a group does not meet minimum participation requirements or the employer does not make minimum premium contributions, except during an annual one-month open enrollment period from November 15 to December 15 when the requirements are waived. The NPRM asks for comments on prohibiting insurers from applying minimum participation or contribution requirements to groups with between 51 and 100 employees in states that choose to define these groups as small groups. Employers in this category are subject to the employer mandate and arguably should not be barred from purchasing coverage if they face a penalty for failing to do so.
Current guaranteed renewability rules allow insurers to refuse to renew groups that violate group participation or employer contribution requirements or cease to participate in an association. Under both of these circumstances, insurers must guarantee availability, so it makes no sense to say they do not need to guarantee renewability. Both of these exceptions to the guaranteed renewability requirement are therefore removed.
Student Health Coverage
The NPRM proposes a couple of changes as to student health coverage. First it recognizes that although student health plans are not generally subject to the single risk pool requirement that applies to other individual coverage, allowing insurers to indiscriminately segment student health plan risk pools is problematic. Under the proposed rule, insurers could only create separate risk pools for separate educational institutions or multiple risk pools in a single institution for bona fide reasons, such as separating undergraduate and graduate students. Insurers could not, for example, base rates on the percent of students enrolled in coverage or the length of time a university had coverage through the insurer.
Because students usually do not have a choice among student health plans of different actuarial values or even with the same actuarial value, CMS proposes to waive actuarial value tier requirements for student health plans, and allow insurers to provide coverage at any actuarial value, as certified by an actuary, of at least 60 percent. CMS requests comments as to whether student health plans should have to disclose their actuarial value in the summaries of benefits and coverage.
Risk Adjustment
The NPRM proposes a number of changes in the 3R premium stabilization programs. The risk corridor and reinsurance programs remain subject to sequestration for fiscal year 2016—risk corridors at a level of 7 percent and reinsurance at a 6.8 percent level. HHS believes that the sequestered payments will be available for payment to insurers in FY 2017 unless Congress takes further action to bar this, which would seem likely. CMS has recently announced at its Regtap.info website that is will be releasing 2014 reinsurance payments (7.3 percent of payments) and risk corridor payments in the 29 states where there are no appeals pending (7.5 percent of payments plus 2.5 percent that was held back for appeals) this month.
The risk adjustment program has recently faced heavy criticism from the health insurance cooperatives, which have asserted that it was a significant factor in the CO-OP failures. The CO-OPs claim that the risk adjustment program, which is supposed to transfer funds from health insurers that have low-risk enrollees to those that have high-risk enrollees, in fact transferred funds from small start-up insurers with low premiums to large established insurers, with high premiums, sophisticated data-capture capabilities, and historical claims information.
The NPRM does not propose significant changes in the risk adjustment program for 2017. It does propose updating risk factors for claims data from 2012, 2013, and 2014. It would also incorporate data on the use of preventive services into its simulation of plan liability, improving the risk scores of plans with healthier populations, especially in bronze and silver plans.
CMS is also considering the use of prescription drug information for risk scoring, a request of the CO-OPs. CMS is considering how to handle partial year enrollees in the risk adjustment formula, as there have been claims that insurers are experiencing high costs from partial-year enrollees on whom they may not have accumulated diagnostic information. Otherwise the risk adjustment formula is largely the same as that used in prior years.
The risk adjustment user fee is set at $1.80 per enrollee per year for 2017, up from $1.75 for 216. Entities acquiring or entering into another arrangement with an insolvent insurer, including state guaranty funds, may be able to accrue previous months of claims experience for the application of risk corridor or reinsurance payments.
An insurer subject to the risk adjustment program that fails to provide HHS access to required data in a dedicated data environment (an EDGE server) in a timely manner, or that fails to meet certain data requirements, is subject to a default charge since HHS cannot determine the insurer’s actual charge. A reinsurance-eligible insurer that fails to provide required data will forfeit reinsurance payments. Insurers that report low enrollment or claims counts compared to baselines, or that fail certain data quality metrics, can be assessed a default risk adjustment charge and forfeit reinsurance payments.
CMS is also proposing to end the good faith compliance safe harbor it observed for 2014 and 2015 and to potentially assess civil penalties against insurers that fail to comply with risk adjustment and reinsurance program data requirements, even if they do so in good faith.
For 2014, the default charge for insurers that failed to failed to establish a dedicated distributed data environment or submitted inadequate data was set at the product of the statewide average premium for the risk pool, the 75th percentile risk transfer amount, and the plan’s enrollment. For plans that fail to meet these requirements for 2015, the default charge will be based on the 90th percentile risk transfer amount. CMS believes that plans are less likely to have technical difficulties that will keep them from fulfilling requirements as of 2015 and that some might decide to simply pay the 75th percentile charge rather than meet requirements. Small insurers, with 500 billable member months or fewer, however, can simply pay a charge of 14 percent of premium rather than set up an EDGE server.
Reinsurance And Risk Corridors
The reinsurance and risk corridor programs end in 2016. The NPRM, however, proposes a few changes in these programs for 2016. First, the NPRM proposes spending all remaining reinsurance program funds in 2016. CMS will first increase the coinsurance rate to 100 percent and, if any funds remain, then reduce the attachment point below $90,000 until all funds are spent. The NPRM also amends the rule to ensure that third party administrators, administrative services-only contractors, and other third parties that determine enrollment counts—and thus program liability–for self-insured plans are subject to audit.
The NPRM would require HHS to adjust the 2015 risk corridor payments or charge for 2015 for insurers that overestimated the cost-sharing reductions they offered in 2014—which increased their incurred claims, medical loss ratio, and possibly their risk corridor payments—to correct for the difference. Insurers would be required to report any differences between estimated cost-sharing reduction amounts and actual cost-sharing reductions for 2014. Insurers would also be required to adjust their claims for 2015 to account for inaccurate estimation of unpaid claims for 2014.
Finally, CMS proposes deleting certain interim risk corridor data reporting requirements.
Rate Review
Under the NPRM, beginning in 2017 non-grandfathered coverage in the individual and small group market would be subject to rate review if the average increase — including premium rating factors such as age or geography — for all enrollees weighted by premium volume for any plan within a product exceeds the “unreasonableness” threshold, presumably 10 percent. Rating factors are being added to avoid gaming of the premium increase threshold by changing the geographic rating area for a plan.
Also beginning in 2017, insurers must submit rate filings using the Unified Rate Review Template to CMS not only when they seek an increase, but also when they are planning to decrease a rate or not modify it. CMS has concluded that it needs all rate filings to reasonably evaluate rate increases. Insurers seeking rate increases must additionally file an actuarial memorandum, and insurers seeking increases above the threshold must additionally file a written justification. Insurers must also file rate filing information for student health plans with CMS.
For all proposed rate filings, regardless of whether rates are subject to review, CMS proposes to make rate filing information publicly available if is not trade secret or confidential commercial or financial information. For states to be considered to have effective rate review programs they must also make information available to the public on proposed rate increases subject to review and final rate increases, and they must do so at a uniform time.
Exchange Establishment
The NPRM would change the timeframes for submission and approval of exchange blueprints by states wishing to establish their own exchanges. Initially the exchange rules required states seeking to establish their own exchange to give 12 months notice to HHS, which was then shortened to 6.5 months at the time when litigation threatened to end the FFE. Recognizing how long it in fact takes to establish a state exchange, the proposed rule would require a declaration letter from a state seeking to run its own exchange 21 months before open enrollment begins; a state seeking to establish a state-based exchange using the federal platform (SBE-FP) would have to submit a letter nine months before open enrollment.
A new state-based exchange would have to submit a blueprint at least 15 months before open enrollment begins and have its blueprint approved or conditionally approved 14 months before open enrollment. SBE-FPs must submit a blueprint 3 months prior to open enrollment and have it approved or conditionally approved 2 months before open enrollment. If a state exchange ceases operation, HHS will operate the exchange.
The NPRM preface discusses at length how the SBE-FP would operate. The state would remain responsible for plan management and consumer assistance functions, while the FFE would assume eligibility and enrollment functions and operate the call center. SBE-FPs must also maintain an informational website that will direct consumers to the FFE.
Initially the FFE will offer a single package of services; not a menu from which the state can select. States will not be able to add state-specific special enrollment periods, application questions, display elements, or data analysis. Insurers will need to comply with FFE eligibility and enrollment policies and standards. States will otherwise generally be required to enforce standards that apply to insurers in the FFE. The FFE would retain the authority to “suppress” the sale of QHPs where they do not meet federal requirements and the SBE-FP fails to take action.
Essential Health Benefits
The ACA requires states to cover the cost of health care services that they require qualified health plans (QHPs) to cover that are not essential health benefits (EHBs). Benefits required by state mandates adopted prior to December 31, 2011 are considered to be EHBs, but benefits mandated by states after that date are not EHBs unless the mandate was adopted to comply with federal requirements. Under the proposed regulation, states would be responsible for identifying mandated services that are not EHBs. QHP insurers are supposed to quantify the cost of these services and notify the state to defray this cost.
If, however, a state mandates that a large group HMO or state employee plan cover a service, but does not require QHPs to cover it, and the large group or state employee plan becomes the base benchmark plan, states do not need to defray the cost of the service provided by QHP insurers, even though it would be covered by QHPs as a benchmark plan EHB. If a state imposes a mandate only on individual or small group plans outside the exchange, under the ACA the mandate must apply uniformly to plans inside the exchange as well, and the state must defray the cost for QHP coverage. Finally, if a state imposes a mandate on employers in the 51 to 100 employee range and then expands the definition of small group to cover these employers, the state would have to defray the cost of mandates applied to these products adopted after 2011.
Navigators and Assisters
The NPRM proposes the imposition of a number of new requirements on navigators, non-navigator assistance personnel, and consumer assisters. Navigators in all exchanges must provide targeted assistance to underserved and vulnerable populations, as defined and identified by their exchange. This is not their exclusive mission, but a necessary part of their mission.
In the FFE, these populations would be identified through the Navigator Funding Opportunity Announcement. This standard would apply in the FFE beginning in 2018. This requirement would not extend to consumer assisters or to non-navigator assistance personnel, although they would be encouraged to reach these populations as well.
As noted in my first post, the NPRM would require navigators in all exchanges to help provide consumers with post-enrollment assistance, including assistance with filing eligibility appeals (though not representing the consumer in the appeal), filing for shared responsibility exemptions, providing basic information regarding the reconciliation of premium tax credits, and understanding basic concepts related to using health coverage. CMS notes that non-navigator assistance personnel also have some post-eligibility responsibilities. Certified application counselors do not, but nothing prohibits them from assisting consumers post enrollment.
Navigators may not offer tax assistance or interpret tax rules, but must help consumers understand the availability of exemptions through the tax filing process and assist them in understanding the forms, tools, and concepts that apply in the tax credit reconciliation process. CMS seeks comments on whether navigators should have to disclose that they are not tax advisors. The NPRM also would require navigators to refer consumers to licensed tax advisers, tax preparers, and other tax resources.
Navigators should also help consumers understand how to use their insurance, including understanding basic insurance terms like deductible and coinsurance, when to use or not use an emergency department, how to identify in-network providers and make medical appointments, how to make follow-up appointments or fill prescriptions, and how to access preventive services without cost sharing.
Exchanges are responsible for ensuring that navigators are trained for these new responsibilities. Any navigators, non-navigator assisters, or certified application counselors must complete training before carrying out any assister functions, including outreach and education.
The NPRM would clarify the rules governing the provision of gifts of nominal value, such as pens, magnets, or key chains by navigators. Navigators, non-navigator assisters, and certified enrollment counselors cannot offer gifts as inducements for enrollment. They may offer nominal value gifts at outreach and education events, however, which can include nominal value gifts to potential enrollees. Consumer assisters do not need to keep track of who has received a nominal value gift over multiple encounters as long as no more than nominal value is provided in any one encounter.
Reimbursement for legitimate expenses incurred by a consumer to receive enrollment assistance—for example, transportation costs or postage—is permitted. Provision of gifts or promotional items that promote the products or services of a third party is prohibited.
Under the NPRM, certified application counselor organizations would have to provide an exchange with information on the number of the organization’s certified application counselors and the consumer assistance they are providing. The FFE would begin collecting data monthly beginning in January 2017 including the number of people certified as application counselors; the number of consumers who receive assistance; and the number who received assistance selecting a QHP, enrolling in a QHP, and enrolling in Medicaid or CHIP.
Brokers and Agents
Brokers and agents must receive training and register with an exchange to assist consumers with enrollment. They must also sign a privacy and security agreement. Agents or brokers in SBE-FPs must comply with all applicable FFE standards. The HHS may terminate a broker or agent’s agreement with the FFE for cause based on a specific finding of noncompliance or a pattern of noncompliance. The agent or broker (including a web broker) must be given a 30-day opportunity to resolve the matter. A broker or agent may request reconsideration, but the reconsideration decision is final and non-appealable.
Under the NPRM, HHS would also be able to suspend an agent’s or broker’s registration for up to 90 days immediately upon the date of notice in cases of fraud or abusive conduct. The agent or broker would not be able to enroll consumers during the suspension period. If the agent or broker fails to submit information to resolve the issue, permanent termination could follow.
The agent or broker would also be terminated if HHS or a state or law enforcement agency reasonably confirmed the allegations of fraud or abuse. Termination would not require the normal 30-day notice. Agents and brokers could also be barred from returning to the FFE in future years for misconduct and could be subjected to civil money penalties for providing false or fraudulent information to the exchange, or disclosing private information.
CMS is further proposing standards of conduct for agents and brokers. These would include requirements that they provide consumers with correct information without omission of material fact; refrain from marketing that is misleading, coercive or discriminatory; obtain consent before enrolling individuals or employers in coverage; protect consumers’ personally identifiable information; and otherwise comply with federal and state laws and regulations. The use of the words “exchange” or “marketplace” in a name or URL that would cause confusion with a federal program or website may be considered misleading.
Violation of these standards could be grounds for termination. HHS recognizes that primary responsibility for overseeing agents and brokers resides with the state and will limit itself to compliance with FFE enrollment activities.
Currently a consumer applying for exchange enrollment through a web-broker or directly through an insurer must be redirected to the exchange website to complete the enrollment and receive an eligibility determination. HHS is considering an option where the consumer could remain on the web-broker’s or insurer’s website to complete the application and enroll in coverage, with the web-broker or insurer obtaining eligibility information from the exchange. The web-broker or insurer would have to use the FFE single streamlined application without change to obtain information. CMS is examining the web-broker experience and consider expanding audits or requiring additional information displays from web-brokers.
HHS approves vendors to offer agent and broker training. Under current requirements, vendors must identity proof agents and brokers and verify state licensure. CMS is proposing to remove these verification functions as unnecessary because the FFE verifies identify for registration purposes and QHP insurers must verify state licensure before affiliating with agents and brokers. The NPRM would add a requirement that vendors provide basic technical assistance to agent and broker users of the vendor’s training platform.
Notices To Employers
The NPRM proposes amending the process through which exchanges notify employers when an employee is determined eligible for federal financial assistance. This notice informs an employer that it may be liable for the employer mandate penalty if its employee receives assistance. The notice may also help reduce an employee’s responsibility to pay back tax credits if the employer prevails in an appeal and the employee ceases to receive tax credits.
Under the NPRM, the employer would only be notified if the employee actually enrolls in a QHP through an exchange, not upon a determination of eligibility as is currently the case. The exchange can either notify the employer on an employee-by-employee basis or for groups of employees who enroll in a QHP with financial assistance.
Financial Subsidy Eligibility Verification
Eligibility for financial assistance through the exchanges is based on projected income for the coming year. Many consumers who are eligible for income assistance have fluctuating income that is difficult to predict. Their actual income often does not match trusted data sources such as earlier tax returns, which could be two years old. Under current procedures, if no income data is available from trusted data sources or income is more than 10 percent less than income documented through such data sources, exchanges must demand income verification.
CMS has concluded that this threshold is not adequate to accommodate normal income variations. It proposes that exchanges apply more reasonable standards, such as a variation of more than 20 percent or $5,000. The threshold will be set through guidance.
The NPRM also proposes modifications in current procedures for verifying the absence of employer coverage for applicants from current accurate data sources, statistical sampling, or an alternative process approved by HHS. CMS also seeks comments on how it should alert enrollees of their potential eligibility for Medicare when they reach age 65.
Reenrollment and Binder Payments
As noted in my initial post, CMS is proposing a change in its reenrollment hierarchy to ensure that enrollees in silver plans that cease to become available are auto-reenrolled in another silver plan in a different product, rather than being reenrolled in a different metal tier plan of the same product, thus maintaining tax credit eligibility. CMS is again also exploring reenrollment possibilities that would move enrollees to lower-cost plans through auto-reenrollment when the plan they were enrolled in for the previous year becomes more costly.
One proposal is that an enrollee could designate when he or she enrolls for a year that if the plan’s premiums increase relative to those of other plans more than a certain percentage, the enrollee would be enrolled in a plan on the same metal level with the lowest-cost premium in the enrollee’s service area. Of course, the new plan could have a significantly different network or cost-sharing structure, and if the lowest-cost plan was a small plan with limited capacity it could be overwhelmed. CMS continues to solicit comments on this idea.
The NPRM proposes codifying previous guidance on binder payments. The deadline for paying the first premium for prospective coverage must be set by the insurer and must be no earlier than the effective date of coverage and no later than 30 days after that date or the date the insurer receives the enrollment transaction. Where a consumer qualifies for retroactive coverage — for example by prevailing on an appeal — the consumer must make a binder payment for all premiums due for the period of retroactive coverage, and will only receive prospective coverage if he or she only pays for one month.
Open and Special Enrollments
The NPRM proposes keeping the open enrollment period for 2017 at November 1 to January 31. CMS is considering, however, moving open enrollment to an earlier period, such as October 15, and either making it longer or ending before the end of the year.
CMS also seeks data on claims that special enrollment periods have been subject to abuse, a charge recently raised by UnitedHealth in explaining why it is considering withdrawing from the exchanges. The NPRM proposes allowing the exchanges to cancel or retroactively terminate coverage where it is determined that an enrollment was made due to fraudulent activity. Consumers would also be able to terminate their own coverage if they were enrolled through error, misconduct, or fraud perpetrated by someone else.
An enrollee who was unable to terminate coverage due to a technical error would have up to 60 days after discovering the error to terminate coverage retroactively. An individual who could demonstrate that his or her enrollment was unintentional, inadvertent, or erroneous could also request cancellation of coverage, which the exchange could grant if the enrollee’s claim was supported by the totality of the circumstances. Finally, an enrollee who is fraudulently enrolled by another could cancel within 60 days of discovering the fraud.
Eligibility Appeals
The NPRM proposes a number of provisions relating to exchange eligibility appeals. These include amended rules covering requests for information by the appellate entity and permission to submit an untimely appeal if the appeal was delayed by exceptional circumstances. Additional provisions would permit the dismissal of an appeal upon death of an appellant and holding a hearing with less than 15 days notice when the appellant requests it or the appeal is expedited.
The proposed rules would recognize retroactive eligibility to the date that would have applied had the determination been correct and provide for redetermining an employee’s eligibility when an employer prevails on an appeal, raising the question of whether the employer provides its employee affordable, minimum-value, coverage. Applicants and enrollees can appeal state exchange decisions to HHS.
Individual Responsibility Exemptions
The NPRM contains several provisions relating to the determination of exemptions from the individual responsibility requirement. Under the individual responsibility requirement, individuals must pay a tax unless they qualify for an exemption. First, the NPRM provides that members of health care sharing ministries and Indian tribes and incarcerated individuals can claim exemptions through IRS form 8965 upon filing their taxes and need not seek a certificate through the exchange. The NPRM would also limit hardship exemptions to the remainder of the calendar year during which the hardship commenced plus the next calendar year plus the month before the hardship commenced. An individual claiming continuing hardship would have to file a new application beyond that point, but could use as evidence proof submitted with a previous application up to three years earlier.
The NPRM sets out a revised non-exclusive list of the events and circumstances that would qualify for a hardship exemption, such as homelessness, domestic violence, or bankruptcy. These were formerly set out in guidance. The hardship event or circumstances must have occurred within three years of the application for the exemption. Since a hardship exemption can only last at most two years, an applicant who seeks to establish a hardship retroactively for three years may need to establish two hardship exemption periods.
Individuals who would have been eligible for Medicaid if their state had extended Medicaid to the under-65 adult population may qualify for a hardship exemption without applying for and being denied Medicaid. Individuals who qualify for a hardship exemption because their state did not expand Medicaid may claim the exemption on their tax return beginning with the 2015 tax year.
An individual responsibility exemption is available if an individual cannot afford coverage — that is, if the amount he or she would have to contribute for coverage exceeds the required contribution percentage of his or her income. An individual is also exempt if his or her required contribution exceeds the required contribution percentage for his or her household. Finally, if more than one member of a family is employed and the combined cost of coverage for all of them exceeds the required contribution percentage, the family is exempt.
The required contribution percentage was set for 2014 at 8 percent. It must be updated each year, however, for inflation—or more specifically for the excess in the rate of premium grown over the rate of income growth since 2013. The method for doing this was established in 2015, but CMS is proposing to change the database it uses for calculating this ratio. Under the proposed approach to calculating the ratio, the required contribution percentage for 2017 would be 8.16, an increase of 0.37 percentage points from 2015.
The NPRM proposes a procedure for discontinuing, with notice and an opportunity to respond, applications for exemptions that are not completed. Finally, CMS proposes to indefinitely allow state-based exchanges to use HHS to determine exemptions. States were supposed to begin processing exemptions themselves by the start of open enrollment for 2016.
The SHOP Exchange
Currently, employers in the SHOP can pick a single plan or allow employee choice within a single tier of coverage. For 2017, CMS is proposing to allow employers to permit employees “vertical choice,” the option of picking all plans across all levels from a single insurer. CMS is also considering other options, such as allowing employers to offer a choice of any plan in a single actuarial level of coverage or the level above it, or of simply allowing states in which an FFE is located to recommend additional models of employee choice. States with SBE-FP SHOPs will have to use the FF-SHOP models plus additional models they suggest.
The NPRM modifies the rules for effectuating enrollment in SHOP so that initial premium payments for new enrollees are due by the 20th day of the month prior to the month coverage begins, as opposed to the current requirement of the 15th day of the preceding month. Where an employer plan qualifies for retroactive SHOP coverage, all payments must be received for all months covered retroactively by 30 days after the event that triggers retroactive coverage before coverage is effectuated retroactively. The NPRM clarifies that employers may contribute a fixed percentage of the premiums paid by each individual employee or a percentage of the cost of a reference plan, leaving employees to pay the additional premium for a higher-cost plan. The costs of a tobacco surcharge are borne fully by the employee.
The NPRM modifies the definition of “applicant” for SHOP coverage to include employers seeking eligibility to purchase coverage through the SHOP but not enrolling in it themselves. The NPRM also clarifies that termination of SHOP enrollment is not necessarily termination of group coverage, which may continue in the outside market. FF-SHOP employers must allow their employees an open enrollment period of at least a week annually. Employers can select a coverage effective date up to 2 months in advance and submit plan selections by the 15th of a month for coverage the next month or after the 15th for coverage the second following month.
SHOPs can auto-enroll enrollees in the same coverage for a subsequent year unless the enrollee opts out or alternatively require enrollees to re-enroll themselves. When an enrollee in the SHOP changes from one plan to another during open enrollment or a special enrollment period, termination of the first plan is effective the day before the effective date of the new plan to avoid a gap in coverage. Employers must give qualified employees 90-days notice before an adult child reaches age 26 and ages off coverage. Under the proposed rule, employers or employees could appeal the failure of a SHOP to give timely notice of an eligibility determination and would be able to determine whether the effective date of coverage following a successful appeal should be prospective or retroactive.
Selective Contracting and Standard Plans In The FFE
For the first years of the operation of the FFE, HHS used an “open market” approach—all QHPs were welcome. Under the ACA, however, an exchange may refuse to certify a QHP if it is not in the interest of qualified individuals and employers. CMS proposes to continue focusing denial of certification on situations involving the integrity of plans, such as material non-compliance with applicable requirements, financial insolvency, or errors in data submissions. CMS is considering, however, becoming more of an active purchaser, possibly denying certification to plans that meet minimum certification requirements but are not in the best interest of consumers.
One specific proposal is standardizing plans offered in the exchange, an approach several states have taken. There is considerable evidence that having to choose among too many plans can cause consumer confusion and discouragement. To focus consumer choice, CMS is proposing a set of standardized plan options for 2017. Insurers would not be required to offer standard options and could offer additional options if they chose to do so, but standardized plans would be displayed at healthcare.gov in a manner that made them easy to identify so that consumers could compare standard plans across insurers.
Plan options would be standardized for the gold, silver, and bronze levels and for each of the enhanced cost-sharing tiers within the silver level. Standardized options would have a single provider tier, a four-tier (or possibly five-tier) formulary, a fixed in-network deductible, a fixed annual cost-sharing limit, and standardized copayments and coinsurance levels for key EHB services. Standardized plans would offer some services before the deductible applied, including primary care visits, generic drugs, and at silver and higher levels specialist visits and mental health and substance abuse disorder outpatient services.
The 2017 standard silver plan, for example, would have a $3,500 deductible; an annual out-of-pocket limit of $7,150 (the legal maximum); a $400 copay for emergency room care after the deductible; access to urgent care, primary care visits, specialist visits, mental health and substance abuse disorder outpatient care, and generic and preferred brand name drugs before the deductible subject only to copayments; and 20 percent coinsurance for inpatient hospitalizations and other services. The same standardized plans would be offered nationally. CMS requests comments as to how standardized cost sharing would work considering state limits on cost sharing for certain services, like emergency care.
Insurers could offer more than one standardized plan if the plans were meaningfully different, such as an HMO and PPO plan. Non-standardized plans would also continue to have to be meaningfully different. Plans are not considered meaningfully different just because one is health savings account eligible and another is not or because they do or do not offer dependent coverage. CMS may consider capping the number of plans that could be offered by a single insurer in future years.
FFE User Fee
The FFE user fee charged to market QHP plans through the FFE will continue to be 3.5 percent of premium. This continues to be less than the actual full cost of providing FFE services. SBE-FP insurers will be charged a user fee of 3 percent for the use of the federal platform services. For the 2017 benefit year, however, this fee may be reduced to 1.5 or 2 percent to permit a transition. In SBE-FPs, HHS will offer the option of collecting on behalf of the state the entire user fee to fund both SBE and FP operations. The NPRM does not mention a user fee for SBE-FPs for 2016.
The Drug Formulary Exceptions Process
Current rules require plans providing EHB to have a pharmacy exceptions process, independent of the standard appeal processes, through which an enrollee or enrollee’s physician can request and gain access to clinically appropriate drugs, on an expedited basis if necessary. For 2016 this process includes an internal and external review procedure. The costs of non-formulary drugs obtained through an exception apply to annual limitations on cost-sharing.
Some states, however, have different processes for accessing non-formulary drugs. CMS is considering amending its exceptions process so that plans may alternatively comply with state requirements in states that have procedures that are more protective of consumers or that conflict with the federal process. States would determine which process would apply. CMS is also considering allowing a second level of internal review for pharmacy appeals and for clarifying the availability of medication-assisted treatment for opioid addiction as a mental health and substance abuse disorder EHB.
The Premium Adjustment Percentage
The ACA requires HHS to determine an annual premium adjustment percentage, which is used to set the rate of increase for three ACA parameters: the maximum annual limitation on cost sharing; the required contribution percentage for individuals for minimum essential coverage, which is used by HHS to determine eligibility for hardship exemptions under the individual responsibility requirement; and the assessable payment amounts owed by employers under the employer mandate. Under the ACA, the premium adjustment percentage is the percentage (if any) by which the average per capita premium for health insurance coverage for the preceding calendar year exceeds such average per capita premium for health insurance for 2013.
For 2017, the percentage would increase 2013 amounts by 13.25256291 percent. Based on this percentage, the maximum out-of-pocket limit for 2017 will be $7,150 for an individual and $14,300 for a family, compared to $6,350 and $12,700 for 2014. For reduced cost sharing plans, the out-of-pocket maximum would be $2,350 for individuals with incomes below 200 percent of the federal poverty level and $5,700 for individuals with incomes between 200 and 250 percent of the FPL, with family maximums at twice those amounts. Maximum out-of-pocket limits for stand-alone dental plans are currently $350 for one covered child and $700 for two or more covered children.
CMS seeks comments on how these maximums should be updated for inflation for 2017.
The Actuarial Value Calculator
The NPRM proposes allowing greater flexibility for designing the AV calculator, used to determine the actuarial value of plans. CMS published with the NPRM the proposed 2017 AV calculator and AV calculator methodology.
Network Adequacy
A major subject of recent controversy has been the adequacy of health plan networks as QHP plans have moved to ever narrower networks to remain price competitive in the exchanges. The National Association of Insurance Commissioners (NAIC) has been engaged in a major effort to amend its state network adequacy model law to address this issue. Existing QHP rules require networks to be adequate to ensure access to services without unreasonable delay and also require the availability of up-to-date provider directories. The NPRM would go further.
First, states in which the FFE is operating would be asked to use quantifiable network adequacy metrics to determine adequacy. HHS will provide guidance with metrics that can be used, but they would at least include time and distance standards and minimum provider-covered person ratios for the specialties with the highest utilization rates in the state. (These specialties may not include in-hospital physicians such as anesthesiologists or pathologists, a very important omission.)
In FFE states that do not apply quantifiable network adequacy standards, the FFE would apply time and distance standards, calculated at the county level, similar to those used for evaluating Medicare Advantage plans. Plans that could not meet these requirements could submit a justification for a variance request. Multistate plans would have to meet OPM network adequacy requirements.
Second, QHP insurers in the FFE would be required to provide 30 days notice (or notice as soon as practicable) to regular patients of providers who are being dropped from the plan’s network, regardless of whether the termination is for-cause or no-cause or is simply a non-renewal. Insurers are also encouraged to inform enrollees of comparable in-network providers.
Third, QHP insurers in the FFE would be required under the NPRM to allow enrollees under treatment by a provider terminated without cause to continue treatment for up to 90 days if the patient is 1) in an ongoing course of treatment for a life-threatening condition, 2) in an ongoing course of treatment for a serious acute condition, 3) in the second or third trimester of pregnancy, or 4) in a course of treatment where the treating physician attests that discontinuing care from the provider would worsen the condition or interfere with anticipated outcomes.
An ongoing course of treatment would include mental health and substance abuse disorder treatments. Decisions with respect to these requests would be subject to internal and external appeal. CMS requests comments on whether these continuity of care requirements should extend to nonrenewal situations.
Finally, the NPRM proposes very limited protection for individuals who receive care from an in-network facility but receive services from out-of-network providers, such as anesthesiologists or pathologists – resulting in a phenomenon frequently referred to as surprise balance billing. If there is a potential of out-of-network providers providing services in in-network facilities, a plan may provide notice to an enrollee at least 10 days in advance, probably at the time of pre-authorization of the service, that this is a possibility.
If a plan fails to provide this notice, any cost-sharing imposed by out-of-network providers must be charged against the plan’s out-of-pocket limit so that the insurer absorbs costs above that limit. This provision would apply to all QHP plans, not just those in the FFE.
This is an inadequate response to the problem of surprise balance billing. First, the plan can avoid responsibility by simply providing a form notice to all patients pre-approved for services, as long as it is done 10 days in advance. Second, it is not clear that cost-sharing in fact includes balance bills — bills from providers that exceed the allowable amount payable by a health plan — as balance bills are not normally considered cost-sharing. Balance bills are often the most burdensome bills faced by consumers.
Fortunately, this provision does not preempt more protective state laws, which have already been adopted by a number of states and may be adopted by more, as the NAIC has finalized its model act.
CMS requests comments on further network adequacy issues, including network resilience policies in disasters and whether wait-time measures should be applied to determine network adequacy. CMS solicits comments on whether insures should be required to survey providers on a regular basis to see if the providers are accepting new patients, and whether insurers should be required to provide their selection and tiering criteria to regulators. Finally, CMS is considering establishing a rating or classification system for healthcare.gov that would classify plans into three different categories by network breadth to allow consumers to more easily identify narrow and less narrow networks.
Essential Community Providers
CMS continues to tinker with its policies regarding essential community providers, which serve underserved communities. Beginning in 2018, it is considering allowing health plans to count multiple contracted full-time equivalent ECP practitioners practicing at a single location as separate ECPs for meeting ECP participation ratios. The denominator at that time would be updated to include separately all ECP practitioners reported to HHS in the insurers plan service area. CMS had been considering disaggregating categories of ECP providers that must be included by a QHP, but has decided that there are too few ECPS in existing categories to do this at this time.
The Premium Payment Grace Period
The NPRM would amend the rules applying to the three-month grace period for nonpayment of premiums for individuals receiving premium tax credit assistance to clarify that if an individual loses premium tax credit assistance during that period the three month grace period would still apply. The NPRM also clarifies that if an individual reenrolls in coverage for a new year, the enrollee is not required to pay a binder payment for coverage for the new year and is protected by the three-month grace period for nonpayment. An individual can reinstate coverage during the three-month grace period by making a payment that satisfies the insurer’s payment threshold requirements.
Enforcement and Appeals
The NPRM would maker certain amendments to clarify CMS enforcement policies and insurer appeal rights. For 2014 and 2015, CMS applied a good faith compliance enforcement policy. For 2016 and future years, good faith will not be a defense in compliance actions. Where an insurer informs CMS that it cannot provide coverage to enrollees who purchase a QHP, CMS may suppress the sale of the QHP by the insurer or terminate its QHP certification. CMS may also decertify QHPs that are the subject of state enforcement actions or do not have funds to continue to provide coverage for enrollees for the remainder of the plan year.
The NPRM proposes a number of modifications in the administrative appeals process for insurers, including clarifying grounds for requesting reconsiderations and appeals involving the premium stabilization programs and timing for requesting reconsiderations.
These will not be explored in detail here. The NPRM would also require insurers to notify enrollees of benefit display errors that might have affected their plan selection and of the availability of a special enrollment period under these circumstances.
Quality and Patient Safety
CMS proposes to strengthen its quality and patient safety standards for 2017 to require hospitals with more than 50 beds to certify that they use a patient safety evaluation system to continue QHP participation. QHP participating hospitals with more than 50 beds must also implement a comprehensive person-oriented discharge program. Such hospitals are expected to contract with a patient safety organization.
HHS also strongly supports hospitals tracking patient safety events using the Agency for Healthcare Research and Quality Common Formats; it also supports hospitals implementing evidence-based patient safety standards. QHPs must collect documentation to ensure compliance with these standards.
Third Party Payments
The NPRM also attempts to tidy up the rules governing third-party payments for QHP coverage. The ACA does not prohibit third parties from paying for QHP coverage, but there would be obvious concerns if, for example, hospitals could purchase coverage for their patients, thus shifting the risk of uncompensated care.
In March of 2014, however, CMS published an interim final rule requiring QHP and stand-alone dental plan insurers to accept payments from Ryan White HIV/AIDS programs, other federal or state government programs, and Indian tribes and organizations. The NPRM would clarify that state government programs include local government programs, and that when government programs provide funding through grantees, insurers would also be required to accept premium payments from those grantees.
Entities that make third party payments would be required to notify HHS. In some situations insurers would also be required to accept cost-sharing payments from these entities. CMS continues to consider whether plans should be required to accept payments from charitable organizations and what guardrails would be needed to protect the risk pool if they were required to do so.
A Medical Loss Ratio Surprise At The End
Finally, the NPRM proposes a few changes with respect to medical loss ratio reporting and calculation. The NPRM would require insurers to use a six rather than a three month run-out period for reporting incurred claims, which should result in more accurate MLR calculations.
But in a zinger on the last page of the preface, in case anyone was still paying attention, CMS invites comments on whether it should consider insurers’ fraud prevention activities as incurred claims for calculating the MLR. This proposal was actively considered by both the NAIC and the agencies in 2010 and 2011. An accommodation on the fraud issue was made in the 2011 amended MLR rule by allowing insurers to offset fraud recoveries against claims, a reasonable accommodation.
Fraud prevention is important, but it is a quintessential administrative, cost control, expense. Not by any stretch of imagination does fraud prevention qualify as an incurred claim, and calling it so would be contrary to clear statutory language.