[Federal Register Volume 84, Number 80 (Thursday, April 25, 2019)]
[Rules and Regulations]
[Pages 17454-17568]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-08017]
[[Page 17453]]
Vol. 84
Thursday,
No. 80
April 25, 2019
Part II
Department of Health and Human Services
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45 CFR Parts 146, 147, 148, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2020; Final Rule
Federal Register / Vol. 84 , No. 80 / Thursday, April 25, 2019 /
Rules and Regulations
[[Page 17454]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 146, 147, 148, 153, 155, and 156
[CMS-9926-F]
RIN 0938-AT37
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2020
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
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SUMMARY: This final rule sets forth payment parameters and provisions
related to the risk adjustment and risk adjustment data validation
programs; cost-sharing parameters; and user fees for Federally-
facilitated Exchanges (FFEs) and State-based Exchanges on the Federal
Platform (SBE-FPs). It finalizes changes that will allow greater
flexibility related to the duties and training requirements for the
Navigator program and changes that will provide greater flexibility for
direct enrollment entities, while strengthening program integrity
oversight over those entities. It finalizes a change intended to reduce
the costs of prescription drugs. This final rule also includes changes
to Exchange standards related to eligibility and enrollment;
exemptions; and other related topics.
DATES: These regulations are effective on June 24, 2019.
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Kiahana Brooks, (301) 492-5229, Ken
Buerger, (410) 786-1190, or Abigail Walker, (410) 786-1725, for general
information.
David Mlawsky, (410) 786-6851, for matters related to guaranteed
renewability.
Avareena Cropper, (410) 786-3794, for matters related to
sequestration.
Allison Yadsko, (410) 786-1740, for matters related to risk
adjustment.
Jacalyn Boyce, (301) 492-5122, for matters related to Federally-
facilitated Exchange and State-based Exchange on the Federal Platform
user fees.
Abigail Walker, (410) 786-1725, Alper Ozinal, (301) 492-4178,
Allison Yadsko, (410) 786-1740, or Adam Shaw, (410) 786-1091, for
matters related to risk adjustment data validation.
Ken Buerger, (410) 786-1190, or LeAnn Brodhead, (410) 786-3943, for
matters related to the opioid crisis.
Amir Al-Kourainy, (301) 492-5210, for matters related to
Navigators.
Carly Rhyne, (301) 492-4188, for matters related to special
enrollment periods.
Amanda Brander, (202) 690-7892, for matters related to exemptions.
Daniel Brown, (434) 995-5886, for matters related to direct
enrollment.
Leigha Basini, (301) 492-4380, for matters related to health
insurance issuer drug policy, essential health benefits, and qualified
health plan certification requirements.
Abigail Walker, (410) 786-1725, for matters related to the required
contribution percentage, cost-sharing parameters, and the premium
adjustment percentage.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Final Rule
III. Provisions of the Final Regulations and Analysis and Responses
to Public Comments
A. Part 146--Requirements for the Group Health Insurance Market
B. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
C. Part 148--Requirements for the Individual Health Insurance
Market
D. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment Under the Affordable Care Act
E. Part 155--Exchange Establishment Standards and Other Related
Standards under the Affordable Care Act
F. Part 156--Health Insurance Issuer Standards under the
Affordable Care Act, Including Standards Related to Exchanges
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Risk Adjustment Data Validation Exemptions
C. ICRs Regarding Agent or Broker Termination and Web Broker
Data Collection
D. ICRs Regarding Direct Enrollment Entity Standardized
Disclaimer
E. ICRs Regarding Special Enrollment Periods
F. ICRs Regarding Eligibility Standards for Exemptions
G. Summary of Annual Burden Estimates for Requirements
H. Submission of PRA-Related Comments
V. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
H. Congressional Review Act
I. Reducing Regulation and Controlling Regulatory Costs
J. Conclusion
I. Executive Summary
American Health Benefit Exchanges, or ``Exchanges'' are entities
established under the Patient Protection and Affordable Care Act \1\
(PPACA) through which qualified individuals and qualified employers can
purchase health insurance coverage. Many individuals who enroll in
qualified health plans (QHPs) through individual market Exchanges are
eligible to receive a premium tax credit to reduce their costs for
health insurance premiums and to receive reductions in required cost-
sharing payments to reduce out-of-pocket expenses for health care
services. The PPACA also established the risk adjustment program.
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\1\ The PPACA (Pub. L. 111-148) was enacted on March 23, 2010.
The Health Care and Education Reconciliation Act of 2010 (Pub. L.
111-152), which amended and revised several provisions of the PPACA,
was enacted on March 30, 2010. In this final rule, we refer to the
two statutes collectively as the ``Patient Protection and Affordable
Care Act'' or ``PPACA''.
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On January 20, 2017, the President issued an Executive Order which
stated that, to the maximum extent permitted by law, the Secretary of
HHS and heads of all other executive departments and agencies with
authorities and responsibilities under the PPACA should exercise all
authority and discretion available to them to waive, defer, grant
exemptions from, or delay the implementation of any provision or
requirement of the PPACA that would impose a fiscal burden on any state
or a cost, fee, tax, penalty, or regulatory burden on individuals,
families, health care providers, health insurers, patients, recipients
of health care services, purchasers of health insurance, or makers of
medical devices, products, or medications. This rule will, within the
limitations of the current statute, reduce fiscal and regulatory
burdens across different program areas and provide stakeholders with
greater flexibility.
Over time, issuer market exits and increasing insurance rates have
threatened the stability of the individual and small group market
Exchanges in many geographic areas. These dynamics have put coverage
out of reach for many, notably those consumers enrolling outside of the
Exchanges, who do not benefit from the PPACA's advance payments of the
premium tax credit (APTC).
In previous rulemaking, we have established provisions and
parameters to implement many PPACA requirements and programs. In this
rule, we amend these provisions and parameters, with a focus on
maintaining a stable regulatory environment to provide issuers with
greater
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predictability for upcoming plan years, while simultaneously enhancing
the role of states in these programs and providing states with
additional flexibilities, reducing unnecessary regulatory burdens on
stakeholders, empowering consumers, and improving affordability.
Risk adjustment continues to be a core program in the individual
and small group markets both on and off the Exchanges, and we are
finalizing recalibrated parameters for the HHS-operated risk adjustment
methodology. We are finalizing several changes related to the risk
adjustment data validation program that are intended to ensure the
integrity of the results of risk adjustment, and others intended to
alleviate issuer burden associated with complying with risk adjustment
data validation requirements.
As we do every year in the HHS notice of benefit and payment
parameters, we are finalizing updated parameters applicable in the
individual and small group markets. We are finalizing the user fee rate
for issuers participating on Federally-facilitated Exchanges (FFEs) and
State-based Exchanges on the Federal platform (SBE-FPs) for 2020 to be
3.0 and 2.5 percent of premiums, respectively. These rates are a
decrease from past years, which will increase affordability for
consumers. We are finalizing updates to the premium adjustment
percentage methodology and amount, and consequently the maximum annual
limitations on cost sharing for the 2020 benefit year, including those
for cost-sharing reduction plan variations.
We are finalizing changes to the requirements regarding Navigators
to reduce burden, increase flexibility, and enable Exchanges to more
easily and cost-effectively operate Navigator programs. Streamlining
the Navigator training requirements and authorizing but not requiring
assisters to provide certain types of assistance, including post-
enrollment assistance, will allow assisters to allocate their resources
in a manner that best meets community needs, consumer demands, and
organizational resources.
We are finalizing a number of changes in this rule that are
intended to reduce the burden for consumers by making it easier to
enroll in affordable coverage through the Exchanges. First, we are
finalizing a policy that would provide additional flexibility to those
in need of a hardship exemption that currently must be obtained by
filing an application with an Exchange, by expanding the types of
hardship exemptions that consumers may claim for 2018 through the tax
filing process. Second, we believe consumers should have greater
flexibility in how they shop for coverage, including the avenues
through which they enroll in QHPs. As such, we have been working to
expand opportunities for individuals to directly enroll in Exchange
coverage through the websites of certain third parties, called direct
enrollment entities, rather than having to visit HealthCare.gov. Third,
we are finalizing several regulatory changes to streamline the
regulatory requirements applicable to these direct enrollment entities.
Fourth, we are finalizing a proposal to create a special enrollment
period for off-Exchange enrollees who experience a decrease in
household income and are determined to be eligible for APTC by the
Exchange. This will allow enrollees to enroll in a more affordable on-
Exchange product when a consumer's household income decreases mid-year.
We requested comment on automatic re-enrollment processes and
capabilities, as well as additional policies or program measures that
would reduce eligibility errors and potential government misspending
for potential action in future rulemaking applicable not sooner than
plan year 2021.
In the proposed rule, we discussed why we believe increased
transparency is a critical component of a consumer driven health care
system, and expressed our interest to receive comments discussing ways
to provide consumers with greater transparency with regards to their
own health care data, QHP offerings on the FFEs, and the cost of health
care services. We continue to believe that when consumers have access
to relevant, meaningful, and consumer-friendly information, they are
empowered to make more informed decisions with regards to their care.
The proposed rule discussed a future opportunity for public input
on ways to increase the interoperability of patient-mediated health
care data across health care programs, including in coverage purchased
through the Exchanges. To that end, in the March 4, 2019 Federal
Register, we published the ``Interoperability and Patient Access
Proposed Rule'' with a 60-day public comment period. The
Interoperability and Patient Access Proposed Rule includes policy
proposals to make certain health care data easily accessible through
common technologies in a convenient, timely, and portable way. We
encourage public input on that proposed rule.
Additionally, we sought comment on ways to further implement
section 1311(e)(3) of the PPACA, as implemented by 45 CFR 156.220(d),
where a QHP issuer must make available the amount of enrollee cost
sharing under the individual's plan or coverage for the furnishing of a
specific item or service by a participating provider in a timely manner
upon the request of the individual. We were particularly interested in
input regarding what types of data will be most useful to improving
consumers' abilities to make informed health care decisions, including
decisions related to their coverage.
We also expressed our interest in ways to improve consumers' access
to information about health care costs. We stated that we believe that
consumers would benefit from a greater understanding of what their
potential out-of-pocket costs would be for various services, based on
which QHP they are enrolled in and which provider they see. We stated
that we believe that such a policy would promote consumers' ability to
shop for covered services, and to play a more active role in their
health care.
We also are finalizing our proposal to create a limited data set
file using masked enrollee-level data submitted to HHS from the
External Data Gathering Environment (EDGE) servers for issuers of risk
adjustment covered plans in the individual and small group (including
merged) markets, with one modification: We will not make this limited
data set available for public health or health care operations
purposes. Thus, we are finalizing our proposal to make this file
available to requestors who seek the data for research purposes only.
In addition, we are finalizing our proposal to broaden the permissible
HHS uses of the enrollee-level EDGE data currently submitted for
purposes of risk adjustment. We believe this will increase
understanding of these markets and contribute to greater transparency.
We sought comment on ways that we can promote the offering and
take-up of high deductible health plans (HDHPs) that can be paired with
health savings accounts (HSAs), which can serve as an effective and
tax-advantageous method for certain consumers to manage their health
care expenditures. We also sought comments for ways to increase the
visibility of HSA-eligible HDHPs on HealthCare.gov.
In furtherance of the Administration's priority to reduce
prescription drug costs and to align with the President's American
Patients First blueprint, we proposed a series of changes regarding
prescription drug benefits, to the extent permitted by applicable state
law. These proposals included provisions that would allow issuers to
adopt mid-year formulary changes to incentivize greater
[[Page 17456]]
enrollee use of lower-cost generic drugs and that would allow issuers
to not count certain cost sharing toward the annual limitation on cost
sharing if a consumer selects a brand drug when a medically appropriate
generic drug is available. Based on issues raised by commenters, we are
not finalizing these proposals. However, we are finalizing a change
that would allow issuers and plans to exclude drug manufacturer coupons
from counting toward the annual limitation on cost sharing when a
medically appropriate generic drug is available. We expect this change
to support issuers' and plans' ability to lower the cost of coverage
and generate cost savings while also ensuring efficient use of federal
funds and sufficient coverage for people with diverse health needs.
II. Background
A. Legislative and Regulatory Overview
Title I of the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) added a new title XXVII to the Public Health Service
Act (PHS Act) to establish various reforms to the group and individual
health insurance markets, including a guaranteed renewability
requirement in the individual, small group, and large group markets.
Subtitles A and C of title I of the PPACA reorganized, amended, and
added to the provisions of part A of title XXVII of the PHS Act
relating to group health plans and health insurance issuers in the
group and individual markets.
Section 1302 of the PPACA provides for the establishment of an
essential health benefits (EHB) package that includes coverage of EHB
(as defined by the Secretary), cost-sharing limits, and actuarial value
requirements. The law directs that EHBs be equal in scope to the
benefits provided under a typical employer plan, and that they cover at
least the following 10 general categories: Ambulatory patient services;
emergency services; hospitalization; maternity and newborn care; mental
health and substance use disorder services, including behavioral health
treatment; prescription drugs; rehabilitative and habilitative services
and devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care.
Section 1301(a)(1)(B) of the PPACA directs all issuers of QHPs to
cover the EHB package described in section 1302(a) of the PPACA,
including coverage of the services described in section 1302(b) of the
PPACA, adherence to the cost-sharing limits described in section
1302(c) of the PPACA, and meeting the actuarial value (AV) levels
established in section 1302(d) of the PPACA. Section 2707(a) of the PHS
Act, which is effective for plan or policy years beginning on or after
January 1, 2014, extends the requirement to cover the EHB package to
non-grandfathered individual and small group health insurance coverage,
irrespective of whether such coverage is offered through an Exchange.
In addition, section 2707(b) of the PHS Act directs non-grandfathered
group health plans to ensure that cost sharing under the plan does not
exceed the limitations described in sections 1302(c)(1) of the PPACA.
Section 1311(d)(3)(B) of the PPACA permits a state, at its option,
to require QHPs to cover benefits in addition to the EHB. This section
also requires a state to make payments, either to the individual
enrollee or to the issuer on behalf of the enrollee, to defray the cost
of these additional state-required benefits.
Section 1302(d) of the PPACA describes the various levels of
coverage based on AV. Consistent with section 1302(d)(2)(A) of the
PPACA, AV is calculated based on the provision of EHB to a standard
population. Section 1302(d)(3) of the PPACA directs the Secretary to
develop guidelines that allow for de minimis variation in AV
calculations.
Section 1311(b)(1)(B) of the PPACA directs that the Small Business
Health Options Program assist qualified small employers in facilitating
the enrollment of their employees in QHPs offered in the small group
market. Sections 1312(f)(1) and (2) of the PPACA define qualified
individuals and qualified employers. Under section 1312(f)(2)(B) of the
PPACA, beginning in 2017, states have the option to allow issuers to
offer QHPs in the large group market through an Exchange.\2\
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\2\ If a state elects this option, the rating rules in section
2701 of the PHS Act and its implementing regulations will apply to
all coverage offered in such state's large group market (except for
self-insured group health plans) under section 2701(a)(5) of the PHS
Act.
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Section 1311(d)(4)(B) of the PPACA requires an Exchange to provide
for the operation of a toll-free telephone hotline to respond to
requests for assistance.
Sections 1311(d)(4)(K) and 1311(i) of the PPACA direct all
Exchanges to establish a Navigator program.
Section 1311(c)(6)(C) of the PPACA establishes special enrollment
periods and section 1311(c)(6)(D) of the PPACA establishes the monthly
enrollment period for Indians, as defined by section 4 of the Indian
Health Care Improvement Act.
Section 1312(c) of the PPACA generally requires a health insurance
issuer to consider all enrollees in all health plans (except
grandfathered health plans) offered by such issuer to be members of a
single risk pool for each of its individual and small group markets.
States have the option to merge the individual and small group market
risk pools under section 1312(c)(3) of the PPACA.
Section 1312(e) of the PPACA directs the Secretary to establish
procedures under which a state may permit agents and brokers to enroll
qualified individuals and qualified employers in QHPs through an
Exchange and to assist individuals in applying for premium tax credits
and cost-sharing reductions for QHPs sold through an Exchange.
Section 1321(a) of the PPACA provides broad authority for the
Secretary to establish standards and regulations to implement the
statutory requirements related to Exchanges, QHPs and other components
of title I of the PPACA. Section 1321(a)(1) of the PPACA directs the
Secretary to issue regulations that set standards for meeting the
requirements of title I of the PPACA for, among other things, the
establishment and operation of Exchanges.
Section 1311(c) of the PPACA provides the Secretary the authority
to issue regulations to establish criteria for the certification of
QHPs. Section 1311(e)(1) of the PPACA grants the Exchange the authority
to certify a health plan as a QHP if the health plan meets the
Secretary's requirements for certification issued under section 1311(c)
of the PPACA, and the Exchange determines that making the plan
available through the Exchange is in the interests of individuals and
employers in the state.
Sections 1313 and 1321 of the PPACA provide the Secretary with the
authority to oversee the financial integrity of State Exchanges, their
compliance with HHS standards, and the efficient and non-discriminatory
administration of State Exchange activities. Section 1321 of the PPACA
provides for state flexibility in the operation and enforcement of
Exchanges and related requirements.
When operating an FFE under section 1321(c)(1) of the PPACA, HHS
has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the
PPACA to collect and spend user fees. Office of Management and Budget
(OMB) Circular A-25 establishes federal policy regarding user fees and
specifies that a user charge will be assessed against each identifiable
recipient for special
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benefits derived from federal activities beyond those received by the
general public.
Section 1321(d) of the PPACA provides that nothing in title I of
the PPACA should be construed to preempt any state law that does not
prevent the application of title I of the PPACA. Section 1311(k) of the
PPACA specifies that Exchanges may not establish rules that conflict
with or prevent the application of regulations issued by the Secretary.
Section 1343 of the PPACA establishes a permanent risk adjustment
program to provide payments to health insurance issuers that attract
higher-than average risk populations, such as those with chronic
conditions, funded by payments from those that attract lower-than-
average risk populations, thereby reducing incentives for issuers to
avoid higher-risk enrollees.
Section 1402 of the PPACA provides for, among other things,
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level health plans offered through the
individual market Exchanges. This section also provides for reductions
in cost sharing for Indians enrolled in QHPs at any metal level.
Section 5000A of the Internal Revenue Code (the Code), as added by
section 1501(b) of the PPACA, requires individuals to have minimum
essential coverage (MEC) for each month, qualify for an exemption, or
make an individual shared responsibility payment. Under the Tax Cuts
and Jobs Act, which was enacted on December 22, 2017, the individual
shared responsibility payment is reduced to $0, effective for months
beginning after December 31, 2018.\3\ Notwithstanding that reduction,
certain exemptions are still relevant to determine whether individuals
above the age of 30 qualify to enroll in catastrophic coverage under
Sec. 155.305(h).
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\3\ Public Law 115-97, 131 Stat. 2054 (2017).
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The Protecting Affordable Coverage for Employees Act (Pub. L. 114-
60, enacted on October 7, 2015) amended the definition of small
employer in section 1304(b) of the PPACA and section 2791(e) of the PHS
Act to mean, in connection with a group health plan for a calendar year
and a plan year, an employer who employed an average of at least 1 but
not more than 50 employees on business days during the preceding
calendar year and who employs at least 1 employee on the first day of
the plan year. It also amended these statutes to make conforming
changes to the definition of large employer, and to provide that a
state may treat as a small employer, for a calendar year and a plan
year, an employer who employed an average of at least 1 but not more
than 100 employees on business days during the preceding calendar year
and who employs at least 1 employee on the first day of the plan year.
1. Premium Stabilization Programs \4\
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\4\ The term premium stabilization programs refers to the risk
adjustment, risk corridors, and reinsurance programs established by
the PPACA. See 42 U.S.C. 18061, 18062, and 18063.
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In the July 15, 2011 Federal Register (76 FR 41929), we published a
proposed rule outlining the framework for the premium stabilization
programs. We implemented the premium stabilization programs in a final
rule, published in the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule). In the December 7, 2012 Federal Register
(77 FR 73117), we published a proposed rule outlining the benefit and
payment parameters for the 2014 benefit year to expand the provisions
related to the premium stabilization programs and set forth payment
parameters in those programs (proposed 2014 Payment Notice). We
published the 2014 Payment Notice final rule in the March 11, 2013
Federal Register (78 FR 15409). In the June 19, 2013 Federal Register
(78 FR 37032), we proposed a modification to the HHS-operated
methodology related to community rating states. In the October 30, 2013
Federal Register (78 FR 65046), we finalized the proposed modification
to the HHS-operated methodology related to community rating states. We
published a correcting amendment to the 2014 Payment Notice final rule
in the November 6, 2013 Federal Register (78 FR 66653) to address how
an enrollee's age for the risk score calculation would be determined
under the HHS-operated risk adjustment methodology.
In the December 2, 2013 Federal Register (78 FR 72321), we
published a proposed rule outlining the benefit and payment parameters
for the 2015 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2015 Payment Notice). We published the 2015 Payment Notice
final rule in the March 11, 2014 Federal Register (79 FR 13743). In the
May 27, 2014 Federal Register (79 FR 30240), the 2015 fiscal year
sequestration rates for the risk adjustment and reinsurance programs
were announced.
In the November 26, 2014 Federal Register (79 FR 70673), we
published a proposed rule outlining the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2016 Payment Notice). We published the 2016 Payment Notice
final rule in the February 27, 2015 Federal Register (80 FR 10749).
In the December 2, 2015 Federal Register (80 FR 75487), we
published a proposed rule outlining the benefit and payment parameters
for the 2017 benefit year to expand the provisions related to the
premium stabilization programs, setting forth certain oversight
provisions and establishing the payment parameters in those programs
(proposed 2017 Payment Notice). We published the 2017 Payment Notice
final rule in the March 8, 2016 Federal Register (81 FR 12203).
In the September 6, 2016 Federal Register (81 FR 61455), we
published a proposed rule outlining the benefit and payment parameters
for the 2018 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology, new policies around the use of external data
for recalibration of the HHS risk adjustment models, and amendments to
the risk adjustment data validation process (proposed 2018 Payment
Notice). We published the 2018 Payment Notice final rule in the
December 22, 2016 Federal Register (81 FR 94058).
In the November 2, 2017 Federal Register (82 FR 51042), we
published a proposed rule outlining the benefit and payment parameters
for the 2019 benefit year, and to further promote stable premiums in
the individual and small group markets. We proposed updates to the risk
adjustment methodology and amendments to the risk adjustment data
validation process (proposed 2019 Payment Notice). We published the
2019 Payment Notice final rule in the April 17, 2018 Federal Register
(83 FR 16930). We published a correction to the 2019 benefit year risk
adjustment coefficients in the 2019 Payment Notice final rule in the
May 11, 2018 Federal Register (83 FR 21925). On July 27, 2018,
consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019 benefit
year final risk adjustment model coefficients to reflect an additional
[[Page 17458]]
recalibration related to an update to the 2016 enrollee-level EDGE
dataset.\5\
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\5\ ``Updated 2019 Benefit Year Final HHS Risk Adjustment Model
Coefficients.'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.
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In the July 30, 2018 Federal Register (83 FR 36456), we published a
final rule that adopted the 2017 benefit year risk adjustment
methodology as established in the final rules published in the March
23, 2012 (77 FR 17220 through 17252) and in the March 8, 2016 editions
of the Federal Register (81 FR 12204 through 12352). This final rule
sets forth additional explanation of the rationale supporting the use
of the statewide average premium in the HHS-operated risk adjustment
state payment transfer calculation for the 2017 benefit year, including
the reasons why the program is operated in a budget-neutral manner.
This final rule permitted HHS to resume 2017 benefit year risk
adjustment payments and charges. HHS also provided guidance as to the
operation of the HHS-operated risk adjustment program for the 2017
benefit year in light of publication of this final rule.\6\
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\6\ ``Update on the HHS-operated Risk Adjustment Program for the
2017 Benefit Year.'' July 27, 2018. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.
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In the August 10, 2018 Federal Register (83 FR 39644), we published
a proposed rule seeking comment on adopting the 2018 benefit year risk
adjustment methodology in the final rules published in the March 23,
2012 (77 FR 17219) and in the December 22, 2016 editions of the Federal
Register (81 FR 94058). The proposed rule set forth additional
explanation of the rationale supporting use of statewide average
premium in the HHS-operated risk adjustment state payment transfer
formula for the 2018 benefit year, including the reasons why the
program is operated in a budget-neutral manner. In the December 10,
2018 Federal Register (83 FR 63419), we issued a final rule adopting
the 2018 benefit year HHS-operated risk adjustment methodology as
established in the final rules published in the March 23, 2012 (77 FR
17219) and the December 22, 2016 (81 FR 94058) editions of the Federal
Register. This final rule sets forth additional explanation of the
rationale supporting use of statewide average premium in the HHS-
operated risk adjustment state payment transfer formula for the 2018
benefit year, including the reasons why the program is operated in a
budget-neutral manner.
2. Program Integrity
In the June 19, 2013 Federal Register (78 FR 37031), we published a
proposed rule that proposed certain program integrity standards related
to Exchanges and the premium stabilization programs (proposed Program
Integrity Rule). The provisions of that proposed rule were finalized in
two rules, the ``first Program Integrity Rule'' published in the August
30, 2013 Federal Register (78 FR 54069) and the ``second Program
Integrity Rule'' published in the October 30, 2013 Federal Register (78
FR 65045).
3. Market Rules
An interim final rule relating to the HIPAA health insurance
reforms was published in the April 8, 1997 Federal Register (62 FR
16894). A proposed rule relating to the 2014 health insurance market
rules was published in the November 26, 2012 Federal Register (77 FR
70584). A final rule implementing the health insurance market rules was
published in the February 27, 2013 Federal Register (78 FR 13406) (2014
Market Rules).
A proposed rule relating to Exchanges and Insurance Market
Standards for 2015 and Beyond was published in the March 21, 2014
Federal Register (79 FR 15808) (2015 Market Standards Proposed Rule). A
final rule implementing the Exchange and Insurance Market Standards for
2015 and Beyond was published in the May 27, 2014 Federal Register (79
FR 30240) (2015 Market Standards Rule). The 2018 Payment Notice final
rule in the December 22, 2016 Federal Register (81 FR 94058) provided
additional guidance on guaranteed availability and guaranteed
renewability. In the April 18, 2017 Market Stabilization final rule (82
FR 18346), we released further guidance related to guaranteed
availability.
4. Exchanges
We published a request for comment relating to Exchanges in the
August 3, 2010 Federal Register (75 FR 45584). We issued initial
guidance to states on Exchanges on November 18, 2010. We proposed a
rule in the July 15, 2011 Federal Register (76 FR 41865) to implement
components of the Exchanges, and a rule in the August 17, 2011 Federal
Register (76 FR 51201) regarding Exchange functions in the individual
market and SHOP, eligibility determinations, and Exchange standards for
employers. A final rule implementing components of the Exchanges and
setting forth standards for eligibility for Exchanges was published in
the March 27, 2012 Federal Register (77 FR 18309) (Exchange
Establishment Rule).
We established additional standards for SHOP in the 2014 Payment
Notice and in the Amendments to the HHS Notice of Benefit and Payment
Parameters for 2014 interim final rule, published in the March 11, 2013
Federal Register (78 FR 15541). The provisions established in the
interim final rule were finalized in the second Program Integrity Rule.
We also set forth standards related to Exchange user fees in the 2014
Payment Notice. We established an adjustment to the FFE user fee in the
Coverage of Certain Preventive Services Under the Affordable Care Act
final rule, published in the July 2, 2013 Federal Register (78 FR
39869) (Preventive Services Rule).
In a final rule published in the March 27, 2012 Federal Register
(77 FR 18309), we established the original regulatory Navigator duties
and training requirements. In a final rule published in the July 17,
2013 Federal Register (78 FR 42823), we established standards for
Navigators and non-Navigator assistance personnel in FFEs and for non-
Navigator assistance personnel funded through an Exchange establishment
grant. This final rule also established a certified application
counselor program for Exchanges and set standards for that program. In
the 2017 Payment Notice final rule, published in the March 8, 2016
Federal Register (81 FR 12204), we expanded Navigator duties and
training requirements. In the 2019 Payment Notice final rule, published
in the April 17, 2018 Federal Register (83 FR 16930), we removed the
requirements that each Exchange must have at least two Navigator
entities; that one of these entities must be a community and consumer-
focused nonprofit group; and that each Navigator entity must maintain a
physical presence in the Exchange service area.
In an interim final rule, published in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
special enrollment periods (2016 Interim Final Rule). We finalized
these in the 2018 Payment Notice final rule, published in the December
22, 2016 Federal Register (81 FR 94058). In the April 18, 2017 Market
Stabilization final rule Federal Register (82 FR 18346), we amended
standards relating to special enrollment periods and QHP certification.
In the 2019 Payment Notice final rule, published in the April 17, 2018
Federal Register (83 FR 16930), we modified parameters around certain
special enrollment periods.
[[Page 17459]]
5. Essential Health Benefits
On December 16, 2011, HHS released a bulletin \7\ that outlined our
intended regulatory approach for defining EHB, including a benchmark-
based framework. A proposed rule relating to EHBs was published in the
November 26, 2012 Federal Register (77 FR 70643). We established
requirements relating to EHBs in the Standards Related to Essential
Health Benefits, Actuarial Value, and Accreditation Final Rule, which
was published in the February 25, 2013 Federal Register (78 FR 12833)
(EHB Rule). In the 2019 Payment Notice, published in the April 17, 2018
Federal Register (83 FR 16930), we added Sec. 156.111 to provide
states with additional options from which to select an EHB-benchmark
plan for plan years 2020 and beyond.
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\7\ ``Essential Health Benefits Bulletin.'' December 16, 2011.
Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.
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6. Minimum Essential Coverage
In the February 1, 2013 Federal Register (78 FR 7348), we published
a proposed rule that designates other health benefits coverage as MEC
and outlines substantive and procedural requirements that other types
of coverage must fulfill to be recognized as MEC. The provisions were
finalized in the July 1, 2013 Federal Register (78 FR 39494).
In the November 26, 2014 Federal Register (79 FR 70674), we
published a proposed rule seeking comments on whether state high risk
pools should be permanently designated as MEC or whether the
designation should be time-limited. In the February 27, 2015 Federal
Register (80 FR 10750), we designated state high risk pools established
on or before November 26, 2014 as MEC.
B. Stakeholder Consultation and Input
HHS consulted with stakeholders on policies related to the
operation of Exchanges, including the SHOP, and the risk adjustment and
risk adjustment data validation programs. We held a number of listening
sessions with consumers, providers, employers, health plans, and the
actuarial community to gather public input. We solicited input from
state representatives on numerous topics, particularly essential health
benefits, QHP certification, Exchange establishment, and risk
adjustment. We consulted with stakeholders through regular meetings
with the National Association of Insurance Commissioners (NAIC),
regular contact with states through the Exchange Establishment grant
and Exchange Blueprint approval processes, and meetings with Tribal
leaders and representatives, health insurance issuers, trade groups,
consumer advocates, employers, and other interested parties. We
considered all public input we received as we developed the policies in
this final rule.
C. Structure of Final Rule
The regulations outlined in this final rule will be codified in 45
CFR parts 146, 147, 148, 153, 155, and 156.
The changes to 45 CFR parts 146, 147, and 148 make a non-
substantive technical correction to the guaranteed renewability
regulations.
The changes to the HHS risk adjustment program established under 45
CFR part 153 relate to the determination of the final coefficients for
the 2020 benefit year, and the data sources used to calculate those
coefficients. This final rule addresses high-cost risk pooling, where
we finalize the same parameters that applied to the 2018 and 2019
benefit years to the 2020 benefit year and future benefit years unless
changed in future rulemaking. The finalized provisions in part 153 also
relate to the risk adjustment user fee for the 2020 benefit year and
modifications to risk adjustment data validation requirements.
The final regulations in 45 CFR part 155 will provide more
flexibility related to the training requirements for Navigators by
streamlining 20 existing specific training topics into 4 broad
categories. They also provide more flexibility to FFE Navigators by
making the provision of certain types of assistance, including post-
enrollment assistance, permissible for FFE Navigators, but not
required.\8\ They amend and streamline our regulations related to
direct enrollment. They also establish a new special enrollment period,
at the option of the Exchange, for off-Exchange enrollees who
experience a decrease in income and are newly determined to be eligible
for APTC by the Exchange. They also increase flexibility for
individuals seeking the general hardship exemption by allowing them to
claim the exemption on their federal income tax return for 2018 without
obtaining an exemption certificate number from the Exchange. Finally,
they include several amendments to the definitions applicable to part
155.
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\8\ This assistance includes: Understanding the process of
filing Exchange eligibility appeals; understanding and applying for
exemptions from the individual shared responsibility payment that
are granted through the Exchange; understanding the availability of
exemptions from the requirement to maintain MEC and from the
individual shared responsibility payment that are claimed through
the tax filing process and how to claim them; the Exchange-related
components of the premium tax credit reconciliation process;
understanding basic concepts and rights related to health coverage
and how to use it; and referrals to licensed tax advisers, tax
preparers, or other resources for assistance with tax preparation
and tax advice on certain Exchange-related topics.
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The final regulations in 45 CFR part 156 set forth provisions
related to cost sharing, including the premium adjustment percentage,
the maximum annual limitation on cost sharing, and the reductions in
the maximum annual limitation for cost-sharing plan variations for
2020. As we do every year in the HHS notice of benefit and payment
parameters, we are finalizing updates to the premium adjustment
percentage, which helps determine the required contribution percentage,
the maximum annual limitation on cost sharing, and the reduced maximum
annual limitation on cost sharing based on the premium adjustment
percentage.
We finalize the FFE and SBE-FP user fee rates for 2020 to be 3.0
and 2.5 percent of premiums, respectively. The final regulations in
part 156 also include a policy to incentivize the use of generic drugs.
In addition, the final rule at part 156 includes changes related to
direct enrollment to conform to the changes finalized to 45 CFR part
155.
III. Provisions of the Final Regulations and Analysis and Responses to
Public Comments
In the January 24, 2019 Federal Register (84 FR 227), we published
the ``Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2020'' proposed rule (proposed 2020 Payment
Notice or proposed rule). We received 26,129 comments, including 25,632
comments that were substantially similar to one of eight different
letters. Comments were received from state entities, such as
departments of insurance and state Exchanges; health insurance issuers;
providers and provider groups; consumer groups; industry groups;
national interest groups; and other stakeholders. The comments ranged
from general support of or opposition to the proposed provisions to
specific questions or comments regarding proposed changes. We received
a number of comments and suggestions that were outside the scope of the
proposed rule that will not be addressed in this final rule.
In this final rule, we provide a summary of certain proposed
provisions, a summary of the public comments received that directly
related to those proposals, our responses to
[[Page 17460]]
them, and a description of the provisions we are finalizing.
Comment: We received multiple comments criticizing the short
comment period, stating that the length of the comment period made it
difficult for stakeholders to conduct an in-depth analysis of the
proposed rule. Commenters suggested that HHS adopt a comment period of
at least 30 days from rule publication, and to fully comply with
notice-and-comment requirements under the Administrative Procedure Act.
Response: The timeline for publication of this final rule
accommodates issuer filing deadlines for the 2020 plan year. A longer
comment period would have delayed the publication of this final rule,
and created significant challenges for states, Exchanges, issuers, and
other entities in meeting deadlines related to implementing these
rules. We continue to try to expand the comment period while also
providing industry stakeholders with more time to implement the final
rule.
Comment: We received multiple comments criticizing the timing of
the release of the proposed rule, stating that publishing the proposal
for this annual rule in January 2019 creates challenges for states,
Exchanges, issuers, and other entities in implementing changes for plan
year 2020.
Response: We recognize the importance of a timely release of
updates to our regulations, and make every effort to do so efficiently.
After the comment period closed, we took steps to expedite the
publication of this final rule. We will continue to support consumers
and stakeholders to implement the changes in this final rule in a
timely fashion.
Comment: We received numerous comments cautioning us about making
changes that would weaken the PPACA.
Response: Our top priority at HHS is putting patients first. While
we have made great strides forward, there is still work to be done,
including ensuring that coverage is affordable to all consumers. We
have already made great strides in working to streamline our
regulations and our operations with the goal of reducing unnecessary
burden, increasing efficiencies and improving the patient experience.
We will continue to seek innovative ways to reduce costs and burden
while meeting the health needs of all Americans, within the constraints
of the law. We are continuing to address feedback we receive from
stakeholders and the public, and in turn we are making changes that
will better serve patients and allow states to address the unique
health needs of their populations.
We sought comment on ways to further implement section 1311(e)(3)
of the PPACA, as implemented by Sec. 156.220(d), to enhance enrollee
cost-sharing transparency. We also sought comment on whether there are
any existing regulatory barriers that stand in the way of privately led
efforts at price transparency, and ways that we can facilitate or
support increased private innovation in price transparency.
We requested comment on automatic re-enrollment processes and
capabilities, as well as additional policies or program measures that
would reduce eligibility errors and potential government misspending
for potential action in future rulemaking.
Comment: Commenters who addressed this topic unanimously supported
retaining automatic re-enrollment processes. Supporters cited benefits
such as the stabilization of the risk pool due to the retention of
lower-risk enrollees who are least likely to actively re-enroll, the
increased efficiencies and reduced administrative costs for issuers,
the reduction of the numbers of uninsured, and lower premiums.
Commenters stated that existing processes, such as eligibility
redeterminations, electronic and document-based verification of
eligibility information, periodic data matching, and premium tax credit
reconciliations, are sufficient safeguards against potential
eligibility errors and increased federal spending.
Response: We appreciate commenters' feedback and will take it into
consideration as we continue to explore options to improve Exchange
program integrity going forward. As we discussed in the preamble to the
proposed rule, we agree that automatic re-enrollment significantly
reduces issuer administrative expenses, makes enrolling in health
insurance more convenient for consumers, and is consistent with broader
industry practices. We are not making changes for these processes in
this rule but will continue to consider the feedback provided for
potential action in future rulemaking applicable not sooner than plan
year 2021.
Comment: All commenters that commented on efforts to increase price
transparency supported the idea of increased price transparency. Many
commenters provided suggestions for how to disclose health care costs
to consumers, such as providing costs for common, shoppable services,
including costs for both in- and out-of-network health care, and
accounting for consumer-specific benefit information such as progress
towards meeting a deductible, out-of-pocket limit and visit limits in
health care cost estimates. One commenter supported implementing price
transparency requirements across all private markets. Another commenter
suggested that price transparency efforts be a part of a larger payment
reform, provider empowerment, and patient engagement strategy. Some
commenters expressed caution for how such policies should be
implemented, warning against duplicating state efforts and passing
along administrative costs to consumers, and cautioning that the
proprietary and competitive nature of payment data should be protected.
Response: We are not making changes to further implement the
enrollee cost-sharing transparency requirements under Sec. 156.220(d)
as part of this rule. We will take this input into account as we
continue our efforts to promote price transparency in health care
markets.
We sought comment on ways that we can promote the offering and
take-up of HDHPs that can be paired with HSAs. We also sought comments
for ways to increase the visibility of HSA-eligible HDHPs on
HealthCare.gov.
Comment: Many commenters provided suggestions on how to improve the
educational content about HSAs on HealthCare.gov, and methods to
improve the technical aspects of HealthCare.gov to incorporate HSAs
into the QHP shopping experience. Commenters also encouraged HHS'
involvement in the incorporation of value-based insurance design
principles into HSA-eligible HDHP designs.
Response: We appreciate these comments, and will take them under
consideration should we make any future changes to our approach towards
HSAs on HealthCare.gov. We note that the rules for HSAs and HSA-
eligible HDHPs are set forth in section 223 of the Code and are under
the jurisdiction of the Department of the Treasury and the Internal
Revenue Service (IRS).
A. Part 146--Requirements for the Group Health Insurance Market
For a discussion of the provisions in this final rule related to
part 146, please see the preamble to part 147.
B. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
Section 147.106 implements the guaranteed renewability requirements
under the PPACA (applicable to non-grandfathered plans), and Sec. Sec.
146.152 and 148.122 implement the guaranteed renewability requirements
enacted by HIPAA (applicable to both grandfathered and non-
grandfathered
[[Page 17461]]
plans). We proposed amendments in Sec. 147.106, and conforming
amendments to Sec. Sec. 146.152 and 148.122, which, taken together
with proposed amendments to Sec. Sec. 156.122 and 156.130, aimed to
reduce prescription drug expenditures.
In the 2016 Payment Notice, we expressed concerns about the impact
on consumers of mid-year formulary changes. We noted that, under
guaranteed renewability requirements and the definitions of ``product''
and ``plan,'' issuers generally may not make plan design changes, other
than at the time of plan renewal. However, we also stated that certain
mid-year changes to drug formularies related to the availability of
drugs in the market may be necessary and appropriate.\9\
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\9\ 80 FR at 10822.
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In the proposed rule, we proposed to add Sec. 147.106(e)(5) to set
parameters in the individual, small group, and large group markets, for
plan years beginning on or after January 1, 2020, for certain mid-year
formulary changes, if permitted by applicable state law. At Sec.
147.106(e)(5), we proposed allowing issuers, for plan years beginning
on or after January 1, 2020, to make formulary changes during the plan
year when a generic equivalent of a prescription drug becomes available
on the market, within a reasonable time after that drug becomes
available. We proposed that the issuer be permitted to modify its
plans' formularies to add the generic equivalent drug. At that time,
the issuer would also be permitted to remove the equivalent brand drug
from the formulary or move the equivalent brand drug to a different
cost-sharing tier on the formulary. We proposed that any mid-year
formulary changes would have to be consistent with the standards
applicable to uniform modifications in paragraph (e)(2) or (e)(3).
We proposed that issuers, including issuers of grandfathered plans,
would also be required to provide enrollees the option to request
coverage for a brand drug that was removed from the formulary through
the applicable coverage appeal process under Sec. 147.136 or the drug
exception request process under Sec. 156.122(c).
Under our proposal, before removing a brand drug from the formulary
or moving it to a different cost-sharing tier, a health insurance
issuer would be required to notify all plan enrollees of the change in
writing a minimum of 60 days prior to initiating the change. This
notice would identify the name of the brand drug that is the subject of
the change, disclose whether the brand drug will be removed from the
formulary or placed on a different cost-sharing tier, provide the name
of the generic equivalent that will be made available, specify the date
the changes will become effective, and state that under the appeals
processes outlined in Sec. 147.136 or the exceptions processes
outlined in Sec. 156.122(c), enrollees and dependents may request and
gain access to the brand drug when clinically appropriate and not
otherwise covered by the health plan.
We also proposed changes to Sec. 147.106(a) to reflect that
paragraph (e) currently provides an exception to the general rule on
guaranteed renewability. This is merely a technical correction, not a
substantive change. We similarly proposed technical corrections to
Sec. Sec. 146.152(a) and 148.122(b).
We sought comment on these proposals related to prescription drug
benefits and coverage, including whether to limit the proposal related
to mid-year formulary changes to the individual and small group
markets, and whether a different advance notice period, such as 90 days
or 120 days, would be more appropriate.
Comment: While some commenters generally supported the proposal,
many commenters opposed it, because they noted it inappropriately
expanded or narrowed issuers' ability to make drug formulary changes
mid-year. Several commenters opposed the proposal as overly
restrictive. These commenters stated that federal law does not prohibit
mid-year formulary changes, and that it is a current practice that
occurs much more broadly than what the proposal would permit. For
example, these commenters stated that formularies are changed when a
biosimilar drug, a lower-priced brand name therapeutic equivalent, a
new drug that is clinically effective, or an over-the-counter version
of a drug becomes available; when there is a shortage of a preferred
generic drug; when there is new evidence of the efficacy of a drug; or
when there are expanded indications for a drug. One commenter stated
that most states do not prohibit mid-year formulary changes, regardless
of the federal guaranteed renewability requirements and stated that
mid-year formulary changes should be allowed for all drugs as long as
the changes are approved by the issuer's pharmacy and therapeutics
committee, and notice is provided. Several commenters stated that
approval by a pharmacy and therapeutics committee, notice to enrollees,
and providing an exceptions process to request and gain access to
removed drugs when medically appropriate and necessary, are all current
industry practice.
Many other commenters stated the proposal would improperly allow
mid-year formulary changes and opposed the proposal because they noted
it would hurt consumers. These commenters stated, for example, that
consumers choose their plans based on the formulary composition at the
beginning of the plan year and that changing formularies could result
in patient safety and health issues such as additional emergency room
visits, additional outpatient appointments, and higher medical costs. A
few commenters stated that these dangers could occur notwithstanding
the availability of an exceptions or appeals process. Many commenters
stated that mid-year formulary changes arbitrarily eliminate an EHB.
Response: In the 2016 Payment Notice, we stated that certain mid-
year changes to drug formularies related to the availability of drugs
in the market may be necessary and appropriate. Comments to this rule
supported that belief. At the same time, in the 2016 Payment Notice, we
also expressed concerns about the impact on consumers of mid-year
formulary changes.\10\ We appreciate the comments to this rule
identifying potential negative impacts on consumers. Given the
complexity of this issue, and the challenges of balancing the interests
of consumers with the importance of mitigating the effects of rising
prescription drug costs, we are not finalizing the proposal at this
time. Rather, we will continue to examine the issue of mid-year
formulary changes, and may provide guidance on this issue in the
future. In the meantime, to the extent issuers make mid-year formulary
changes consistent with applicable state law, our expectation is that
all issuers (in the individual, small group and large group markets)
will continue to provide certain consumer protections that, as
commenters have stated, are generally consistent with current industry
practice. These protections include pre-approval by a pharmacy and
therapeutics committee, and reasonable advance notice to affected
individuals of the mid-year removal of any drug from a formulary (or
the placement of any drug on a higher cost-sharing tier). Additionally,
we expect that affected individuals will generally have access to the
appeals processes outlined in Sec. 147.136 or the exceptions processes
outlined in Sec. 156.122(c), under which enrollees and dependents may
request and gain access to a non-formulary drug when clinically
appropriate and not otherwise covered by the health plan.
[[Page 17462]]
Several commenters specifically noted that issuers currently offer an
exceptions process when making mid-year formulary changes. Therefore,
our expectation is that issuers will also offer an appeals process or
exceptions process when making mid-year formulary changes.
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\10\ 80 FR 10822.
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We do not agree that mid-year formulary changes arbitrarily
eliminate an EHB. Rather, we remind issuers that all requirements in
Sec. 156.122 related to EHB as applied to prescription drug coverage
continue to apply in the context of mid-year formulary changes. For
example, a health plan does not provide EHB unless it covers the
greater of one drug in every United States Pharmacopeia (USP) category
and class or the same number of prescription drugs in each category and
class as the EHB-benchmark plan. Additionally, the EHB regulations at
Sec. 156.122(a)(3) require the use of a pharmacy and therapeutics
committee to establish and manage the formulary drug list throughout
the year. Issuers required to provide EHB must continue to meet these
requirements.
Comment: Many commenters, including those who generally support and
those who generally oppose the proposal, requested specific changes to
the proposal. One commenter favored applying mid-year formulary
restrictions to issuers in the large group market, while a few opposed
doing so. One commenter stated that the uniform-modification-of-
coverage requirements should not apply to mid-year formulary changes in
the large group market, while another stated they should not apply in
any market. One commenter raised what it believed to be practical
concerns with any restrictions on mid-year formulary changes in the
group markets, since plan years in those markets are not required to
align with the calendar year. Many commenters stated that mid-year
formulary changes should be permitted as a way to add drugs, but not to
remove drugs or move drugs to a different tier. A few commenters stated
the formulary changes should not apply, for the rest of the plan year,
to people already taking the affected drugs. Several commenters noted
that we did not define ``generic drug,'' and offered definitions.
Response: As stated in this rule, we are not finalizing the
proposal at this time, and instead intend to continue to examine the
issue of mid-year formulary changes. We appreciate the important
considerations raised by commenters, in particular regarding the
practical concerns with restrictions on mid-year formulary changes, and
believe it is important for us to more fully explore these issues and
other issues raised by commenters prior to issuing further guidance. We
will consider all of these comments as we consider future guidance in
this area.
We also are not finalizing any changes to the definitions of
``plan'' and ``product'' at Sec. 144.103--which incorporate by
reference the uniform modification standards--with regard to
determining whether a product and plan that have undergone formulary
changes are considered the same product and plan. This definition
provides that, among other things, within a product, each plan must
have the same cost-sharing structure as before the modification, except
for any variation in cost sharing solely related to changes in cost and
utilization of medical care, or to maintain the same metal level of
coverage. We interpret this provision to mean that for modifications of
prescription drug formularies, each tier must continue to have the same
cost-sharing structure, or any changes to the tier structure must be
related to changes in cost or utilization of medical care, or to
maintain the same metal level, to be considered a uniform modification
of coverage, regardless of any changes made to the placement of drugs
within the formulary. Additionally, the product must provide the same
covered benefits, except for any changes in benefits that cumulatively
impact the plan-adjusted index rate for any plan within the product
within an allowable variation of 2 percentage points (not
including changes pursuant to applicable federal or state
requirements). Given the nature of formulary changes, our expectation
is that generally, any changes to which drugs are covered under the
formulary would not be of a magnitude that would exceed the allowable
variation of 2 percentage points of the plan-adjusted index
rate. However, if formulary changes do result in a change to the plan-
adjusted index rate outside this permitted variation, such changes
would result in the product being considered to have been discontinued,
and a new product to have been issued.
Comment: While many commenters generally supported the requirement
for issuers to provide an appeals or exceptions process, a few
commenters recommended requiring an exceptions process of all issuers,
suggesting it is more protective than the appeals process. We did not
receive any comments that generally opposed such a requirement. In
describing current industry practice, multiple commenters pointed out
that issuers making mid-year formulary changes already regularly
provide affected consumers with access to the exceptions process.
Response: We agree with commenters that access to an appeals or
exceptions process when a mid-year formulary change occurs is an
important consumer protection. Although we are not finalizing our
proposal, we note that issuers offering non-grandfathered group or
individual health insurance coverage are required to provide an appeals
or exceptions process under which enrollees and dependents may request
and gain access to a non-covered drug, including one that was removed
from the formulary (other than one removed for safety reasons) when
clinically appropriate and not otherwise covered by the health plan,
under Sec. Sec. 147.136 or 156.122(c), as applicable. We expect
issuers to continue to do so, with respect to mid-year formulary
changes.
Comment: For the proposed notice requirement, many commenters
generally agreed that a notice requirement is necessary, while only one
stated otherwise. Many commenters agreed with the proposed 60-day
advance notice requirement, while many advocated for a 90-day or 120-
day requirement. A few commenters stated it should be 30 days,
consistent with the notice Medicare requires under some circumstances.
Many commenters stated that the notice should be sent only to affected
enrollees, while others stated the notice should also be sent to
prescribers and pharmacies. A few commenters requested either a
template or specific language. A few commenters stated that a two-step
notice should be provided: The first notice should apprise enrollees of
the availability of the generic drug, as well as any cost advantage to
switching; at least 90 days later, the issuer must provide a second
notice, stating that changes to the brand drug's cost sharing will
occur; and only 60 days after the second notice is sent, could the
issuer change the brand drug's cost sharing. A few commenters stated
that state law should determine the timing and content of notices.
Several commenters stated that notice to enrollees is common industry
practice when mid-year formulary changes occur.
Response: We agree with the many commenters who stated that
providing advance notice to affected consumers is important, and
although we are not finalizing the proposal at this time, we expect
issuers will continue to provide reasonable notice to affected
consumers, pending any further guidance on mid-year formulary changes.
We will continue to examine this issue.
We received no comments on the proposed technical corrections to
[[Page 17463]]
Sec. Sec. 146.152, 147.106, and 148.122, and are finalizing them as
proposed.
C. Part 148--Requirements for the Individual Health Insurance Market
For a discussion of the provisions in this final rule related to
part 148, please see the preamble to part 147.
D. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment Under the Affordable Care Act
1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2019,\11\ both the transitional
reinsurance program and permanent risk adjustment program are subject
to the fiscal year 2019 sequestration. The federal government's 2019
fiscal year began October 1, 2018. Although the 2016 benefit year was
the final year of the transitional reinsurance program, we continue to
make reinsurance payments in the 2019 fiscal year for close-out
activities. Therefore, the risk adjustment and reinsurance programs
will be sequestered at a rate of 6.2 percent for payments made from
fiscal year 2019 resources (that is, funds collected during the 2019
fiscal year).
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\11\ ``OMB Report to Congress on the Joint Committee Reductions
for Fiscal Year 2019'', p. 6. February 12, 2018. Available at
https://www.whitehouse.gov/wp-content/uploads/2018/02/Sequestration_Report_February_2018.pdf.
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HHS, in coordination with the OMB, has determined that, under
section 256(k)(6) of the Balanced Budget and Emergency Deficit Control
Act of 1985 (Pub. L. 99-177, enacted on December 12, 1985), as amended,
and the underlying authority for the reinsurance and risk adjustment
programs, the funds that are sequestered in fiscal year 2019 from the
reinsurance and risk adjustment programs will become available for
payment to issuers in fiscal year 2020 without further Congressional
action. If Congress does not enact deficit reduction provisions that
replace the Joint Committee reductions, these programs will be
sequestered in future fiscal years, and any sequestered funding will
become available in the fiscal year following that in which it was
sequestered.
2. Provisions and Parameters for the Risk Adjustment Program
In subparts A, B, D, G, and H of part 153, we established standards
for the administration of the risk adjustment program. The risk
adjustment program is a permanent program created by section 1343 of
the PPACA that transfers funds from lower-than-average risk, risk
adjustment covered plans to higher-than-average risk, risk adjustment
covered plans in the individual and small group markets (including
merged markets), inside and outside the Exchanges. In accordance with
Sec. 153.310(a), a state that is approved or conditionally approved by
the Secretary to operate an Exchange may establish a risk adjustment
program, or have HHS do so on its behalf. HHS did not receive any
requests from states to operate risk adjustment for the 2020 benefit
year. Therefore, HHS will operate risk adjustment in every state and
the District of Columbia for the 2020 benefit year.
a. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on that person's age, sex, and diagnoses (also
referred to as hierarchical condition categories (HCCs)), producing a
risk score. The current structure of these models is described in the
2019 Payment Notice.\12\ The HHS risk adjustment methodology utilizes
separate models for adults, children, and infants to account for cost
differences in each age group. In the adult and child models, the
relative risk assigned to an individual's age, sex, and diagnoses are
added together to produce an individual risk score. Additionally, to
calculate enrollee risk scores in the adult models, we added enrollment
duration factors beginning with the 2017 benefit year, and prescription
drug categories (RXCs) beginning with the 2018 benefit year. Infant
risk scores are determined by inclusion in one of 25 mutually exclusive
groups, based on the infant's maturity and the severity of diagnoses.
If applicable, the risk score for adults, children, or infants is
multiplied by a cost-sharing reduction adjustment that accounts for
differences in induced demand at various levels of cost sharing.
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\12\ See 83 FR 16930 at 16939.
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The enrollment-weighted average risk score of all enrollees in a
particular risk adjustment covered plan (also referred to as the plan
liability risk score or PLRS) within a geographic rating area is one of
the inputs into the risk adjustment state payment transfer formula,
which determines the state payment or charge that an issuer will
receive or be required to pay for that plan. Thus, the HHS risk
adjustment models predict average group costs to account for risk
across plans, in keeping with the Actuarial Standards Board's Actuarial
Standards of Practice for risk classification.
i. Definitions (Sec. 153.20)
In this final rule, we are making a technical correction to the
definition of a risk adjustment covered plan under Sec. 153.20 by
correcting a citation in the definition of ``risk adjustment covered
plan'' from Sec. 146.145(c) to Sec. 146.145(b). Specifically, this
definition was finalized in the final rule entitled Standards Related
to Reinsurance, Risk Corridors and Risk Adjustment,\13\ and after that
rule was finalized, the final rule entitled Amendments to the HHS
Notice of Benefit and Payment Parameters for 2014 \14\ amended and
redesignated the numbering under Sec. 146.145. Among other things,
these amendments moved the excepted benefit provision from paragraph
(c) to paragraph (b) of Sec. 146.145. Thus, the purpose of this
technical correction is to update this citation to refer to the
paragraph on excepted benefit plans under Sec. 146.145, consistent
with the original intent of this definition when it was first adopted.
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\13\ 77 FR 17220 (March 23, 2012).
\14\ 78 FR 65046 (October 30, 2013).
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ii. Updates to the Risk Adjustment Model Recalibration
We used the 3 most recent years of MarketScan[supreg] data
available to recalibrate the 2016, 2017, and 2018 benefit year risk
adjustment models. For the 2019 benefit year, we recalibrated the
models using 2 years of MarketScan[supreg] data (2014 and 2015) and
2016 enrollee-level EDGE data. The 2019 benefit year was the first
recalibration year in which enrollee-level EDGE data was used for this
purpose. This approach used blended (averaged) coefficients from 3
years of separately solved models to provide stability for the risk
adjustment coefficients year-to-year, while reflecting the most recent
years' claims experience available. For the 2020 benefit year, we
proposed to blend the 2 most recent years of enrollee-level EDGE data
available (2016 and 2017) with the most recent year of
MarketScan[supreg] data available (2017). We also noted that if we are
unable to publish the final coefficients in the final rule, consistent
with Sec. 153.320(b)(1)(i), and as we have done for certain prior
benefit years,\15\ we would publish the final coefficients for the 2020
benefit year in guidance after the publication of the final rule. We
sought comments on these proposals.
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\15\ For example, see 2018 Payment Notice final rule, 81 FR
94058 (December 22, 2016). Also see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Final-HHS-RA-Model-Coefficients.pdf.
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[[Page 17464]]
We did not propose to make any changes to the categories included
in the HHS risk adjustment models for the 2020 benefit year from those
finalized in the 2019 benefit year models. That is, we proposed to
maintain the same age, sex, enrollment duration, HCC, RXC, and severity
categories for the 2020 benefit year models as those used for the 2019
benefit year models.\16\ However, we proposed to make a pricing
adjustment for one RXC coefficient for the 2020 benefit year adult
models. Consistent with our treatment of other RXCs where we constrain
the RXC coefficient to the average cost of the drugs in the
category,\17\ we proposed to make a pricing adjustment to the Hepatitis
C RXC to mitigate overprescribing incentives in the 2020 benefit year
adult models. For the RXC coefficients listed in Table 1 of the
proposed rule, we constrained the Hepatitis C coefficient to the
average expected costs of Hepatitis C drugs. This had the material
effect of reducing the Hepatitis C RXC and the RXC-HCC interaction
coefficients. For the final 2020 benefit year Hepatitis C factors in
the adult models, we proposed to adjust the plan liability associated
with Hepatitis C drugs to reflect future market pricing of Hepatitis C
drugs before solving for the adult models' coefficients. We proposed
applying an adjustment to the plan liability to ensure that plans can
continue to receive incremental credit for enrollees having both the
RXC and HCC for Hepatitis C, and allow for differential plan liability
across metal levels. We sought comment on these proposals.
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\16\ See 83 FR 16939.
\17\ See Section 4.0, ``Constraints on RXC Coefficients to Limit
Incentives for Inappropriate Prescribing'' of the Creation of the
2018 Benefit Year HHS-Operated Risk Adjustment Adult Models Draft
Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs) Crosswalk
Memo. Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
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We are not finalizing our proposal to blend the most recent year of
MarketScan[supreg] data (2017) with the 2 most recent years of
enrollee-level EDGE data (2016 and 2017) for 2020 risk adjustment model
recalibration. We are instead finalizing an approach that would blend 3
consecutive years of data--one year of data from MarketScan[supreg]
(2015) with the 2 most recent years of enrollee-level EDGE data (2016
and 2017), an approach that more closely aligns with the approach we
used to recalibrate risk adjustment models for the 2016, 2017, 2018,
and 2019 benefit years. This approach maintains our previously
finalized policy of blending coefficients from 3 years of separately
solved models and promotes stability for the risk adjustment
coefficients year-to-year. Accordingly, we have incorporated the 2015
MarketScan[supreg] data with 2016 and 2017 benefit year enrollee-level
EDGE data for the final 2020 benefit year risk adjustment coefficients
presented in this final rule. Additionally, we are finalizing the
pricing adjustment to the plan liability simulation for the Hepatitis C
RXC, as proposed, and are not otherwise making changes to the
categories included in the HHS risk adjustment models for the 2020
benefit year from those finalized for the 2019 benefit year models.
The following is a summary of the public comments we received on
the risk adjustment model recalibration proposals.
Comment: Most commenters supported using enrollee-level EDGE data
to recalibrate the risk adjustment models, with some commenters
especially supporting the blending of 2016 and 2017 enrollee-level EDGE
data and 2017 MarketScan[supreg] data for the recalibration of the 2020
risk adjustment models. Some commenters stated that they had expected
the 2020 benefit year models to incorporate coefficients solved from
the 2015 MarketScan[supreg] data to maintain 2 of the same data years
(2015 MarketScan and 2016 enrollee-level EDGE) as those used in the
2019 benefit year models. These commenters raised concerns that using
2017 MarketScan[supreg] and 2017 enrollee-level EDGE data may result in
double counting certain enrollees to the extent the individual and
small group market plans contribute data to MarketScan[supreg], and
suggested that using currently available 2015 MarketScan[supreg] data
with 2016-2017 enrollee-level EDGE data to recalibrate the 2020 risk
adjustment models would allow the final coefficients to be published
with the final rule. One of these commenters was concerned about
volatility in coefficients relative to prior years, which blended 3
consecutive years of data (rather than 2 data sets from the same year),
wanting more information on whether this volatility would be reduced if
2015 MarketScan[supreg] data were used. Some commenters supported HHS'
intent to propose use of 3 consecutive years of enrollee-level EDGE
data to recalibrate the risk adjustments models for the 2021 benefit
year and beyond. One commenter supported maintaining the categories
included in the HHS risk adjustment models for the 2020 benefit year.
Response: We believe blending multiple years of data promotes
stability and certainty for issuers in rate setting, helping to smooth
significant differences in coefficients solved from any one year's
dataset, particularly for conditions with small sample sizes. Because
the MarketScan[supreg] data generally represent enrollees in the large
self-insured employer market and the enrollee-level EDGE data
represents enrollees in the small group and individual markets, using
two datasets from the same year (2017 MarketScan[supreg] and 2017
enrollee-level EDGE) would not significantly double count enrollees
between the different datasets for the 2017 benefit year. However, we
agree with commenters who noted that maintaining 2 years of data from
one recalibration year to the next has a stabilizing effect by
spreading the impact of new experience over 3 years. We recognize and
agree with the concerns that recalibrating the 2020 benefit year risk
adjustment models blending 2017 MarketScan[supreg] data with 2016 and
2017 enrollee-level EDGE data may create unintentional volatility, as
it would only maintain one of the three datasets that were used in the
2019 benefit year recalibration. Based on comments received, we are
finalizing the 2020 benefit year risk adjustment models using blended
coefficients from 2015 MarketScan[supreg] data, and 2016 and 2017
enrollee-level EDGE data. We intend to continue our efforts to
recalibrate the risk adjustment models using enrollee-level EDGE data
from issuers' individual and small group or merged market populations,
and transition away from the MarketScan[supreg] commercial database.
Specifically, beginning with the 2021 benefit year, we intend to
propose to use the 3 most recent years of enrollee-level EDGE data
available to recalibrate the risk adjustment models.
Comment: Several commenters requested that HHS provide the final
coefficients in the final rule and the actual proposed coefficients to
be proposed in proposed rules in future years. However, one commenter
requested that the final coefficients be made available by March 31,
2019 due to state filing deadlines.
Response: We appreciate the commenter's concern that the final
coefficients be made available by the time of initial state rate filing
submissions. Our ability to provide the proposed and final coefficients
in the proposed and final rules depends on the availability of data and
our ability to execute the model regressions with that data to solve
the coefficients for the risk adjustment models for a given benefit
year, reflecting any applicable
[[Page 17465]]
modifications adopted as part of the rulemaking process.
Due to the availability of data and our ability to execute the
model regressions, this year, we are able to provide the final
recalibrated coefficients for 2020 benefit year in the tables below. In
the future, we will continue to look for opportunities to update our
processes to obtain and process the recalibrated coefficients as soon
as practical. However, if data is not available or if we are unable to
calculate the coefficients for the risk adjustment models for a benefit
year in time for publication in the applicable final annual HHS notice
of benefit and payment parameters, then we will publish the draft
factors to be employed in the models in the final rule, including
demographic factors, diagnostic factors, and utilization factors, and
the datasets to be used to calculate the final coefficients.\18\ In
such circumstances, we will also notify issuers in the final rule of
the date by which final coefficients will be released in guidance.\19\
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\18\ See Sec. 153.320(b)(1)(i).
\19\ Ibid.
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Comment: One commenter encouraged HHS to monitor the volatility of
coefficients year-to-year in switching to enrollee-level EDGE data. One
commenter recommended evaluating the models continually to ensure they
fully capture the cost of the current standard of care for conditions.
One commenter recommended HHS continue to contemplate the best way to
incorporate drug pipeline data, while a different commenter supported
continuing to reevaluate drugs. Another commenter supported monitoring
and evaluating the impact on patient access of changes to the risk
adjustment program.
Response: As with every recalibration year, we continue to monitor
the year-to-year changes in risk scores, including the volatility of
the coefficients from year to year. As discussed in the proposed rule,
we noted that for HCCs with corresponding RXCs and RXC-HCC interaction
factors in the adult risk adjustment models, we are observing year-to-
year fluctuations in the risk score weights between the HCC, RXC, and
RXC-HCC interaction factors. This fluctuation is mainly due to the
collinearity between these factors, making the statistical models, and
therefore, the coefficients solved for these factors, sensitive to
small changes in the data. Although the HCC, RXC, and RXC-HCC
interaction factors may be changing from year to year, the aggregate
impact of the factors has remained relatively stable between
recalibration updates. Similarly, the aggregate impact of the HCC, RXC
and RXC-HCC interaction factors for the 2020 benefit year continues to
be relatively stable.
Additionally, we have been continuously assessing the availability
of drugs in the market and the associated mapping of those drugs to
RXCs in the adult risk adjustment model. As a results of this on-going
assessment, we make quarterly updates to the RXC Crosswalk \20\ to
ensure drugs, including new drugs, are being mapped to RXCs where
appropriate, and intend to continue to make these updates in the
future.
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\20\ April 4, 2019, was our last update of the 2018 Benefit Year
Risk Adjustment (RA): Updated HHS-Developed Risk Adjustment Model
Algorithm ``Do It Yourself (DIY)'' Software--Technical Details that
includes the RXC Crosswalk. The RXC Crosswalk is available at
https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Updated-DIY-Tables-2018.xlsx.
---------------------------------------------------------------------------
Overall, we also continue to regularly evaluate the individual and
small group markets (including merged markets) and assess whether
updates to the HHS-operated risk adjustment program could improve the
assessment of plan actuarial risk. We also regularly review the impact
of the risk adjustment program on the markets. We expect to continue to
review the risk adjustment program and propose changes as necessary.
Comment: Most commenters generally supported a pricing adjustment
for the Hepatitis C RXC coefficient to reflect changing drug prices. A
few commenters were concerned that the proposal is over-adjusting the
Hepatitis C RXC coefficient, and wanted clarification on the approach
used for the adjustment. One commenter stated that HHS should modify
the Hepatitis C RXC adjustment based on a days' supply variable. While
some commenters agreed with the adjustment to Hepatitis C RXC to
mitigate against the potential for misaligned incentives such as
overprescribing, others disagreed with the implication that health
plans influence providers' prescribing patterns.
Response: We found significant pricing changes due to the
introduction of new Hepatitis C drugs into the market upon review of
the Hepatitis C treatments that are approved and expected to be
available before the 2020 benefit year.\21\ Due to the lag between the
data years used to recalibrate the risk adjustment models and the
applicable benefit year, the data used for recalibrating the models do
not precisely reflect the average cost of Hepatitis C treatments
applicable to the benefit year in question. In addition, the first few
years of enrollee-level EDGE data do not include days' supply
information for the RXCs; thus, the enrollee-level EDGE datasets could
not be used to model a variable for the days' supply of the Hepatitis C
RXC. Since we are finalizing the risk adjustment models for the 2020
benefit year coefficients with the 2015 MarketScan[supreg] data, which
represents even older and costlier Hepatitis C trends than what is
anticipated in the 2020 benefit year, we continue to believe the
pricing adjustment as proposed is appropriate.
---------------------------------------------------------------------------
\21\ See https://www.gilead.com/news-and-press/press-room/press-releases/2018/9/gilead-subsidiary-to-launch-authorized-generics-of-epclusa-sofosbuvirvelpatasvir-and-harvoni-ledipasvirsofosbuvir-for-the-treatment-of-chronic. Also see https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm.
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We believe the pricing adjustment, as finalized, is appropriate
based on our review of published expectations for plan liability
associated with Hepatitis C drugs. Additionally, we agree with
commenters that due to the high cost of these drugs, without a pricing
adjustment to plan liability, issuers would be overcompensated for the
Hepatitis C RXC in the 2020 benefit year and could be incentivized to
``game'' risk adjustment or encourage overprescribing practices. We
appreciate the commenters' view that plans generally do not influence
prescribing patterns. However, to avoid perverse incentives to
influence overprescribing behavior, we are finalizing the pricing
adjustment as proposed. This pricing adjustment leads to Hepatitis C
RXC coefficients that better reflect anticipated actual 2020 benefit
year plan liability associated with Hepatitis C drugs.
As such, we are finalizing our proposed pricing adjustment to make
a pricing adjustment to more closely reflect the expected average
additional plan liability of the Hepatitis C RXC for the 2020 benefit
year. In making this determination, we consulted our clinical experts
to assess whether the lower cost Hepatitis C drugs are substitutable to
ensure that plans that cover various treatments would continue to be
compensated for their incremental plan liability. We found that due to
the generic entrant, prices for all variations of Hepatitis C drugs are
expected to be significantly lower in the 2020 benefit year than those
observed in the currently available datasets (which reflect prior
benefit years). We believe this approach to estimating the Hepatitis
[[Page 17466]]
C plan liability appropriately balances reflecting the changes in costs
of the Hepatitis C drugs in the market in the 2020 benefit year while
limiting the potential for overprescribing incentives. We intend to
reassess this pricing adjustment in future benefit years' model
recalibrations with additional years of enrollee-level EDGE data.
Comment: Several commenters wanted HHS to consider incorporating
the Pre-Exposure Prophylactics (PrEP) into the risk adjustment models,
given the recent draft United States Preventive Services Task Force
(USPSTF) Grade A recommendation \22\ for clinicians to offer PrEP with
effective antiretroviral therapy to persons who are at high risk of HIV
acquisition, citing that the high cost for PrEP therapy is likely to
lead to cost avoidance strategies by issuers. One commenter expressed
support for including preventive services in the risk adjustment
models.
---------------------------------------------------------------------------
\22\ U.S. Preventive Services Task Force, ``Draft Recommendation
Statement: Prevention of Human Immunodeficiency Virus (HIV)
Infection: Pre-Exposure Prophylaxis'' (2018) available at https://www.uspreventiveservicestaskforce.org/Page/Document/draft-recommendation-statement/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis.
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Response: We appreciate the commenters noting the draft USPSTF
recommendation, which, if finalized, would require issuers to cover a
high cost-therapy with no cost sharing. However, we are not
incorporating PrEP into the risk adjustment models. As a general
principle, RXCs are incorporated into the HHS risk adjustment models to
impute a missing diagnosis or indicate severity of a diagnosis. While
preventive services are incorporated in the simulation of plan
liability, they do not directly affect specific diagnoses. We
incorporate preventive services into our models to ensure that 100
percent of those services are reflected in the plan's liability;
however, many preventive services only count as preventive services
under certain conditions. In the case of PrEP and the draft USPSTF
recommendation, the recommendation is only applied if the enrollee
meets certain conditions for ``persons who are at high risk.'' Some of
the at-risk categories are not recorded in claims data, making them
impossible to identify. Furthermore, the USPSTF recommendation for PrEP
is only a draft recommendation, and we do not know if or when it would
become final. We also note that we are aware of other current drugs
that are preventive in nature that may be similar to PrEP in that they
are medications recommended for a subset population that is at risk.
While we do not plan to make an adjustment for PrEP at this time, we
may consider soliciting comments in the future on whether and how to
incorporate preventive medications into the risk adjustment models, and
how to identify at-risk populations in the enrollee-level EDGE data
that may be eligible for drugs classified as preventive services.
Comment: Some commenters noted concern about the enrollment
duration factors in the adult models, and wanted HHS to consider
further adjustments to these factors. For example, certain commenters
discussed the differences between special enrollment period enrollees
versus open enrollment period enrollees that drop coverage during the
plan year. These commenters noted concerns that the current combined
enrollee duration factors do not adequately address both scenarios, and
wanted the enrollment duration factors to vary for these different
scenarios. In particular, one of these commenters expressed concerns
about the changes in the enrollment duration factors over time, stating
that the factors never seemed to correctly adjust for increased special
enrollment period spending (particularly for those with the maternity
HCC), and provided several recommendations on potential modifications
to improve the enrollment duration factors, including special
consideration for maternity and NICU-related HCCs. Another commenter
requested that HHS take a holistic look at the child risk scores and
whether duration factors would be appropriate for incorporation into
the child models, as well as the relationship of duration factors with
risk scores to age rating factors. One commenter supported HHS making
adjustments to give greater weight to the enrollee-level EDGE data when
recalibrating the model coefficients if HHS finds significant
demographic or distributional differences in the enrollee-level EDGE
data compared to the MarketScan[supreg] data, and was supportive of HHS
continuing to analyze the enrollee-level EDGE data to study key
differences between the individual and small group markets, including
costs, utilization patterns, induced demand, and partial year
enrollment.
Response: While there are differences in total spending in
MarketScan[supreg] data compared to enrollee-level EDGE data, we have
found that the relative risk differences for age-sex, HCC, and RXC
categories in the enrollee-level EDGE data are generally similar to
those in the MarketScan[supreg] data. Therefore, we do not believe
giving greater weight to the enrollee-level EDGE data is needed. Since
the 2016 Risk Adjustment White Paper and Conference,\23\ we have
continued to assess options to update the enrollment duration factors
in the risk adjustment adult models as we stated we would. With the
2017 enrollee-level EDGE data, we are now able to analyze whether to
modify enrollment duration factors with a lens of differences between
individual and small group markets, since the market identifier was not
part of the 2016 enrollee-level EDGE data. Our preliminary analysis of
2017 enrollee-level EDGE data found that separate enrollment duration
factors for the individual and small group markets in the adult models
may be warranted, given the differences in risk profiles of partial
year enrollees between the two markets. Small group market partial year
enrollees had a lower incremental risk on average than the individual
market partial year enrollees in the 2017 benefit year data.
Additionally, we did not observe a significant additional risk for
special enrollment period enrollees or enrollees who dropped coverage
prior to the end of the benefit year in either market.
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\23\ https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf and
https://www.regtap.info/uploads/library/RA_ConferenceSlides_033116_5CR_040516.pdf.
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We did not propose and are not making any change to the current
enrollment duration factors used in the adult risk adjustment models at
this time. Our goal is to continue to analyze enrollee-level EDGE data;
we will consider proposing changes to how partial year enrollees are
accounted for in the risk adjustment models for future benefit years in
notice-and-comment rulemaking. We intend to solicit feedback and
recommendations in the future for potential updates to how partial year
enrollees are accounted for in the risk adjustment models, including
adjustments to the enrollment duration factors and the use of separate
enrollment duration factors for individual and small group markets and
may consider whether such factors should be incorporated in the child
models.
iii. High-Cost Risk Pooling (Sec. 153.320) and Accounting for the
High-Cost Risk Pool in the Risk Adjustment Transfer Methodology
HHS finalized a high-cost risk pool adjustment in the 2018 Payment
Notice to account for the incorporation of risk associated with high-
cost enrollees in the HHS risk adjustment models.\24\ Specifically, we
finalized adjusting the models for high-cost enrollees in risk
[[Page 17467]]
adjustment covered plans beginning with the 2018 benefit year by
excluding a percentage of costs above a certain threshold in the
calculation of enrollee-level plan liability risk scores so that risk
adjustment factors are calculated without the high-cost risk, since the
average risk associated with HCCs and RXCs is better accounted for
without the inclusion of the high-cost enrollees. In addition, to
account for issuers' risk associated with high-cost enrollees, issuers
of risk adjustment covered plans will receive a percentage of costs
(coinsurance rate) above the threshold. We set the threshold and
coinsurance rate at levels that will continue to incentivize issuers to
control costs while improving the predictiveness of the HHS risk
adjustment models. Issuers of risk adjustment covered plans with high-
cost enrollees will receive a payment for the percentage of costs above
the threshold in their respective transfers for the applicable benefit
year. Using claims data submitted to the EDGE servers by issuers of
risk adjustment covered plans, we calculate the total amount of paid
claims costs for high-cost enrollees based on the threshold and the
coinsurance rate. We then calculate a charge as a percentage of the
issuers' total premiums in the individual (including catastrophic and
non-catastrophic plans and merged market plans) or small group markets,
which is applied to the total transfer amount in each market, thus
maintaining the balance of payments and charges within the HHS-operated
risk adjustment program. We finalized a threshold of $1 million and a
coinsurance rate of 60 percent across all states for the individual
(including catastrophic and non-catastrophic plans and merged market
plans) and small group markets for the 2018 and 2019 benefit years.\25\
For the 2020 benefit year and beyond, we proposed to maintain the same
parameters that apply to the 2018 and 2019 benefit years, unless
amended through notice and comment rulemaking.
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\24\ 81 FR 94058 at 94080 (December 22, 2016).
\25\ See 81 FR 94058 at 94080 and 83 FR 16930 at 16943.
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Additionally, beginning with the 2018 benefit year, we added to the
HHS risk adjustment methodology additional transfer terms to reflect
the payments and charges assessed for the high-cost risk pool. To
account for costs associated with exceptionally high-risk enrollees, we
added transfer terms (a payment term and a charge term) that are
calculated separately from the state payment transfer formula in the
HHS-operated risk adjustment transfer methodology. Beginning for the
2018 benefit year, we finalized the addition of a term that reflects 60
percent of costs above $1 million (HRPi), and another term that
reflects a percentage of premium adjustment to fund the high-cost risk
pool and maintain the balance of payments and charges within the HHS-
operated risk adjustment program for a given benefit year. We described
in detail in the 2019 Payment Notice how these terms will be calculated
in conjunction with the calculations under the state payment transfer
formula for the 2019 benefit year.\26\ These terms are described in
detail in this rule, along with the calculations under the total state
payment transfer formula, and are also highlighted as part of the
illustration of the total risk adjustment transfer methodology below.
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\26\ See 83 FR 16930 at 16954.
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Similar to the 2019 benefit year, consistent with the proposed
adoption of the same high-cost risk pool parameters (that is, a $1
million threshold and 60 percent coinsurance rate), we proposed to add
a term that would reflect 60 percent of costs above $1 million (HRPi)
in the total plan transfer calculation and another term that would
reflect a percentage of premium adjustment to fund the high-cost risk
pool and maintain the balance of payment and charges within the HHS-
operated risk adjustment program for a given benefit year. We proposed
to use a percentage of premium adjustment factor that would be applied
to each plan's total premium amount, rather than the percentage of PMPM
premium adjustment factor, consistent with the approach finalized in
the 2019 Payment Notice. The percentage of premium adjustment factor
applied to a plan's total premium amount would result in the same
adjustment as a percentage of the PMPM premium adjustment factor
applied to a plan's PMPM premium amount and multiplied by the plan's
number of billable member months. We proposed to apply these same terms
for future benefit years that maintain the same underlying parameters
for the high-cost risk pool adjustment (that is, $1 million threshold
and 60 percent coinsurance rate).
We are finalizing the high-cost risk pool parameters and the
additional terms to account for the high-cost risk pool in the risk
adjustment transfer methodology as proposed for the 2020 benefit year
and for future benefit years unless changed in notice-and-comment
rulemaking. The following is a summary of the public comments we
received on our proposal on the high-cost risk pool parameters and how
to account for the high-cost risk pool in the risk adjustment transfer
methodology.
Comment: Most commenters supported maintaining the high-cost risk
pool parameters at the $1 million threshold and 60 percent coinsurance
rate. One commenter disagreed with the high-cost risk pool methodology
due to concerns that issuers may try to ``game'' the system by
inflating the cost of high cost services to push payments over the
threshold, and stated that the methodology creates another level of
uncertainty that insurers will need to factor into their premiums. This
commenter stated that if HHS wants to continue the reinsurance program,
it should be pursued outside of risk adjustment, and suggested HHS
should instead create a permanent reinsurance program, using Medicare
pricing to reprice all claims over $1 million and account for
geographic pricing variations in its calculation of the high-cost risk
pool payment and charge terms. One commenter cautioned against
drastically changing the parameters from year to year which could
result in instability, and supported the national funding approach for
this aspect of the HHS risk adjustment program, as it maintains a
balance between the level of assessments applied to support the program
and the allowance for some risk-pooling across states or geographic
areas. One commenter noted the importance for states to consider the
high-cost risk pool program when designing state-based reinsurance
programs, and that section 1332 waiver applications should address the
potential overlap between the section 1332 program and the federal risk
adjustment program to minimize the likelihood of federal taxpayers
compensating issuers twice for the same high value claims. One
commenter recommended HHS solicit feedback on possible changes in a
separate rulemaking to incorporate a high-cost risk pool stratification
methodology, to consider adoption of multiple high-cost pool thresholds
with increased coinsurance amounts, and to adjust the issuer charge
calculation methodology to avoid penalizing lower-cost issuers. Another
commenter requested the ability to comment on the high-cost risk pool
parameters each benefit year. Some commenters requested that data on
the specific transfer amounts attributable to the high-cost risk pool
adjustment, with charges and claims reimbursed reported separately, be
sent to issuers in the EDGE reports, and that HHS publish the net
amount (reimbursed claims--charges) by state and issuer in the
[[Page 17468]]
annual summary risk adjustment report with one requesting high-cost
risk pool information in the interim risk adjustment report.
Response: We are finalizing the high-cost risk pool parameters and
the approach for accounting for the high-cost risk pool payment and
charge terms in the risk adjustment payment transfer methodology as
proposed. As detailed in the 2018 Payment Notice,\27\ we incorporated a
high-cost risk pool calculation into the HHS risk adjustment
methodology to mitigate any residual incentive for risk selection to
avoid high-cost enrollees, and to ensure that, consistent with the
statute, transfers better reflect the average actuarial risk of risk
adjustment covered plans. It is not intended to be a continuation of
the transitional reinsurance program established under section 1341 of
the PPACA that ended at the conclusion of the 2016 benefit year. We
continue to believe a $1 million threshold and 60 percent coinsurance
rate for the 2020 benefit year and beyond are appropriate to
incentivize issuers to control costs while improving risk prediction
under the HHS risk adjustment models. Furthermore, we believe the $1
million threshold and 60 percent coinsurance rate will result in total
high-cost risk pool payments or charges nationally that are very small
as a percentage of premiums for issuers, and will prevent states and
issuers with very high-cost enrollees from bearing a disproportionate
amount of unpredictable risk.
---------------------------------------------------------------------------
\27\ 81 FR 94080.
---------------------------------------------------------------------------
We also believe that maintaining the same threshold and coinsurance
rate from year-to-year will help promote stability and predictability
for issuers, and for all of these reasons, we are finalizing the $1
million threshold and 60 percent coinsurance rate for 2020 benefit year
and beyond without requiring notice and comment on the high-cost risk
pool thresholds each year. We intend to release information about the
2018 benefit year high-cost risk pool payment amounts, and the percent
of premium charged by the high-cost risk pool in the 2018 benefit year
summary risk adjustment report released under Sec. 153.310(e), and
would follow a similar approach for future benefit years. We appreciate
the comments suggesting various potential changes to the high-cost risk
pool methodology. Once we have results and experience from the initial
years of the high-cost risk pool in the HHS risk adjustment program, we
intend to analyze those results including considering the geographic
variation within those results. If we were to seek to make changes to
these parameters for benefit years beyond 2020, we would do so through
notice-and-comment rulemaking prior to any changes being implemented.
We encourage states considering a state-based reinsurance program
to consider the interplay between the high-cost risk pool adjustment in
the HHS-operated risk adjustment program and any state-based
reinsurance program. We have provided technical guidance to states
considering state-based reinsurance programs to assist them in
designing such programs in a manner that avoids double compensating for
costs that would otherwise be compensated under the risk adjustment
methodology, including the high-cost risk pool adjustment.
iv. List of Factors To Be Employed in the Risk Adjustment Models (Sec.
153.320)
The factors resulting from the equally weighted blended factors
from the 2015 MarketScan[supreg] data and the 2016 and 2017 enrollee-
level EDGE data separately solved models, including the finalized
constraints for the Hepatitis C RXC coefficient, are shown in Tables 1,
3, and 4. For the purposes of the below coefficients, the adult, child,
and infant models have been truncated to account for the high-cost risk
pool payment parameters by removing 60 percent of costs above the $1
million threshold.
Table 1 contains factors for each adult model, including the age-
sex, HCCs, RXCs, RXC-HCC interactions, and enrollment duration
coefficients. Table 2 contains the HHS HCCs in the severity illness
indicator variable. Table 3 contains the factors for each child model.
Table 4 contains the factors for each infant model. Tables 5 and 6
contain the HCCs included in the infant model maturity and severity
categories, respectively.
Table 1--Adult Risk Adjustment Model Factors for 2020 Benefit Year
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCC or RXC No. Factor Platinum Gold Silver Bronze Catastrophic
--------------------------------------------------------------------------------------------------------------------------------------------------------
Demographic Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
Age 21-24, Male............. 0.149 0.117 0.079 0.043 0.039
Age 25-29, Male............. 0.143 0.111 0.072 0.035 0.030
Age 30-34, Male............. 0.170 0.131 0.085 0.039 0.033
Age 35-39, Male............. 0.208 0.161 0.106 0.051 0.045
Age 40-44, Male............. 0.251 0.198 0.136 0.074 0.067
Age 45-49, Male............. 0.294 0.234 0.165 0.094 0.086
Age 50-54, Male............. 0.381 0.311 0.229 0.144 0.134
Age 55-59, Male............. 0.427 0.348 0.259 0.166 0.154
Age 60-64, Male............. 0.476 0.386 0.286 0.180 0.167
Age 21-24, Female........... 0.233 0.185 0.122 0.061 0.054
Age 25-29, Female........... 0.263 0.208 0.139 0.070 0.061
Age 30-34, Female........... 0.350 0.282 0.203 0.124 0.115
Age 35-39, Female........... 0.422 0.346 0.261 0.177 0.167
Age 40-44, Female........... 0.467 0.382 0.288 0.194 0.183
Age 45-49, Female........... 0.478 0.389 0.289 0.188 0.175
Age 50-54, Female........... 0.523 0.430 0.324 0.211 0.197
Age 55-59, Female........... 0.501 0.407 0.299 0.185 0.171
Age 60-64, Female........... 0.508 0.409 0.295 0.174 0.158
--------------------------------------------------------------------------------------------------------------------------------------------------------
Diagnosis Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
HCC001.................................... HIV/AIDS.................... 2.965 2.679 2.477 2.398 2.390
[[Page 17469]]
HCC002.................................... Septicemia, Sepsis, Systemic 7.468 7.261 7.144 7.172 7.180
Inflammatory Response
Syndrome/Shock.
HCC003.................................... Central Nervous System 5.477 5.397 5.344 5.361 5.363
Infections, Except Viral
Meningitis.
HCC004.................................... Viral or Unspecified 4.437 4.230 4.106 4.022 4.012
Meningitis.
HCC006.................................... Opportunistic Infections.... 5.920 5.844 5.796 5.758 5.753
HCC008.................................... Metastatic Cancer........... 21.104 20.616 20.288 20.316 20.320
HCC009.................................... Lung, Brain, and Other 10.886 10.539 10.306 10.268 10.263
Severe Cancers, Including
Pediatric Acute Lymphoid
Leukemia.
HCC010.................................... Non-Hodgkin`s Lymphomas and 5.254 5.018 4.850 4.768 4.757
Other Cancers and Tumors.
HCC011.................................... Colorectal, Breast (Age 3.851 3.620 3.454 3.369 3.358
<50), Kidney, and Other
Cancers.
HCC012.................................... Breast (Age 50+) and 2.502 2.333 2.208 2.127 2.116
Prostate Cancer, Benign/
Uncertain Brain Tumors, and
Other Cancers and Tumors.
HCC013.................................... Thyroid Cancer, Melanoma, 1.108 0.981 0.874 0.754 0.738
Neurofibromatosis, and
Other Cancers and Tumors.
HCC018.................................... Pancreas Transplant Status/ 4.008 3.806 3.686 3.681 3.682
Complications.
HCC019.................................... Diabetes with Acute 0.470 0.406 0.345 0.281 0.273
Complications.
HCC020.................................... Diabetes with Chronic 0.470 0.406 0.345 0.281 0.273
Complications.
HCC021.................................... Diabetes without 0.470 0.406 0.345 0.281 0.273
Complication.
HCC023.................................... Protein-Calorie Malnutrition 11.139 11.127 11.117 11.204 11.215
HCC026.................................... Mucopolysaccharidosis....... 2.368 2.269 2.192 2.130 2.122
HCC027.................................... Lipidoses and Glycogenosis.. 2.368 2.269 2.192 2.130 2.122
HCC029.................................... Amyloidosis, Porphyria, and 2.368 2.269 2.192 2.130 2.122
Other Metabolic Disorders.
HCC030.................................... Adrenal, Pituitary, and 2.368 2.269 2.192 2.130 2.122
Other Significant Endocrine
Disorders.
HCC034.................................... Liver Transplant Status/ 9.422 9.331 9.272 9.246 9.242
Complications.
HCC035.................................... End-Stage Liver Disease..... 4.595 4.386 4.253 4.225 4.222
HCC036.................................... Cirrhosis of Liver.......... 1.282 1.152 1.065 0.999 0.991
HCC037_1.................................. Chronic Viral Hepatitis C... 0.847 0.741 0.667 0.594 0.586
HCC037_2.................................. Chronic Hepatitis, Other/ 0.847 0.741 0.667 0.594 0.586
Unspecified.
HCC038.................................... Acute Liver Failure/Disease, 4.287 4.119 4.015 3.981 3.978
Including Neonatal
Hepatitis.
HCC041.................................... Intestine Transplant Status/ 31.374 31.347 31.328 31.345 31.346
Complications.
HCC042.................................... Peritonitis/Gastrointestinal 9.205 8.962 8.803 8.803 8.804
Perforation/Necrotizing
Enterocolitis.
HCC045.................................... Intestinal Obstruction...... 5.389 5.146 5.000 4.975 4.973
HCC046.................................... Chronic Pancreatitis........ 4.008 3.806 3.686 3.681 3.682
HCC047.................................... Acute Pancreatitis/Other 2.028 1.869 1.761 1.675 1.664
Pancreatic Disorders and
Intestinal Malabsorption.
HCC048.................................... Inflammatory Bowel Disease.. 2.185 2.010 1.877 1.774 1.760
HCC054.................................... Necrotizing Fasciitis....... 5.280 5.093 4.966 4.966 4.966
HCC055.................................... Bone/Joint/Muscle Infections/ 5.280 5.093 4.966 4.966 4.966
Necrosis.
HCC056.................................... Rheumatoid Arthritis and 3.170 2.968 2.818 2.754 2.746
Specified Autoimmune
Disorders.
HCC057.................................... Systemic Lupus Erythematosus 0.803 0.689 0.591 0.473 0.457
and Other Autoimmune
Disorders.
HCC061.................................... Osteogenesis Imperfecta and 2.651 2.462 2.325 2.244 2.234
Other Osteodystrophies.
HCC062.................................... Congenital/Developmental 2.651 2.462 2.325 2.244 2.234
Skeletal and Connective
Tissue Disorders.
HCC063.................................... Cleft Lip/Cleft Palate...... 1.841 1.676 1.561 1.476 1.467
HCC066.................................... Hemophilia.................. 60.165 59.790 59.521 59.527 59.526
HCC067.................................... Myelodysplastic Syndromes 11.585 11.458 11.370 11.361 11.360
and Myelofibrosis.
HCC068.................................... Aplastic Anemia............. 11.585 11.458 11.370 11.361 11.360
HCC069.................................... Acquired Hemolytic Anemia, 7.073 6.964 6.883 6.847 6.842
Including Hemolytic Disease
of Newborn.
HCC070.................................... Sickle Cell Anemia (Hb-SS).. 7.073 6.964 6.883 6.847 6.842
HCC071.................................... Thalassemia Major........... 7.073 6.964 6.883 6.847 6.842
[[Page 17470]]
HCC073.................................... Combined and Other Severe 4.606 4.478 4.394 4.381 4.379
Immunodeficiencies.
HCC074.................................... Disorders of the Immune 4.606 4.478 4.394 4.381 4.379
Mechanism.
HCC075.................................... Coagulation Defects and 2.791 2.702 2.634 2.596 2.591
Other Specified
Hematological Disorders.
HCC081.................................... Drug Psychosis.............. 3.438 3.202 3.033 2.892 2.872
HCC082.................................... Drug Dependence............. 3.438 3.202 3.033 2.892 2.872
HCC087.................................... Schizophrenia............... 2.827 2.586 2.422 2.311 2.298
HCC088.................................... Major Depressive and Bipolar 1.602 1.438 1.313 1.184 1.167
Disorders.
HCC089.................................... Reactive and Unspecified 1.589 1.433 1.312 1.183 1.165
Psychosis, Delusional
Disorders.
HCC090.................................... Personality Disorders....... 1.115 0.998 0.889 0.759 0.742
HCC094.................................... Anorexia/Bulimia Nervosa.... 2.535 2.370 2.245 2.164 2.152
HCC096.................................... Prader-Willi, Patau, 5.275 5.178 5.108 5.049 5.040
Edwards, and Autosomal
Deletion Syndromes.
HCC097.................................... Down Syndrome, Fragile X, 1.351 1.255 1.177 1.105 1.096
Other Chromosomal
Anomalies, and Congenital
Malformation Syndromes.
HCC102.................................... Autistic Disorder........... 1.127 1.009 0.899 0.771 0.754
HCC103.................................... Pervasive Developmental 1.115 0.998 0.889 0.759 0.742
Disorders, Except Autistic
Disorder.
HCC106.................................... Traumatic Complete Lesion 10.383 10.248 10.157 10.135 10.131
Cervical Spinal Cord.
HCC107.................................... Quadriplegia................ 10.383 10.248 10.157 10.135 10.131
HCC108.................................... Traumatic Complete Lesion 7.512 7.355 7.247 7.209 7.203
Dorsal Spinal Cord.
HCC109.................................... Paraplegia.................. 7.512 7.355 7.247 7.209 7.203
HCC110.................................... Spinal Cord Disorders/ 5.070 4.849 4.700 4.653 4.647
Injuries.
HCC111.................................... Amyotrophic Lateral 1.804 1.606 1.474 1.372 1.360
Sclerosis and Other
Anterior Horn Cell Disease.
HCC112.................................... Quadriplegic Cerebral Palsy. 0.073 0.036 0.009 0.000 0.000
HCC113.................................... Cerebral Palsy, Except 0.073 0.036 0.009 0.000 0.000
Quadriplegic.
HCC114.................................... Spina Bifida and Other Brain/ 0.544 0.452 0.392 0.341 0.335
Spinal/Nervous System
Congenital Anomalies.
HCC115.................................... Myasthenia Gravis/Myoneural 5.301 5.172 5.088 5.074 5.072
Disorders and Guillain-
Barre Syndrome/Inflammatory
and Toxic Neuropathy.
HCC117.................................... Muscular Dystrophy.......... 1.925 1.783 1.682 1.581 1.565
HCC118.................................... Multiple Sclerosis.......... 3.769 3.557 3.406 3.322 3.311
HCC119.................................... Parkinson`s, Huntington`s, 1.925 1.783 1.682 1.581 1.565
and Spinocerebellar
Disease, and Other
Neurodegenerative Disorders.
HCC120.................................... Seizure Disorders and 1.275 1.128 1.020 0.917 0.904
Convulsions.
HCC121.................................... Hydrocephalus............... 6.490 6.383 6.303 6.282 6.279
HCC122.................................... Non-Traumatic Coma, and 8.031 7.885 7.780 7.766 7.763
Brain Compression/Anoxic
Damage.
HCC125.................................... Respirator Dependence/ 24.882 24.831 24.794 24.883 24.894
Tracheostomy Status.
HCC126.................................... Respiratory Arrest.......... 7.394 7.224 7.123 7.191 7.202
HCC127.................................... Cardio-Respiratory Failure 7.394 7.224 7.123 7.191 7.202
and Shock, Including
Respiratory Distress
Syndromes.
HCC128.................................... Heart Assistive Device/ 27.608 27.411 27.286 27.322 27.328
Artificial Heart.
HCC129.................................... Heart Transplant............ 27.608 27.411 27.286 27.322 27.328
HCC130.................................... Congestive Heart Failure.... 2.607 2.505 2.437 2.423 2.422
HCC131.................................... Acute Myocardial Infarction. 7.214 6.923 6.738 6.797 6.807
HCC132.................................... Unstable Angina and Other 4.822 4.534 4.368 4.345 4.345
Acute Ischemic Heart
Disease.
HCC135.................................... Heart Infection/ 5.503 5.383 5.302 5.271 5.268
Inflammation, Except
Rheumatic.
HCC142.................................... Specified Heart Arrhythmias. 2.479 2.340 2.237 2.159 2.149
HCC145.................................... Intracranial Hemorrhage..... 7.332 7.062 6.890 6.848 6.844
HCC146.................................... Ischemic or Unspecified 1.907 1.754 1.666 1.624 1.620
Stroke.
HCC149.................................... Cerebral Aneurysm and 2.765 2.588 2.468 2.389 2.378
Arteriovenous Malformation.
HCC150.................................... Hemiplegia/Hemiparesis...... 4.362 4.253 4.188 4.232 4.240
[[Page 17471]]
HCC151.................................... Monoplegia, Other Paralytic 2.821 2.693 2.606 2.557 2.551
Syndromes.
HCC153.................................... Atherosclerosis of the 8.986 8.890 8.830 8.913 8.926
Extremities with Ulceration
or Gangrene.
HCC154.................................... Vascular Disease with 6.374 6.218 6.114 6.091 6.088
Complications.
HCC156.................................... Pulmonary Embolism and Deep 3.333 3.184 3.082 3.013 3.004
Vein Thrombosis.
HCC158.................................... Lung Transplant Status/ 22.628 22.505 22.423 22.495 22.505
Complications.
HCC159.................................... Cystic Fibrosis............. 6.673 6.414 6.226 6.203 6.200
HCC160.................................... Chronic Obstructive 0.867 0.759 0.665 0.564 0.551
Pulmonary Disease,
Including Bronchiectasis.
HCC161.................................... Asthma...................... 0.867 0.759 0.665 0.564 0.551
HCC162.................................... Fibrosis of Lung and Other 1.918 1.813 1.742 1.688 1.680
Lung Disorders.
HCC163.................................... Aspiration and Specified 6.343 6.311 6.288 6.291 6.292
Bacterial Pneumonias and
Other Severe Lung
Infections.
HCC183.................................... Kidney Transplant Status.... 6.355 6.161 6.035 5.970 5.965
HCC184.................................... End Stage Renal Disease..... 25.179 24.922 24.750 24.897 24.939
HCC187.................................... Chronic Kidney Disease, 1.067 1.016 0.985 0.997 1.001
Stage 5.
HCC188.................................... Chronic Kidney Disease, 1.067 1.016 0.985 0.997 1.001
Stage 4.
HCC203.................................... Ectopic and Molar Pregnancy, 1.003 0.868 0.740 0.542 0.512
Except with Renal Failure,
Shock, or Embolism.
HCC204.................................... Miscarriage with 1.003 0.868 0.740 0.542 0.512
Complications.
HCC205.................................... Miscarriage with No or Minor 1.003 0.868 0.740 0.542 0.512
Complications.
HCC207.................................... Completed Pregnancy With 3.296 2.892 2.678 2.344 2.301
Major Complications.
HCC208.................................... Completed Pregnancy With 3.296 2.892 2.678 2.344 2.301
Complications.
HCC209.................................... Completed Pregnancy with No 3.296 2.892 2.678 2.344 2.301
or Minor Complications.
HCC217.................................... Chronic Ulcer of Skin, 1.908 1.800 1.730 1.702 1.700
Except Pressure.
HCC226.................................... Hip Fractures and 8.274 8.044 7.894 7.911 7.913
Pathological Vertebral or
Humerus Fractures.
HCC227.................................... Pathological Fractures, 4.796 4.648 4.546 4.494 4.488
Except of Vertebrae, Hip,
or Humerus.
HCC251.................................... Stem Cell, Including Bone 24.793 24.786 24.778 24.810 24.814
Marrow, Transplant Status/
Complications.
HCC253.................................... Artificial Openings for 7.812 7.725 7.666 7.696 7.700
Feeding or Elimination.
HCC254.................................... Amputation Status, Lower 3.011 2.887 2.811 2.821 2.823
Limb/Amputation
Complications.
--------------------------------------------------------------------------------------------------------------------------------------------------------
Interaction Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
SEVERE x HCC006........................... Severe illness x 7.044 7.251 7.387 7.555 7.575
Opportunistic Infections.
SEVERE x HCC008........................... Severe illness x Metastatic 7.044 7.251 7.387 7.555 7.575
Cancer.
SEVERE x HCC009........................... Severe illness x Lung, 7.044 7.251 7.387 7.555 7.575
Brain, and Other Severe
Cancers, Including
Pediatric Acute Lymphoid
Leukemia.
SEVERE x HCC010........................... Severe illness x Non- 7.044 7.251 7.387 7.555 7.575
Hodgkin`s Lymphomas and
Other Cancers and Tumors.
SEVERE x HCC115........................... Severe illness x Myasthenia 7.044 7.251 7.387 7.555 7.575
Gravis/Myoneural Disorders
and Guillain-Barre Syndrome/
Inflammatory and Toxic
Neuropathy.
SEVERE x HCC135........................... Severe illness x Heart 7.044 7.251 7.387 7.555 7.575
Infection/Inflammation,
Except Rheumatic.
SEVERE x HCC145........................... Severe illness x 7.044 7.251 7.387 7.555 7.575
Intracranial Hemorrhage.
SEVERE x G06.............................. Severe illness x HCC group 7.044 7.251 7.387 7.555 7.575
G06 (G06 is HCC Group 6
which includes the
following HCCs in the blood
disease category: 67, 68).
[[Page 17472]]
SEVERE x G08.............................. Severe illness x HCC group 7.044 7.251 7.387 7.555 7.575
G08 (G08 is HCC Group 8
which includes the
following HCCs in the blood
disease category: 73, 74).
SEVERE x HCC035........................... Severe illness x End-Stage 0.873 0.935 0.977 1.119 1.136
Liver Disease.
SEVERE x HCC038........................... Severe illness x Acute Liver 0.873 0.935 0.977 1.119 1.136
Failure/Disease, Including
Neonatal Hepatitis.
SEVERE x HCC153........................... Severe illness x 0.873 0.935 0.977 1.119 1.136
Atherosclerosis of the
Extremities with Ulceration
or Gangrene.
SEVERE x HCC154........................... Severe illness x Vascular 0.873 0.935 0.977 1.119 1.136
Disease with Complications.
SEVERE x HCC163........................... Severe illness x Aspiration 0.873 0.935 0.977 1.119 1.136
and Specified Bacterial
Pneumonias and Other Severe
Lung Infections.
SEVERE x HCC253........................... Severe illness x Artificial 0.873 0.935 0.977 1.119 1.136
Openings for Feeding or
Elimination.
SEVERE x G03.............................. Severe illness x HCC group 0.873 0.935 0.977 1.119 1.136
G03 (G03 is HCC Group 3
which includes the
following HCCs in the
musculoskeletal disease
category: 54, 55).
--------------------------------------------------------------------------------------------------------------------------------------------------------
Enrollment Duration Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 month of enrollment....... 0.316 0.276 0.247 0.232 0.230
2 months of enrollment...... 0.302 0.263 0.234 0.219 0.218
3 months of enrollment...... 0.278 0.241 0.213 0.199 0.197
4 months of enrollment...... 0.241 0.208 0.179 0.165 0.164
5 months of enrollment...... 0.217 0.188 0.162 0.148 0.147
6 months of enrollment...... 0.185 0.160 0.137 0.123 0.122
7 months of enrollment...... 0.152 0.131 0.111 0.099 0.098
8 months of enrollment...... 0.118 0.103 0.088 0.079 0.078
9 months of enrollment...... 0.074 0.064 0.054 0.048 0.048
10 months of enrollment..... 0.035 0.032 0.030 0.029 0.029
11 months of enrollment..... 0.030 0.028 0.027 0.027 0.027
--------------------------------------------------------------------------------------------------------------------------------------------------------
Prescription Drug Factors
--------------------------------------------------------------------------------------------------------------------------------------------------------
RXC 01.................................... Anti-HIV Agents............. 6.528 5.936 5.505 5.164 5.120
RXC 02.................................... Anti-Hepatitis C (HCV) 8.369 7.752 7.359 7.413 7.430
Agents.
RXC 03.................................... Antiarrhythmics............. 0.116 0.112 0.109 0.096 0.090
RXC 04.................................... Phosphate Binders........... 1.927 1.924 1.918 1.904 1.862
RXC 05.................................... Inflammatory Bowel Disease 1.746 1.591 1.470 1.293 1.266
Agents.
RXC 06.................................... Insulin..................... 1.796 1.630 1.453 1.254 1.227
RXC 07.................................... Anti-Diabetic Agents, Except 0.644 0.547 0.452 0.315 0.296
Insulin and Metformin Only.
RXC 08.................................... Multiple Sclerosis Agents... 18.819 17.877 17.252 17.101 17.067
RXC 09.................................... Immune Suppressants and 12.688 12.085 11.697 11.770 11.783
Immunomodulators.
RXC 10.................................... Cystic Fibrosis Agents...... 12.240 11.876 11.659 11.708 11.717
RXC 01 x HCC001........................... Additional effect for 0.273 0.520 0.735 1.187 1.247
enrollees with RXC 01 (Anti-
HIV Agents) and HCC 001
(HIV/AIDS).
RXC 02 x HCC037_1, 036, 035, 034.......... Additional effect for -0.156 0.043 0.168 0.300 0.311
enrollees with RXC 02 (Anti-
Hepatitis C (HCV) Agents)
and (HCC 037_1 (Chronic
Viral Hepatitis C) or 036
(Cirrhosis of Liver) or 035
(End-Stage Liver Disease)
or 034 (Liver Transplant
Status/Complications)).
RXC 03 x HCC142........................... Additional effect for 0.000 0.000 0.000 0.000 0.000
enrollees with RxC 03
(Antiarrhythmics) and HCC
142 (Specified Heart
Arrhythmias).
[[Page 17473]]
RXC 04 x HCC184, 183, 187, 188............ Additional effect for 0.000 0.000 0.000 0.000 0.000
enrollees with RxC 04
(Phosphate Binders) and
(HCC 184 (End Stage Renal
Disease) or 183 (Kidney
Transplant Status) or 187
(Chronic Kidney Disease,
Stage 5) or 188 (Chronic
Kidney Disease, Severe
Stage 4)).
RXC 05 x HCC048, 041...................... Additional effect for -0.820 -0.761 -0.692 -0.635 -0.626
enrollees with RxC 05
(Inflammatory Bowel Disease
Agents) and (HCC 048
(Inflammatory Bowel
Disease) or 041 (Intestine
Transplant Status/
Complications)).
RXC 06 x HCC018, 019, 020, 021............ Additional effect for 0.289 0.247 0.309 0.355 0.360
enrollees with RxC 06
(Insulin) and (HCC 018
(Pancreas Transplant Status/
Complications) or 019
(Diabetes with Acute
Complications) or 020
(Diabetes with Chronic
Complications) or 021
(Diabetes without
Complication)).
RXC 07 x HCC018, 019, 020, 021............ Additional effect for -0.303 -0.259 -0.209 -0.169 -0.164
enrollees with RxC 07 (Anti-
Diabetic Agents, Except
Insulin and Metformin Only)
and (HCC 018 (Pancreas
Transplant Status/
Complications) or 019
(Diabetes with Acute
Complications) or 020
(Diabetes with Chronic
Complications) or 021
(Diabetes without
Complication)).
RXC 08 x HCC118........................... Additional effect for -1.409 -0.898 -0.556 -0.216 -0.157
enrollees with RxC 08
(Multiple Sclerosis Agents)
and HCC 118 (Multiple
Sclerosis).
RXC 09 x HCC056 or 057 and 048 or 041..... Additional effect for 0.536 0.652 0.731 0.831 0.844
enrollees with RxC 09
(Immune Suppressants and
Immunomodulators) and (HCC
048 (Inflammatory Bowel
Disease) or 041 (Intestine
Transplant Status/
Complications)) and (HCC
056 (Rheumatoid Arthritis
and Specified Autoimmune
Disorders) or 057 (Systemic
Lupus Erythematosus and
Other Autoimmune
Disorders)).
RXC 09 x HCC056........................... Additional effect for -3.170 -2.968 -2.818 -2.754 -2.746
enrollees with RxC 09
(Immune Suppressants and
Immunomodulators) and HCC
056 (Rheumatoid Arthritis
and Specified Autoimmune
Disorders).
RXC 09 x HCC057........................... Additional effect for -0.803 -0.689 -0.545 -0.428 -0.411
enrollees with RxC 09
(Immune Suppressants and
Immunomodulators) and HCC
057 (Systemic Lupus
Erythematosus and Other
Autoimmune Disorders).
RXC 09 x HCC048, 041...................... Additional effect for -0.783 -0.621 -0.528 -0.439 -0.427
enrollees with RxC 09
(Immune Suppressants and
Immunomodulators) and (HCC
048 (Inflammatory Bowel
Disease) or 041 (Intestine
Transplant Status/
Complications)).
RXC 10 x HCC159, 158...................... Additional effect for 38.322 38.485 38.558 38.691 38.706
enrollees with RxC 10
(Cystic Fibrosis Agents)
and (HCC 159 (Cystic
Fibrosis) or 158 (Lung
Transplant Status/
Complications)).
--------------------------------------------------------------------------------------------------------------------------------------------------------
[[Page 17474]]
Table 2--HHS HCCs in the Severity Illness Indicator Variable
------------------------------------------------------------------------
HCC/description
-------------------------------------------------------------------------
Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock
Peritonitis/Gastrointestinal Perforation/Necrotizing Entercolitis
Seizure Disorders and Convulsions
Non-Traumatic Coma, Brain Compression/Anoxic Damage
Respirator Dependence/Tracheostomy Status
Respiratory Arrest
Cardio-Respiratory Failure and Shock, Including Respiratory Distress
Syndromes
Pulmonary Embolism and Deep Vein Thrombosis
------------------------------------------------------------------------
Table 3--Child Risk Adjustment Model Factors for 2020 Benefit Year
----------------------------------------------------------------------------------------------------------------
Factor Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Demographic Factors
----------------------------------------------------------------------------------------------------------------
Age 2-4, Male................... 0.201 0.156 0.105 0.060 0.054
Age 5-9, Male................... 0.141 0.105 0.064 0.031 0.028
Age 10-14, Male................. 0.178 0.141 0.094 0.058 0.055
Age 15-20, Male................. 0.231 0.186 0.132 0.084 0.079
Age 2-4, Female................. 0.153 0.115 0.074 0.041 0.037
Age 5-9, Female................. 0.097 0.068 0.034 0.009 0.008
Age 10-14, Female............... 0.169 0.133 0.090 0.058 0.055
Age 15-20, Female............... 0.251 0.197 0.130 0.069 0.063
----------------------------------------------------------------------------------------------------------------
Diagnosis Factors
----------------------------------------------------------------------------------------------------------------
HIV/AIDS........................ 4.444 4.000 3.704 3.571 3.553
Septicemia, Sepsis, Systemic 12.684 12.483 12.370 12.357 12.358
Inflammatory Response Syndrome/
Shock..........................
Central Nervous System 7.639 7.474 7.370 7.375 7.376
Infections, Except Viral
Meningitis.....................
Viral or Unspecified Meningitis. 3.537 3.306 3.162 2.985 2.961
Opportunistic Infections........ 14.897 14.855 14.821 14.803 14.798
Metastatic Cancer............... 33.549 33.307 33.125 33.137 33.137
Lung, Brain, and Other Severe 9.316 9.063 8.873 8.780 8.769
Cancers, Including Pediatric
Acute Lymphoid Leukemia........
Non-Hodgkin's Lymphomas and 7.430 7.181 6.996 6.883 6.868
Other Cancers and Tumors.......
Colorectal, Breast (Age <50), 3.288 3.116 2.980 2.862 2.844
Kidney, and Other Cancers......
Breast (Age 50+) and Prostate 3.288 3.116 2.980 2.862 2.844
Cancer, Benign/Uncertain Brain
Tumors, and Other Cancers and
Tumors.........................
Thyroid Cancer, Melanoma, 0.971 0.848 0.742 0.624 0.608
Neurofibromatosis, and Other
Cancers and Tumors.............
Pancreas Transplant Status/ 22.808 22.525 22.334 22.355 22.358
Complications..................
Diabetes with Acute 2.562 2.227 2.024 1.732 1.695
Complications..................
Diabetes with Chronic 2.562 2.227 2.024 1.732 1.695
Complications..................
Diabetes without Complication... 2.562 2.227 2.024 1.732 1.695
Protein-Calorie Malnutrition.... 13.857 13.753 13.679 13.719 13.724
Mucopolysaccharidosis........... 6.541 6.316 6.146 6.097 6.090
Lipidoses and Glycogenosis...... 6.541 6.316 6.146 6.097 6.090
Congenital Metabolic Disorders, 6.541 6.316 6.146 6.097 6.090
Not Elsewhere Classified.......
Amyloidosis, Porphyria, and 6.541 6.316 6.146 6.097 6.090
Other Metabolic Disorders......
Adrenal, Pituitary, and Other 6.541 6.316 6.146 6.097 6.090
Significant Endocrine Disorders
Liver Transplant Status/ 22.808 22.525 22.334 22.355 22.358
Complications..................
End-Stage Liver Disease......... 16.546 16.340 16.213 16.213 16.213
Cirrhosis of Liver.............. 3.126 3.000 2.914 2.887 2.887
Chronic Viral Hepatitis C....... 2.946 2.800 2.696 2.677 2.679
Chronic Hepatitis, Other/ 0.565 0.486 0.438 0.412 0.409
Unspecified....................
Acute Liver Failure/Disease, 11.172 11.066 11.000 11.024 11.029
Including Neonatal Hepatitis...
Intestine Transplant Status/ 22.808 22.525 22.334 22.355 22.358
Complications..................
Peritonitis/Gastrointestinal 11.360 11.054 10.851 10.833 10.833
Perforation/Necrotizing Entero-
colitis.........................
Intestinal Obstruction.......... 4.422 4.220 4.069 3.964 3.951
Chronic Pancreatitis............ 12.558 12.300 12.130 12.111 12.111
Acute Pancreatitis/Other 2.280 2.164 2.067 1.971 1.957
Pancreatic Disorders and
Intestinal Malabsorption.......
Inflammatory Bowel Disease...... 7.491 7.076 6.790 6.672 6.656
Necrotizing Fasciitis........... 3.884 3.665 3.504 3.422 3.412
Bone/Joint/Muscle Infections/ 3.884 3.665 3.504 3.422 3.412
Necrosis.......................
Rheumatoid Arthritis and 4.147 3.898 3.705 3.613 3.602
Specified Autoimmune Disorders.
[[Page 17475]]
Systemic Lupus Erythematosus and 0.707 0.589 0.478 0.367 0.355
Other Autoimmune Disorders.....
Osteogenesis Imperfecta and 1.308 1.197 1.101 1.020 1.009
Other Osteodystrophies.........
Congenital/Developmental 1.308 1.197 1.101 1.020 1.009
Skeletal and Connective Tissue
Disorders......................
Cleft Lip/Cleft Palate.......... 1.309 1.130 0.998 0.869 0.853
Hemophilia...................... 63.672 63.119 62.729 62.694 62.689
Myelodysplastic Syndromes and 14.847 14.726 14.643 14.617 14.613
Myelofibrosis..................
Aplastic Anemia................. 14.847 14.726 14.643 14.617 14.613
Acquired Hemolytic Anemia, 6.690 6.486 6.338 6.255 6.246
Including Hemolytic Disease of
Newborn........................
Sickle Cell Anemia (Hb-SS)...... 6.690 6.486 6.338 6.255 6.246
Thalassemia Major............... 6.690 6.486 6.338 6.255 6.246
Combined and Other Severe 5.228 5.082 4.975 4.916 4.908
Immunodeficiencies.............
Disorders of the Immune 5.228 5.082 4.975 4.916 4.908
Mechanism......................
Coagulation Defects and Other 4.562 4.439 4.341 4.263 4.253
Specified Hematological
Disorders......................
Drug Psychosis.................. 5.378 5.097 4.918 4.827 4.816
Drug Dependence................. 5.378 5.097 4.918 4.827 4.816
Schizophrenia................... 4.720 4.358 4.111 3.955 3.935
Major Depressive and Bipolar 2.523 2.294 2.112 1.933 1.909
Disorders......................
Reactive and Unspecified 2.437 2.219 2.042 1.864 1.841
Psychosis, Delusional Disorders
Personality Disorders........... 0.505 0.407 0.299 0.163 0.145
Anorexia/Bulimia Nervosa........ 2.473 2.274 2.118 2.023 2.009
Prader-Willi, Patau, Edwards, 1.577 1.426 1.324 1.254 1.244
and Autosomal Deletion
Syndromes......................
Down Syndrome, Fragile X, Other 1.523 1.376 1.270 1.181 1.169
Chromosomal Anomalies, and
Congenital Malformation
Syndromes......................
Autistic Disorder............... 2.419 2.205 2.030 1.859 1.836
Pervasive Developmental 0.522 0.436 0.337 0.218 0.203
Disorders, Except Autistic
Disorder.......................
Traumatic Complete Lesion 9.975 9.927 9.898 9.978 9.989
Cervical Spinal Cord...........
Quadriplegia.................... 9.975 9.927 9.898 9.978 9.989
Traumatic Complete Lesion Dorsal 7.111 6.894 6.752 6.717 6.710
Spinal Cord....................
Paraplegia...................... 7.111 6.894 6.752 6.717 6.710
Spinal Cord Disorders/Injuries.. 3.688 3.501 3.361 3.265 3.251
Amyotrophic Lateral Sclerosis 15.639 15.397 15.212 15.129 15.117
and Other Anterior Horn Cell
Disease........................
Quadriplegic Cerebral Palsy..... 2.136 1.935 1.829 1.823 1.824
Cerebral Palsy, Except 0.189 0.141 0.109 0.080 0.076
Quadriplegic...................
Spina Bifida and Other Brain/ 1.317 1.190 1.100 1.029 1.020
Spinal/Nervous System
Congenital Anomalies...........
Myasthenia Gravis/Myoneural 10.492 10.315 10.194 10.192 10.192
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.....................
Muscular Dystrophy.............. 3.105 2.925 2.800 2.692 2.679
Multiple Sclerosis.............. 9.585 9.204 8.943 8.908 8.904
Parkinson's, Huntington's, and 3.105 2.925 2.800 2.692 2.679
Spinocerebellar Disease, and
Other Neurodegenerative
Disorders......................
Seizure Disorders and 1.998 1.839 1.701 1.554 1.535
Convulsions....................
Hydrocephalus................... 4.263 4.146 4.066 4.043 4.041
Non-Traumatic Coma, and Brain 5.460 5.327 5.226 5.177 5.170
Compression/Anoxic Damage......
Respirator Dependence/ 31.764 31.644 31.579 31.727 31.745
Tracheostomy Status............
Respiratory Arrest.............. 9.892 9.639 9.484 9.442 9.437
Cardio-Respiratory Failure and 9.892 9.639 9.484 9.442 9.437
Shock, Including Respiratory
Distress Syndromes.............
Heart Assistive Device/ 22.808 22.525 22.334 22.355 22.358
Artificial Heart...............
Heart Transplant................ 22.808 22.525 22.334 22.355 22.358
Congestive Heart Failure........ 5.721 5.612 5.528 5.484 5.477
Acute Myocardial Infarction..... 5.658 5.556 5.512 5.497 5.494
Unstable Angina and Other Acute 4.360 4.255 4.196 4.165 4.163
Ischemic Heart Disease.........
Heart Infection/Inflammation, 12.103 11.996 11.921 11.912 11.912
Except Rheumatic...............
Hypoplastic Left Heart Syndrome 3.989 3.841 3.696 3.585 3.569
and Other Severe Congenital
Heart Disorders................
Major Congenital Heart/ 1.271 1.172 1.054 0.940 0.927
Circulatory Disorders..........
Atrial and Ventricular Septal 0.828 0.738 0.638 0.551 0.541
Defects, Patent Ductus
Arteriosus, and Other
Congenital Heart/Circulatory
Disorders......................
Specified Heart Arrhythmias..... 3.678 3.514 3.378 3.301 3.291
Intracranial Hemorrhage......... 12.336 12.112 11.968 11.959 11.960
Ischemic or Unspecified Stroke.. 4.916 4.834 4.788 4.787 4.788
Cerebral Aneurysm and 3.106 2.925 2.803 2.713 2.701
Arteriovenous Malformation.....
[[Page 17476]]
Hemiplegia/Hemiparesis.......... 4.229 4.100 4.016 3.960 3.952
Monoplegia, Other Paralytic 2.907 2.753 2.650 2.591 2.582
Syndromes......................
Atherosclerosis of the 12.094 11.845 11.673 11.607 11.596
Extremities with Ulceration or
Gangrene.......................
Vascular Disease with 11.883 11.747 11.650 11.669 11.670
Complications..................
Pulmonary Embolism and Deep Vein 15.067 14.952 14.883 14.915 14.920
Thrombosis.....................
Lung Transplant Status/ 22.808 22.525 22.334 22.355 22.358
Complications..................
Cystic Fibrosis................. 22.808 22.525 22.334 22.355 22.358
Chronic Obstructive Pulmonary 0.373 0.307 0.222 0.134 0.123
Disease, Including
Bronchiectasis.................
Asthma.......................... 0.373 0.307 0.222 0.134 0.123
Fibrosis of Lung and Other Lung 2.327 2.232 2.140 2.066 2.058
Disorders......................
Aspiration and Specified 6.863 6.796 6.748 6.770 6.772
Bacterial Pneumonias and Other
Severe Lung Infections.........
Kidney Transplant Status........ 10.610 10.344 10.176 10.122 10.115
End Stage Renal Disease......... 32.082 31.966 31.885 31.983 31.998
Chronic Kidney Disease, Stage 5. 3.813 3.698 3.607 3.511 3.502
Chronic Kidney Disease, Severe 3.813 3.698 3.607 3.511 3.502
(Stage 4)......................
Ectopic and Molar Pregnancy, 0.929 0.782 0.635 0.417 0.386
Except with Renal Failure,
Shock, or Embolism.............
Miscarriage with Complications.. 0.929 0.782 0.635 0.417 0.386
Miscarriage with No or Minor 0.929 0.782 0.635 0.417 0.386
Complications..................
Completed Pregnancy With Major 2.848 2.472 2.253 1.879 1.824
Complications..................
Completed Pregnancy With 2.848 2.472 2.253 1.879 1.824
Complications..................
Completed Pregnancy with No or 2.848 2.472 2.253 1.879 1.824
Minor Complications............
Chronic Ulcer of Skin, Except 2.720 2.626 2.539 2.464 2.456
Pressure.......................
Hip Fractures and Pathological 6.385 6.075 5.850 5.736 5.724
Vertebral or Humerus Fractures.
Pathological Fractures, Except 1.954 1.797 1.655 1.504 1.483
of Vertebrae, Hip, or Humerus..
Stem Cell, Including Bone 22.808 22.525 22.334 22.355 22.358
Marrow, Transplant Status/
Complications..................
Artificial Openings for Feeding 11.222 11.090 11.022 11.127 11.143
or Elimination.................
Amputation Status, Lower Limb/ 5.244 4.993 4.817 4.689 4.670
Amputation Complications.......
----------------------------------------------------------------------------------------------------------------
Table 4--Infant Risk Adjustment Model Factors for 2020 Benefit Year
----------------------------------------------------------------------------------------------------------------
Group Platinum Gold Silver Bronze Catastrophic
----------------------------------------------------------------------------------------------------------------
Extremely Immature * Severity 242.262 240.657 239.483 239.461 239.461
Level 5 (Highest)..............
Extremely Immature * Severity 148.994 147.251 145.979 145.799 145.783
Level 4........................
Extremely Immature * Severity 34.940 33.753 32.859 32.577 32.555
Level 3........................
Extremely Immature * Severity 34.940 33.753 32.859 32.577 32.555
Level 2........................
Extremely Immature * Severity 34.940 33.753 32.859 32.577 32.555
Level 1 (Lowest)...............
Immature * Severity Level 5 149.437 147.839 146.672 146.625 146.621
(Highest)......................
Immature * Severity Level 4..... 71.066 69.513 68.370 68.254 68.240
Immature * Severity Level 3..... 33.916 32.618 31.662 31.423 31.400
Immature * Severity Level 2..... 24.559 23.305 22.377 22.064 22.026
Immature * Severity Level 1 24.559 23.305 22.377 22.064 22.026
(Lowest).......................
Premature/Multiples * Severity 113.849 112.409 111.366 111.243 111.232
Level 5 (Highest)..............
Premature/Multiples * Severity 26.707 25.337 24.357 24.088 24.061
Level 4........................
Premature/Multiples * Severity 13.625 12.592 11.834 11.346 11.287
Level 3........................
Premature/Multiples * Severity 8.285 7.520 6.882 6.224 6.128
Level 2........................
Premature/Multiples * Severity 5.381 4.835 4.284 3.704 3.632
Level 1 (Lowest)...............
Term * Severity Level 5 87.084 85.832 84.905 84.690 84.663
(Highest)......................
Term * Severity Level 4......... 13.879 12.979 12.323 11.859 11.806
Term * Severity Level 3......... 5.728 5.171 4.646 4.042 3.959
Term * Severity Level 2......... 3.614 3.188 2.691 2.051 1.970
Term * Severity Level 1 (Lowest) 1.596 1.375 0.973 0.579 0.544
Age1 * Severity Level 5 57.825 57.074 56.512 56.400 56.389
(Highest)......................
Age1 *Severity Level 4.......... 10.546 10.003 9.561 9.255 9.219
Age1 * Severity Level 3......... 3.013 2.744 2.491 2.267 2.241
Age1 * Severity Level 2......... 1.880 1.673 1.452 1.219 1.191
Age1 * Severity Level 1 (Lowest) 0.515 0.455 0.374 0.314 0.307
Age 0 Male...................... 0.646 0.595 0.560 0.489 0.478
Age 1 Male...................... 0.120 0.106 0.093 0.073 0.070
----------------------------------------------------------------------------------------------------------------
[[Page 17477]]
Table 5--HHS HCCs Included in Infant Model Maturity Categories
------------------------------------------------------------------------
Maturity category HCC/description
------------------------------------------------------------------------
Extremely Immature................ Extremely Immature Newborns, Birth
weight <500 Grams.
Extremely Immature................ Extremely Immature Newborns,
Including Birth weight 500-749
Grams.
Extremely Immature................ Extremely Immature Newborns,
Including Birth weight 750-999
Grams.
Immature.......................... Premature Newborns, Including Birth
weight 1000-1499 Grams.
Immature.......................... Premature Newborns, Including Birth
weight 1500-1999 Grams.
Premature/Multiples............... Premature Newborns, Including Birth
weight 2000-2499 Grams.
Premature/Multiples............... Other Premature, Low Birth weight,
Malnourished, or Multiple Birth
Newborns.
Term.............................. Term or Post-Term Singleton Newborn,
Normal or High Birth weight.
Age 1............................. All age 1 infants.
------------------------------------------------------------------------
Table 6--HHS HCCs Included in Infant Model Severity Categories
------------------------------------------------------------------------
Severity category HCC/description
------------------------------------------------------------------------
Severity Level 5 (Highest)........ Metastatic Cancer.
Severity Level 5.................. Pancreas Transplant Status/
Complications.
Severity Level 5.................. Liver Transplant Status/
Complications.
Severity Level 5.................. End-Stage Liver Disease.
Severity Level 5.................. Intestine Transplant Status/
Complications.
Severity Level 5.................. Peritonitis/Gastrointestinal
Perforation/Necrotizing
Enterocolitis.
Severity Level 5.................. Respirator Dependence/Tracheostomy
Status.
Severity Level 5.................. Heart Assistive Device/Artificial
Heart.
Severity Level 5.................. Heart Transplant.
Severity Level 5.................. Congestive Heart Failure.
Severity Level 5.................. Hypoplastic Left Heart Syndrome and
Other Severe Congenital Heart
Disorders.
Severity Level 5.................. Lung Transplant Status/
Complications.
Severity Level 5.................. Kidney Transplant Status.
Severity Level 5.................. End Stage Renal Disease.
Severity Level 5.................. Stem Cell, Including Bone Marrow,
Transplant Status/Complications.
Severity Level 4.................. Septicemia, Sepsis, Systemic
Inflammatory Response Syndrome/
Shock.
Severity Level 4.................. Lung, Brain, and Other Severe
Cancers, Including Pediatric Acute
Lymphoid Leukemia.
Severity Level 4.................. Mucopolysaccharidosis.
Severity Level 4.................. Major Congenital Anomalies of
Diaphragm, Abdominal Wall, and
Esophagus, Age <2.
Severity Level 4.................. Myelodysplastic Syndromes and
Myelofibrosis.
Severity Level 4.................. Aplastic Anemia.
Severity Level 4.................. Combined and Other Severe
Immunodeficiencies.
Severity Level 4.................. Traumatic Complete Lesion Cervical
Spinal Cord.
Severity Level 4.................. Quadriplegia.
Severity Level 4.................. Amyotrophic Lateral Sclerosis and
Other Anterior Horn Cell Disease.
Severity Level 4.................. Quadriplegic Cerebral Palsy.
Severity Level 4.................. Myasthenia Gravis/Myoneural
Disorders and Guillain-Barre
Syndrome/Inflammatory and Toxic
Neuropathy.
Severity Level 4.................. Non-Traumatic Coma, Brain
Compression/Anoxic Damage.
Severity Level 4.................. Respiratory Arrest.
Severity Level 4.................. Cardio-Respiratory Failure and
Shock, Including Respiratory
Distress Syndromes.
Severity Level 4.................. Acute Myocardial Infarction.
Severity Level 4.................. Heart Infection/Inflammation, Except
Rheumatic.
Severity Level 4.................. Major Congenital Heart/Circulatory
Disorders.
Severity Level 4.................. Intracranial Hemorrhage.
Severity Level 4.................. Ischemic or Unspecified Stroke.
Severity Level 4.................. Vascular Disease with Complications.
Severity Level 4.................. Pulmonary Embolism and Deep Vein
Thrombosis.
Severity Level 4.................. Aspiration and Specified Bacterial
Pneumonias and Other Severe Lung
Infections.
Severity Level 4.................. Chronic Kidney Disease, Stage 5.
Severity Level 4.................. Hip Fractures and Pathological
Vertebral or Humerus Fractures.
Severity Level 4.................. Artificial Openings for Feeding or
Elimination.
Severity Level 3.................. HIV/AIDS.
Severity Level 3.................. Central Nervous System Infections,
Except Viral Meningitis.
Severity Level 3.................. Opportunistic Infections.
Severity Level 3.................. Non-Hodgkin`s Lymphomas and Other
Cancers and Tumors.
Severity Level 3.................. Colorectal, Breast (Age <50), Kidney
and Other Cancers.
Severity Level 3.................. Breast (Age 50+), Prostate Cancer,
Benign/Uncertain Brain Tumors, and
Other Cancers and Tumors.
Severity Level 3.................. Lipidoses and Glycogenosis.
Severity Level 3.................. Adrenal, Pituitary, and Other
Significant Endocrine Disorders.
Severity Level 3.................. Acute Liver Failure/Disease,
Including Neonatal Hepatitis.
Severity Level 3.................. Intestinal Obstruction.
Severity Level 3.................. Necrotizing Fasciitis.
Severity Level 3.................. Bone/Joint/Muscle Infections/
Necrosis.
Severity Level 3.................. Osteogenesis Imperfecta and Other
Osteodystrophies.
Severity Level 3.................. Cleft Lip/Cleft Palate.
Severity Level 3.................. Hemophilia.
Severity Level 3.................. Disorders of the Immune Mechanism.
[[Page 17478]]
Severity Level 3.................. Coagulation Defects and Other
Specified Hematological Disorders.
Severity Level 3.................. Prader-Willi, Patau, Edwards, and
Autosomal Deletion Syndromes.
Severity Level 3.................. Traumatic Complete Lesion Dorsal
Spinal Cord.
Severity Level 3.................. Paraplegia.
Severity Level 3.................. Spinal Cord Disorders/Injuries.
Severity Level 3.................. Cerebral Palsy, Except Quadriplegic.
Severity Level 3.................. Muscular Dystrophy.
Severity Level 3.................. Parkinson`s, Huntington`s, and
Spinocerebellar Disease, and Other
Neurodegenerative Disorders.
Severity Level 3.................. Hydrocephalus.
Severity Level 3.................. Unstable Angina and Other Acute
Ischemic Heart Disease.
Severity Level 3.................. Atrial and Ventricular Septal
Defects, Patent Ductus Arteriosus,
and Other Congenital Heart/
Circulatory Disorders.
Severity Level 3.................. Specified Heart Arrhythmias.
Severity Level 3.................. Cerebral Aneurysm and Arteriovenous
Malformation.
Severity Level 3.................. Hemiplegia/Hemiparesis.
Severity Level 3.................. Cystic Fibrosis.
Severity Level 3.................. Fibrosis of Lung and Other Lung
Disorders.
Severity Level 3.................. Pathological Fractures, Except of
Vertebrae, Hip, or Humerus.
Severity Level 2.................. Viral or Unspecified Meningitis.
Severity Level 2.................. Thyroid, Melanoma,
Neurofibromatosis, and Other
Cancers and Tumors.
Severity Level 2.................. Diabetes with Acute Complications.
Severity Level 2.................. Diabetes with Chronic Complications.
Severity Level 2.................. Diabetes without Complication.
Severity Level 2.................. Protein-Calorie Malnutrition.
Severity Level 2.................. Congenital Metabolic Disorders, Not
Elsewhere Classified.
Severity Level 2.................. Amyloidosis, Porphyria, and Other
Metabolic Disorders.
Severity Level 2.................. Cirrhosis of Liver.
Severity Level 2.................. Chronic Pancreatitis.
Severity Level 2.................. Inflammatory Bowel Disease.
Severity Level 2.................. Rheumatoid Arthritis and Specified
Autoimmune Disorders.
Severity Level 2.................. Systemic Lupus Erythematosus and
Other Autoimmune Disorders.
Severity Level 2.................. Congenital/Developmental Skeletal
and Connective Tissue Disorders.
Severity Level 2.................. Acquired Hemolytic Anemia, Including
Hemolytic Disease of Newborn.
Severity Level 2.................. Sickle Cell Anemia (Hb-SS).
Severity Level 2.................. Drug Psychosis.
Severity Level 2.................. Drug Dependence.
Severity Level 2.................. Down Syndrome, Fragile X, Other
Chromosomal Anomalies, and
Congenital Malformation Syndromes.
Severity Level 2.................. Spina Bifida and Other Brain/Spinal/
Nervous System Congenital
Anomalies.
Severity Level 2.................. Seizure Disorders and Convulsions.
Severity Level 2.................. Monoplegia, Other Paralytic
Syndromes.
Severity Level 2.................. Atherosclerosis of the Extremities
with Ulceration or Gangrene.
Severity Level 2.................. Chronic Obstructive Pulmonary
Disease, Including Bronchiectasis.
Severity Level 2.................. Chronic Ulcer of Skin, Except
Pressure.
Severity Level 1 (Lowest)......... Chronic Hepatitis.
Severity Level 1.................. Acute Pancreatitis/Other Pancreatic
Disorders and Intestinal
Malabsorption.
Severity Level 1.................. Thalassemia Major.
Severity Level 1.................. Autistic Disorder.
Severity Level 1.................. Pervasive Developmental Disorders,
Except Autistic Disorder.
Severity Level 1.................. Multiple Sclerosis.
Severity Level 1.................. Asthma.
Severity Level 1.................. Chronic Kidney Disease, Severe
(Stage 4).
Severity Level 1.................. Amputation Status, Lower Limb/
Amputation Complications.
Severity Level 1.................. No Severity HCCs.
------------------------------------------------------------------------
v. Cost-Sharing Reduction Adjustments
We proposed to continue including an adjustment for the receipt of
cost-sharing reductions (CSRs) in the risk adjustment models to account
for increased plan liability due to increased utilization of health
care services by enrollees receiving CSRs in all 50 states and the
District of Columbia. For the 2020 benefit year, to maintain stability
and certainty for issuers, we proposed to maintain the CSR factors
finalized in the 2019 Payment Notice.\28\ See Table 7.
---------------------------------------------------------------------------
\28\ See 83 FR 16930 at 16953.
---------------------------------------------------------------------------
Consistent with the approach finalized in the 2017 Payment
Notice,\29\ we also proposed to continue to use CSR adjustment factors
of 1.12 for all Massachusetts wrap-around plans in the risk adjustment
plan liability risk score calculation, as all of Massachusetts' cost-
sharing plan variations have actuarial values above 94 percent. We are
finalizing the CSR adjustment as proposed.
---------------------------------------------------------------------------
\29\ See 81 FR 12203 at 12228.
[[Page 17479]]
Table 7--Cost-Sharing Reduction Adjustment
------------------------------------------------------------------------
Induced
Household income Plan AV utilization
factor
------------------------------------------------------------------------
Silver Plan Variant Recipients
------------------------------------------------------------------------
100-150% of FPL................... Plan Variation 94%.. 1.12
150-200% of FPL................... Plan Variation 87%.. 1.12
200-250% of FPL................... Plan Variation 73%.. 1.00
>250% of FPL...................... Standard Plan 70%... 1.00
------------------------------------------------------------------------
Zero Cost Sharing Recipients
------------------------------------------------------------------------
<300% of FPL...................... Platinum (90%)...... 1.00
<300% of FPL...................... Gold (80%).......... 1.07
<300% of FPL...................... Silver (70%)........ 1.12
<300% of FPL...................... Bronze (60%)........ 1.15
------------------------------------------------------------------------
Limited Cost Sharing Recipients
------------------------------------------------------------------------
>300% of FPL...................... Platinum (90%)...... 1.00
>300% of FPL...................... Gold (80%).......... 1.07
>300% of FPL...................... Silver (70%)........ 1.12
>300% of FPL...................... Bronze (60%)........ 1.15
------------------------------------------------------------------------
Comment: Commenters supported the proposal that the CSR adjustments
be consistent with those finalized in the 2019 Payment Notice. One
commenter recommended that if HHS contemplates changing these factors
for future benefit years, HHS should publish a white paper prior to
rulemaking to provide issuers an advance opportunity to review and
comment on the proposed approach. One commenter requested that HHS
assess the impact of these factors and consider the possibility that
issuers with a lower distribution of silver plan enrollees may be
negatively impacted. One commenter supported continuing to use the CSR
factor of 1.12 for Massachusetts' wrap-around coverage.
Response: We are finalizing the CSR adjustment as proposed. We
intend to continue to review the enrollee-level EDGE data, including
the distribution of enrollees by metal tier, to assess whether changes
to these factors are needed. If we were to consider changes to the CSR
adjustment in the future, we would do so through notice-and-comment
rulemaking.
vi. Model Performance Statistics
To evaluate risk adjustment model performance, we examined each
model's R-squared statistic and predictive ratios. The R-squared
statistic, which calculates the percentage of individual variation
explained by a model, measures the predictive accuracy of the model
overall. The predictive ratios also measure the predictive accuracy of
a model for different validation groups or subpopulations. The
predictive ratio for each of the HHS risk adjustment models is the
ratio of the weighted mean predicted plan liability for the model
sample population to the weighted mean actual plan liability for the
model sample population. The predictive ratio represents how well the
model does on average at predicting plan liability for that
subpopulation. A subpopulation that is predicted perfectly will have a
predictive ratio of 1.0. For each of the HHS risk adjustment models,
the R-squared statistic and the predictive ratios are in the range of
published estimates for concurrent risk adjustment models.\30\ The
final R-squared statistic for each model that is shown in Table 8
reflects the results from each dataset used in the separately solved
models that are used to recalibrate the models for the 2020 benefit
year, namely the 2015 MarketScan[supreg] data, and the 2016 and 2017
enrollee-level EDGE data.
---------------------------------------------------------------------------
\30\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis
of Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.
Table 8--R-Squared Statistic for HHS Risk Adjustment Models
----------------------------------------------------------------------------------------------------------------
2016 Enrollee 2017 Enrollee- 2015
Models level EDGE level EDGE MarketScan[supreg]
data data R-squared data R-squared
----------------------------------------------------------------------------------------------------------------
Platinum Adult.............................................. 0.4189 0.4131 0.4120
Gold Adult.................................................. 0.4131 0.4065 0.4065
Silver Adult................................................ 0.4084 0.4011 0.4023
Bronze Adult................................................ 0.4052 0.3974 0.3996
Catastrophic Adult.......................................... 0.4047 0.3968 0.3991
Platinum Child.............................................. 0.3109 0.3252 0.3330
Gold Child.................................................. 0.3062 0.3201 0.3283
Silver Child................................................ 0.3022 0.3157 0.3244
Bronze Child................................................ 0.2986 0.3118 0.3207
Catastrophic Child.......................................... 0.2981 0.3112 0.3201
Platinum Infant............................................. 0.3257 0.3168 0.3331
Gold Infant................................................. 0.3217 0.3127 0.3310
[[Page 17480]]
Silver Infant............................................... 0.3188 0.3096 0.3297
Bronze Infant............................................... 0.3172 0.3079 0.3294
Catastrophic Infant......................................... 0.3170 0.3077 0.3294
----------------------------------------------------------------------------------------------------------------
b. Overview of the Risk Adjustment Transfer Methodology (Sec. 153.320)
We defined the calculation of plan average actuarial risk and the
calculation of payments and charges in the Premium Stabilization Rule.
In the 2014 Payment Notice, we combined those concepts into a risk
adjustment state payment transfer formula.\31\ The risk adjustment
transfer methodology (state transfer formula payments and charges and
high-cost risk pool payments and charges) is applied after issuers have
completed their risk adjustment EDGE data submissions for the
applicable benefit year. The state payment transfer formula includes a
set of cost adjustment terms that require transfers to be calculated at
the geographic rating area level for each plan (that is, we calculate
separate transfer amounts for each rating area in which a risk
adjustment covered plan operates).
---------------------------------------------------------------------------
\31\ The state payment transfer formula refers to the part of
the HHS risk adjustment methodology that calculates payments and
charges prior to the calculation of the high-cost risk pool payment
and charge terms that apply beginning with the 2018 benefit year.
---------------------------------------------------------------------------
The risk adjustment state payment transfer formula generally
calculates the difference between the revenues required by a plan,
based on the health risk of the plan's enrollees, and the revenues that
the plan can generate for those enrollees. These differences are then
compared across plans in the state market risk pool and converted to a
dollar amount based on the statewide average premium. HHS chose to use
statewide average premium and normalize the risk adjustment state
payment transfer formula to reflect state average factors so that each
plan's enrollment characteristics are compared to the state average and
the calculated payment amounts equal calculated charges in each state
market risk pool. Thus, each plan in the risk pool receives a risk
adjustment payment or charge designed to compensate for risk for a plan
with average risk in a budget-neutral manner. This approach supports
the overall goals of the risk adjustment program, which are to
encourage issuers to rate for the average risk in the applicable state
market risk pool, to stabilize premiums, and to avoid the creation of
incentives for issuers to operate less efficiently, set higher prices,
or develop benefit designs or create marketing strategies to avoid
high-risk enrollees. Such incentives could arise if we used each
issuer's plan's own premium in the risk adjustment state payment
transfer formula, instead of statewide average premium.
In the absence of additional funding, we established through
notice-and-comment rulemaking \32\ the HHS-operated risk adjustment
program as a budget-neutral program to provide certainty to issuers
regarding risk adjustment payments and charges, which allows issuers to
set rates based on those expectations. Adopting an approach that would
not result in balanced payments and charges would create considerable
uncertainty for issuers regarding the proportion of risk adjustment
payments they could expect to receive. Additionally, in establishing
the HHS-operated risk adjustment program, we could not have relied on
the potential availability of general appropriation funds without
creating the same uncertainty for issuers in the amount of risk
adjustment payments they could expect, or reducing funding available
for other programs. Relying on each year's budget process also would
have required us to delay setting the parameters for any risk
adjustment payment proration rates until well after the plans were in
effect for the applicable benefit year. HHS also could not have relied
on any potential state budget appropriations in states that elected to
operate a state-based risk adjustment program, as such funds would not
be available for purposes of administering the HHS-operated risk
adjustment program. Without the adoption of a budget-neutral framework,
HHS would need to assess a charge or otherwise collect additional funds
to avoid prorating risk adjustment payments. The resulting uncertainty
would have also conflicted with the overall goals of the risk
adjustment program--to stabilize premiums and reduce incentives for
issuers to avoid enrolling individuals with higher-than-average
actuarial risk.
---------------------------------------------------------------------------
\32\ For example, see Standards Related to Reinsurance, Risk
Corridors, and Risk Adjustment, Proposed Rule, 76 FR 41938 (July 15,
2011); Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment, Final Rule, 77 FR 17232 (March 23, 2012); and the 2014
Payment Notice, Final Rule, 78 FR 15441 (March 11, 2013). Also see,
the 2018 Payment Notice, Final Rule, 81 FR 94058 (December 22,
2016); and the 2019 Payment Notice, Final Rule, 83 FR 16930 (April
17, 2018). Also see the Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program Under the Patient
Protection and Affordable Care Act for the 2017 Benefit Year, Final
Rule, 83 FR 36456 (July 30, 2018) and the Patient Protection and
Affordable Care Act; Adoption of the Methodology for the HHS-
Operated Permanent Risk Adjustment Program for the 2018 Benefit
Year, Final Rule, 83 FR 63419 (December 10, 2018).
---------------------------------------------------------------------------
In light of the budget-neutral framework, HHS uses statewide
average premium as the cost-scaling factor in the state payment
transfer formula under the HHS-operated risk adjustment methodology,
rather than a different parameter, such as each plan's own premium,
which would not have automatically achieved equality between risk
adjustment payments and charges in each benefit year. As set forth in
prior discussions,\33\ use of a plan's own premium or a similar
parameter would have required a balancing adjustment in light of the
program's need for budget neutrality--either through reducing payments
to issuers owed a payment, increasing charges on issuers assessed a
charge, or splitting the difference in some fashion between issuers
owed payments and issuers assessed charges. Such adjustments would have
impaired the risk adjustment program's goals of encouraging issuers to
rate for the average risk in the applicable state market risk pool,
stabilizing premiums, and avoiding the creation of incentives
[[Page 17481]]
for issuers to operate less efficiently, set higher prices, develop
benefit designs or create marketing strategies to avoid higher-risk
enrollees. Adoption of a methodology that would require use of an
after-the-fact balancing adjustment is also less predictable for
issuers than a methodology that is established in advance of a benefit
year. Stakeholders who support use of a plan's own premium state that
use of statewide average premium penalizes issuers with efficient care
management. While effective care management may make a plan more likely
to have lower costs,\34\ we do not believe that care management
strategies make the plan more likely to enroll lower-than-average risk
enrollees; effective care management strategies might even make the
plan more likely to attract higher-than-average risk enrollees, in
which case the plan will benefit from the use of statewide average
premium in the state payment transfer formula in the HHS risk
adjustment methodology. As noted by commenters to the 2014 Payment
Notice proposed rule, transfers may also be more volatile from year to
year and sensitive to anomalous premiums if scaled to a plan's own
premium instead of the statewide average premium. In all, the
advantages of using statewide average premium outweigh the pricing
instability and other challenges associated with calculating transfers
based on a plan's own premium.
---------------------------------------------------------------------------
\33\ For example, see September 12, 2011, Risk Adjustment
Implementation Issues White Paper, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/riskadjustment_whitepaper_web.pdf.
Also see the Adoption of the Methodology for the HHS-Operated
Permanent Risk Adjustment Program Under the Patient Protection and
Affordable Care Act for the 2017 Benefit Year, Final Rule, 83 FR
36456 (July 30, 2018) and the Patient Protection and Affordable Care
Act; Adoption of the Methodology for the HHS-Operated Permanent Risk
Adjustment Program for the 2018 Benefit Year, Final Rule, 83 FR
63419 (December 10, 2018).
\34\ There are many reasons why an issuer could have lower-than-
average premiums. For example, the low premium could be the result
of efficiency, mispricing, a strategy to gain market share, or some
combination thereof.
---------------------------------------------------------------------------
In the HHS risk adjustment transfer methodology, the state payment
transfer formula is designed to provide a per member per month (PMPM)
transfer amount. The PMPM transfer amount derived from the state
payment transfer formula is multiplied by each plan's total billable
member months for the applicable benefit year to determine the payment
due to or charge owed by the issuer for that plan in a rating area. The
payment or charge under the state payment transfer formula is thus
calculated to balance the state market risk pool in question.
Although we did not seek comment on this topic, we summarize and
respond to the comments on statewide average premium and plan's own
premium received in response to the proposed rule below. Given the
volume of exhibits, court filings, white papers (including all
corresponding exhibits), and comments on other rulemakings incorporated
by reference, we are not able to separately address each of those
documents. Instead, we summarize and respond to the significant
comments and issues raised by the commenters that are within the scope
of this rulemaking.
Comment: Some commenters expressed support for the operation of the
HHS risk adjustment program in a budget-neutral manner and the
utilization of statewide average premium as the cost-scaling factor to
ensure that issuers' collection amounts equal payment amounts for the
applicable benefit year. These commenters noted that use of statewide
average premium results in balanced payment transfers in a state market
risk pool and helps advance the market stabilizing goals of the risk
adjustment program, and they supported maintaining the current risk
adjustment state payment transfer formula and the budget neutral
framework.
Some commenters opposed the use of statewide average premiums.
These commenters stated that the current risk adjustment state payment
transfer formula's use of statewide average premiums penalizes
efficient plans, and is a biased estimate of enrollee medical costs and
actuarial risk that perversely penalize efficient, high-performing
issuers. These commenters requested that HHS adopt alternatives to the
existing risk adjustment methodology. One commenter supported the use
of each plan's own premium as the cost scaling factor. This commenter
stated that the risk adjustment state payment transfer formula does not
need to operate as budget neutral, as section 1343 of the PPACA does
not require that the program be budget neutral, and funds are available
to HHS for the risk adjustment program from the CMS Program Management
account to offset any potential shortfalls. The commenter also
disagreed with HHS' rationale for using statewide average premium to
achieve budget neutrality, and stated that even if budget neutrality is
required, any risk adjustment payment shortfalls that may result from
using a plan's own premium in the state payment transfer formula could
be addressed through pro rata adjustments to risk adjustment transfers.
This commenter further stated that use of statewide average premium is
not predictable for issuers trying to set rates and compared the
predicted risk adjustment results issuers set out in their respective
rate filings with HHS' published actual risk adjustment results for a
state, concluding that the risk adjustment program is failing to
achieve its goal because its analysis found that issuers are failing to
accurately forecast their risk adjustment results in their rate
filings.
Conversely, other commenters expressed concerns about alternatives
to statewide average premium. One commenter specifically opposed using
a plan's own premium stating that it would undermine the risk
adjustment program, create incentives for issuers to avoid enrolling
high-cost individuals, and would not automatically balance transfers to
zero. This commenter noted that the PPACA's risk adjustment statute
requires states, or HHS on behalf of the states, to assess a charge on
plans with lower than the average actuarial risk in the state market
risk pool, and to make payments to plans with higher than the average
actuarial risk in the state market risk pool. This commenter also
agreed that absent Congressional action to appropriate additional
funds, the risk adjustment program must operate in a budget-neutral
manner. Additionally, the commenter concurred that if HHS were to
require states operating their own risk adjustment programs to operate
the programs to cover any shortfall between collections and payments
for a benefit year, HHS would be effectively imposing an unfunded
mandate on states. This commenter noted that analyses by the American
Academy of Actuaries and Oliver Wyman indicated that the risk
adjustment program is working as intended by compensating issuers that
enroll higher-than-average risk enrollees and protecting against
adverse selection.
Response: We agree that the use of statewide average premium
supports the underlying goals of the risk adjustment program by
discouraging the creation of benefit designs and marketing strategies
to avoid high-risk enrollees and promoting market stability and
predictability. The benefits of using statewide average premium as the
cost scaling factor in the HHS risk adjustment state payment transfer
formula therefore extend beyond its role in maintaining the budget
neutrality of the program. Consistent with the statute, under the HHS-
operated risk adjustment program, each risk adjustment covered plan in
the state market risk pool receives a risk adjustment payment or owes a
charge based on the plan's risk compared to the average risk in the
state market risk pool. The statewide average premium reflects the
average cost and efficiency level and was chosen as the cost scaling
factor in the state payment transfer formula under the HHS-operated
risk adjustment methodology for a number of reasons. More specifically,
HHS chose to use statewide average premium to encourage issuers to rate
for the average risk, to automatically achieve equality between
[[Page 17482]]
risk adjustment payments and charges in each benefit year, and to avoid
the creation of incentives for issuers to operate less efficiently, set
higher prices, or develop benefits designs or create marketing
strategies to avoid high-risk enrollees. HHS considered and again
declined in the 2018 and 2019 Payment Notices \35\ and in the Adoption
of the Methodology for the HHS-operated Permanent Risk Adjustment
Program for the 2017 Benefit Year Final Rule (2017 Risk Adjustment
Final Rule) \36\ and Adoption of the Methodology for the HHS-operated
Permanent Risk Adjustment Program for the 2018 Benefit Year Final Rule
(2018 Risk Adjustment Final Rule) \37\ to adopt the use of each plan's
own premium in the state payment transfer formula.
---------------------------------------------------------------------------
\35\ 81 FR 94100 and 83 FR 16930.
\36\ 83 FR 36456.
\37\ 83 FR 63419.
---------------------------------------------------------------------------
As we detailed in the 2018 Payment Notice and the 2017 and 2018
Risk Adjustment Final Rules,\38\ use of a plan's own premium would
likely lead to substantial volatility in transfer results, and could
result in even higher transfer charges for low-risk, low-premium plans
because of the program's budget neutral framework. In addition, use of
plan's own premium in a budget neutral program would require even
greater transfer payments to high-risk, high-premium plans.
Furthermore, use of a plan's own premium in the HHS formula would
actually disadvantage high-risk, low-premium plans, or plans that some
commenters referred to as the ``efficient plans,'' by undercompensating
them based on their lower average premiums, which, in turn, could
incentivize such plans to inflate premium prices to receive more
favorable risk adjustment transfers along with increased premium
revenue. If HHS instead applied a balancing adjustment to the state
payment transfer formula in favor of these plans, low-risk, low-premium
plans would be required to pay an even higher percentage of their plan-
specific premiums in risk adjustment transfer charges due to the need
to maintain the program's budget neutrality. This type of balancing
adjustment would also result in a reduction to payments to high-risk,
low-premium plans that are presumably more efficient than high-risk,
high-premium plans, further incentivizing such plans to inflate
premiums as described above. In other words, the use of a plan's own
premium in the HHS program would neither reduce risk adjustment charges
for low-cost and low-risk issuers, nor would it incentivize issuers to
operate at the average efficiency. The application of a balancing
adjustment in favor of low-risk, low-premium plans could under-
compensate high-risk plans, increasing the likelihood that such plans
would raise premiums. In addition, if the application of a balancing
adjustment was split equally between high-risk and low-risk plans, such
an adjustment would incentivize issuers to increase premiums or to
employ risk-avoidance techniques. Finally, any such balancing
adjustments would have to be determined after state transfers had been
calculated, because an approach that uses the plan's own premium to
calculate transfers would not necessarily result in budget-neutral
transfers without a separate after-the-fact adjustment. As detailed
above, such after-the-fact adjustments would impair the goals of the
risk adjustment program and be less predictable for issuers. For all of
these reasons, we previously declined and continue to decline to use
each plan's own premium and are maintaining use of statewide average
premium as the cost-scaling factor in the state payment transfer
formula.
---------------------------------------------------------------------------
\38\ 81 FR at 94100; 83 FR at 36458; and 83 FR at 63425.
---------------------------------------------------------------------------
Comments: One commenter requested that HHS include a care
management factor in the risk adjustment methodology, such as the care
management effectiveness index (CME index) developed by Axene Health
Partners, as this commenter believed that a care coordination factor
would mitigate the impact of using statewide average premiums for
issuers that successfully perform care management and improve health.
This commenter stated that HHS represented in previous rulemaking that
it could consider using the CME index in future years and encouraged
HHS to follow through on that promise. Another commenter requested that
HHS explore how plans with low administrative costs or high quality
scores based on objective criteria and high-performing networks could
be rewarded. One commenter stated that HHS' position in the proposed
rule that it did ``not believe that the care management strategies make
the plan more likely to enroll lower-than-average risk enrollees;
effective care management strategies might even make the plan more
likely to attract higher-than-average risk enrollees, in which case the
plan would benefit from the use of statewide average premium in the
state payment transfer formula in the HHS risk adjustment methodology''
was based on a faulty premise. This commenter stated that, in addition
to care management strategies, the breadth of the plan's provider
network has significant impact on price, and that, through the state
payment transfer formula, enrollees who choose narrow networks
subsidize plans from dominant issuers that can tend to have larger
networks and higher prices. This commenter viewed this as a detrimental
effect of the state payment transfer formula on plans with enrollees
that choose narrow networks.
Some comments suggested proposed improvements to the HHS risk
adjustment program generally. A few commenters expressed a desire for
broad risk adjustment changes, including an exemption for new and fast-
growing plans from risk adjustment for 3 to 5 years, applying a
credibility-based approach to participation in risk adjustment based on
membership size or market share, and placing an upper bound on the
amount of a plan's risk adjustment transfer charge or using two-stage
adult models that HHS proposed in the 2018 Payment Notice proposed
rule. One commenter suggested HHS look at steps some states have taken
to correct market distortions and consider the possibility of
incorporating similar changes into the HHS risk adjustment models and
state payment transfer formula. One commenter noted that HHS is aware
of risk adjustment bias, has acknowledged its distortion, and has
ignored the ``fix'' to switch the risk scores that were used by HHS
with risk scores that more accurately represent the actual HCC costs or
adopt another model that would eliminate estimated bias. This commenter
also suggested HHS give states the option, at their discretion, to use
a graduated cap on risk adjustment charges to reduce volatility and
increase predictability of results, to establish a cap based on a
percentage of premium to protect small issuers from the impact of large
risk adjustment charges, or to allow states to consider structures in
which caps shift at smaller more graduated intervals based on issuer
size, to lower the risk that small enrollment shifts will tip an issuer
between various caps.
Response: We appreciate the feedback on proposed updates to the HHS
risk adjustment program. As we have noted, we remain committed to
evaluating the program and engaging stakeholders in the program's
policy development. We continue to regularly assess whether the HHS-
operated risk adjustment program should be modified based on analysis
of more recent data and changes (if any) in market dynamics, while
weighing the tradeoffs of refinements with continuing to provide
stability and predictability. Throughout this rule, we have identified
several specific risk adjustment topics
[[Page 17483]]
we are currently assessing, anticipate seeking stakeholder feedback on,
and may contemplate changes for future benefit years through notice-
and-comment rulemaking.
We continuously evaluate whether improvements are needed to the HHS
risk adjustment methodology, and will continue to do so as additional
years' data become available. For example, beginning with the 2018
benefit year, we adopted a 14 percent reduction to the statewide
average premium to account for administrative costs that are unrelated
to the claims risk of the enrollee population.\39\ While low cost plans
are not necessarily efficient plans,\40\ we believe this adjustment
differentiates between premiums that reflect savings resulting from
administrative efficiency from premiums that reflect healthier-than-
average enrollees. HHS also modified the risk adjustment methodology
beginning with the 2018 benefit year by incorporating a high-cost risk
pool adjustment to mitigate residual incentives for risk selection to
avoid high-cost enrollees, to better account for the average risk
associated with the factors used in the HHS risk adjustment models, and
to ensure that the actuarial risk of a plan with high-cost enrollees is
better reflected in transfers to issuers with high actuarial risk.\41\
Other recent changes made to the HHS risk adjustment program include
the incorporation of a partial year adjustment factor and prescription
drug utilization factors.\42\
---------------------------------------------------------------------------
\39\ 81 FR 94099.
\40\ If a plan is a low-cost plan with low claims costs, it
could be an indication of mispricing, as the issuer should be
pricing for average risk.
\41\ See 81 FR 94080.
\42\ See 81 FR at 94071 and 94074.
---------------------------------------------------------------------------
However, at this time, we decline to amend the risk adjustment
methodology to include a CME index or a similar care coordination
adjustment. As we previously noted,\43\ a change of this magnitude
requires significant study and evaluation. Although this type of change
is not feasible at present, we will continue to examine the
feasibility, specificity, and sensitivity of measuring care management
effectiveness through enrollee-level EDGE data for the individual,
small group, and merged markets, and the benefits of incorporating such
measures in the HHS risk adjustment transfer methodology in future
benefit years, either through future rulemaking or other opportunities
in which the public can submit comments. We believe that a robust risk
adjustment program encourages issuers to improve care management
effectiveness, as doing so would reduce plans' medical costs. As we
explain above, use of statewide average premium in the HHS risk
adjustment state payment transfer formula incentivizes plans to apply
effective care management techniques to reduce losses, whereas use of a
plan's own premium could be inflationary as it benefits plans with
higher-than-average costs and premiums. While effective care management
may make a plan more likely to have lower costs and premiums, we do not
believe that care management strategies necessarily make the plan more
likely to enroll lower-than-average risk enrollees. As we noted in the
proposed rule, implementation of effective care management strategies
may particularly attract high-risk enrollees with complex conditions
that incur repeat utilization of services.
---------------------------------------------------------------------------
\43\ See 83 FR at 93425.
---------------------------------------------------------------------------
In addition, there are many reasons why an issuer could have lower-
than-average premiums. For example, the low premium could be the result
of efficiency, mispricing, a strategy to gain market share, or some
combination thereof. As such, we disagree with the comment that the
risk adjustment state payment transfer formula unfairly results in
enrollees that choose narrow networks subsidizing enrollees in broader
networks, including enrollees in plans issued by dominant carriers.
Networks are just one of many plan design characteristics that are
captured through the use of the statewide average premium in the state
payment transfer formula, which is designed to discourage the creation
of plan designs and marketing strategies to avoid high-risk enrollees,
in keeping with the goals of the risk adjustment program. Thus, to the
extent certain plan network designs attract sicker-than-average
enrollees, the risk adjustment program assesses the level of risk and
compensates those plans for the incremental risk.
We have previously considered other model changes, including the
adoption of a two-stage adult model. Specifically, as discussed in the
2018 Payment Notice proposed rule,\44\ we considered the use of a
constrained regression approach under which we would have estimated the
adult risk adjustment model using only the age-sex variables. Under
this approach, we would have then re-estimated the model using the full
set of HCCs, while constraining the value of the age-sex coefficients
to be the same as those from the first estimation. We also considered
creating separate models for enrollees with and without HCCs to derive
two separate sets of age-sex coefficients. We evaluated the effect of
these possible modifications, and ultimately decided to not move
forward with such changes due to concerns of significantly
undercompensating plans with higher-than-average actuarial risk.\45\
---------------------------------------------------------------------------
\44\ 81 FR 61455 at 61473.
\45\ 81 FR at 94083.
---------------------------------------------------------------------------
We continue to evaluate ways to improve the risk prediction of the
HHS risk adjustment models under various approaches to model estimation
that might more precisely account for the non-linearities in plan
liability as referenced in the 2016 Risk Adjustment White Paper.\46\ We
are continuing to investigate HCC count models whereby the number of an
enrollee's HCCs would be considered in calculating an enrollee's risk
score, similar to the proposed Medicare Advantage risk adjustment model
incorporating HCC counts.\47\ As another alternative, we are evaluating
whether a non-linear term might improve the prediction of the models
over the current linear model specification method for the adult
models. For example, this non-linear method would include an additive
term that is the sum of the risk score exponentiated to a factor solved
by the models. The added non-linear term would be a measure of overall
disease burden in which having combinations of HCCs can have a larger
effect than the sum of the individual HCCs.
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\46\ Available at https://www.cms.gov/CCIIO/Resources/Forms-
Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-
032416.pdf.
\47\ Advance Notice of Methodological Changes for Calendar Year
(CY) 2020 for the Medicare Advantage (MA) CMS-HCC Risk Adjustment
Model. December 20, 2018. https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2020Part1.pdf.
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We continue to evaluate alternative modeling approaches while
considering several important trade-offs between making improvements to
risk prediction and the year-to-year predictability of the models. We
also are examining any shortcomings of the potential alternatives that
include additional complexity, lack of transparency, and potential
upcoding incentives. For example, because issuers would receive an
incremental additional factor for coding another HCC, there might be an
incentive for upcoding, particularly with a count model. We believe
that these alternative approaches require further investigation prior
to making any of these types of changes to the models. For these
reasons, we intend to solicit comments in the future on potential
proposed improvements to the current models, as well as alternative
modeling methods involving either non-linear or count models for
potential use in future benefit years of HHS-operated
[[Page 17484]]
risk adjustment model recalibration. We would especially be interested
in comments regarding the factors HHS should consider in evaluating
performance and their effects on subgroups in the population. We intend
to also seek comment on the trade-offs we should consider, along with
other risk adjustment topics.
Comment: One commenter requested that HHS reopen rulemaking
proceedings, reconsider, and revise the Payment Notices for the 2017,
2018, and 2019 benefit years regarding the risk adjustment program
under section 553(e) of the Administrative Procedure Act.
Response: The requests related to the 2017, 2018, and 2019 benefit
year rulemakings are outside the scope of the proposed rule and this
final rule, which is limited to the 2020 benefit year.
i. State Flexibility Requests (Sec. 153.320(d))
In the 2019 Payment Notice, we provided states the flexibility to
request a reduction to the otherwise applicable risk adjustment
transfers calculated under the HHS-operated risk adjustment
methodology, which is calibrated on a national dataset, for the state's
individual, small group, or merged markets, by up to 50 percent to more
precisely account for differences in actuarial risk in the applicable
state's market(s). We finalized that any requests received will be
published in the respective benefit year's proposed notice of benefit
and payment parameters, and the supporting evidence for the request
will be made available for public comment.\48\
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\48\ 2019 Payment Notice Final Rule, 83 FR 16930 (April 17,
2018) and Sec. 153.320(d)(3).
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In accordance with Sec. 153.320(d)(2), beginning with the 2020
benefit year, states must submit such requests with the supporting
evidence and analysis outlined under Sec. 153.320(d)(1) by August 1st
of the calendar year that is 2 calendar years prior to the beginning of
the applicable benefit year. If approved by HHS, state reduction
requests will be applied to the plan PMPM payment or charge transfer
amount (Ti in the state payment transfer calculation below).
We proposed to amend Sec. 153.320(d)(3) to add language to provide
that if the state requests that HHS not make publicly available certain
supporting evidence and analysis because it contains trade secrets or
confidential commercial or financial information within the meaning of
the HHS Freedom of Information Act (FOIA) regulations at 45 CFR
5.31(d), HHS will do so, making available on the CMS website only the
supporting evidence submitted by the state that is not a trade secret
or confidential commercial or financial information. Similar to the
rate review program established under section 2794 of the PHS Act, HHS
would release only information that is not a trade secret or
confidential commercial or financial information as defined under the
HHS FOIA regulations.\49\ In these circumstances, similar to the
federal rate review requirements, we proposed that any states
requesting a reduction provide a version for public release that
redacts the trade secret and confidential commercial or financial
information as defined under the HHS FOIA regulations, while also
providing an unredacted version to HHS for its review of the state's
reduction request. We also proposed that state requests for individual
market risk adjustment transfer reductions would be applied to both the
catastrophic and non-catastrophic individual market risk pools, unless
state regulators request otherwise.
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\49\ See Sec. 154.215(h)(2).
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We are finalizing our amendment to Sec. 153.320(d)(3) to add
language to provide that if the state requests that HHS not make
publicly available certain supporting evidence and analysis because it
contains trade secrets or confidential commercial or financial
information within the meaning of the HHS FOIA regulations at 45 CFR
5.31(d), HHS will make available on the CMS website only the supporting
evidence submitted by the state that is not a trade secret or
confidential commercial or financial information by posting a redacted
version of the state's supporting evidence. In light of comments
received, we are not finalizing our proposal to apply requests for
individual market risk adjustment transfer reductions to both the
catastrophic and non-catastrophic individual market risk pools within
the state, unless the state requested otherwise.
For the 2020 benefit year, HHS received a request to reduce risk
adjustment transfers for the Alabama small group market by 50 percent.
Alabama's request states that the presence of a dominant carrier in the
small group market precludes the HHS-operated risk adjustment program
from working as precisely as it would with a more balanced distribution
of market share. The state regulators stated that their review of the
risk adjustment payment issuers' financial data suggested that any
premium increase resulting from a reduction to risk adjustment payments
of 50 percent in the small group market for the 2020 benefit year will
not exceed 1 percent, the de minimis premium increase threshold. We
sought comment on Alabama's request to reduce risk adjustment transfers
in the small group market by 50 percent for the 2020 benefit year. The
request and additional documentation submitted by Alabama was posted
under the ``State Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html. In light of our analysis of the information
submitted with Alabama's request and the comments received, we are
approving Alabama's request to reduce risk adjustment transfers in the
small group market for the 2020 benefit year by 50 percent.
The following is a summary of the public comments we received on
our proposals regarding state flexibility requests under Sec.
153.320(d), and on Alabama's 2020 benefit year reduction request.
Comment: Commenters supported the ability of states to provide
redacted versions of public-facing documents, although two raised
questions about the scope of the redactions and whether the resulting
documents would be sufficient to permit an effective review by
interested parties.
Response: We are finalizing this amendment as proposed, as we
believe it is important to protect information that contains trade
secrets or confidential commercial or financial information within the
meaning of the HHS FOIA regulations at Sec. 5.31(d). However, we will
seek to implement an approach with targeted redactions focused on
information that would be considered trade secrets or confidential
commercial, or financial information under Sec. 5.31(d), to support
effective review by interested parties.
Comment: One commenter opposed the application of state individual
market risk adjustment transfer reduction requests to both the
individual market catastrophic and non-catastrophic risk pools within
the state. The commenter noted that the individual market catastrophic
and non-catastrophic risk pools have different characteristics that
impact the size of transfers.
Response: After consideration of the commenters' concerns, we are
not finalizing the proposed default to extend a state individual market
reduction request to adjust transfers in both the individual
catastrophic and non-catastrophic risk pools, unless the
[[Page 17485]]
state regulators request otherwise. When a state submits a reduction
request related to the individual market transfers under the HHS state
payment transfer formula, it will need to outline the risk pools the
request and analysis apply to as part of its submission under Sec.
153.320(d)(1). We are amending the regulatory language at Sec.
153.320(d) to specifically reference state market risk pools consistent
with this approach and to make some technical edits.
Comment: The majority of comments about Alabama's state flexibility
request expressed support for the state's request, with many stating
that states are best equipped to evaluate the needs of their insurance
markets. Commenters opposing this request pointed to the fact that
states can elect to operate the PPACA risk adjustment program and
propose their own risk adjustment methodology, or that the current HHS-
operated risk adjustment methodology is operating as intended. Multiple
commenters expressed concern regarding the methodology Alabama used to
provide evidence supporting its request, each stating that a more
thorough actuarial analysis was needed, and some pointed to the
requested 50 percent reduction as a crude and blunt figure not based on
data.
Response: We agree that states are best equipped to understand the
needs of their insurance markets and in the 2019 Payment Notice, HHS
provided the flexibility for these reduction requests when a state
elects not to operate the PPACA risk adjustment program. For some
states, an adjustment to transfers calculated by HHS under the state
payment transfer formula may more precisely account for cost
differences attributable to adverse selection in the respective state
market risk pools. Further, allowing these adjustments can account for
the effect of state-specific rules or unique market dynamics that may
not be captured in the HHS methodology, which is calibrated on a
national dataset, without the necessity for states to undertake the
burden and cost of operating their own PPACA risk adjustment program.
We reviewed Alabama's supporting evidence regarding the state's
unique small group market dynamics that it believes warrant an
adjustment to the HHS calculated risk adjustment small group market
transfers for the 2020 benefit year. Alabama provided information
demonstrating the presence of a dominant carrier in the small group
market precludes the HHS-operated risk adjustment transfer methodology
from working as precisely as it would with a more balanced distribution
of market share. Alabama state regulators noted they do not assert that
the HHS formula is flawed, only that it results in imprecise results in
the state's small group market that could further reduce competition
and increase costs for consumers. The state regulators also provided
information demonstrating that the request would have a de minimis
impact on necessary premium increase for payment issuers, consistent
with Sec. 153.320(d)(1)(iii). We note that HHS reviewed the unredacted
state supporting analysis in evaluating Alabama's request, along with
other data available to HHS. We found the supporting analysis submitted
by Alabama to be sufficient in evaluating the market-specific
circumstances validating Alabama's request.
Based on our review, we agree that any necessary premium increase
for issuers likely to receive payments as a result of a 50 percent
reduction to risk adjustment transfers in the Alabama small group
market for the 2020 benefit year would not exceed 1 percent. HHS has
determined that the state has demonstrated the existence of relevant
state-specific factors that warrant an adjustment to more precisely
account for relative risk differences and that the adjustment would
have a de minimis effect. Therefore, we are approving Alabama's
requested reduction under Sec. 153.320(d)(4)(i)(B) based on the state
regulators' identification of unique state-specific factors in the
Alabama small group market and the supporting analysis of a de minimis
effect of the reduction requested. The 50 percent reduction will be
applied to the 2020 benefit year plan PMPM payment or charge transfer
amount (Ti in the state payment transfer calculation below)
for the Alabama small group market.
We also note that state regulators seeking a reduction to risk
adjustment transfers in the state's individual catastrophic risk pool,
individual non-catastrophic risk pool, small group market or a merged
market for the 2021 benefit year should submit supporting materials to
HHS as established under Sec. 153.320(d). We will review any requests
received on an annual basis, will make the supporting evidence publicly
available for comment in the proposed notice of benefit and payment
parameters for the respective benefit year, and will consider the
relevant comments in our review of the state request for the applicable
benefit year.
ii. The Risk Adjustment Transfer Methodology
Although the proposed HHS risk adjustment transfer methodology for
the 2020 benefit year is unchanged from what was finalized in the 2019
Payment Notice (83 FR 16954 through 16961), we believe it is useful to
republish the calculation in its entirety. Additionally, we are
republishing the description of the administrative cost reduction to
the statewide average premium and high-cost risk pool factors, although
these factors and terms also remain unchanged in this final rule.\50\
Transfers (payments and charges) under the state payment transfer
formula will be calculated as the difference between the plan premium
estimate reflecting risk selection and the plan premium estimate not
reflecting risk selection. The state payment transfer calculation that
is part of the HHS risk adjustment transfer methodology is:
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\50\ See 83 FR 16930 at 16960.
[GRAPHIC] [TIFF OMITTED] TR25AP19.000
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Where:
PS = Statewide average premium;
PLRSi = plan i's plan liability risk score;
AVi = plan i's metal level AV;
ARFi = allowable rating factor;
IDFi = plan i's induced demand factor;
GCFi = plan i's geographic cost factor;
si = plan i's share of state enrollment.
The denominator will be summed across all risk adjustment covered
plans in the risk pool in the market in the state.
The difference between the two premium estimates in the state
payment transfer formula determines whether a plan pays a risk
adjustment charge or receives a risk adjustment payment. The value of
the plan average risk score by itself does not determine whether a plan
will be assessed a charge or receive a payment--even if its risk score
is greater than 1.0, it is possible that the plan will be assessed a
charge if the premium
[[Page 17486]]
compensation that the plan may receive through its rating (as measured
through the allowable rating factor) exceeds the plan's predicted
liability associated with risk selection. Risk adjustment transfers
under the state payment transfer formula are calculated at the state
market risk pool level, and catastrophic plans are treated as a
separate risk pool for purposes of the risk adjustment state payment
transfer calculations.\51\ This resulting PMPM plan payment or charge
will be multiplied by the number of billable member months to determine
the plan's payment or charge based on plan liability risk scores for a
plan's geographic rating area for the risk pool market within the
state.
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\51\ As detailed elsewhere in this final rule, catastrophic
plans and non-catastrophic plans and merged market plans are
considered part of the individual market for purposes of the
national high-cost risk pool payment and charge calculations.
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We defined the cost scaling factor, or the statewide average
premium term, as the sum of the average premium per member month of
plan i (Pi) multiplied by plan i's share of statewide
enrollment in the market risk pool (si). The statewide
average premium will be adjusted to remove a portion of the
administrative costs that do not vary with claims (14 percent) as
follows:
PS = ([Sigma]i(si [middot] Pi)) * (1 -0.14) = ([Sigma]i(si [middot]
Pi)) * 0.86
Where:
si = plan i's share of statewide enrollment in the market in the
risk pool;
Pi = average premium per member month of plan i.
The high-cost risk pool adjustment amount will be added to the
state payment transfer formula to account for: (1) The payment term,
representing the portion of costs above the threshold reimbursed to the
issuer for high-cost risk pool payments (HRPi), if applicable; and (2)
the charge term, representing a percentage of premium adjustment, which
is the product of the high-cost risk pool adjustment factor (HRPCm) for
the respective national high-cost risk pool m (one for the individual
market, including catastrophic, non-catastrophic and merged market
plans, and another for the small group market), and the plan's total
premiums (TPi). For this calculation, we will use a percent of premium
adjustment factor that is applied to each plan's total premium amount.
The total plan transfers for a given benefit year will be
calculated as the product of the plan PMPM's transfer amount
(Ti) multiplied by the plan's billable member months
(Mi), plus the high-cost risk pool adjustments. The total
plan transfer (payment or charge) amounts under the HHS risk adjustment
transfer methodology for a benefit year will be calculated as follows:
Total transferi = (Ti [middot] Mi) + (HRPi-(HRPCm [middot] TPi)
Where:
Total Transferi = Plan i's total HHS risk adjustment program
transfer amount;
Ti = Plan i's PMPM transfer amount based on the state transfer
calculation;
Mi = Plan i's billable member months;
HRPi = Plan i's total high-cost risk pool payment;
HRPCm = High-cost risk pool percent of premium adjustment factor for
the respective national high-cost risk pool m;
TPi = Plan i's total premium amounts.
As we noted above, we approved Alabama's small group market
reduction request for the 2020 benefit year. The approved reduction
percentage (50 percent) will be applied to the 2020 benefit year plan
PMPM payment or charge transfer amount (Ti) under the state
payment transfer calculation for the Alabama small group market risk
pool. The Alabama reduction to the PMPM transfer amounts is not shown
in the HHS risk adjustment state payment transfer formula above. While
we note that we addressed comments regarding the high-cost risk pool
transfer calculation in the high-cost risk pool section above and
comments regarding the cost-scaling factor in the state payment
transfer formula in the overview of the transfer methodology section
above, the following is a summary of the other public comments we
received on the total plan transfer calculation published in the
proposed rule.
Comment: One commenter supported HHS reducing the statewide average
premium to account for costs associated with administrative expenses
that do not vary with claims. Another commenter recommended that HHS
publish the analysis used to determine the 14 percent administrative
expense factor, including the specific line items from the Medical Loss
Ratio (MLR) Annual Reporting Form that were included as administrative
expenses that do not vary with claims to determine the 14 percent
reduction of premium.
Response: As detailed in the 2018 Payment Notice,\52\ to derive
this parameter, we analyzed and categorized administrative and other
non-claims expenses in the MLR Annual Reporting Form,\53\ and
estimated, by category, the extent to which the expenses varied with
claims. We compared those expenses to the total costs that issuers
finance through premiums, including claims, administrative expenses,
and taxes, netting out claims costs financed through cost-sharing
reduction payments.\54\ We compared these expenses to total costs,
rather than directly to premiums, to ensure that the estimated
administrative cost percentage was not distorted by under- or over-
pricing during the years for which MLR data are available. Using this
methodology, we determined that the mean administrative cost percentage
is 14 percent. While we are assessing whether other data sources might
be able to supplement this analysis for potential updates for future
years, we continue to believe that the current percentage represents a
reasonable percentage of administrative costs on which risk adjustment
transfers should not be calculated.
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\52\ 81 FR 94100.
\53\ To estimate the administrative cost parameter, we used
information in the MLR Annual Reporting Form on health care quality
improvement expenses incurred, the federal and state taxes and
licensing on regulatory fees, and other non-claims costs. We also
assumed 25 percent of general administrative expenses, as reported
on the MLR Annual Reporting Form would be included in the
administrative cost parameter. Information on the medical loss ratio
data are available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
\54\ The analysis used 2016 CSR payment data.
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c. Risk Adjustment Issuer Data Requirements (Sec. Sec. 153.610,
153.710)
In the 2018 Payment Notice,\55\ we finalized the collection of
masked enrollee-level data from issuers' EDGE servers (referred to as
``enrollee-level EDGE data'') beginning with the 2016 benefit year to
recalibrate the HHS risk adjustment models and inform development of
the AV Calculator and methodology.
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\55\ See 81 FR 94058 at 94101.
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In the 2018 Payment Notice, we also stated that we would consider
using this enrollee-level EDGE data in the future to calibrate other
HHS programs in the individual and small group markets, and to produce
a public use file to help governmental entities and independent
researchers better understand these markets. We noted that a public use
file derived from these data would be de-identified in accordance with
the Health Insurance Portability and Accountability Act of 1996 (HIPAA)
requirements, would not include proprietary issuer or plan identifying
data, and would adhere to HHS rules and policies regarding protected
health information (PHI) and personally identifiable information (PII).
We also described in guidance the data elements in the enrollee-level
EDGE data set and
[[Page 17487]]
the data elements proposed to be made available for research
requests.\56\
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\56\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollee-level-EDGE-Dataset-for-Research-Requests-05-18-18.pdf.
---------------------------------------------------------------------------
Under the HIPAA safe harbor for de-identification of data at 45 CFR
164.514(b)(2), public use files are considered de-identified if they
exclude 18 specific identifiers that could be used alone or in
combination with other information to identify an individual who is a
subject of the information. To make the enrollee-level EDGE data
available as a public use file that comports with the requirements of
Sec. 164.514(b)(2), we would have to remove dates (other than the
year) and ages for enrollees ages 90 or older,\57\ and determine that
the information could not be used alone or in combination with other
information to identify an individual who is a subject of the
information. Commenters stated that a public use file would be limited
in its usefulness because it excludes dates that would be useful to
conduct health services research. A limited data set, as defined at
Sec. 164.514(e)(2), may include dates, which could enable requestors
to do analyses they would not be able to do with a public use file. In
addition, under Sec. 164.514(e)(4), a limited data set recipient must
enter into a data use agreement that establishes the permitted uses or
disclosures of the information and prohibits the recipient from
identifying the information. We believe entities seeking to use the
enrollee-level EDGE data will be able to better understand the
individual and small group markets with a limited data set.
---------------------------------------------------------------------------
\57\ HHS does not currently collect any of the other data
elements under Sec. 164.514(b)(2) that would require de-
identification.
---------------------------------------------------------------------------
Thus, in the proposed rule, we proposed to create and make
available by request a limited data set file rather than a public use
file, as we believe a limited data set file will be more useful to
requestors for research, public health, or health care operations
purposes. We noted that, under this proposal, we would make enrollee-
level EDGE data, beginning with the 2016 benefit year, available as a
``limited data set'' file under Sec. 164.514(e). This limited data set
file would not include the direct identifiers of the individual or of
relatives, employers, or household members of the individual, which are
required to be removed under the limited data set definition at Sec.
164.514(e)(2) and which issuers do not submit to their EDGE servers. We
also proposed to limit disclosures of the limited data set to
requestors who seek these data for research, public health, or health
care operations purposes, as those terms are defined under Sec.
164.501. We stated that we would require qualified requestors to sign a
data use agreement to ensure these data will be maintained, used, and
disclosed only as permitted under the HIPAA Privacy Rule, and to ensure
that any inappropriate uses or disclosures are reported to HHS. We
noted that HHS components would also be able to request the limited
data set file for research, public health, or health care operations
purposes, as those terms are defined under Sec. 164.501. We also
clarified that, if the proposal is finalized, we would make a limited
data set file available on an annual basis, reflecting enrollee-level
data from the most recent benefit year available on EDGE servers. We
stated that if we finalize the proposal to make a limited data set file
available, HHS would not offer a public use file based on the enrollee-
level EDGE data. We sought comment on this proposal.
In addition, we explained in the proposed rule that we received
feedback in response to the guidance describing the data elements to be
made available as part of the public use file for research requests
\58\ noting that researchers would benefit from additional data
elements on enrollees' geographic identifiers, enrollees' income level,
provider identifier, provider's geographic location, hashed claim
identifier, enrollees' plan benefit design details, and enrollees' out-
of-pocket costs by cost-sharing type (deductible, coinsurance, and
copayment). We noted that we began collecting a claim identifier \59\
to associate all services rendered under the same claim beginning with
the 2017 benefit year enrollee-level EDGE data. Therefore, we stated
that if we were to finalize the limited data set proposal, we would be
able to include this grouped claims identifier beginning for the 2017
benefit year enrollee-level EDGE limited data set file. However,
regarding the other data elements commenters requested, we explained
that either issuers do not submit them to their EDGE servers, or we
currently do not extract them from issuers' EDGE servers due to
concerns about the ability to use the data element(s) to identify
issuers or plans. For example, issuers do not currently submit data to
their EDGE servers on enrollees' plan benefit design, specific cost-
sharing elements (deductibles, copayments), provider identifiers,
providers' geographic location, enrollees' income level, or enrollees'
geographic location more specific than the rating area, and therefore,
we are unable to extract such information as part of the enrollee-level
EDGE data. However, issuers do submit enrollees' state and rating areas
as part of the EDGE server submissions, making it possible to extract
these data elements from the issuers' EDGE servers as part of the
enrollee-level EDGE data. We stated in the proposed rule that, if we
were to extract state and rating area data elements, we could also make
such information available as part of the proposed enrollee-level EDGE
limited data set file. We stated in the proposed rule that we continue
to believe the enrollee-level EDGE data can increase cost transparency
for consumers and stakeholders for the individual and small group
markets, and can be a useful resource for government entities and
independent researchers to better understand these markets. We also
recognized access and use of enrollee-level EDGE data should continue
to safeguard enrollees' privacy and security and issuers' proprietary
information. We reiterated that we use the enrollee-level EDGE data to
recalibrate the HHS risk adjustment models and inform development of
the AV Calculator and methodology and stated that extracting additional
state and rating area information could enable HHS to assess the impact
of differences in geographic factors in the HHS risk adjustment
methodology. In addition, we stated that stakeholders have noted that
adding geographic elements to the AV Calculator would better estimate
the AV of plans based on the cost differences across regions.
Extraction of these geographic details (state and rating area) from
issuers' EDGE servers could also help support other HHS programs and
policy priorities, as well as provide additional data elements for
researchers. We noted that although these geographic data elements are
not currently extracted from the enrollee-level EDGE data set,
extracting them would not increase burden for issuers, as issuers
already submit these data elements as part of the EDGE server data
submission process. We stated in the proposed rule that if we were to
extract state and rating area
[[Page 17488]]
information, we would do so as part of the enrollee-level EDGE data
extraction and would use this information to support the recalibration
and policy development related to the HHS-operated risk adjustment
program, the AV Calculator and methodology, as well as other HHS
programs in the individual and small group (including merged) markets.
We sought comment on whether to extract state and rating area
information for enrollees as part of the enrollee-level EDGE data. We
also sought comment on how state and rating area information could be
used in the HHS-operated risk adjustment program, AV Calculator and
methodology, and other HHS programs in the individual and small group
(including merged) markets, as well as on how these data elements could
benefit researchers and public health. We sought comment on, if we were
to extract these data elements, whether to make state and rating area
information available as part of the proposed limited data set file
that would be made available to qualified requestors. We sought comment
on the advantages and disadvantages of using state and rating area
information for recalibration of the HHS-operated risk adjustment
program, the AV Calculator and methodology, and other HHS individual
and small group (including merged) market programs. In addition, we
sought specific comment on possible research purposes for these data
elements, whether the benefits of extracting these additional data
elements outweigh the potential risk to issuers' proprietary
information, and whether extraction of these data elements is
consistent with the goals of a distributed data environment.
---------------------------------------------------------------------------
\58\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollee-level-EDGE-Dataset-for-Research-Requests-05-18-18.pdf.
\59\ For the 2017 benefit year, we have included a unique claim
identifier field, a hashed claim identifier, in the data extract.
The claim identifier is a random hashed number assigned for each set
of service line items associated with each claim, and cannot be used
to identify the enrollee, plan or medical record. Including this
claim identifier will allow data users to associate all service line
items rendered under the same claim and also permit more rigorous
checks of data quality.
---------------------------------------------------------------------------
We also sought specific comment on the other data elements outlined
in the proposed rule that commenters requested be part of the enrollee-
level EDGE dataset, but that issuers do not currently submit to their
EDGE servers (for example, enrollees' income level, provider
identifier, provider's geographic location, hashed claim
identifier,\60\ enrollees' plan benefit design details, and enrollees'
out-of-pocket costs by cost-sharing type, such as deductible,
coinsurance, and copayment), and other enrollment and claims data
elements not otherwise described in the proposed rule, and whether
collection of such data elements could benefit the calibration of the
HHS risk adjustment program, the AV calculator and methodology, and
other HHS individual and small group (including merged) market
programs. We also sought specific comment with examples on whether
other data elements that issuers do not currently submit to their EDGE
servers could benefit further research, public health, or health care
operations as part of a limited data set file made available to
qualified requestors.
---------------------------------------------------------------------------
\60\ As noted previously, we began extracting a hashed claim
identifier to identify all the service line items that belong to the
same claim beginning with the 2017 benefit year enrollee-level EDGE
extract.
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Finally, we proposed to extend the use of enrollee-level EDGE data
and reports extracted from issuers' EDGE servers (including data
reports and ad hoc querying tool reports) to calibrate and
operationalize our individual and small group (including merged) market
programs (for example, the HHS-operated risk adjustment program, the AV
calculator and methodology, and the out-of-pocket calculator), as well
as to conduct policy analysis for the individual and small group
(including merged) markets (for example, to assess the market impacts
of policy options being deliberated). We explained that we believe
these additional uses of the enrollee-level EDGE data would enhance our
ability to develop and set policy for the individual and small group
(including merged) markets and avoid burdensome data collections from
issuers.
To further our commitment to increasing transparency in health care
markets and help the public better understand these markets, we are
finalizing our proposal with one modification. Under our final policy,
we will create and make available, on an annual basis, enrollee-level
EDGE data as a limited data set file for qualified requestors who seek
these data for research purposes. We will not make this limited data
set available to requestors for public health or health care operations
activities. While these purposes are permitted by the HIPAA Privacy
Rule, in light of comments received and HHS' operational limitations,
HHS will not make this limited data set file available to requestors
for public health or health care operations activities at this time. We
note that we may consider exploring the use of the public health and
heath care operations pathways for making the limited data set file
available in the future. We did not propose to extract state and rating
area information from issuers' EDGE servers or collect additional data
elements, and based on comments received, at this time, we do not
believe the benefits from additional data element extractions or
collections would outweigh the costs of potential increased risk to
issuers' proprietary information and increased issuer burden. As noted
in the proposed rule, we will include the grouped claims identifier
beginning with the 2017 benefit year enrollee-level EDGE limited data
set file, as that is the first year that data element is available. We
are finalizing our proposal to allow HHS to use the enrollee-level EDGE
data and reports extracted from issuers' EDGE servers (including data
reports and ad hoc querying tool reports) to calibrate and
operationalize our individual and small group (including merged) market
programs, including to conduct recalibration of the HHS risk adjustment
program and to make updates to the AV Calculator, and to conduct policy
analysis for the individual and small group (including merged) markets.
We believe these additional uses of the enrollee-level EDGE data and
reports will enhance our ability to develop and set policy for the
individual and small group (including merged) markets and avoid
burdensome data collections from issuers. We clarify that our policies
regarding HHS uses of the enrollee-level EDGE data apply to the HHS
components that currently receive and use such data for purposes of the
HHS risk adjustment program. As we stated in the proposed rule, other
HHS components will be able to request the EDGE limited data set file
for research purposes, as that term is defined under Sec. 164.501. We
also note that the enrollee-level EDGE data may be subject to
disclosure as otherwise required by law.\61\
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\61\ See, for example, 2 U.S.C. 601(d).
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Comment: Many commenters supported HHS' proposal to create and make
available by request a limited data set file using enrollee-level EDGE
data. These commenters noted that the limited data set file will
support research, public health, external accountability, and
transparency. One commenter stated these data will provide researchers
with a better understanding of Exchange functions and enrollees' health
needs. Another commenter noted these data will help support state
departments of insurance in the rate review process. However, numerous
other commenters did not support the proposal to offer a limited data
set file. Most of these commenters expressed concerns about the
potential for unauthorized disclosure of PII and issuer proprietary
information. One commenter stated it was particularly concerned with
the enrollee-level EDGE data being used for the purpose of health care
operations. One commenter stated HHS has not provided adequate
assurances that the information would not be used for unauthorized
purposes.
[[Page 17489]]
Several commenters expressed concerns about the potential of these data
to undermine provider contracting and rate negotiations. Some
commenters noted that offering these data could erode issuer confidence
and could be used by some issuers to competitively price products and
game the federal risk adjustment program.
Response: We appreciate the comments we received on our proposal to
create and make available by request a limited data set file using the
enrollee-level EDGE data. We continue to believe the enrollee-level
EDGE data can increase cost transparency for consumers and stakeholders
for the individual and small group (including merged) markets and can
be a useful resource for government entities and independent
researchers to better understand these markets. These benefits align
with HHS' goal to promote increased transparency in health insurance
markets. We also recognize that any access to and use of the enrollee-
level EDGE data should continue to safeguard enrollee privacy and
security and issuers' proprietary information. While we acknowledge and
appreciate commenters' concerns, we believe the benefits of making
these data available for research purposes outweigh the potential risks
associated with unauthorized disclosure of these data. While some
commenters stated that the limited data set file will benefit public
health, others expressed concern. Moreover, HHS does not currently make
limited data sets available for health care operations or public health
purposes. Therefore, as discussed above, in light of comments received
and HHS' operational limitations, HHS will not make this limited data
set file available to requestors for public health or health care
operations activities at this time. We note that we intend to use the
existing process to make limited data set files available and
requestors will be required to provide a research purpose as part of
their requests.\62\ We believe the potential risks will be mitigated
through the existing controls that limit access to these data to
qualified requestors who seek these data for research purposes, by
requiring requestors to enter into a data use agreement, and by
continuing to apply the precautions already in place to mask enrollee
identifiers. Under Sec. 153.720, issuers do not upload PII to their
EDGE servers, and must establish and use a unique masked identification
number for each enrollee and may not include the enrollee's PII in the
masked enrollee identification number. Furthermore, when HHS extracts
enrollee-level EDGE data, we create a hashed enrollee identifier, a
system-generated random number, that cannot be linked back to the
issuers' EDGE servers to identify the issuer or plan. As we noted in
the proposed rule and reiterated above, this limited data set file will
not include the direct identifiers of the individual or of relatives,
employers, or household members of the individual, which are required
to be removed under the limited data set definition at Sec.
164.514(e)(2), as issuers do not upload these identifiers to their EDGE
servers. Thus, we believe we will continue to protect enrollees' PII
and issuers' proprietary information. Furthermore, the limited data set
regulations under Sec. 164.514(e) impose specific limitations on use
and disclosure of these types of data, and qualified requestors will be
required to abide by these requirements and our policies for limited
data sets. Requestors will be required to provide a research purpose as
part of their request. The data use agreement will require the
requestors to maintain, use, and disclose the limited data set only as
permitted under Sec. 164.514(e) and report any inappropriate uses or
disclosures of these data.\63\ As discussed below, we are not
finalizing a policy to extract state and rating area information from
issuers' EDGE servers, and therefore, we will not include those data in
the limited data set file developed using enrollee-level EDGE data.
Because the limited data set files will not include issuer or plan
identifiable information, requestors with access to the limited data
set files will not receive or be able to misuse any issuer trade secret
information. Additionally, the extracted enrollee-level EDGE data does
not include premium information from issuers' EDGE servers and
therefore requestors will not be able to determine issuer-specific rate
negotiation information. Furthermore, issuers do not upload provider
(for example, hospital or physician) identifying information to their
EDGE servers. Therefore, these types of provider identifiers cannot be
extracted for the enrollee-level EDGE data collection either,
mitigating commenters' concerns that the data could reveal issuer-
specific provider contracting or negotiated price information.
Therefore, we do not believe the enrollee-level EDGE data could be used
to identify issuer-specific proprietary pricing data.
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\62\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html.
\63\ https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html.
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Comment: One commenter sought clarity on the types of entities that
can request the limited data set file and the process HHS will use to
consider requests. Another commenter noted HHS should develop strict
standards for release of these data as a limited data set for which it
should seek public comment.
Response: As described in this rule, the limited data set will be
made available in accordance with the regulations at Sec. 164.514(e)
and existing policies and procedures for limited data set requests. The
limited data set file, when available, would be provided to qualified
requestors who seek these data for research purposes, consistent with
other limited data sets made available by CMS.\64\ Requestors will need
to submit a research purpose statement and sign a data use agreement to
ensure these data will be used for the stated purpose only and that
these data will be maintained, used, and disclosed only as permitted by
the agreement or otherwise required by law. We will have final
discretion over the decision whether to approve a request for access to
the limited data set file.
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\64\ For information on the CMS limited data set process and
data use agreements, see https://www.cms.gov/Research-Statistics-Data-and-Systems/Files-for-Order/Data-Disclosures-Data-Agreements/DUA_-_NewLDS.html#Policies.
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Comment: Several commenters expressed concern with any use of state
and rating area information to support the operation of the risk
adjustment program and other HHS programs. Some commenters noted
outside entities could identify issuers and, possibly, individual
enrollees in a limited data set if it included state and rating area
data elements, which could risk issuers' proprietary information and
enrollees' PII. However, some commenters who supported release of a
limited data set also supported including state and rating area
information in the limited data set, stating that this information
would make these data more useful to researchers. Most commenters did
not support the use of state and rating area information to calibrate
the AV Calculator. Most commenters noted this would add increased
complexity with little benefit, cause consumer and issuer confusion,
and result in unintended consequences affecting the underlying AV
Calculator and methodology. One commenter stated that there may not be
adequate data in some states and rating areas to build models for the
AV Calculator and methodology.
Response: We appreciate the comments we received regarding
[[Page 17490]]
extraction and use of state and rating area information from issuers'
EDGE servers. While we believe state and rating area information would
enhance the usefulness of the enrollee-level EDGE data, including for
the limited data set file, we agree that the risk of potential
unauthorized disclosure of issuer- or plan-level information through
inclusion of geographic identifiers outweighs these benefits. We
understand that including geographic identifiers in the limited data
set would enable qualified requestors who receive the limited data set
file to identify issuers in states or rating areas with only one
issuer. We appreciate the comments describing concerns regarding the
extraction of state and rating area data elements, and as we did not
propose to extract and use those data elements for the enrollee-level
EDGE data, we are not making any changes in that regard at this time.
We agree with commenters that using geographic information for the
AV Calculator and methodology is neither required nor would enhance the
current methodology. For AV Calculator and methodology updates in
future years, we will continue to use enrollee-level EDGE data in its
current format (without the state or rating area information).
Comment: Many commenters did not support the collection of
additional data elements, such as enrollees' income level, provider
identifier, plan benefit design details, and enrollees' out-of-pocket
costs by cost-sharing type (deductible, coinsurance, and copayment),
that issuers are not already submitting to their EDGE servers.
Commenters stated the submission of additional data elements would be
administratively complex, burdensome, and beyond the minimum necessary
data elements needed for recalibration of the risk adjustment program.
One commenter noted HHS should expand the data elements available in
the limited data set file, but did not provide further specificity,
including how HHS would do that without first collecting those data
elements on the issuers' EDGE servers.
Response: We believe that collection of additional data elements
that are not currently submitted by issuers to their EDGE servers, such
as enrollees' plan benefit design details, and enrollees' out-of-pocket
costs by cost-sharing type (deductible, coinsurance, and copayment),
would enhance the usefulness of the enrollee-level EDGE data, including
for the limited data set. However, we acknowledge the commenters'
concerns that collection of additional data elements on issuers' EDGE
servers could be administratively complex and burdensome for issuers,
as it would increase their data collection requirement, and for HHS, as
these data elements would have to be validated and added to the file
structure that is submitted through the distributed data environment.
We recognize the need to balance the benefits of enhanced transparency
and helping the public better understand these markets against
minimizing issuer and government costs and burden. As we did not
propose to make any changes in this regard, we are not making any such
changes at this time, and will consider whether to propose collection
of any additional data elements for the EDGE server submissions for
future benefit years.
Comment: Some commenters supported HHS broadening its uses of
enrollee-level EDGE data to improve and administer programs within HHS'
scope, including to recalibrate the risk adjustment program and the AV
Calculator and methodology. Most who commented supported HHS broadening
the use of the enrollee-level EDGE data as proposed. One commenter
noted HHS should not use these data for any other purpose without
express issuer permission. Some commenters noted HHS should not use
EDGE server data outside of the risk adjustment program, stating that
such use would be inconsistent with the intent of using a distributed
data environment for administering the risk adjustment program. One
commenter did not support the use of EDGE data for policy analysis
outside of the risk adjustment program, and recommended that, if HHS
proceeds with this proposal, it should define policy analysis and seek
public comment.
Response: We are finalizing our proposal to allow HHS to use the
enrollee-level EDGE data and reports extracted from issuers' EDGE
servers (including data reports and ad hoc querying tool reports) to
calibrate and operationalize our individual and small group (including
merged) market programs (for example, the HHS-operated risk adjustment
program, the AV Calculator and methodology and the out-of-pocket
calculator), as well as to conduct policy analysis for the individual
and small group (including merged) markets. We agree with commenters
that our use of the enrollee-level EDGE data for these purposes will
help improve our understanding of the nuances unique to the individual
and small group (including merged) markets so that we can be responsive
to market fluctuations and pursue updates to these programs, as
appropriate. Additionally, we anticipate that leveraging these data in
this way will increase efficiencies by reducing our need to initiate
new, potentially burdensome data collections.
HHS may use the enrollee-level EDGE data to help inform which of
various policies related to the individual and small group (including
merged) markets will further HHS' goals to promote transparency,
support innovation in the private sector, reduce burden on
stakeholders, and improve program integrity. Generally, policies that
could be informed by these data would be developed or revised through
the notice-and-comment rulemaking process. We do not believe using the
enrollee-level EDGE data and reports extracted from issuers' EDGE
servers for the purposes we have outlined is inconsistent with the
intent of using a distributed data environment for the HHS operated
risk adjustment program. In the 2014 payment notice, we finalized the
distributed data model for data collection for the risk adjustment and
reinsurance programs when HHS operates those programs on behalf of a
State.\65\ In evaluating data collection options, we determined the
distributed data collection model proved the most effective approach
for obtaining and processing the data necessary for both reinsurance
and risk adjustment calculations because such a model would minimize
issuer burden while protecting enrollees' privacy. We did not propose
and are not making any changes to the risk adjustment data transfer
process between issuers and HHS. As discussed previously, we recognize
the sensitivity of enrollee-level EDGE data and are taking precautions
to safeguard these data. We believe the analyses and uses described in
this rule would benefit issuers and the broader individual and small
group market (including merged market) stakeholders. While we do not
believe issuer permission is necessary for HHS to use enrollee-level
EDGE data or reports as HHS would not make issuer proprietary
information public nor would HHS require issuers to submit additional
data elements, we appreciate the sensitivities related to enrollee-
level EDGE data and intend to continue following the current process,
under which we engage in notice-and-comment rulemaking prior to
expanding uses or disclosures of this data.
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\65\ 2014 Payment Notice, 78 FR 15497.
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d. Risk Adjustment Default Charge (Sec. 153.740(b))
As described below, we are finalizing a change to the timeline for
publication of the 2017 benefit year risk adjustment data validation
results and the
[[Page 17491]]
accompanying collection and payment of adjustments related to these
results. Consistent with those changes, the 2018 benefit year summary
risk adjustment transfer report issued by June 30, 2019, will not
reflect the impact of the 2017 benefit year risk adjustment data
validation adjustments on 2018 risk adjustment transfers, but will
continue to include information on the assessment and allocation of the
applicable benefit year's risk adjustment default charges under Sec.
153.740(b). HHS' calculation of the 2018 benefit year PMPM risk
adjustment default charge will be equal to the 90th percentile of the
2018 risk adjustment transfers not adjusted with the results of 2017
risk adjustment data validation.\66\
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\66\ As established in the 2015 Payment Notice at 79 FR 13790, a
PMPM default charge is equal to the product of the statewide average
premium (expressed as a PMPM amount) for a risk pool and the 75th
percentile plan risk transfer amount expressed as a percentage of
the respective statewide average PMPM premiums for the risk pool.
See 79 FR at 13790. While this percentile was subsequently adjusted
to the 90th percentile in the 2017 Payment Notice, the PMPM amount
is otherwise calculated in the same manner. See 81 FR 12237.
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e. Risk Adjustment User Fee for 2020 Benefit Year (Sec. 153.610(f))
As noted in this rule, if a state is not approved to operate, or
chooses to forgo operating its own risk adjustment program, HHS will
operate a risk adjustment program on its behalf. For the 2020 benefit
year, HHS will operate a risk adjustment program in every state and the
District of Columbia. As described in the 2014 Payment Notice,\67\ HHS'
operation of risk adjustment on behalf of states is funded through a
risk adjustment user fee. Section 153.610(f)(2) provides that an issuer
of a risk adjustment covered plan must remit a user fee to HHS equal to
the product of its monthly billable member enrollment in the plan and
the PMPM risk adjustment user fee rate specified in the annual HHS
notice of benefit and payment parameters for the applicable benefit
year.
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\67\ See 78 FR 15409 at 15416.
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OMB Circular No. A-25R established federal policy regarding user
fees, and specified that a user charge will be assessed against each
identifiable recipient for special benefits derived from federal
activities beyond those received by the general public. The risk
adjustment program will provide special benefits as defined in section
6(a)(1)(B) of Circular No. A-25R to issuers of risk adjustment covered
plans because it mitigates the financial instability associated with
potential adverse risk selection. The risk adjustment program also
contributes to consumer confidence in the health insurance industry by
helping to stabilize premiums across the individual, merged, and small
group markets.
In the 2019 Payment Notice,\68\ we calculated the federal
administrative expenses of operating the risk adjustment program for
the 2019 benefit year to result in a risk adjustment user fee rate of
$1.80 per billable member per year or $0.15 PMPM, based on our
estimated contract costs for risk adjustment operations, estimates of
billable member months for individuals enrolled in risk adjustment
covered plans, and eligible administrative and personnel costs related
to the administration of the HHS-operated risk adjustment program. For
the 2020 benefit year, we proposed to generally use the same
methodology to estimate our administrative expenses to operate the
program, with the modifications described in this rule. These costs
cover development of the risk adjustment models and methodology,
collections, payments, account management, data collection, data
validation, program integrity and audit functions, operational and
fraud analytics, stakeholder training, operational support, and
administrative and personnel costs dedicated to risk adjustment
activities related to the HHS-operated program. To calculate the user
fee, we divided HHS' projected total costs for administering the risk
adjustment program by the expected number of billable member months in
risk adjustment covered plans in the 50 states and the District of
Columbia where HHS will operate risk adjustment for the 2020 benefit
year.
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\68\ 83 FR 16930 at 16972.
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We estimated the total cost for HHS to operate the risk adjustment
program for the 2020 benefit year to be approximately $50 million, and
the risk adjustment user fee would be $2.16 per billable member per
year, or $0.18 PMPM. The updated cost estimates attribute all costs
related to the EDGE server data collection and data evaluation
(quantity and quality evaluations) activities to the risk adjustment
program rather than sharing them with the reinsurance program, which is
no longer operational.\69\ We collected amounts under the reinsurance
program for administrative expenses related to that program, which
partially funded contracts that were used for both the risk adjustment
and reinsurance programs. We no longer allocate indirect costs for
personnel or administrative costs to the reinsurance program, and are
reflecting the full value of those costs as part of risk adjustment
operations for the 2020 benefit year. The risk adjustment user fee
costs are also estimated to be slightly higher due to increased
contract costs based on additional activities for the risk adjustment
data validation program development and execution, including updated
cost estimates associated with the non-pilot years of the risk
adjustment data validation program, including estimates for error rate
adjustments, development of the new risk adjustment data validation
audit tool, and additional contractor support for risk adjustment data
validation discrepancies and appeals. The estimated costs also
incorporate the full personnel and administrative costs associated with
risk adjustment program development and operations in the risk
adjustment user fee for the 2020 benefit year. The personnel and
administrative costs included in the calculation of the 2019 benefit
year risk adjustment user fee for the 2019 Payment Notice final rule
incorporated only a portion of the personnel costs, and excluded
indirect costs. The 2020 benefit year risk adjustment user fee includes
the full amount for eligible personnel costs, as well as eligible
indirect costs. Finally, we estimated individual and small group market
billable member months for the 2020 benefit year to remain roughly the
same, as observed in the most recent risk adjustment data available for
the 2017 benefit year.
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\69\ Although the 2016 benefit year was the final benefit year
for the reinsurance program, close-out activities continued in the
2018 fiscal year, including the collection of the second part of the
2016 benefit year contributions for contributing entities that
elected the bifurcated schedule, which were due by November 15,
2017, and are expected to continue in the 2019 fiscal year.
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We received one comment on the proposed risk adjustment user fee
for the 2020 benefit year, which supported our proposal to establish a
risk adjustment user fee for the 2020 benefit year of $2.16 per
billable member per year, or $0.18 PMPM. We are finalizing the risk
adjustment user fee rate for the 2020 benefit year as proposed.
3. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)
We conduct risk adjustment data validation under Sec. Sec. 153.630
and 153.350 in any state where HHS is operating risk adjustment on the
state's behalf, which for the 2020 benefit year is all 50 states and
the District of Columbia. The purpose of risk adjustment data
validation is to ensure issuers are providing accurate and complete
risk adjustment data to HHS, which is crucial to the purpose and
[[Page 17492]]
proper functioning of the HHS-operated risk adjustment program. Risk
adjustment data validation consists of an initial validation audit and
a second validation audit. Under Sec. 153.630, each issuer of a risk
adjustment covered plan must engage an independent initial validation
auditor. The issuer provides demographic, enrollment, and medical
record documentation for a sample of enrollees selected by HHS to its
initial validation auditor for data validation. Each issuer's initial
validation audit is followed by a second validation audit, which is
conducted by an entity HHS retains to verify the accuracy of the
findings of the initial validation audit. In the proposed rule, we set
forth a number of proposed amendments and clarifications to the HHS
risk adjustment data validation program in light of experience and
feedback from issuers during the first 2 pilot years of the program.
The following is a summary of the general public comments we
received related to risk adjustment data validation requirements when
HHS operates risk adjustment. Additional comments related to the error
estimation methodology and negative error outliers are discussed later
in this rule.
Comment: A few commenters urged HHS to adopt the HEDIS (Healthcare
Effectiveness Data and Information Set) audit methodology, which only
requires medical record review for supplemental codes that the plan
pulls from medical records.
Response: We continue to seek ways to improve the HHS risk
adjustment data validation program for both accuracy and user
experience, and will continue to examine approaches taken by other
organizations when making updates to the risk adjustment data
validation process. However, because the intent of risk adjustment data
validation is to ensure the integrity of the risk adjustment program by
validate all diagnoses for which an issuer received credit in risk
adjustment, we believe that risk adjustment data validation should
include all diagnoses, and not simply be limited to supplemental
diagnoses. Additionally, we note that the HEDIS audit methodology is a
two-part process that is customized based on an organization's
informational systems, and that we believe that the distributed data
environment precludes the need for such customization. As such, we are
maintaining our current methodology for risk adjustment data
validation.
Comment: A few commenters requested relief for issuers experiencing
difficulty with obtaining medical records from providers in connection
with the issuers' risk adjustment data validation. One commenter stated
that it was having difficulty accessing medical records that included
mental health or substance use disorder diagnoses because state privacy
law was more stringent than the relevant federal requirements, and that
enrollee consent must be obtained even for summary information. Another
commenter requested that HHS create a process to exempt issuers from
validating HCCs for which a provider refused to supply a medical record
and the issuer demonstrated good faith in trying to obtain such record.
Response: In the 2019 Payment Notice, we finalized Sec.
153.630(b)(6) to provide relief to issuers that are prohibited from
obtaining medical records by state privacy laws in response to similar
concerns expressed by some issuers. We recognize the difficulties that
federal and state privacy laws can pose to issuers of risk adjustment
covered plans for purposes of risk adjustment data validation, and our
intention is not to penalize issuers that seek to obtain the necessary
information from providers. We are continuing to consider possible
approaches that permit users to meet the requirements of risk
adjustment data validation consistent with all applicable privacy laws.
Although we appreciate the comments, the proposed rule did not propose
changes to Sec. 153.630(b)(6), and we are not making any changes to
that provision as part of this final rule.
a. Varying Initial Validation Audit Sample Size (Sec. 153.630(b))
In the 2014 Payment Notice, we established the risk adjustment data
validation program that HHS uses when operating risk adjustment on
behalf of a state. Consistent with Sec. 153.350(a), HHS is required to
ensure proper validation of a statistically valid sample of risk
adjustment data from each issuer that offers at least one risk
adjustment covered plan in that state. The current enrollee sample size
selected for the initial validation audit is 200 enrollees statewide
(that is, combining an issuer's individual, small group, and merged
market enrollees (as applicable) in risk adjustment covered plans in
the state) for each issuer's Health Insurance Oversight System (HIOS)
ID, based on sample size precision analyses we conducted using proxy
data from the Medicare Advantage program. Those analyses calculated a
range of sample sizes to target a 10 percent precision at a 95 percent
confidence level. The resulting range of sample sizes were between 100
and 300, and we selected 200 as a midpoint.\70\ In the 2015 Payment
Notice, we stated that, after the initial years of risk adjustment data
validation, we would evaluate our sampling assumptions using actual
enrollee data and consider using larger sample sizes for issuers that
are larger or have higher variability in their enrollee risk score
error rates, and smaller sample sizes for issuers that are smaller or
have lower variability in their enrollee risk score error rates. We
also stated that we would use our sampling experience in the initial
years of risk adjustment data validation to evaluate using issuer-
specific sample sizes.
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\70\ See 79 FR 13743 at 13756.
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The current initial validation audit sample size of 200 was
selected to achieve an estimated 10 percent precision, assuming a
distribution of risk score errors similar to that found in the Medicare
Advantage risk adjustment data validation program. However, since the
HCC group failure rate approach to error estimation (referred to as the
HCC failure rate methodology) was implemented beginning with the 2017
benefit year of risk adjustment data validation, we anticipate that the
calculated precision would differ from the estimate we used, which was
based on the Medicare Advantage error rate data. Therefore, beginning
with the 2019 benefit year of risk adjustment data validation,\71\ we
proposed to vary the initial validation audit sample size and set forth
in detail and sought comment on several different approaches for
varying the initial validation audit sample size. One proposed approach
would vary the initial validation audit sample size based on issuer
characteristics, such as issuer size, prior year HCC failure rates, and
sample precision. We also solicited comment on an alternative approach
to adjusting sample size that would increase sample sizes based on
issuer size alone, and would continue to use the proxy Medicare
Advantage risk score error rate data for the accompanying precision
analyses. Additionally, we solicited comment on whether the issuers'
enrollment should be calculated based on the year that is being
adjusted or based on the benefit year in which the HCC failure
occurred. In response to a comment we received on the 2019 Payment
Notice that larger sample sizes could improve the accuracy of issuers'
risk adjustment data validation samples, we solicited comment on
whether to permit issuers of any size and HCC failure rate to request a
larger sample
[[Page 17493]]
size before the applicable benefit year's initial validation audit
commences. Finally, we also explained that under these alternative
approaches, HHS would not increase the sample above 200 enrollees when
performing the second validation audit pairwise means test because a
200-enrollee sample is sufficient to achieve statistical significance
in that test.
---------------------------------------------------------------------------
\71\ Activities related to the 2019 benefit year risk adjustment
data validation generally begin in the second quarter of CY 2020.
---------------------------------------------------------------------------
After consideration of the comments submitted, we are not
finalizing any increase to the initial validation audit sample size at
this time. We will continue to consider potential changes to initial
validation audit sample sizes for future benefit years of risk
adjustment data validation. We may revisit these proposals, and may
also consider additional alternatives, following further consultation
with stakeholders and further analysis of actual enrollee data and non-
pilot year risk adjustment data validation results.
Comment: A number of commenters did not support varying the initial
validation audit sample size at all (regardless of the approach to do
so), and recommended that HHS maintain the current sample size of 200
enrollees. These commenters stated that increasing the initial
validation audit sample size would create undue administrative and
financial burdens, as well as disruption to plans and the provider
community, without improving the quality of the data validation
results. Other commenters generally supported varying the initial
validation audit sample size, stating that larger sample sizes would
help meet desired precision targets, and lend additional credibility to
risk adjustment data validation results.
Response: We continue to believe that larger sample sizes would
help achieve the goals of increasing initial validation audit sample
precision and ensuring the statistical validity of the sample. However,
in light of the comments regarding the potential uncertainty related to
using 2017 benefit year risk adjustment data validation results to make
such changes, we are not finalizing any changes to the initial
validation audit sample size at this time. We are maintaining the
current initial validation audit sample size of 200 enrollees for all
issuers of risk adjustment covered plans required to participate in the
HHS risk adjustment data validation program. We are also sensitive to
the concerns about the potential increased burdens for stakeholders and
will consider how best to strike the balance between mitigating these
burdens and increasing precision as we continue to analyze different
approaches for varying sample size. HHS intends to revisit potential
changes to initial validation audit sample sizes for future benefit
years following further consultation with stakeholders and further
analysis of actual enrollee data and non-pilot year risk adjustment
data validation results.
Comment: While one commenter supported the proposal to use 2017
benefit year HCC failure rates to develop sample sizes for the 2019
benefit year, another commenter did not support using 2017 risk
adjustment data validation results, because the commenter believed that
the methodology would not appropriately reflect the 2019 benefit year
enrollee population. This commenter noted that any enrollee data used
prior to the elimination of the shared responsibility payment would not
reflect significant differences that could affect the risk profile and
composition of the 2019 benefit year population.
Response: We are not finalizing any changes to the initial
validation audit sample size at this time. HHS intends to revisit
potential changes to initial validation audit sample sizes for future
benefit years following further consultation with stakeholders and
further analysis of actual enrollee data and non-pilot year risk
adjustment data validation results. We note that 2017 risk adjustment
data validation program year results are the most recent results that
would be available in the 2019 benefit year, as a result of the
operational timing of the risk adjustment data validation program. As
such, we note that any approach to modify risk adjustment data
validation sampling for an upcoming benefit year based on consideration
of HCC failure rates, would rely on previous benefit year failure
rates, as more recent data would not be available prior to when initial
data validation samples are drawn.
Comment: A few commenters supported the proposal to vary the
initial validation audit sample size based on HCC failure rates, sample
precision, and issuer size as they believe larger sample sizes would
help HHS meet desired precision targets and would lend additional
credibility to risk adjustment data validation results. Another
commenter encouraged HHS to increase the sample size as a means to
potentially reduce data validation error rates. One commenter supported
increasing sample size for the initial validation audit for those
issuers that fall outside of the confidence interval. Several
commenters supported the proposal to vary the initial validation audit
sample size based only on issuer size, stating that sample sizes should
be statistically significant and not capped at 200 or 400 for large
issuers, and that larger sample sizes would increase the accuracy of
the risk adjustment data validation results. Commenters also stated
that if issuer size is used as a basis to determine the initial
validation audit sample size, HHS should use the issuer's enrollment
for the year that is being validated.
However, many other commenters did not support the proposal to vary
sample size based on HCC failure rates, sample precision, and issuer
size. One commenter stated HHS should only do so once there is
sufficient credible experience with the HHS risk adjustment data
validation program, citing concerns with making such changes based on
2017 benefit year data validation results, the first non-pilot risk
adjustment data validation year under the HHS program. Another
commenter did not support this proposal as they stated it effectively
disincentives issuers from focusing on reducing their HCC failure rate
because any issuer that is an outlier below the confidence interval
threshold would be penalized by an increased sample size. The same
commenter also noted the potential for annual variation in sample size
would make it difficult for issuers to plan for staffing and resource
needs.
Other commenters did not support varying the sample size based only
on issuer size, expressing concerns over undue administrative burden
related to obtaining medical records and substantiating diagnoses, the
financial burden of increased administrative costs, and the resulting
disruption to plans and the provider community without improving the
quality of the data validation results. Yet another commenter stated
that until electronic health record interoperability and widespread
data sharing is implemented, increasing the sample size would create
undue administrative burden.
Response: We share commenters' goals of increasing initial
validation audit sample precision and ensuring the statistical validity
of the sample, and while we believe that increased sample sizes could
help achieve these goals, we are also sensitive to commenters' concerns
about the burden of an increase to the sample size and the use of
results from the first non-pilot year of risk adjustment data
validation to establish larger sample sizes. However, while we
recognize these concerns, we do not agree with comments that suggested
that increased sample sizes will act as a disincentive for issuers to
improve their failure rates. We believe that increasing sample size
would
[[Page 17494]]
generally increase the sample precision, and could help issuers obtain
more favorable risk adjustment data validation results by capturing
enrollees with HCCs that may have been missed in smaller samples. We
believe that this potential benefit would generally outweigh the
additional costs of larger initial validation audit samples. As noted
in this rule, we are not finalizing any increase to the initial
validation audit sample size at this time, but intend to revisit these
proposals and will consider the comments received on these proposals
when we revisit potential changes to sample sizes for future benefit
years.
Comment: One commenter supported the proposal to use 2017 benefit
year HCC failure rates to develop sample sizes for the 2019 benefit
year, while another commenter opposed the use of prior-year error rates
in determining sample sizes. One commenter stated they believe the
current risk adjustment data validation error estimation approach had
several flaws that would not be adequately addressed by increasing the
risk adjustment data validation sample size for certain issuers. The
commenter stated that these flaws included basing adjustments to risk
scores solely on risk adjustment data validation outlier status, the
use of national benchmarks with large confidence intervals, and
adjustment of coefficients by the difference between an outlier
issuer's HCC group failure rate and the weighted mean HCC failure rate.
The commenter stated that rather than increasing the sample size for
certain issuers and building on a flawed process, HHS should reevaluate
the risk adjustment data validation methodology in its entirety.
Another commenter opposed allowing issuers to request a larger
sample size, stating that allowing such requests could provide
opportunities for issuers to intentionally affect the data validation
results of other issuers and disproportionately affect HCC failure
rates and confidence intervals.
Several commenters suggested alternative approaches to vary the
initial validation audit sample size. One commenter suggested adopting
sample sizes based on statistical significance with a 90 percent
confidence interval and suppression of positive outlier resampling for
issuers that have demonstrated a low HCC error rate over multiple
years. Another commenter stated HHS should replace the current random
sample of 200 enrollees with a data-driven targeted process that
identifies situations that warrant investigation. Another commenter
recommended HHS evaluate ways to ensure providers' timely submission of
the needed information and documentation to validate the diagnoses
captured on the medical record(s). Another commenter did not agree that
HHS should continue to use the Medicare Advantage risk score error rate
data to determine precision, and recommended that HHS use the available
commercial risk adjustment data starting with the 2020 benefit year of
risk adjustment data validation. Another commenter stated that if
larger sample sizes were adopted, issuers with plans in multiple states
should be given the option to use the existing sample sizes for the
initial validation audit.
Response: We remain interested in exploring ways to increase sample
precision and the statistical validity of the initial validation audit
sample and appreciate the different approaches offered. We are
sensitive to commenters' concerns about the proposals outlined in the
proposed rule and believe that further analysis is needed before making
changes to sample sizes. Therefore, at this time, we are not finalizing
any increase to the initial validation audit sample size and are
maintaining the current sample size of 200 enrollees. We will revisit
these proposals, along with the comments submitted, and may consider
alternatives following consultation with stakeholders and further
analysis of available data. We respond to comments on the risk
adjustment data validation error estimation methodology in the preamble
below.
b. Initial Validation Audit Sample Size--10th Stratum and Neyman
Allocation (Sec. 153.630(b))
In the initial years of risk adjustment data validation, we
constrained the ``10th stratum'' of the initial validation audit
sample--that is, enrollees without HCCs selected for the initial
validation audit sample--to be one-third of the sampled initial
validation audit enrollees. Under this current approach, the remaining
9 age-risk strata were selected using a Neyman allocation \72\ which
optimizes the number of enrollees per stratum for the remaining two-
thirds of sampled enrollees. Because we expected enrollees without HCCs
to make up the majority of issuers' enrollees, in the absence of data
from the individual and small group markets, we constrained stratum 10
to ensure that healthy enrollees were sampled in the initial years of
risk adjustment data validation to establish adequate sampling
assumptions.
---------------------------------------------------------------------------
\72\ Neyman allocation is a method to allocate samples to strata
based on the strata's variances and similar sampling costs in the
strata. A Neyman allocation scheme provides the most precision for
estimating a population mean given a fixed total sample size. See
http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml.
---------------------------------------------------------------------------
In the proposed rule, we proposed to extend the Neyman allocation
sampling methodology to also include the 10th stratum of enrollees
without HCCs, such that samples will be assigned to all 10 strata using
a Neyman allocation. Since a Neyman allocation approach is expected to
provide a more optimal sample size allocation, we explained that we
believe using the Neyman allocation for all strata would optimize
issuers' initial validation samples and yield better precision than the
one-third/two-thirds approach currently used in the enrollee initial
validation audit sample. Further, an approach that permits for a larger
portion of the sample to be allocated to the HCC strata as compared to
the two-thirds allocation used in the current approach would result in
a more robust HCC sample in support of the measurement of HCC failure
rates under the HCC failure rate methodology finalized in the 2019
Payment Notice.\73\ Finally, it would increase the probability of
achieving our original target of 10 percent precision based on our
historical observations of greater error rate variances among the HCC
strata. We are finalizing the extension of the Neyman allocation
sampling methodology to the 10th stratum, as proposed.
---------------------------------------------------------------------------
\73\ 83 FR 16930 at 16961 (April 17, 2018).
---------------------------------------------------------------------------
Comment: Some commenters supported extending the Neyman allocation
sampling methodology to the 10th stratum, stating that doing so would
effectively create an increase in the size of the sample actually
available to validate the HCCs submitted to issuer EDGE servers. These
commenters noted this approach would permit for a larger portion of the
sample to be allocated to the HCC strata as compared to the two-thirds
allocation used in the current approach, thereby resulting in a more
robust HCC sample in support of the measurement of HCC failure rates
under the HCC failure rate methodology finalized in the 2019 Payment
Notice. However, other commenters did not support this proposal, as
they were concerned that increasing the number of sampled members with
HCCs would create undue administrative and financial burden on plans
and the provider community without improving the quality of the data
validation results or addressing their perceived flaws of the risk
adjustment data validation sampling.
[[Page 17495]]
Response: We are finalizing the extension of the Neyman allocation
sampling methodology to also include the 10th stratum of enrollees
without HCCs, such that samples will be assigned to all 10 strata using
a Neyman allocation. As noted by some commenters, this is expected to
provide a more optimal sample size allocation than the current one-
third/two-thirds approach. We believe this will also allow us to
achieve greater precision in the HCC error rate methodology by
expanding the portion of the sample that may be allocated to the HCC
strata (that is, strata 1 through 9) because of the potential for a
more robust HCC sample than the current approach provides. We are
finalizing the extension of the Neyman allocation sampling methodology
to also include the 10th stratum of enrollees without HCCs, such that
samples will be assigned to all 10 strata using a Neyman allocation. As
noted by some commenters, this is expected to provide a more optimal
sample size allocation than the current one-third/two-thirds approach.
We believe this will also allow us to achieve greater precision in the
HCC error rate methodology by expanding the portion of the sample that
may be allocated to the HCC strata (that is, strata 1 through 10)
because of the potential for a more robust HCC sample than the current
approach provides. We further believe that the benefits of more
accurate initial validation samples generally outweigh the additional
burden of increased sample sizes by capturing enrollees with HCCs that
may have been missed in smaller samples. However, as discussed above,
we will monitor the impact of this change and continue to consider
modifications to the initial validation audit sampling approach for
future benefit years in consultation with stakeholders.
c. Second Validation Audit Findings and Error Rate Discrepancy
Reporting (Sec. 153.630(d)(2))
Under Sec. 153.630(d)(2), issuers have 30 calendar days to confirm
the findings of the second validation audit or the calculation of the
risk score error rate, or file a discrepancy report, in the manner set
forth by HHS, to dispute the foregoing. We proposed to amend paragraph
(d)(2) to shorten the window to confirm the findings of the second
validation audit (if applicable) or the calculation of the risk score
error rate, or file a discrepancy, to within 15 calendar days of the
notification by HHS, beginning with the 2018 benefit year risk
adjustment data validation. In light of comments received, we will not
shorten the timeframe under Sec. 153.630(d)(2) to 15 calendar days at
this time, and will maintain the existing 30-calendar day window for
issuers to confirm the findings of the second validation audit (if
applicable) or the calculation or the risk score error rate.
We also clarified in the proposed rule that there are two
discrepancy reporting windows under Sec. 153.630(d)(2). First, at the
conclusion of the second validation audit, we will distribute to
issuers their second validation audit findings in the event there is
insufficient agreement between the initial and second validation audit
results during the pairwise means analysis, and the second validation
audit findings will be used for the risk score error rate calculation.
The window for issuers who receive second validation audit findings to
confirm the findings or file a discrepancy, in a manner set forth by
HHS, would begin when the second validation audit findings reports are
issued. Second, at the conclusion of the risk score error rate
calculation process, we will distribute the risk score error rate
calculation results to all issuers for the given benefit year. Once the
risk score error rate calculation results are distributed, the window
to confirm the results or file a discrepancy, in the manner set forth
by HHS, would begin.
We reiterated, consistent with the approach finalized in the 2018
Payment Notice, that issuers are not permitted to appeal the resolution
of any discrepancy disputing the initial validation audit sample, or to
file a discrepancy or appeal the results of the initial validation
audit.\74\ As detailed in the 2015 Payment Notice \75\ and discussed
later in this final rule, if sufficient pairwise means agreement is
achieved, the initial validation audit findings will be used for
purposes of the risk score error rate calculation, and therefore, those
issuers will only be permitted to file a discrepancy or appeal the risk
score error rate calculation.
---------------------------------------------------------------------------
\74\ 81 FR 94106.
\75\ See 78 FR at 72334 through 72337 and 79 FR at 13761 through
13768.
---------------------------------------------------------------------------
Finally, we proposed to amend Sec. 153.630(d)(2) to replace the
phrase ``audit and error rate'' for which an issuer must confirm or
file a discrepancy that appears at the end of the provision with ``the
findings of the second validation audit (if applicable) or the
calculation of a risk score error rate as a result of risk adjustment
data validation.'' We are finalizing the amendments to Sec.
153.630(d)(2) as proposed, except for the proposed shortening of the
applicable timeframe from 15 to 30 calendar days.
The following is a summary of the public comments we received on
our proposals regarding the second validation audit findings and risk
score error rate discrepancy reporting windows under Sec.
153.630(d)(2).
Comment: Commenters overwhelmingly opposed shortening the
discrepancy windows for risk adjustment data validation, with a few
suggesting that HHS revisit the idea after a non-pilot year of risk
adjustment data validation has occurred. Several commenters suggested
we examine other areas of the risk adjustment data validation timeline
to possibly make shorter.
Response: In light of comments received, we are not finalizing the
proposal to shorten the discrepancy reporting window under Sec.
153.630(d)(2) from 30 to 15 calendar days. Although 15 calendar days is
consistent with the initial validation audit sample and EDGE
discrepancy submission windows,\76\ we agree that such a change should
not be made until after completion of the first non-pilot year of risk
adjustment data validation and we have more experience with the
process. Additionally, we will continue to examine opportunities to
refine the risk adjustment data validation timeline for future benefit
years.
---------------------------------------------------------------------------
\76\ See Sec. Sec. 153.630(d)(1) and 153.710(d).
---------------------------------------------------------------------------
d. Default Data Validation Charge
Under Sec. 153.630(b)(10), if an issuer of a risk adjustment
covered plan fails to engage an initial validation auditor or submit
initial validation audit results, we impose a ``default data validation
charge,'' which the regulation currently refers to in paragraph (b)(10)
as a ``default risk adjustment charge.'' As explained in the 2015
Payment Notice, the default data validation charge is calculated in the
same manner as the default risk adjustment charge under Sec.
153.740(b).\77\ With the 2017 benefit year being the first non-pilot
year of risk adjustment data validation, and the first year for which
HHS may impose the default data validation charge for noncompliance
with applicable data validation requirements, we proposed several
amendments to further distinguish the default data validation charge
assessed under Sec. 153.630(b)(10) from the default risk adjustment
charge assessed under Sec. 153.740(b). First, we proposed to amend
Sec. 153.630(b)(10) to replace the phrase ``HHS will impose a default
risk adjustment charge'' with ``HHS will impose a default data
validation charge.'' This change is intended to more clearly
distinguish
[[Page 17496]]
between the two separate risk adjustment-related default charges.
Second, we proposed to modify how the default data validation charge
under Sec. 153.630(b)(10) would be calculated. While we would
generally continue to calculate the default data validation charge in
the same manner as the risk adjustment default charge under Sec.
153.740(b), we proposed to calculate the default data validation charge
based on the enrollment for the benefit year being audited in risk
adjustment data validation, rather than the benefit year during which
transfers would be adjusted as a result of risk adjustment data
validation. By way of example, if an issuer is subject to the default
data validation charge for the 2021 benefit year risk adjustment data
validation and it offers risk adjustment covered plans in the same
state market risk pool in the 2022 benefit year, its default data
validation charge would be calculated based on 2021 benefit year
enrollment data (rather than 2022 benefit year enrollment data). Under
this example, the default data validation charge this issuer would
receive for failing to comply with the 2021 benefit year risk
adjustment data validation requirements would equal a per member per
month (PMPM) amount for the 2021 benefit year multiplied by the plan's
enrollment for the 2021 benefit year as follows:
---------------------------------------------------------------------------
\77\ 79 FR at 13769.
---------------------------------------------------------------------------
Tn = Cn * En
Where:
Tn = total default data validation charge for a plan n;
Cn = the PMPM amount for plan n; \78\ and
---------------------------------------------------------------------------
\78\ Except as otherwise provided in this final rule, the
default data validation charge is calculated in the same manner as
the risk adjustment default charge under Sec. 153.740(b). See 79 FR
at 13769. As established in the 2015 Payment Notice, a PMPM default
charge is equal to the product of the statewide average premium
(expressed as a PMPM amount) for a risk pool and the 75th percentile
plan risk transfer amount expressed as a percentage of the
respective statewide average PMPM premiums for the risk pool. See 79
FR at 13790. While this percentile was subsequently adjusted to the
90th percentile in the 2017 Payment Notice, the PMPM amount is
otherwise calculated in the same manner. See 81 FR at 12237. The
2020 Payment Notice proposed rule did not propose, and this final
rule does not make, any changes to this aspect of the calculation of
the default data validation charge.
In the 2015 Payment Notice at 79 FR 13790, we provided that En
could be calculated using an enrollment count provided by the
issuer, enrollment data from the issuer's MLR and risk corridors
filings for the applicable benefit year, or other reliable data
sources. The proposed rule did not propose, and this final rule does
not make, any changes to the sources that could be used.
---------------------------------------------------------------------------
En = the total enrollment (total billable member months) for plan
n.\79\
---------------------------------------------------------------------------
\79\ Ibid.
Third, we proposed to amend the allocation approach for
distribution of default data validation charges among issuers. We
proposed to allocate a default data validation charge to the risk
adjustment data validation issuers that were part of the same benefit
year risk pool(s) as the noncompliant issuer. However, we would not
allocate default data validation charges to any other noncompliant
issuers in the same benefit year risk pool(s). This approach is
consistent with the methodology for allocating the default risk
adjustment charges under Sec. 153.740(b), and includes all issuers in
the same benefit year risk pool(s) that could be subject to a risk
score adjustment as the result of other issuers' risk adjustment data
validation results. Issuers in the same benefit year risk pool(s) that
are exempt from the risk adjustment data validation requirements would
also be included in the allocation of any default data validation
charges. Therefore, we proposed to allocate any default data validation
charges collected from noncompliant issuers among the compliant and
exempt issuers in the same benefit year risk pool(s) in proportion to
their respective market shares and risk adjustment transfer amounts for
the benefit year being audited for risk adjustment data validation.
As an illustrative example, assume there are 4 issuers (A, B, C,
and D) in the individual non-catastrophic risk pool in state X for the
2017 benefit year, and an additional issuer, E, in the 2018 benefit
year individual non-catastrophic risk pool in state X. Assume:
Issuer A does not comply with risk adjustment data
validation requirements for the 2017 benefit year and is assessed a
default data validation charge.
Issuer B was exempt from risk adjustment data validation
for the 2017 benefit year because it was a small issuer (that is, it
had 500 or fewer billable member months statewide in state X).
Issuers C and D complied with applicable 2017 benefit year
risk adjustment data validation requirements.
Issuer E was not in the individual non-catastrophic risk
pool in state X for 2017.
Issuer A's default data validation charge would be allocated to
issuers B, C, and D in proportion to their 2017 benefit year transfer
amounts and market shares. While Issuer B was not subject to risk
adjustment data validation for the 2017 benefit year, it was still part
of the same state market risk pool and would be subject to possible
risk score adjustments due to the risk adjustment data validation
results of Issuers C and D. Since Issuers C and D also participated in
the individual non-catastrophic risk pool in state X for 2017 and
complied with applicable data validation requirements, they would also
receive part of Issuer A's default data validation charge. However,
Issuer E was not part of the individual non-catastrophic risk pool in
state X until the 2018 benefit year, and therefore, would not receive
any part of Issuer A's 2017 benefit year default data validation
charge.
In the proposed rule, we noted that we intend to publish the
default data validation charge information in the benefit year's
report(s) released under Sec. 153.310(e) in which transfers are
adjusted based on risk adjustment data validation results. We also
explained that, following release of the report under Sec. 153.310(e),
these amounts would then be included as part of the monthly payment and
collection processes described in Sec. 156.1215 alongside the
collection of risk adjustment charges and payments calculated under the
HHS risk adjustment methodology for the applicable benefit year.
Fourth, we clarified that a default data validation charge under
Sec. 153.630(b)(10) is separate from risk adjustment transfers for a
given benefit year, unlike a default risk adjustment charge under Sec.
153.740(b), which replaces the issuer's transfer amount for that
benefit year. For example, if an issuer fails to submit initial
validation audit results for the 2017 benefit year, it would receive a
default data validation charge based on 2017 benefit year data
calculated in accordance with the formula outlined in this final rule.
This default data validation charge for the 2017 benefit year would be
in addition to, and separate from, the issuer's 2018 benefit year risk
adjustment payment or charge amount as calculated under the HHS-
operated risk adjustment methodology. This means that an issuer may owe
both a risk adjustment charge and a default data validation charge (for
example, an issuer could owe a risk adjustment charge for the 2018
benefit year and a default data validation charge for the 2017 benefit
year risk adjustment data validation). Similarly, an issuer may owe a
default risk adjustment charge for a given benefit year, alongside a
default data validation charge for the benefit year being audited (for
example, an issuer could owe a default risk adjustment charge for the
2018 benefit year, as well as a default data validation charge for the
2017 benefit year).
We offered these proposals and clarifications about how HHS will
assess and allocate the default data validation charge at this time to
allow issuers to better understand the
[[Page 17497]]
implications of noncompliance with initial validation audit
requirements as risk adjustment data validation operations transition
away from the pilot years of the program.
We are finalizing the amendments to Sec. 153.630(b)(10), as well
as the proposed changes to the calculation and allocation of the
default data validation charge, as proposed. As outlined further below,
we are modifying the timing for publication, collection and
distribution of the default data validation charges.
Comment: Commenters were in favor of basing the default data
validation charge on the enrollment of the year being audited rather
than the year being adjusted. One commenter requested that we clarify
the allocation methodology for issuers that have exited the market.
Response: We are finalizing the proposals related to the default
data validation charge, but are modifying the timing for publication,
collection, and distribution of the default data validation charges.
Rather than releasing this information as part of the annual summary
risk adjustment transfer report released by June 30, information on
default data validation charges and allocations will be published as
part of the separate announcement of risk adjustment data validation
results and related adjustments to risk adjustment transfers for the
applicable benefit year so that issuers will not have to consult
multiple reports for information on payments and charges related to
risk adjustment data validation. Default data validation charge amounts
will be included as part of the monthly payment and collection
processes described in Sec. 156.1215 alongside the collection and
distribution of the risk adjustment data validation-related adjustments
to risk adjustment transfers. Please refer to the preamble section
below on negative error rate outlier markets for further details on the
updated timeline for publication of risk adjustment data validation
results, as well as collection and disbursement of risk adjustment data
validation related adjustments to risk adjustment transfers.
We clarify that if an issuer is in a state market risk pool with a
noncompliant issuer in a given benefit year, and then exits the state
market risk pool in the subsequent benefit year, it will still be
eligible to receive its portion of the allocation from the noncompliant
issuer's default data validation charge. This approach is consistent
with the general policy established in the 2019 Payment Notice \80\ to
adjust exiting issuers' risk adjustment transfers based on risk
adjustment data validation results, and it allows those who are
compliant with applicable risk adjustment data validation related
adjustments to gain the benefit of an allocation amount.
---------------------------------------------------------------------------
\80\ 83 FR 16965.
---------------------------------------------------------------------------
e. Second Validation Audit Pairwise Means Test
In the 2014 Payment Notice, we provided that a second validation
audit will be conducted by an entity retained by HHS to verify the
accuracy of the findings of the initial validation audit.\81\
Consistent with Sec. 153.630(c), HHS must select a subsample of the
risk adjustment data validated by the initial validation audit for the
second validation audit. In the 2015 Payment Notice, we indicated that
to select the subsample, the second validation auditor will use a
sampling methodology that allows for pairwise means testing to
establish a statistical difference between the initial and second
validation audit results.\82\ This pairwise means test uses a 95
percent confidence interval (and a standard deviation of 1.96). To do
pairwise means testing under the current approach, the second
validation auditor tests a subsample of enrollees from an issuer's
initial validation audit sample of 200 enrollees. If the pairwise means
test results for a subsample indicate that the difference in enrollee
results between the initial and second validation audits is not
statistically significant, the initial validation audit results are
used for calculation of HCC failure rates and risk score error rates.
If the pairwise means test results for the subsample yield a
statistically significant difference, the second validation auditor
performs another validation audit on a larger subsample of enrollees
from the initial validation audit. The results from the second
validation audit of the larger subsample are again compared to the
results of the initial validation audit using the pairwise means test
with a subsample size of up to 100 enrollees. If there is no
statistically significant difference between the initial and second
validation audits of the larger subsample, HHS will apply the initial
validation audit error results to calculate the HCC failure rates and
risk score error rates. However, if a statistically significant
difference is found based on the second validation audit of the larger
subsample up to 100 enrollees, HHS will apply the second validation
audit results to the larger subsample to calculate the HCC failure
rates and risk score error rates.
---------------------------------------------------------------------------
\81\ 78 FR 15437.
\82\ 79 FR 13761.
---------------------------------------------------------------------------
Based on the results of the second validation audit for the 2016
risk adjustment data validation pilot year, we proposed to modify the
statistical subsampling methodology to further expand the comparison of
results between the initial and second validation audits. Specifically,
when the larger subsample (of up to 100 enrollees) results indicate a
statistically significant difference, we believe that further sampling
by the second validation auditor is necessary and appropriate to
determine whether the second validation audit results from the full
sample should be used in place of the initial validation audit results.
Therefore, we proposed that, if a statistically significant difference
is found based on the second validation audit of the larger subsample
(of up to 100 enrollees), HHS would expand its sample to the full
initial validation audit sample to consider whether the second
validation audit results of the full sample or the subsample (of up to
100 enrollees) results should be used in place of initial validation
audit results. Allowing the further testing of the sample provides
assurance and confidence in the second validation audit results and the
associated error estimation rate that will ultimately be used to adjust
risk scores and transfers.
To determine whether to expand the second validation audit to the
full initial validation audit sample, we proposed to use a precision
analysis. We proposed to use precision metrics, including the standard
error and confidence intervals, to determine if the second validation
audit review of the larger subsample (of up to 100 enrollees) is of
high or low precision. If the results of the second validation audit
precision analysis determined that the precision level is high, we
proposed that HHS would use the second validation audit results for the
larger subsample (of up to 100 enrollees) in place of the initial
validation audit results for the error estimation and calculation of
adjustments for plan average risk score, as applicable. However, if the
second validation audit precision analysis for a larger subsample (of
up to 100 enrollees) determined that the precision level was low, the
second validation audit would expand and use the full initial
validation audit sample of 200 enrollees for error estimation and
calculation of adjustments for plan average risk score.
We are finalizing this approach as proposed.
Comment: One commenter stated that it believed the proposal would
not substantially improve the process.
[[Page 17498]]
Another commenter did not explicitly oppose the proposal, but suggested
better pairwise accuracy could be achieved through increased education
and outreach.
Response: HHS has an interest in providing issuers every
opportunity to use the results submitted by the initial validation
audit entity and attested to by the issuer before taking the step of
replacing those results with second validation audit findings.
Expanding the subsample further and then testing precision when the
larger subsample (of up to 100 enrollees) results indicate a
statistically significant difference allows additional opportunity to
find the initial validation audit findings are valid. We disagree with
the commenter that these proposals would not substantially improve the
process. On the contrary, we believe that allowing further testing of
the sample provides assurance and confidence in the audit results and
the associated error estimation rate that will ultimately be used to
adjust risk scores and transfers. Therefore, we are finalizing this
approach as proposed. We remain committed to providing training and
support as needed to improve the initial validation audit process and
subsequent pairwise results.
f. Error Estimation for Prescription Drugs
In the proposed rule, we proposed several options for incorporating
RXCs in the risk adjustment data validation processes beginning with
the 2018 benefit year risk adjustment data validation. Because the
incorporation of payment RXCs into the risk adjustment models for
adults began with the 2018 benefit year, we discussed whether
modification was appropriate to the error estimation methodology to
take into account the RXC failure rates as part of the HHS risk
adjustment data validation process and we proposed various ways to
incorporate RXCs into risk adjustment data validation processes,
including adding RXCs to the error estimation methodology by treating
RXCs similar to HCCs.
The first proposal that we outlined would incorporate RXCs into the
HCC failure rate methodology by adding each RXC as a separate factor,
similar to an ``HCC'', for classification into the low, medium, and
high HCC groups determined by the national failure rates for each RXC.
To apply this change to the error estimation methodology finalized in
the 2019 Payment Notice, we proposed the definition of superscript h
would expand to a list of codes including both the 128 HCCs and 12 RXCs
whereby HHS would first calculate the failure rate for each HCC and RXC
in issuers' samples as:
[GRAPHIC] [TIFF OMITTED] TR25AP19.001
Where:
h_r is the set of codes including 128 HHS HCCs and 12 RXCs.
Freq_EDGEh-r is the frequency of HCC code h or RXC code r occurring
on EDGE, which is the number of sampled enrollees recording HCC code
h or RXC code r on EDGE.
Freq_IVAh-r is the frequency of HCC code h or RXC code r occurring
in initial validation audit results, which is the number of sampled
enrollees with HCC code h or RXC code r in initial validation audit
results.
FRh-r is the failure rate of HCC code h or RXC code r.
HHS would then create three ``HCC/RXC'' groups based on the HCC
failure rates and RXC failure rates derived in the above calculation.
These ``HCC/RXC'' failure rate groups would rank all HCC failure rates
and RXC failure rates to assign each unique HCC and RXC in the initial
validation audit samples to a high, medium, or low failure rate group.
To assign each HCC and RXC to a ``HCC/RXC'' failure rate group, we
proposed to use the current HCC failure rate ranking methodology that
ranks each HCC/RXC failure rate divided into three groupings based on
weighted total observations or frequencies of that HCC/RXC across all
issuers' initial validation sample, or assigning HCCs and RXCs failure
rates by taking into consideration the ranking of related HCCs and RXCs
in the grouping. Under this approach, we would maintain a single
classification for HCC and RXC high, medium, or low groups, instead of
creating two separate classifications of RXCs and single component
HCCs.
Alternatively, we proposed incorporating RXCs as a separate ``HCC''
grouping in the error estimation methodology. Under this approach, we
would keep the 128 HCCs in the three groups, but combine all RXCs into
an additional, fourth separate group. Therefore, separate RXC and HCCs
groups would be created, and their failure rates would be computed
within those four groupings. This approach to group RXCs would be the
same as for HCC groupings, which is based on the failure rates FRr of
the 12 RXCs:
[GRAPHIC] [TIFF OMITTED] TR25AP19.002
[[Page 17499]]
Where:
r is the set of 12 RXCs.
Freq_EDGE\r\ is the frequency of RXC code r occurring on EDGE, which
is the number of sampled enrollees recording RXC code r on EDGE.
Freq_IVA\r\ is the frequency of RXC code r occurring in initial
validation audit results, which is the number of sampled enrollees
with RXC code r in initial validation audit results.
FR\r\ is the failure rate of RXC code r.
While we assumed that RXCs may be easier to validate, this proposed
approach could take into consideration the potential differing failure
rates within the RXC groupings as opposed to the single component HCC
groupings, or isolate the RXC failure rates to a separate grouping from
HCCs before applying those failure rates to the error rate calculation.
This alternative approach would have also resulted in an additional
grouping in the error estimation methodology, and having more groupings
means that the number of groupings where it is possible for an issuer
to be an outlier would increase. Further, in the event that all RXCs do
not have similar, low failure rates, the confidence interval for an
RXC-only group could be quite large, resulting in a significant
difference between the outliers' failure rates to the group's failure
rate mean, and by extension, could result in a larger failure rate
adjustment factor for the RXC-only group.
In addition to adopting one of the above approaches to group RXCs
as part of the error estimation methodology, we would also need to
incorporate RXCs into the error rate calculation under the error
estimation methodology. To do so, we proposed three alternative
approaches to incorporate and adjust for RXCs and RXC-HCC interaction
factors in the error rate calculation.
One option that we proposed to incorporate the RXCs in the error
rate calculation was to add RXCs to the current methodology of
calculating error rates, without accounting for any HCC-RXC interaction
factors. To incorporate RXCs in the current error rate calculation
under this option, we proposed to modify the formula to calculate an
enrollee's adjustment Adjustmenti,e as follows:
BILLING CODE 4150-28-P
[GRAPHIC] [TIFF OMITTED] TR25AP19.003
[[Page 17500]]
[GRAPHIC] [TIFF OMITTED] TR25AP19.017
[[Page 17501]]
[GRAPHIC] [TIFF OMITTED] TR25AP19.018
BILLING CODE 4150-28-C
The purpose of this second alternative for incorporating RXCs in
the error rate calculation was to capture the sampled enrollee's
characteristics and interaction between the single component HCC and
RXC that may provide a more accurate calculation than not accounting
for any interaction between the single component HCC and RXC. However,
this approach would have added an additional step to the error rate
calculation, whereby the risk score coefficient for a condition would
be adjusted by the interaction coefficients between the single
component HCC and the RXC and would have taken into account the full
interaction coefficient separately for the HCC and RXC, which may
result in an over-adjustment for the interaction terms.
A third alternative to incorporating RXCs as part of the error rate
calculation would be to adjust the risk score coefficient for a single
component HCC and RXC by a modified interaction coefficient between the
single component HCC and RXC indicator, if the coefficient exists. If
there is no coefficient, the single component HCC and the RXC would not
be adjusted by an interaction coefficient. This alternative approach
was intended to capture a sampled enrollee's specific characteristics
and interaction between HCC and RXC and modify the interaction such
that the total adjustments are equal to the total interaction term
value.
We also generally solicited comment on how to weight risk score
coefficients and account for the interaction terms between the single
component HCC and the RXCs in calculating the error rate under these
alternative proposed approaches. Additionally, in the error estimation
methodology finalized in the 2019 Payment Notice, we did not include
the severity illness indicator interactions for HCCs as they can be
triggered by multiple combinations of HCCs, which would be overly
complex to implement. As part of our current evaluation of the impact
of adjusting for the RXC-HCC interactions in the error estimation
methodology, we also sought comment on whether we should similarly not
adjust for the RXC-HCC interactions.
We solicited comment on all of these proposed approaches for
incorporating RXCs into the error estimation methodology and error rate
calculation, including whether we should consider alternative options.
Finally, as an alternative to the aforementioned proposed policies,
we stated that we were also considering methods for incorporating RXCs
(or all drugs) into the risk adjustment data validation process other
than as part of the error estimation methodology and error rate
calculation. We proposed an option to treat RXC errors as a data
submission issue. Specifically, under this approach, we would
incorporate RXCs or all drugs into risk adjustment data validation as a
method of discovering materially incorrect EDGE server data submissions
in the same or similar manner to how we address demographic and
enrollment errors discovered during risk adjustment data
validation.\84\ Under this approach, instead of incorporating RXCs into
the error estimation methodology and error rate calculation, we would
treat RXC or general drug errors discovered during risk adjustment data
validation in a manner similar to an EDGE data discrepancy, which is
addressed in the current benefit year under Sec. 153.710(d). As such,
these RXC or general drug errors would be the basis for an adjustment
to the applicable benefit year risk score and original transfer amount,
rather than the subsequent benefit year risk score. Any material errors
identified through this process would result in a decrease to the
issuer's original risk score, thereby resulting in a reduced risk
adjustment payment or an increased risk adjustment charge for that
issuer. If this alternative approach were adopted, the identification
of RXC or general drug errors could also have the effect of reducing
charges or increasing payments to other issuers in the state market
risk pool, holding constant the other elements of the state payment
transfer formula, due to the budget neutral framework for the HHS
operated program. We solicited comment on this alternative approach,
especially in comparison to the proposals for incorporating RXCs into
the error estimation methodology or error rate calculation, and on
whether other specific requirements would be needed to verify
materiality of risk score impacts if we were to treat RXC or general
drug errors discovered during risk adjustment data validation as a data
submission issue through the EDGE data discrepancy process under Sec.
153.710(d).
---------------------------------------------------------------------------
\84\ See 83 FR 16930 at 16970 through 16971.
---------------------------------------------------------------------------
After consideration of the comments received, we are finalizing an
approach under which we will incorporate RXCs into risk adjustment data
validation as a method of discovering materially incorrect EDGE server
data submissions in a manner similar to how we address demographic and
enrollment errors discovered during risk adjustment data validation,
and will pilot the incorporation of these drugs into the risk
adjustment data validation process for the 2018 benefit year. As a
pilot year, the identification of RXC errors during the 2018 benefit
year risk adjustment data validation process will not be used to adjust
2018 risk scores or transfers.
Comment: While some commenters generally supported adding RXCs to
the error estimation methodology, many commenters discouraged HHS from
doing so because they did not generally believe that adding this
complexity to the error estimation methodology would deliver improved
risk adjustment data validation results, and expressed
[[Page 17502]]
concern that it instead would increase administrative and financial
burden for issuers and the provider community. Some commenters were
concerned about making changes to the error estimation methodology when
issuers have not yet seen the first non-pilot year of risk adjustment
data validation results. Some commenters recommended retaining the
current error estimation methodology that focuses on validating HCCs
and not expanding the error rate methodology to include RXCs, while one
commenter noted the proposed rule did not address changes that would be
made to the member-level risk score adjustment calculation. Some
commenters recommended that further consideration be given to the value
of including RXC related errors before incorporating RXCs (or all
drugs) as part of the data validation process. However, several other
commenters supported treating RXCs in a manner similar to how we
address demographic and enrollment errors discovered during the data
validation process (or an EDGE server data discrepancy) as a more
efficient and less complicated process than the other options.
Response: As discussed in the proposed rule, we recognize there may
be differences between HCCs and RXCs that need to be considered when
incorporating RXCs into risk adjustment data validation. For example,
it may be more straightforward for initial validation auditors to
validate an RXC rather than an HCC because HCC validation requires
recoding a medical record, with a potential for greater variation.
However, given the incorporation of RXCs into the HHS risk adjustment
adult models beginning with the 2018 benefit year and their ability to
affect an issuer's risk score and calculated transfers in the state
market risk pool, we believe it is important that RXCs are validated in
some manner as part of risk adjustment data validation. Therefore,
based on comments received, we are finalizing an approach, starting
with 2018 benefit year risk adjustment data validation, under which we
will incorporate RXCs into risk adjustment data validation in a manner
similar to how we address demographic and enrollment errors discovered
during the data validation process. This approach will not affect or
require changes to the error estimation methodology, including
calculation of the individual member error rate, which was finalized in
the 2019 Payment Notice.\85\ That is, RXC failures will not be measured
as part of the HCC failure rates used to adjust enrollees' risk scores,
but will be treated as an EDGE discrepancy. This approach will ensure
that RXCs are being validated while limiting burden to issuers and
providers to validate these RXCs. Furthermore, for consistency with the
EDGE server data discrepancy process and the policy regarding
adjustments to transfers due to submission of incorrect data \86\, we
are finalizing that RXC errors will only result in a reduced risk
adjustment payment or an increased risk adjustment charge for that
discrepant issuer with the errors and will not result in increased
payment or decreased charges for that issuer.
---------------------------------------------------------------------------
\85\ 83 FR 16930 at 16961-16966.
\86\ See the November 15, 2018, Evaluation of EDGE Data
Submissions for the 2018 Benefit Year Guidance, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2018.pdf. Also see 83 FR at 16970-16971.
---------------------------------------------------------------------------
Additionally, in response to comments, we are finalizing a policy
to treat the incorporation of RXCs into 2018 benefit year risk
adjustment data validation as a pilot year to allow HHS and issuers to
gain experience in validating RXCs before RXCs are used to adjust
issuers' risk scores. This approach will also allow for HHS and issuers
to primarily focus efforts and resources on validating HCCs in the 2018
benefit year risk adjustment data validation and understanding the
first year of risk adjustment data validation results, which issuers
will receive later this year (reflecting 2017 benefit year data
validation results).
Comment: Several commenters suggested piloting the incorporation of
RXCs into the risk adjustment data validation process to gain
experience in how best to evaluate RXC errors and understand potential
implications in the risk adjustment data validation process. Some of
these commenters recommended a pilot for 2 years to allow HHS, issuers
and other stakeholders to gain experience with the incorporation of
RXCs into the risk adjustment data validation process. Other commenters
requested that HHS postpone the implementation of RXCs in risk
adjustment data validation or focus current data validation efforts on
HCCs. One of these commenters noted that HHS would have the means to
address any obvious fraudulent activity regarding RXCs discovered as
part of a pilot process.
Response: We are finalizing the incorporation of RXCs in risk
adjustment data validation beginning with the 2018 benefit year.
However, in response to comments, we will treat the 2018 benefit year
as a pilot year for purposes of incorporating RXCs, similar to the
pilot years that we allowed for other aspects of risk adjustment data
validation for the 2015 and 2016 benefit years. Under this approach,
the risk adjustment data validation processes will proceed for the 2018
benefit year in a similar manner as the 2017 benefit year, with the
addition of RXCs being included and treated in a manner similar to how
we treat demographic and enrollment errors during data validation.
However, the identification of RXC errors as part of 2018 risk
adjustment data validation will not be used to adjust risk scores.
While we do not agree with commenters that piloting RXCs in risk
adjustment data validation for 2 years is necessary at this time, we
agree with commenters who suggested that piloting the incorporation of
RXCs in risk adjustment data validation for the 2018 benefit year will
provide HHS, issuers, and stakeholders with experience in validating
RXCs and understanding potential implications before using identified
RXC errors to adjust risk scores. Our intention at this time is to
fully implement the incorporation of RXCs into risk adjustment data
validation, as outlined in this final rule, beginning with the 2019
benefit year of risk adjustment data validation.
Comment: Commenters wanted additional information on how HHS plans
to validate RXCs, with one commenter recommending a verification
approach where the audit would confirm that the prescription is a valid
paid claim by reviewing this information on issuers' source systems
(similar to how demographic and enrollment data is validated in risk
adjustment data validation), and not obtain the actual prescription,
which a commenter thought would be burdensome and would lead to false
results. Some commenters sought clarification as to what constitutes a
valid prescription that would need to be obtained to validate the RXC
and what would be considered acceptable documentation within the
medical record system for the purposes of validating the RXC. One
commenter, who wanted clarification on how HHS determines the
materiality of errors and the size of the adjustment for data
discrepancies, noted that issuers may not have the ability to provide
other types of documentation to validate that a prescription was
written by a provider, and another commenter stated that as long as the
issuer paid for the drug, it would be difficult to see how the issuer
acted in bad faith and that applying a data validation process that
makes sure the issuer's claims and payments match what is reported to
[[Page 17503]]
EDGE is the only validation that might identify potential inappropriate
or fraudulent actions. Other commenters suggested varying types of
collaboration with stakeholders on methodology and documentation
standards related to incorporation of RXCs into risk adjustment data
validation.
Response: As discussed in the 2018 Payment Notice,\87\ HHS does not
perform risk adjustment data validation audits with the intent of
determining whether a clinician correctly diagnosed a patient. Rather,
HHS focuses on ensuring that enrollees' diagnoses on paid claims
reflect the appropriately assigned HCCs and were diagnosed by a
licensed clinician. Likewise, in validating pharmacy claims, we intend
to validate factors such as whether the prescription was paid by the
issuer, and whether the RXC eligible service code on a medical claim
was paid by the issuer.
---------------------------------------------------------------------------
\87\ 81 FR 94077.
---------------------------------------------------------------------------
We believe that this type of approach to RXCs will be an effective
approach for validating that issuers are providing accurate RXC claims
information while limiting the burden on issuers and other stakeholders
involved in the risk adjustment data validation process. Specifically,
to validate RXCs in risk adjustment data validation, we will conduct a
claims-based validation to evaluate the accuracy of RXC data
submissions. Under this approach, similar to how we confirm demographic
and enrollment data during the risk adjustment data validation process,
we will not require the issuer to obtain a valid prescription for the
RXC and will only subject issuers' source system documentation of
pharmacy claims or medical claims to the initial validation auditor and
second validation auditor review, thereby limiting the burden on
issuers to validate the RXCs.\88\ Consistent with the treatment of
demographic and enrollment errors discovered during data
validation,\89\ we intend to communicate with issuers where significant
RXC errors are found.
---------------------------------------------------------------------------
\88\ Further details on the process for how RXCs will be
validated during the pilot year will be provided in the 2018 Risk
Adjustment Data Validation Protocols that we anticipate will be
released in May 2019.
\89\ See 83 FR at 16970-16971.
---------------------------------------------------------------------------
Furthermore, in a non-pilot year, we would only adjust issuer risk
scores for RXC errors in cases where an issuer has materially incorrect
EDGE server RXC data submissions, and these discovered RXC errors would
be the basis for an adjustment to the applicable benefit year transfer
amount for the state market risk pools in question. We will work with
these issuers to resolve potential discrepancies in a manner similar to
the EDGE data submission discrepancy process.\90\ We also intend to be
in communication with all issuers in affected state market risk pools
throughout the second validation audit process when RXC errors or other
identified data validation errors could result in adjustments to risk
adjustment transfers.
---------------------------------------------------------------------------
\90\ See, https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/EDGE-2018.pdf; https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RA-Adjustment-Guidance-9-2-15.pdf and https://www.regtap.info/uploads/library/DDC_AttestDisc_Slides_050818_v2_5CR_050818(1).pdf.
---------------------------------------------------------------------------
This approach will target materially incorrect RXC data and will
not target an isolated RXC data error, which is similar to the goal of
the error estimation methodology for HCCs finalized in the 2019 Payment
Notice--to avoid adjusting all issuers' risk adjustment transfers for
expected variation. The approach is also similar to how demographic and
enrollment validation is occurring where the review involves the
identification of errors that could result in the initiation of a
discrepancy process for adjustments.\91\ Additionally, we intend to
learn from the experience of validating RXCs during the pilot year to
inform and potentially refine the approach for incorporating review of
RXCs in data validation in future benefit years. However, as noted
above, our intention at this time is to fully implement the
incorporation of RXCs into risk adjustment data validation, as outlined
in this final rule, beginning with the 2019 benefit year of risk
adjustment data validation.
---------------------------------------------------------------------------
\91\ 83 FR at 16970 .
---------------------------------------------------------------------------
g. Risk Adjustment Data Validation Adjustments in Exiting and Single
Issuer Markets and Negative Error Rate Outlier Markets
i. Risk Adjustment Data Validation Adjustments in Exiting Issuer
Markets
Under the risk adjustment data validation program, adjustments to
transfers are generally made in the benefit year following the benefit
year that was audited. For issuers that exit the market following the
benefit year being audited, and therefore do not have transfers to
adjust during the following benefit year, we previously finalized an
exception to this general rule such that we will adjust the exiting
issuer's prior year risk scores and associated transfers where it has
been identified as an outlier through the HCC failure rate methodology
during risk adjustment data validation.\92\ In the proposed rule, we
proposed to amend our policy to provide that, if an exiting issuer is
found to be a negative error rate outlier, HHS would not make
adjustments to that issuer's risk score and its associated risk
adjustment transfers as a result of this negative error rate outlier
finding. A negative error rate will have the effect of increasing an
issuer's risk score and thereby increasing its calculated risk
adjustment payment or reducing its calculated risk adjustment charge.
To avoid retroactively re-opening a risk pool to make adjustments to
other issuers' transfers based on an exiting issuer's negative error
rate, we proposed to re-open the issuer's risk score and its associated
risk adjustment transfers in a prior benefit year only if the exiting
issuer was found to have had a positive error rate, and was therefore
overpaid or undercharged based on its risk adjustment data validation
results. When the exiting issuer is a positive error rate outlier, HHS
would collect funds (either increasing the charge amount or reducing
the payment amount) from the exiting issuer and redistribute the
amounts to other issuers who participated in the same state market risk
pool in the prior benefit year. This approach was intended to help
ensure that issuers are made whole even if an issuer with a positive
error rate exits the state, without the additional burdens associated
with having transfers adjusted (including the potential for additional
charges being assessed) for a prior benefit year for a negative error
rate outlier when an issuer decides to exit a state.
---------------------------------------------------------------------------
\92\ 83 FR 16965.
---------------------------------------------------------------------------
Further, we proposed that to be considered an exiting issuer under
this policy, the issuer would have to exit all of the markets and risk
pools in the state (that is, not selling or offering any new plans in
the state). If an issuer only exits some markets or risk pools in the
state, but continues to sell or offer new plans in others, it would not
be considered an exiting issuer under this policy. Finally, we
clarified that under this proposed policy, a small group market issuer
with off-calendar year coverage who exits the market but has only
carry-over coverage that ends in the next benefit year (that is, carry-
over of run out claims for individuals enrolled in the previous benefit
year, with no new coverage being offered or sold) would be considered
an exiting issuer and would also be exempt from risk adjustment data
validation for the benefit year with the carry-over coverage.
Individual market issuers offering or selling any new individual market
coverage in the subsequent benefit year would be subject to risk
adjustment data
[[Page 17504]]
validation, unless another exemption applied.
Comment: Several commenters supported the proposals regarding
exiting issuers, indicating that it would not be helpful to market
stability and would cause harm to issuers that remain in a market if an
exiting issuer that was a negative error rate outlier resulted in
adjustments to the risk scores and transfers in the state market risk
pool. A few commenters supported the proposal, and some stated that it
should be extended so that no issuer's risk score or transfer would be
increased for a negative error rate, stating that doing so would create
significant uncertainty in financial projections and pricing for
issuers.
Response: After consideration of the comments received, we are
finalizing the risk adjustment data validation policies regarding
exiting issuers, and will apply this policy to the 2018 benefit year
risk adjustment data validation and beyond. We believe that the
policies on exiting issuers mitigate the impact on remaining issuers,
and will aid in the market's stability and proper functioning year to
year by limiting the application of an exiting issuer's risk adjustment
data validation results to situations where the issuer was overpaid or
undercharged for the benefit year being validated. Comments on negative
error rates generally (that is, for issuers who are not exiting
issuers) are addressed in a separate section of this preamble below.
ii. Risk Adjustment Data Validation Adjustments in Single Issuer
Markets
For an issuer that is the sole issuer in a state market risk pool
in a benefit year, there are no risk adjustment transfers under the
state payment transfer formula and thus, no payment or financial
accountability to other issuers for that risk pool.\93\ We do not
calculate risk adjustment transfers for a benefit year in a state
market risk pool in which there is only one issuer, and that issuer is
not required to conduct risk adjustment data validation for that state
market risk pool.\94\ However, if the sole issuer was participating in
multiple risk pools in the state during the year that is being audited,
that issuer will be subject to risk adjustment data validation for
those risk pools with other issuers that had risk adjustment transfers
calculated. In addition, the sole issuer may have been identified as an
outlier for risk adjustment data validation, and its error rate would
be applied to all of its risk adjustment covered plans in the state
market risk pools where it was not the sole issuer. Its error rate
would also be applied to adjust the subsequent benefit year's transfers
for other issuers in the same state market risk pool(s). If the sole
issuer that participated in risk adjustment data validation for a
benefit year was identified as outlier, and in the following benefit
year, a new issuer entered what was formerly the sole issuer risk pool,
we proposed that the former sole issuer's error rate would also apply
to the risk scores for its risk adjustment covered plans in the
subsequent benefit year in the risk pool(s) in which had been the sole
issuer--that is, the formerly sole issuer's risk scores and transfer
amounts calculated for the benefit year in which a new issuer entered
the state market risk pool which did not have risk adjustment transfers
calculated in the prior year would be subject to adjustment based on
the formerly sole issuer's error rate. In addition, the new issuer
would have its risk adjustment transfer adjusted in the current benefit
year if the former sole issuer was an outlier with risk score error
rates in the prior benefit year's risk adjustment data validation.
---------------------------------------------------------------------------
\93\ See 83 FR at 16967.
\94\ Id.
---------------------------------------------------------------------------
Comment: A few commenters disagreed with the proposals for new
entrants into a risk pool that formerly was a single issuer risk pool.
These commenters stated that all issuers should be treated the same
under risk adjustment data validation, and that a new entrant who was
not subject to risk adjustment data validation in the year before the
year in which it entered the state market risk pool should not be
subject to adjustments until both issuers have undergone risk
adjustment data validation. One of these commenters also expressed
concerns that the proposed policy would create ``perverse incentives''
and decrease market stability, and that issuers would face uncertainty
about future liabilities associated with risk adjustment data
validation depending on whether another issuer enters the market in
question.
Response: After consideration of the comments received, we are
finalizing the policies related to the application of risk adjustment
data validation results when there are new entrants into a risk pool
that formerly was a single issuer risk pool for the 2018 benefit year
risk adjustment data validation and beyond. We do not believe that this
policy would create perverse incentives, decrease market stability, or
cause uncertainty about future liabilities associated with risk
adjustment data validation, as this policy results in consistent
treatment for all issuers. Thus, transfers will be adjusted for
outliers when another issuer joins a sole issuer state market risk
pool, as risk adjustment data validation is based on all state markets
and outlier status in one market is reflective of outlier status in
others.\95\ In fact, we believe postponing the application of
adjustments due to risk adjustment data validation outlier status for
sole issuer state market risk pools until both issuers have undergone
risk adjustment data validation possibly could create perverse
incentives and result in market distortions, as issuers would not be
required to substantiate their EDGE data submissions nor would the
issuer identified as an outlier in other market risk pools in the state
be subject to the adjustments deemed appropriate through the prior
year's risk adjustment data validation. Additionally, we do not agree
that issuers would face uncertainty about future liabilities associated
with risk adjustment data validation depending on whether another
issuer enters the state market risk pool in question. This sole issuer
policy finalized in this rule is consistent with the policy established
in the 2015 Payment Notice specifying that each issuer's risk score
adjustment (from risk adjustment data validation results) will be
applied to adjust the plan's average risk score for each of the
issuer's risk adjustment covered plans.\96\ This policy also aligns
with how error rates are applied if a new issuer entered a state market
risk pool with more than one issuer.
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\95\ 79 FR 13768 through 13769.
\96\ 79 FR 13743 at 13768 through 13769.
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iii. Risk Adjustment Data Validation and Negative Error Rate Outlier
Markets
As discussed in the proposed rule if an issuer is a negative error
rate outlier, its risk score will be adjusted upwards. Assuming no
changes to risk scores for the other issuers in the state market risk
pool, this upward adjustment would reduce the issuer's risk adjustment
charge or increase its risk adjustment payment for the applicable
benefit year, leading to an increase in risk adjustment charges or a
decrease in risk adjustment payments for the other issuers in the state
market risk pool. If an issuer is a positive error rate outlier, its
risk score will be adjusted downwards. Assuming no changes to risk
scores for the other issuers in the state market risk pool, this
downward adjustment would increase the issuer's charge or decrease its
payment for the applicable benefit year, leading to a decrease in
charges or an increase in payments for the other issuers in the state
market risk pool. The
[[Page 17505]]
intent of this two-sided outlier identification, and the resulting
adjustments for outlier issuers that have significantly better than
average (negative error rate) and poorer than average (positive error
rate) data validation results is to ensure that risk adjustment data
validation adjusts risk adjustment transfers for identified, material
risk differences between what issuers submitted to their EDGE servers
and what was validated in medical records. The increase to risk
score(s) for negative error rate outliers is consistent with the upward
and downward risk score adjustments that were finalized as part of the
original risk adjustment data validation methodology in the 2015
Payment Notice \97\ and the HCC failure rate approach to error
estimation finalized in the 2019 Payment Notice.\98\ That is, the long-
standing intent of HHS-operated risk adjustment data validation has
been to account for identified risk differences, regardless of the
direction of those differences.\99\
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\97\ For example, we stated in the 2015 Payment Notice that
``the effect of an issuer's risk score error adjustment will depend
upon its magnitude and direction compared to the average risk score
error adjustment and direction for the entire market''. See 79 FR
13743 at 13769.
\98\ For example, in the 2019 Payment Notice, we stated that
``we will use a 1.96 standard deviation cutoff, for a 95 percent
confidence interval, to identify outliers'' and that ``when an
issuer's HCC group failure rate is an outlier, we will reduce (or
increase) each of the applicable initial validation audit sample
enrollees' HCC coefficients by the difference between the outlier
issuer's failure rate for the HCC group and the weighted mean
failure rate for the HCC group.'' We also stated that
``specifically, this will result in the sample enrollees' applicable
HCC risk score components being reduced (or increased) by a partial
value, or percentage, calculated as the difference between the
outlier failure rate for the HCC group and the weighted mean failure
rate for the applicable HCC group.'' 83 FR 16930 at 16962. The
shorthand ``positive error rate outlier'' captures those issuers
whose HCC coefficients are reduced as a result of being identified
as an outlier; while the shorthand ``negative error rate outlier''
captures those issuers whose HCC coefficients are increased as a
result of being identified as an outlier.
\99\ An exception to this approach is the policy finalized,
beginning for the 2018 benefit year of risk adjustment data
validation, and discussed above in this rule for exiting issuers who
are negative error rate outliers.
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However, we sought comment on the impact of the current approach
under the error estimation methodology and the outlier adjustment
policy for negative error rate outlier issuers, or issuers with
significantly lower-than-average HCC failure rates, on other issuers in
a state market risk pool, the incentives that negative error rate
adjustments may create, and potential modifications to the error rate
estimation methodology or the outlier adjustment policy, such as to
utilize the state mean failure rate instead of the national mean
failure rate, to modify the error rate calculation to the confidence
interval instead of the mean, to exclude negative error rate outliers
or to use other methods of lessening the impact of negative error rate
issuers on affected risk pools, beginning with the 2018 benefit year of
risk adjustment data validation or later.
Comment: Some commenters recommended that HHS follow its current
risk adjustment data validation methodology and outlier adjustment
policy, beginning with the application of 2017 benefit year risk
adjustment data validation to 2018 benefit year risk adjustment
transfers, without further delay or material change. These commenters
stated that further delay of risk adjustment data validation would be
unreasonable, create market instability, and would fundamentally
jeopardize the program's integrity. These commenters also expressed
support for evaluating prospective improvements to the HHS risk
adjustment data validation methodology and outlier adjustment policy
for future benefit years.
However, other commenters stated that issuers generally did not
expect the significant financial impact of risk adjustment data
validation to be as large as indicated by the 2016 pilot results that
were released by HHS in July 2018,\100\ noting that the current risk
adjustment data validation error rate methodology was not finalized
until April 2018. These commenters also tended to express concern that
the error rates are calculated based on adjusting to the mean, instead
of the confidence intervals. Some of these commenters were also
concerned that issuers may begin booking anticipated impact of risk
adjustment data validation on 2018 risk adjustment transfers in their
2019 financials, raising premiums due to the uncertainty associated
with estimating those impacts. These commenters believe that the
current risk adjustment data validation methodology would lead to
higher premiums by compelling issuers to raise premiums to buffer
against the potential of unpredictable risk adjustment data validation
adjustments, which could create instability and unpredictability in
rate setting, and affect market participation.
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\100\ On July 13, 2018, HHS released a memo via Risk Adjustment
Data Validation Audit Tool for issuers titled, ``2016 Benefit Year
HHS-operated Risk Adjustment Data Validation (HHS-RADV) Final
Results'' that included the program benchmark metrics and the 2016
benefit year HHS-RADV Results Job Aid report that included the HCC
group definitions and an illustrative example of the steps for error
rate calculation. Thus, issuers were provided with illustrative
information on the 2016 benefit year risk adjustment data validation
results under the methodology finalized in April 2018, but that
information was provided for informational purposes only and should
not have been used for purposes of rate setting. In addition, as a
second pilot year, the 2016 benefit year risk adjustment data
validation results were not applied to adjust risk adjustment
transfers.
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Several commenters expressed concern about the impact of the
negative error rate outliers in cases where the issuer had a zero error
rate, particularly given the potential distributive effect of the
adjustments to transfers based on market share. Another commenter
stated that the exiting issuer proposal on negative error rates should
be extended to all issuers such that no issuer's risk score would be
increased because of a negative error rate. The commenter believes that
this would avoid the creation of significant uncertainty in financial
projections and pricing for issuers in the same state market risk pool
whose transfers could be negatively affected by another issuer's
increased risk score.
One commenter questioned HHS' authority to apply the current risk
adjustment data validation error estimation methodology to 2018 risk
scores. Another commenter stated its belief that HHS has the authority
to make adjustments to the risk adjustment data validation methodology
finalized in the 2019 Payment Notice. Some commenters suggested that
HHS treat the 2017 benefit year as another pilot year or postpone the
implementation of the risk adjustment data validation adjustments to
risk scores and transfers until later benefit years (for example, 2020
and beyond).
Many commenters recommended HHS convene a joint industry
stakeholder workgroup to develop effective solutions to ensure the risk
adjustment program achieves its goals and fulfills its intended
purpose. Other commenters recommended broader changes to the risk
adjustment data validation process, such as using a targeted data-
driven approach to risk adjustment data validation, dividing the audits
into individual and small group to separate the impact on transfers, or
creating a process to exempt issuers from validating HCCs for which a
provider refuses to supply a medical record (when the issuer has
demonstrated good faith in trying to obtain that record).
Response: We did not propose and are not making any changes with
respect to the application of 2017 benefit year risk adjustment data
validation results to 2018 benefit year risk adjustment risk scores and
transfers using the current HHS risk adjustment data validation
methodology and outlier adjustment policy. HHS conducted 2 pilot years
for
[[Page 17506]]
risk adjustment data validation, and we agree with commenters that
another pilot year would not be appropriate at this time (absent the
exception for Massachusetts issuers detailed below) because further
delay could jeopardize the program's integrity. Thus, we are not making
the 2017 benefit year risk adjustment data validation a pilot year, nor
are we making any changes to the risk adjustment data validation error
estimation methodology for the 2017 or 2018 benefit years.
While the current error estimation methodology was not finalized
until April 2018, it was applied prospectively to risk adjustment data
validation for the 2017 benefit year. We have also been transparent
about the potential for adjustments based on risk adjustment data
validation results, including the two-sided nature of such adjustments,
since the inception of the program. Consistent with Sec. 153.350(c),
as finalized in the final rule Standards Related to Reinsurance, Risk
Corridors and Risk Adjustment,\101\ HHS may adjust risk adjustment
payments and charges to all issuers of risk adjustment covered plans
based on adjustments to the average actuarial risk of a risk adjustment
covered plan due to errors discovered during data validation. This
approach was also reflected in the 2014 Payment Notice, which noted our
intent to make adjustments where an issuer under-reported its risk
scores.\102\ Further, under the original risk adjustment data
validation methodology finalized in the 2015 Payment Notice \103\,
every failure to validate an HCC would have resulted in an adjustment
to the issuer's risk score and would have also affected transfers for
all issuers in the state market risk pool (including both issuers with
HCC validation failures and those without) due to the budget neutral
nature of the HHS-operated risk adjustment program.
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\101\ 77 FR 17234.
\102\ 78 FR at 15438.
\103\ For example, we stated in the 2015 Payment Notice that
``the effect of an issuer's risk score error adjustment will depend
upon its magnitude and direction compared to the average risk score
error adjustment and direction for the entire market''. See 79 FR
13769.
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However, as detailed in the 2019 Payment Notice, we recognized that
many issuers would experience some variation and error because
providers' documentation of enrollee health status varies across
provider types and groups. Our experiences with the Medicare Advantage
risk adjustment data validation program and the HHS-operated risk
adjustment data validation pilot years reinforced this belief. As a
result, to avoid adjusting transfers for any and all failures, we
adopted the HCC failure rate methodology, which results in adjustments
to an issuer's risk score only when the issuer's failure rate is
statistically different from the weighted mean failure rate, or total
failure rate, for all issuers that submitted initial validation audits
(that is, the issuer is identified as an outlier). Similar to the
original methodology finalized in the 2015 Payment Notice, when there
is an outlier issuer, the transfers for other issuers in the state
market risk pool will also be adjusted due to the budget neutral nature
of the HHS-operated risk adjustment program. We further note that,
based on our analysis of the 2016 benefit year risk adjustment data
validation results and our analysis of the initial estimated 2017
benefit year risk adjustment data validation results, we have found
that the HCC failure rate approach to error estimation significantly
reduces the overall transfer impact of adjustments when compared with
results under the original methodology.
Additionally, as detailed above, the identification of positive and
negative error rate outliers and the resulting adjustments under the
HCC failure rate methodology is consistent with the two-sided
adjustment approach adopted under the original risk adjustment
methodology finalized in the 2015 Payment Notice. Except as provided
elsewhere in this final rule for negative error rate outliers resulting
from exiting issuers, we continue to believe that adjusting for both
negative and positive error rate outliers ensures that issuers' actual
actuarial risk is reflected and that the HHS-operated risk adjustment
program assesses charges to issuers with plans with lower-than-average
actuarial risk while making payments to issuers with plans with higher-
than-average actuarial risk. It also incentivizes issuers to achieve
the most accurate EDGE data submissions for initial risk adjustment
transfer calculations. For all these reasons, we do not believe that
further changes are needed to the error estimation methodology or the
outlier adjustment policy at this time. We will apply the current
methodology and outlier adjustment policy to both the 2017 benefit year
and 2018 benefit year of risk adjustment data validation. We intend to
solicit further comments and work with stakeholders regarding potential
changes for future benefit years.
However, as explained above, while issuers have been on notice
since 2012 that adjustments based on risk adjustment data validation
results could occur,\104\ we recognize that the initial experience
during the pilot years of risk adjustment data validation has caused
concern over the potential direction and magnitude of the adjustments.
After consideration of the comments received, and further analysis of
timing considerations (such as the impact on adjustments of any
successful risk adjustment data validation appeals, as well as the
proposed change to the risk adjustment appeals holdback for the 2018
benefit year and beyond (``Proposed Holdback Guidance'' \105\)), we are
updating the timeline for publication, collection, and distribution of
risk adjustment data validation adjustments to transfers. We still
intend to publish 2017 benefit year error rates in May 2019, but under
our updated timeline, we intend to publish the 2017 benefit year risk
adjustment data validation adjustments on August 1, 2019 after the
release of the Summary Report on Permanent Risk Adjustment Transfers
for the 2018 Benefit Year (intended to be released on June 28, 2019).
The information released in the August 1, 2019 report on risk
adjustment data validation adjustments to transfers will be based on
the preliminary 2017 benefit year risk adjustment data validation
results, prior to the resolution of appeals. The August 1, 2019 report
will also include information on 2017 benefit year default data
validation charges under Sec. 153.630(b)(10) and allocation of those
amounts. We will also delay the collection and distribution of 2017
benefit year risk adjustment data validation adjustments to 2018
benefit year risk adjustment transfers and 2017 benefit year default
data validation charges and allocations until 2021 to provide issuers
with more options on how and when to book financial impacts from risk
adjustment data validation, in keeping with guidance from state
departments of insurance, where applicable. Specifically, we intend to
update the Medical Loss Ratio Form Instructions to provide guidance to
issuers, consistent with Sec. 153.710(g)(2) and (3), regarding the
reporting of risk adjustment data validation adjustments for medical
loss ratio reporting purposes. The guidance would instruct issuers to
report risk adjustment data validation adjustments and default data
validation charges and allocations in the same medical loss
[[Page 17507]]
ratio reporting year as the year when these amounts are collected and
disbursed (for example, the 2017 benefit year risk adjustment data
validation adjustments and default data validation charges and
allocations would be reported in the 2021 MLR reporting year). We also
intend to update the Unified Rate Review Template (URRT) instructions
to permit issuers and states to consider risk adjustment data
validation adjustment impacts in rates for the year when these amounts
will be collected and disbursed (for example, issuers and states would
have the option to consider 2017 benefit year risk adjustment data
validation adjustments in rate setting for the 2021 benefit year,
instead of 2020 benefit year rate setting). Changing the timeline for
the year in which issuers may pay, receive, and account for their
results from risk adjustment data validation in the MLR and URRT
submissions will only change the timing. This approach will not change
the associated processes and therefore will not increase burden on
issuers or states. Delaying the collection and distribution of 2017
benefit year risk adjustment data validation adjustments to 2018
benefit year risk adjustment transfers until 2021 will also allow more
time for HHS to work with issuers to resolve any risk adjustment data
validation appeals. It will also help mitigate the potential for
additional uncertainty and instability that could be created by making
adjustments before appeals are resolved, as a successful risk
adjustment data validation appeal could affect the calculated risk
score error rate and accompanying adjustments to transfers.
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\104\ See, Standards Related to Reinsurance, Risk Corridors and
Risk Adjustment, 77 FR 17234, 2014 Payment Notice, 78 FR at 15438,
and 2015 Payment Notice, 79 FR 13769.
\105\ Available at www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Proposed-Changes-RA-Holdback-2018BY.pdf.
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We anticipate adhering to a similar timeline in future years for
the collection and payment of risk adjustment data validation
adjustments to risk adjustment transfers (along with default data
validation charges and allocations), such that risk adjustment
transfers without risk adjustment data validation adjustments would be
reported by June 30th of the year after the applicable benefit year,
and issuers would report those amounts in the medical loss ratio
reports submitted by July 31st of the year after the applicable benefit
year. The preliminary risk adjustment data validation adjustments that
could impact that benefit year's transfers, along with information on
default data validation charges and allocations for the applicable
benefit year, would be reported after the June 30 report is published,
and we would collect and disburse risk adjustment data validation
adjustments and default data validation charges and allocations two
years after the announcement. Issuers would be instructed to reflect
those final adjustment amounts and default data validation charges and
allocations in the medical loss ratio reporting year in which
collections and payments of those amounts occur, and would be permitted
to reflect those amounts in rate setting for that same benefit year.
For example, 2018 benefit year risk adjustment data validation
adjustments and default data validation charges and allocations would
be collected and paid in 2022; issuers could account for the impacts of
those amounts in rate setting for the 2022 benefit year, and issuers
would report the adjustments and default data validation charges and
allocations in the 2022 benefit year medical loss ratio reporting year.
Furthermore, given these timeline changes for collecting and paying
risk adjustment data validation adjustments being finalized in this
final rule and in response to comments that we received indicating that
some issuers had difficulty obtaining medical records, we are also
considering options to extend the timeline for conducting and
completing the risk adjustment data validation processes for issuers
and HHS. We believe that this additional time may help issuers in
completing the operational processes in future benefit years.
Therefore, we intend to seek input on an updated risk adjustment data
validation timeline beginning with the 2018 benefit year to provide
more time for medical record collection during the initial validation
audits and more time for the completion of the second validation audit.
Comment: Some commenters supported the current policy that involves
adjusting for both positive and negative outliers with one of these
commenters noting that adjustments for negative outliers encourage
complete and accurate coding, and more comprehensive documentation.
Many commenters, on the other hand, supported the elimination of risk
score adjustments for issuers that are negative error rate outliers,
noting that a negative error rate issuer should not be rewarded for
submitting incorrect or incomplete data to the EDGE server and that
negative error rate outliers create uncertainty in the market,
particularly for issuers within the confidence bounds (that is, those
issuers who are not outliers). One commenter supported adjusting an
issuer's risk score when the issuer's error rate materially deviates
from a statistically meaningful value or when its error rate materially
deviates from a statistically meaningful value by a multiplier figure
that values back to the outlier cutoff point. Another commenter
recommended that HHS apply the error rates to the transfers of the
benefit year that is being audited, rather than to transfers in the
following benefit year.
Several commenters recommended that outlier issuers' error rates be
calculated based on the ends of the confidence interval instead of the
mean to eliminate the ``payment cliff'' under the current methodology.
Some of these commenters preferred adjusting outliers to the nearest
ends of the confidence intervals as a short term solution to reduce the
negative financial impact on other issuers in the state market risk
pool because, for example, they believe the nationwide weighted average
provides an adjustment that is too large in states where the statewide
group failure rate is lower than the nationwide average. Some of these
commenters also noted that adjusting to the confidence intervals would
minimize unexpected impacts on transfers and remove the extreme impact
of small adjustments in HCC accuracy for issuers whose failure rates
are near the edges of the confidence interval.
Response: We did not propose and are not making any changes to the
error estimation methodology applicable to 2017 and 2018 benefit years
risk adjustment data validation. We have concerns about adjusting
outlier issuers to the edges of the confidence intervals instead of the
mean, which is why that approach was not adopted in the current error
estimation methodology. Specifically, we are concerned that adjusting
to the edges of confidence intervals may effectively reduce the impact
of risk adjustment data validation results to the point that the
positive error rate outlier adjustments may not provide enough
disincentive to prevent inappropriate coding and the benefit of
upcoding may outweigh the potential costs of the risk adjustment data
validation risk score adjustments. However, in future years, after we
have analyzed more data on the risk adjustment data validation results,
we intend to consider refinements to the risk adjustment data
validation process and methodology, and may consider alternative
options for error rate adjustments, such as using multiple or smoothed
confidence intervals for outlier identification and risk score
adjustment. While we are interested in applying the risk adjustment
data validation results to the benefit year being audited, we have
concerns that in order to switch to that policy starting with the 2018
benefit year, we would be adjusting 2018 benefit year risk adjustment
twice (once for the 2017
[[Page 17508]]
benefit year risk adjustment data validation results and a second time
for the 2018 benefit year risk adjustment data validation results).
However, we will continue to consider modifications to risk adjustment
data validation processes and methodologies, including which benefit
year transfers' the data validation adjustments are applied to, for
future benefit years. As mentioned elsewhere in this final rule, we
intend to consider the comments received for potential updates to the
current methodology and outlier adjustment policy for future benefit
years. We will consult with stakeholders before implementing any such
changes.
Comment: One commenter requested that HHS treat the 2017 benefit
year as a pilot year for Massachusetts for risk adjustment data
validation purposes since the 2017 benefit year was the first year that
Massachusetts issuers participated in the HHS-operated risk adjustment
program. This commenter noted that there will be some distortion in the
results of audits for issuers in Massachusetts, and was especially
concerned that this distortion may be magnified for smaller issuers.
Response: We understand that Massachusetts issuers are in a unique
situation with regard to risk adjustment data validation for the 2017
benefit year, since the 2017 benefit year was the first year in which
Massachusetts participated in the HHS-operated risk adjustment program
and submitted data to EDGE servers, and no Massachusetts issuers \106\
had an opportunity to participate in the pilot years of HHS risk
adjustment data validation. Therefore, in response to comments and
after consideration of the specific facts and circumstances involved,
we believe that exercising our enforcement discretion to provide
Massachusetts issuers with a non-adjustment year for risk adjustment
data validation is appropriate. It is consistent with our general
approach to implementing risk adjustment data validation in other
states where HHS is responsible for operating the program and we will
therefore exercise our discretion to operate risk adjustment data
validation for the 2017 benefit year as a pilot year for Massachusetts.
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\106\ Participation in risk adjustment data validation is based
on HIOS IDs and not parent companies. Therefore, while some issuers'
parent companies in Massachusetts may have previously participated
in the HHS-operated risk adjustment program in other states under
other issuer HIOS IDs, no issuer HIOS IDs in Massachusetts
previously participated in the HHS-operated risk adjustment program,
including the pilot years of risk adjustment data validation.
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Massachusetts issuers will receive 2017 benefit year risk
adjustment data validation error rate results, but these issuers will
not have their 2018 benefit year risk adjustment risk scores or
transfers for Massachusetts state market risk pools adjusted based on
2017 risk adjustment data validation results. Furthermore,
Massachusetts issuers' failure rates will not be included in the
calculation of the national metrics for the 2017 benefit year risk
adjustment data validation to avoid the potential distortion in the
national metrics that will be applied to issuers in other state market
risk pools. All other issuers in all other states and the District of
Columbia will have their 2018 benefit year risk adjustment risk scores
and transfers adjusted based on 2017 benefit year risk adjustment data
validation results in accordance the current error estimation
methodology finalized in the 2019 Payment Notice. In addition, to the
extent that a Massachusetts issuer also offered risk adjustment covered
plans in other state market risk pools, its 2018 benefit year risk
adjustment risk scores and transfers for those other state market risk
pools will be adjusted based on 2017 benefit year risk adjustment data
validation results.
h. Exemptions From Risk Adjustment Data Validation
In previous rules,\107\ we established exemptions from the HHS-
operated risk adjustment data validation requirements for issuers with
500 or fewer billable member months statewide and issuers at or below a
materiality threshold for the benefit year being audited. Additionally,
on April 9, 2018, we released guidance indicating that we intended to
propose a similar exemption from risk adjustment data validation
requirements for certain issuers in or entering liquidation.\108\ The
purpose of these policies is to address numerous concerns, particularly
from smaller issuers and state regulators, regarding the regulatory
burden and costs associated with complying with the HHS-operated risk
adjustment data validation program. HHS previously considered these
concerns and provided relief where possible, and under this final rule,
we are codifying these exemptions in regulation at Sec. 153.630(g), as
described further below.
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\107\ See 81 FR 94058 at 94104 and 83 FR 16930 at 16966.
\108\ Exemption from HHS-Operated Risk Adjustment Data
Validation (HHS-RADV) for Issuers in Liquidation or Entering
Liquidation (April 9, 2018). https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
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In the 2019 Payment Notice, we finalized that beginning with 2017
benefit year HHS-operated risk adjustment data validation, issuers with
500 billable member months or fewer statewide in the benefit year being
audited that elect to establish and submit data to an EDGE server will
not be subject to the requirement to hire an initial validation auditor
or submit initial validation audit results.\109\ We explained that
exempting these issuers from the requirement to hire an initial
validation auditor is appropriate because they will have a
disproportionately high operational burden for compliance with risk
adjustment data validation. We noted that, beginning with 2018 benefit
year risk adjustment data validation, these issuers will not be subject
to random (or targeted) sampling under the materiality threshold, and
they will continue to not be subject to the requirement to hire an
initial validation auditor or submit initial validation audit results.
Issuers who qualify for this exemption will not be subject to
enforcement action for non-compliance with risk adjustment data
validation requirements, or be assessed the default data validation
charge under Sec. 153.630(b)(10). We stated that the determination of
whether an issuer has 500 or fewer billable member months will be made
on a statewide basis (that is, by combining an issuer's enrollment in a
state's individual, small group, and merged markets, as applicable, in
a benefit year). In the proposed rule, we proposed to codify this
exemption at Sec. 153.630(g)(1). We received no comments on codifying
this exemption; therefore, in this final rule, we are codifying this
exemption as proposed. Consistent with the finalized policy adopted in
the 2019 Payment Notice, this exemption is available beginning with the
2017 benefit year of risk adjustment data validation.
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\109\ 83 FR 16930 at 16966.
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Second, in the 2018 Payment Notice, HHS finalized a materiality
threshold for risk adjustment data validation to ease the burden of
annual audit requirements for smaller issuers of risk adjustment
covered plans.\110\ We evaluated the burden associated with risk
adjustment data validation, particularly, the fixed costs associated
with hiring an initial validation auditor and submitting results to HHS
on an annual basis. We established a materiality threshold for risk
adjustment data validation that considered the burden of such a process
on smaller plans. Specifically, we stated that issuers with total
annual premiums at or below $15 million for risk adjustment covered
plans (calculated statewide based on the premiums of the benefit year
being validated) will not be subject
[[Page 17509]]
to the annual initial validation audit requirements, but will still be
subject to an initial validation audit approximately every 3 years
(barring any risk-based triggers due to experience that warrant more
frequent audits). Under the established process, we will conduct random
and targeted sampling for issuers at or below the materiality
threshold, beginning with the 2018 benefit year of risk adjustment data
validation. Even if an issuer is exempt from initial validation audit
requirements under the materiality threshold, HHS may require these
issuers to make records available for review or to comply with an audit
by the federal government under Sec. 153.620.
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\110\ 81 FR 94058 at 94104-94105.
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We proposed to codify the materiality threshold exemption at Sec.
153.630(g)(2), providing that an issuer of a risk adjustment covered
plan would be exempt from the data validation requirements in Sec.
153.630(b) if the issuer is at or below the materiality threshold
defined by HHS and is not selected by HHS to participate in the data
validation requirements in an applicable benefit year under a random
and targeted sampling conducted approximately every 3 years (barring
any risk-based triggers due to experience that warrant more frequent
participation in risk adjustment data validation).\111\
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\111\ When selecting issuers at or below the materiality
threshold for more frequent initial validation audits, we will
consider the issuer's prior risk adjustment data validation results
and any material changes in risk adjustment data submissions, as
measured by our quality metrics. See 81 FR 94105.
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Consistent with the materiality threshold finalized in the 2019
Payment Notice,\112\ we proposed to define the materiality threshold as
total annual premiums at or below $15 million, based on the premiums of
the benefit year being validated for all of the issuer's risk
adjustment covered plans in the individual, small group, and merged
markets (as applicable) in the state. We did not propose any trending
adjustment to the materiality threshold, but stated that if we were to
modify the definition of materiality to trend the $15 million threshold
in future benefit years, we would propose that change through notice-
and-comment rulemaking.
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\112\ See 83 FR 16966.
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We noted that if an issuer of a risk adjustment covered plan within
the materiality threshold is not exempt from the data validation
requirements for a given benefit year (that is, the issuer is selected
by random and targeted sampling), and fails to engage an initial
validation auditor or to submit the results of an initial validation
audit to HHS, the issuer would be subject to a default data validation
charge in accordance with Sec. 153.630(b)(10), and may be subject to
other enforcement action.
We are codifying this exemption at Sec. 153.630(g)(2), including
the establishment of a $15 million threshold that will continue to
apply until such time as it may be changed through notice-and-comment
rulemaking as proposed. Consistent with the original policy finalized
in the 2018 Payment Notice, this exemption is available beginning with
2018 benefit year risk adjustment data validation.
Lastly, as noted in this rule, HHS released guidance on April 9,
2018 indicating our intention to propose in future rulemaking an
exemption from risk adjustment data validation requirements for certain
issuers in liquidation or that will enter liquidation. The purpose of
exempting these issuers is similar to the reasons outlined in this rule
for smaller issuers and those below the materiality threshold--to
recognize the burdens and costs associated with the risk adjustment
data validation requirements on these issuers, given their reduced
financial and staff resources. Under this proposal, certain issuers in
liquidation or that will enter liquidation would be exempt from the
requirement to hire an initial validation auditor and submit initial
validation audit results, as well as the second validation audit
requirements, and would not be subject to enforcement action for non-
compliance with risk adjustment data validation requirements or be
assessed the default data validation charge under Sec. 153.630(b)(10).
We proposed codifying at Sec. 153.630(g)(3) that an issuer would
be exempt from the applicable benefit year of risk adjustment data
validation if the issuer is in liquidation as of April 30th of the year
when transfer adjustments based on data validation results are made
(that is, 2 benefit years after the benefit year being audited). For
the 2018 benefit year and beyond, we proposed that to qualify for the
exemption, the issuer must also not be a positive error rate outlier in
the prior benefit year of risk adjustment data validation (that is, the
issuer is not a positive error rate outlier under the error estimation
methodology in the prior year's risk adjustment data validation) as
outlined in proposed paragraph (g)(3)(ii). If an issuer in liquidation
or that will enter liquidation by the applicable date was a positive
error rate outlier in the previous year's risk adjustment data
validation, we proposed not to exempt the issuer from the subsequent
benefit year's risk adjustment data validation, and the issuer would be
required to participate in risk adjustment data validation or receive
the default data validation charge in accordance with Sec.
153.630(b)(10) unless another exemption applies.
To qualify for this exemption in any year, we proposed under
paragraph (g)(3)(i) that the issuer must provide to HHS, in a manner
and timeframe to be specified by HHS, an attestation that the issuer is
in or will enter liquidation no later than April 30th 2 years after the
benefit year being audited that is signed by an individual with the
authority to legally and financially bind the issuer. In proposed
paragraph (g)(3)(iii), we proposed to define liquidation as meaning
that a state court has issued an order of liquidation for the issuer
that fixes the rights and liabilities of the issuer and its creditors,
policyholders, shareholders, members, and all other persons of
interest. Our intention with this policy was to align the definition of
liquidation with state law on liquidation of health insurance issuers
and the National Association of Insurance Commissioners' Model Act on
receivership where possible.\113\
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\113\ National Association of Insurance Commissioners Model Act,
Issuer Receivership Act. 2007. http://www.naic.org/store/free/MDL-555.pdf.
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While we understood the exact date of a liquidation order may be
uncertain in specific circumstances, we proposed that the individual
signing the attestation must be reasonably certain that the issuer will
enter liquidation by April 30th 2 benefit years after the benefit year
being audited.
Under our proposal, we would accept an attestation from a
representative of the state's department of insurance, an appointed
liquidator, or other appropriate individual who can legally and
financially bind the issuer. HHS would verify the issuers' liquidation
status with the applicable state regulators for issuers who submitted
an attestation under Sec. 153.630(g)(3). We also proposed that,
because the April 30th 2 benefit years after the benefit year being
audited is after the deadline for completing the initial validation
audit for a given benefit year, an issuer who submits an attestation
for this exemption but is determined by HHS to not meet the criteria
for the exemption would receive a default data validation charge in
accordance with Sec. 153.630(b)(10) if the issuer fails to complete or
comply with the risk adjustment data validation process within the
established timeframes for
[[Page 17510]]
the given benefit year, unless another exemption applies.
Additionally, we noted that any issuer that qualifies for any of
the three exemptions in proposed Sec. 153.630(g) would not have its
risk score and its associated risk adjustment transfers adjusted due to
its own risk score error rate, but that issuer's risk score and its
associated risk adjustment transfers could be adjusted if other issuers
in that state market risk pool were outliers and received risk score
error rates for that benefit year's risk adjustment data validation.
We are also finalizing the codification of the liquidation
exemption at Sec. 153.730(g)(3) as proposed for the 2018 benefit year.
For 2017 benefit year risk adjustment data validation, we intend to
work with issuers in liquidation and will exercise our enforcement
discretion, where appropriate, to provide relief consistent with the
criteria outlined in the April 9, 2018 guidance \114\ and the proposed
rule.
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\114\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
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Comment: Commenters generally supported the codification of a
materiality exemption, but some suggested a different threshold, noting
a flat materiality threshold would not account for variations across
markets. Some of these commenters suggested a threshold based on a
percentage of premiums (for example, issuers whose premiums account for
less than 5 percent of the statewide premium). Alternatively, some
commenters stated that if a flat materiality threshold is used, it
should be updated in future benefit years to account for changes in
market conditions. One commenter did not support the establishment of a
materiality threshold that would exempt issuers from conducting risk
adjustment data validation each year. This commenter stated that all
issuers should be subject to the same requirements and operate on a
level playing field, and if all issuers participate in risk adjustment
data validation, all issuers will have audited results, which will
promote overall confidence in the risk adjustment program.
Response: Although we appreciate the comments, as noted in the
proposed rule, we proposed to codify the materiality exemption that was
finalized in the 2018 and 2019 Payment Notices. As detailed in these
prior rulemakings \115\, we believe this exemption is appropriate
because the fixed costs associated with hiring an initial validation
auditor and submitting results to HHS may be disproportionately high
for smaller issuers, and may even constitute a large portion of their
administrative costs. Also, we estimated that issuers that cover under
2 percent of membership nationally would qualify for this exemption, so
the effect of the exemption on risk adjustment data validation is not
material. HHS will continue to review and analyze whether the threshold
should be updated for future benefit years, but we are maintaining the
current $15 million threshold because we believe that, under current
market conditions, it still delineates properly the limited group of
smaller issuers of risk adjustment covered plans that is appropriate
for the exemption's relief. As detailed in prior rulemakings that
established this exemption, issuers who meet the materiality threshold
would not be exempt from conducting risk adjustment data validation
each year. Issuers meeting this exemption will be subject to random and
targeted sampling to participate in risk adjustment data validation
approximately every 3 years (barring any risk-based triggers due to
experience that warrant more frequent participation in risk adjustment
data validation), beginning with the 2018 benefit year of risk
adjustment data validation. We agree with the commenter that issuers
should generally be subject to the same requirements for risk
adjustment data validation, but also believe there are limited
exemptions that may be appropriate to address specific concerns. We
believe that, for the reasons articulated above, there is adequate
justification for the materiality threshold as currently structured. We
are therefore finalizing the codification of the materiality threshold
exemption at Sec. 153.630(g)(2).
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\115\ See 81 FR 94104 through 94105 and 83 FR 16966 through
16967.
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Comment: Commenters disagreed with the proposal to exempt certain
liquidating issuers from the requirements to hire an initial validation
auditor, submit initial validation audit results, and undergo the
second validation audit, and from enforcement actions for non-
compliance with risk adjustment data validation requirements, including
the default data validation charge. One commenter stated that issuers
facing liquidation might have incentives to submit inaccurate risk
adjustment data given their financial pressures, and that requiring
these issuers to participate in risk adjustment data validation will
promote confidence in the program and the quality of the data submitted
by these issuers. Two commenters had significant concerns that some
plans might find ways to take advantage of the exemption without
entering liquidation. Also, in order to create a level playing field
for all issuers of risk adjustment covered plans, one commenter
stressed the importance of requiring all issuers to conduct risk
adjustment data validation each year, since this will promote
confidence in the transfers by ensuring the quality and integrity of
the issuer data.
Response: While we recognize the commenters' concern that an issuer
that anticipates entering liquidation may have an incentive to provide
poor quality risk adjustment data, we require all issuers to attest to
the accuracy, quantity and quality of their risk adjustment data after
the applicable benefit year's data submission deadline during the EDGE
Attestation and Discrepancy Reporting Process, and part of this
attestation notes that issuers who submit false data upon which risk
adjustment transfers are calculated could be subject to prosecution
under the False Claims Act. HHS also has additional safeguards that
help mitigate the possibility that issuers will provide poor quality
data in connection with the risk adjustment program, including
authority to impose a civil monetary penalty for failure to comply with
risk adjustment data requirements, as well as to impose a risk
adjustment default charge where an issuer failed the EDGE quality/
quantity evaluation by submitting inadequate data.\116\ Further, the
requirements that the attesting individual be reasonably certain that
the issuer will enter liquidation and that, beginning with the 2018
benefit year, an issuer cannot be a positive error rate outlier in risk
adjustment data validation for the prior benefit year are further
safeguards intended to help protect against inappropriate use of the
liquidation exemption. We also note that if an issuer does not enter
liquidation by the applicable April 30th due date, this exemption would
not be available and the issuer would be subject to a default data
validation charge under Sec. 153.630(b)(10). Therefore, we do not
anticipate that issuers will inappropriately attempt to claim the
exemption without entering liquidation, and have put safeguards in
place to protect against situations where an issuer attempts to do so.
Since the liquidation exemption is consistent with our broader policy
of providing relief where appropriate to issuers with limited
resources, and the concerns noted by the commenters should be
ameliorated by the safeguards and
[[Page 17511]]
enforcement authorities described above, we are finalizing the
liquidation exemption for the 2018 benefit year as proposed. We intend
to work with issuers who meet the criteria outlined in the April 9,
2018 guidance \117\ and the proposed rule and will use enforcement
discretion, where appropriate, to exempt these issuers for 2017 benefit
year risk adjustment data validation.
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\116\ See Sec. 153.740(a) and (b).
\117\ Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RADV-Exemption-for-Liquidation-Guidance.pdf.
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E. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Definitions (Sec. 155.20)
We proposed to amend Sec. 155.20 to add definitions of ``direct
enrollment technology provider,'' ``direct enrollment entity,''
``direct enrollment entity application assister,'' and ``web-broker.''
After consideration of the comments received, we are finalizing the
adoption of these new definitions as proposed. For further discussion,
please see the preamble to Sec. Sec. 155.220, 155.221, and 155.415.
Comment: Several commenters supported the proposed definitions, in
particular the distinction created between ``direct enrollment
technology provider'' and ``web-broker.'' One commenter recommended the
term ``direct enrollment technology provider'' not be included in the
definition of ``web-broker'' to avoid potential confusion that direct
enrollment technology providers are licensed as brokers. However, the
same commenter agreed that direct enrollment technology providers and
web-brokers should be subject to the same requirements and acknowledged
the increased complexity of completely distinguishing them.
Response: ``Direct enrollment technology provider'' is defined as a
type of web-broker business entity that is not a licensed agent,
broker, or producer under state law and has been engaged or created by,
or is owned by an agent or broker, to provide technology services to
facilitate participation in direct enrollment under Sec. Sec.
155.220(c)(3) and 155.221. This definition refers to these entities as
a type of web-broker business entity, and the accompanying definition
of ``web-broker'' similarly includes a reference to direct enrollment
technology providers, for the purpose of generally extending the same
requirements to direct enrollment technology providers as web-brokers,
unless otherwise specified. The creation of the term ``direct
enrollment technology provider'' and its accompanying definition was
necessary to distinguish these entities from other types of web-
brokers, where appropriate. See the below preamble discussion in
Sec. Sec. 155.220 and 155.221 for further details.
2. General Functions of an Exchange
a. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
Section 1311(d)(4)(B) of the PPACA requires an Exchange to provide
for the operation of a toll-free telephone hotline to respond to
requests for assistance. In the 2017 Payment Notice, we explained the
distinction between a toll-free call center and a toll-free hotline,
for purposes of specifying the different requirements for SBE-FPs and
other Exchanges.\118\ In the 2019 Payment Notice, we finalized
regulations providing for a leaner FF-SHOP implementation, and have
adopted that approach. In that rulemaking, we explained that the FF-
SHOPs will continue to provide a call center to answer questions
related to the SHOP.\119\ Currently, employers purchase and enroll
their employees in new FF-SHOP coverage through issuers and through
agents and brokers registered with the FFE, and no longer enroll in
SHOP coverage using an online FF-SHOP platform.
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\118\ 81 FR at 12246.
\119\ 83 FR at 16997.
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Under this approach, FF-SHOP call center volume has been extremely
low. Given this experience, we proposed to amend Sec. 155.205(a) to
allow SHOPs operating in the leaner fashion described in the 2019
Payment Notice to operate a toll-free telephone hotline, as required by
section 1311(d)(4)(B) of the PPACA, and to eliminate the requirement to
operate a more robust call center. We proposed to amend the
interpretation provided in the 2017 Payment Notice of what is required
to establish a toll-free hotline, as required by section 1311(d)(4)(B)
of the PPACA. There, we stated that a toll-free hotline includes the
capability to provide information to consumers and appropriately direct
consumers to the federally operated call center or HealthCare.gov to
apply for, and enroll in, coverage through the Exchange. Given that
SHOPs that operate in the leaner fashion no longer offer online
enrollment and to reflect the option for such SHOPs to provide a toll-
free hotline, rather than a more robust call center, we proposed that a
toll-free hotline include the capability to provide information to
consumers about eligibility and enrollment processes, and to
appropriately direct consumers to the applicable Exchange website and
other applicable resources.
The toll-free hotline provided by such SHOPs would consist of a
toll-free number linked to interactive voice response capability, with
prompts to pre-recorded responses to frequently asked questions,
information about locating an agent and broker in the caller's area,
and the ability for the caller to leave a message regarding any
additional information needed. We stated our belief that this hotline
would adequately address the needs of potential FF-SHOP consumers
requesting assistance, and appropriately direct consumers to services
to apply for, and enroll in, FF-SHOP coverage.
Comment: A few commenters were in support of operating the call
center in a leaner fashion. One commenter was not in support of the
proposal, concerned that consumers would not be able to obtain timely
assistance.
Response: The SHOP toll-free call center will continue to provide
timely access to assistance. Consumers can immediately access pre-
recorded responses to frequently asked questions along with information
about locating an agent and broker in the consumer's area. Further, the
consumer can leave a message or send an email requesting any further
information needed, which will be monitored daily for prompt response.
Therefore, we are finalizing these changes as proposed.
b. Navigator Program Standards (Sec. 155.210)
Section 1311(d)(4)(K) and 1311(i) of the PPACA require each
Exchange to establish a Navigator program under which it awards grants
to entities to conduct public education activities to raise awareness
of the availability of QHPs, distribute fair and impartial information
concerning enrollment in QHPs, and the availability of premium tax
credits, and cost-sharing reductions; facilitate enrollment in QHPs;
provide referrals to any applicable office of health insurance consumer
assistance or health insurance ombudsman established under section 2793
of the PHS Act, or any other appropriate state agency or agencies for
any enrollee with a grievance, complaint, or question regarding their
health plan, coverage, or a determination under such plan or coverage;
and provide information in a manner that is culturally and
linguistically appropriate to the needs of the population being served
by the Exchange. The statute also requires the Secretary to develop
standards to ensure that information made available by Navigators is
fair, accurate, and impartial. We have implemented the
[[Page 17512]]
statutorily required Navigator duties through regulations at Sec.
155.210 (for all Exchanges) and Sec. 155.215 (for Navigators in FFEs).
Further, section 1311(i)(4) of the PPACA requires the Secretary to
establish standards for Navigators to ensure that Navigators are
qualified, and licensed, if appropriate, to engage in the Navigator
activities described in the statute. This provision has been
implemented at Sec. 155.210(b) (for all Exchanges) and at Sec.
155.215(b) (for Navigators in FFEs).
Section 155.210(e)(9) specifies that an Exchange may require or
authorize Navigators to provide assistance with a number of topics not
specifically mentioned in the statute, including certain post-
enrollment activities. This section specifies that Navigators operating
in FFEs are authorized to provide assistance on these topics and are
required to do so under Navigator grants awarded in 2018 or later.\120\
To provide more flexibility related to the required duties for
Navigators operating in FFEs, we proposed to amend Sec. 155.210(e)(9)
to make assistance with these topics permissible for FFE Navigators,
not required, effective upon the awarding of the FEE navigator grants
in 2019. We stated our belief that making assistance with these topics
optional for FFE Navigators would reduce regulatory burden on FFE
Navigator entities and better meet consumers' needs by allowing FFE
Navigators to prioritize work according to consumer demand, community
needs, and organizational resources.
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\120\ These topics are: Understanding the process of filing
Exchange eligibility appeals; understanding and applying for
exemptions from the individual shared responsibility payment that
are granted through the Exchange; the Exchange-related components of
the premium tax credit reconciliation process; understanding basic
concepts and rights related to health coverage and how to use it;
and, referrals to licensed tax advisers, tax preparers, or other
resources for assistance with tax preparation and tax advice on
certain Exchange-related topics.
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We acknowledge that HHS added these duties 2 years ago to ensure
the availability of more robust consumer assistance; however, since
that time, there have been programmatic and health care coverage policy
changes that have caused us to reflect further. We stated our belief
that consumers would be better served by allowing more flexibility for
Navigators to tailor their services to make the most of their resources
and to fit the needs of their communities.
In the proposed rule, we emphasized that FFE Navigators would be
authorized to continue to provide assistance with any of the topics
listed under Sec. 155.210(e)(9). Under the proposed approach, if FFE
Navigator grantees choose to provide any of the assistance specified in
Sec. 155.210(e)(9), we will continue to expect them to assess their
communities' needs and build competency in the assistance activities in
which they are engaging. It is important to note that the current FFE
Navigator training for annual certification or recertification might
continue to include training on some of the Sec. 155.210(e)(9) topics.
To supplement the required FFE Navigator training, we also plan to
continue providing FFE Navigators with additional information related
to these assistance activities through informal webinars, newsletters,
and technical assistance resources such as fact sheets and slide
presentations. FFE Navigator grantees that opt to carry out any of the
assistance activities in Sec. 155.210(e)(9) will be expected to draw
upon these materials to ensure their staff and volunteers are
adequately prepared to provide that assistance. Our proposal also
retained SBE autonomy to determine whether requiring or authorizing the
SBE's Navigators to perform the activities listed in Sec.
155.210(e)(9) best meets the state's needs and resources.
We recognize that the time FFE Navigators currently spend providing
assistance with the Sec. 155.210(e)(9) topics varies.
To better understand the future impact of removing this
requirement, we requested comment on how many hours per month FFE
Navigator grantees and individual Navigators currently spend providing
the assistance activities described at Sec. 155.210(e)(9), what
percentage of their current work involves providing these types of
assistance, and how that amount of work would be impacted if providing
these types of assistance would no longer be required. We also
requested comment on how FFE Navigator grantees and individual
Navigators might reprioritize work and spend time fulfilling their
other duties, if not required to provide the types of assistance
described under Sec. 155.210(e)(9).
In addition to proposing to increase FFE Navigator flexibility with
regard to the types of assistance they provide, we also proposed to
provide more flexibility related to the training requirements that
Exchanges establish for Navigators. Sections 155.210(b)(2) and
155.215(b)(2) establish Navigator training standards consistent with
section 1311(i)(4) of the PPACA. Section 155.210(b)(2) specifies that
Exchanges must develop and publicly disseminate a set of training
standards to be met by all entities and individuals carrying out
Navigator functions under the terms of a Navigator grant, to ensure
expertise in several specific topic areas.\121\ Currently, under Sec.
155.210(b)(2), Exchanges (including SBEs) that opt to require their
Navigators to perform the assistance described in Sec. 155.210(e)(9)
must also develop and disseminate training standards related to the
specific assistance areas they require under Sec. 155.210(e)(9). Also,
Navigators in FFEs currently must be trained in fifteen additional
topic areas identified at Sec. 155.215(b)(2).\122\
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\121\ These areas include: the needs of underserved and
vulnerable populations; eligibility and enrollment rules and
procedures; the range of QHP options and insurance affordability
programs; and, the privacy and security standards applicable under
Sec. 155.260.
\122\ These areas include: information on QHPs, including
benefits covered, differences among plans, payment process, rights
and processes for appeals and grievances, and contacting individual
plans; the tax implications of enrollment decisions; information on
affordability programs; Exchange eligibility and enrollment rules
and procedures; privacy and security standards, customer service
standards; outreach and education methods and strategies;
appropriate contact information for other agencies for consumers
seeking information about coverage options not offered through the
Exchange; basic concepts about health insurance and the Exchange;
working effectively with individuals with limited English
proficiency, and disabled, rural, underserved or vulnerable
individuals; providing linguistically and culturally appropriate
services; ensuring physical and other accessibility for people with
a full range of disabilities; and applicable administrative rules,
processes and systems related to Exchanges and QHPs.
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To provide more flexibility related to the training requirements
for Navigators, we proposed to streamline both the requirement in Sec.
155.210(b)(2) for all Exchanges to develop and disseminate Navigator
training standards on specific topics, and the list of required
training topics for FFE Navigators in Sec. 155.215(b)(2). We proposed
to amend the requirement at Sec. 155.210(b)(2) to require Exchanges to
develop and publicly disseminate training standards to ensure that the
entities and individuals are qualified to engage in Navigator
activities, including in the four major areas currently specified at
Sec. 155.210(b)(2)(i) through (iv). This would eliminate the training
requirements at current Sec. 155.210(b)(2)(v)-(ix) that correspond to
the activities outlined in Sec. 155.210(e)(9), since those activities
would no longer be required. We also proposed to replace the current
list of fifteen additional FFE Navigator training topics at Sec.
155.215(b)(2) with a cross-reference to the amended Sec. 155.210(b)(2)
topics.\123\ In the proposed rule, we
[[Page 17513]]
stated that we believe the revised regulations would be broad enough to
ensure that each Navigator program fulfills the requirements described
in section 1311(i) of the PPACA.
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\123\ We note that Sec. 155.215 also applies to non-Navigator
assistance personnel, also referred to as enrollment assistance
personnel. However, at this time, this program is no longer in
operation in the FFEs.
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This approach would provide Exchanges greater flexibility in
designing their Navigator training programs to ensure coverage of the
most instructive and timely topics and to align the training with
future changes in the Navigator program or the operation of the
Exchanges, while still ensuring that Navigators are qualified to carry
out their required duties. This additional flexibility would also allow
Exchanges to focus on training areas they determine to be most relevant
to the populations they serve and on the policy and operations of the
Exchange in which they operate.
Furthermore, Exchanges could opt to provide more training than
would be required under these proposed amendments. For example, in
addition to the FFE annual Navigator training, required for Navigator
certification under Sec. 155.215(b), Navigators in FFEs are provided
with training throughout the year that serves as a supplement to the
annual FFE Navigator training by covering timely and appropriate
training topics that might not be included in the annual FFE Navigator
training. This additional training provided by FFEs, is consistent with
the requirement that FFE Navigators obtain continuing education, as
specified at Sec. 155.215(b)(1)(iv), and we intend to continue this
practice.
Currently, HHS provides SBEs, including SBE-FPs, the flexibility to
decide whether they will require or authorize their Navigators to
provide assistance on any or all of the areas described at Sec.
155.210(e)(9). The changes that we are finalizing in this final rule do
not change that flexibility. If SBEs choose to authorize or require
their Navigators to provide assistance in any of the areas listed at
Sec. 155.210(e)(9), they will still be required to ensure that their
Navigators are qualified to provide this assistance.
Under our amendments, any SBEs opting to authorize or require their
Navigators to provide any or all of the types of assistance listed at
Sec. 155.210(e)(9) will have the flexibility to determine effective
approaches to training their Navigators on performing these types of
assistance based on local experience. We believe each Exchange is best
positioned to determine the training that is most appropriate for the
activities of their Navigators.
These proposals are intended to increase program flexibility within
Exchanges and decrease regulatory burden related to Navigator training
while maintaining standards that will ensure that Navigators are
sufficiently prepared to carry out all required or authorized
activities. We solicited comments on these proposals and received a
range of comments in favor and not in favor of finalizing this policy.
Streamlining the Navigator training requirements will allow Exchanges
and Navigators to prioritize their training resources on those tasks
that will best serve their state markets and Exchanges. HHS will
continue to provide training on all current Navigator training topics.
The format of the provided training may include other methods of
technical assistance, but HHS is still committed to providing training
on all of the streamlined Navigator training topics. We are finalizing
these changes as proposed.
Finally, we proposed allowing, but not requiring, Navigators to
assist consumers with applying for eligibility for insurance
affordability programs and QHP enrollment through web-broker websites
under certain circumstances. We are not finalizing this proposal. For
further discussion of that proposal, please see the preamble to Sec.
155.220.
Comment: We received some comments in support of the state
flexibility the rule grants to SBEs to design their own training
requirements. However, many commenters expressed concern about this
proposal, citing the complexity of the enrollment process; the need to
educate assisters on how to best serve underserved and vulnerable
populations; the need to train Navigators on how to provide culturally
and linguistically appropriate services; and the unique role Navigators
play in helping underserved and vulnerable populations to both enroll
in and use their coverage. Commenters also stated that reducing the
number of mandatory training requirements may result in Navigators not
being fully equipped to serve underserved and vulnerable consumers.
Response: We agree with the commenters that supported the enhanced
flexibility that the rule grants to SBEs to design the training
requirements that are the best fit for their states. Nothing in this
final rule prohibits SBEs from choosing not to streamline their state
training or certification requirements to align with the required
training in the FFEs. We believe it is important to provide SBEs with
enhanced flexibility and the autonomy to design, provide, and implement
the training that is the best fit for their communities.
The streamlined training requirements will still cover how to serve
vulnerable and underserved consumers as a required topic, and still
require that Exchanges develop and publicly disseminate a set of
training standards for Navigators to ensure Navigators are qualified to
engage in Navigator activities. Additionally, the required Navigator
certification and recertification trainings will not be the only source
of training that HHS will provide to best educate Navigators in the
FFEs on the complexities of the enrollment process, how to best serve
vulnerable and underserved consumers, and how to serve consumers in
ways which are culturally and linguistically appropriate. In addition
to the required training, HHS will continue to provide training through
other channels. These channels include webinars, policy briefs, job
aids, newsletters, and fact sheets. HHS is committed to providing
Navigators with sufficient training, and will continue to identify and
provide trainings in areas in which it may be needed.
Comment: Many commenters expressed concern that because all
Navigator entities, as recipients of federal funds, must comply with
section 1557 of the PPACA, Title VI of the Civil Rights Act of 1964,
section 504 of the Rehabilitation Act, and the Americans with
Disabilities Act, it is essential for HHS to continue to provide
training on these topics. These commenters also expressed concern that
if training on these topics were no longer required, Navigators would
be unable to learn how to comply with these laws. These commenters also
expressed their belief that Navigators often serve consumers who have
disabilities, chronic illness, or Limited English Proficiency (LEP),
and stated that if how to serve these populations were no longer a
required training topic, Navigators would be unable to serve these
consumers effectively.
Response: We understand that Navigators must comply with anti-
discrimination laws and intend to continue to provide information about
this topic as part of the broader required training category for
serving vulnerable and underserved consumers required training
category. We interpret the requirement for training standards to ensure
the entities and individuals are qualified to engage in Navigator
activities related to the needs of underserved and vulnerable
populations to include topics such as:
[[Page 17514]]
An overview of anti-discrimination laws such as section
1557 of the PPACA, Title VI of the Civil Rights Act of 1964, section
504 of the Rehabilitation Act and the Americans with Disabilities Act;
Navigators' legal responsibility to comply with the above
laws;
Best practices for how to do so; and
How to serve underserved and vulnerable consumers,
including those who serve consumers who may have disabilities, chronic
illness, or a Limited English Proficiency (LEP).
We will monitor implementation of the revised Navigator trainings
and their impact to ensure that these underserved and vulnerable
populations continue to be properly served by the Navigator program. If
HHS sees significant evidence that the capacity of Navigators to serve
these populations and comply with anti-discrimination laws has eroded
after these changes are implemented, we are open to reconsidering our
approach.
Comment: We received comments in support of the flexibility the
rule grants to SBEs to choose whether their Navigators should continue
to be required to provide certain types of assistance, including post-
enrollment assistance, or whether that should be optional.
Response: We agree with the commenters who supported the enhanced
flexibility that the rule provides. We also agree that SBEs should have
the flexibility to either act in accordance with this rule by making
certain types of assistance, including post-enrollment assistance,
optional, or to continue to require it. We believe that SBEs, rather
than the federal government, are best suited to determine the needs of
the populations they serve, and how to best prioritize the work
Navigators provide to meet those needs. This final rule provides SBEs
with flexibility and autonomy to allocate their resources in ways that
best serve the citizens of their states.
Comment: Many commenters also expressed concern about the proposal
that makes providing certain types of assistance, including post-
enrollment assistance, optional in the FFE. Commenters stated that the
vulnerable populations that Navigators serve require ongoing assistance
after enrollment and that Navigators play an important role in
educating consumers on how to use insurance once they are enrolled,
including their role in assisting consumers on how to file an appeal;
how to report fluctuating income to the Exchange; how to reconcile
their APTC; how to provide referrals to state agencies; how to answer
consumers' questions about their health plans; how to provide education
to improve consumers' health literacy; how to help consumers locate
providers; and how to answer billing and payment questions.
Commenters also stated that because of the trusted relationships
Navigators build with consumers during the enrollment process,
Navigators are best suited to provide the post-enrollment assistance
that those consumers need.
We also received comments that if providing certain types of
assistance, including post-enrollment assistance, became optional
rather than required, consumer health literacy and health equity may be
impacted.
Response: Nothing in this final rule prohibits Navigators in the
FFE from providing these types of assistance. If Navigator grantees
operate in areas where significant assistance in these areas is needed,
those Navigator grantees retain the option to continue providing that
assistance, and we would encourage them to continue to do so.
We believe that, just like in the SBEs, Navigator grantees
themselves, rather than the federal government, are in the best
position to determine the particular needs of the communities they
serve, and the type of assistance that is required to meet those needs.
We also are committed to improving health equity, and encourage
Navigators to continue their important efforts to reduce health
disparities in the communities which they serve.
This final rule provides Navigator grantees with flexibility to
serve their consumers according to consumer demand, community needs,
and organizational resources; and allows Navigators to prioritize their
work accordingly.
If Navigator grantees decide to continue to provide the types of
assistance that will no longer be required, they and the Exchange are
required to ensure that they are appropriately trained to provide that
assistance. The FFEs will continue to provide training on post-
enrollment assistance via webinars, policy briefs, job aids,
newsletters, fact sheets, and other resources, as needed, and urge
those Navigators to review those resources and attend those trainings.
Comment: We sought comment on the amount of time Navigators spend
providing the types of assistance that will no longer be required,
including post-enrollment assistance. Many commenters noted that the
time Navigators spent providing such assistance was manageable, and
that Navigators did not want or need the flexibility the rule provides.
These commenters stated that enrollment assistance needs lessen after
the conclusion of the open enrollment period, and therefore, that
Navigators had the needed time to provide post-enrollment assistance.
Response: We appreciate those who submitted comments on the amount
of time spent providing the types of assistance that will no longer be
required, including post-enrollment assistance. We believe the needs of
the populations served by Navigators are not static, and not all
communities have the same needs. The resources each Navigator may have
to devote to providing this assistance may vary by grantee. We believe
that it is essential to provide Navigators with as much flexibility and
autonomy as possible to prioritize their work according to consumer
demand, community needs, and organizational resources.
Comment: Many commenters suggested that rather than making certain
types of assistance, including post-enrollment assistance, optional,
and streamlining the required Navigator training standards, HHS should
instead allocate more funding to the Navigator program.
Response: When Exchanges were in their infancy and public awareness
and understanding of coverage options was low, HHS encouraged
Navigators to provide intensive face-to-face assistance to consumers.
This assistance included providing certain types of assistance,
including post-enrollment assistance, as a required duty. It also
guided the development of our training standards in past years. Since
that time, public awareness and education on options for coverage
available through the Exchanges has increased. Certified application
counselors, direct enrollment partners, and Exchange-registered agents
and brokers serve as additional resources for education on coverage
options and outreach to consumers. We believe it is appropriate to
scale down the Navigator program and other outreach activities to
reflect the enhanced public awareness of health coverage options
through the Exchanges.
c. Standards Applicable to Navigators and Non-Navigator Assistance
Personnel Carrying Out Consumer Assistance Functions Under Sec. Sec.
155.205(d) and (e) and 155.210 in a Federally-Facilitated Exchange and
to Non-Navigator Assistance Personnel Funded Through an Exchange
Establishment Grant (Sec. 155.215)
For a discussion of the provisions of this final rule related to
standards applicable to Navigators subject to
[[Page 17515]]
Sec. 155.215, please see the preamble to Sec. 155.210.
d. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
Throughout the preamble for Sec. Sec. 155.220 and 155.221, we
proposed to use the term ``web-broker'' to refer to an individual agent
or broker, a group of agents or brokers, or an agent or broker business
entity, registered with an Exchange under Sec. 155.220(d)(1) that
develops and hosts a non-Exchange website that interfaces with an
Exchange to assist consumers with the selection of and enrollment in
QHPs offered through the Exchange, a process referred to as direct
enrollment. We have used the term ``web-broker'' in the preamble of
prior rules, as well as in guidance, and proposed to generally replace
the previously used informal definition with the one proposed in this
rulemaking.\124\ We proposed to define ``web-broker'' in Sec. 155.20
and use that term in Sec. Sec. 155.220 and 155.221, where applicable,
to avoid confusion. We clarified that general references to agents or
brokers would also be applicable to web-brokers when a web-broker is a
licensed agent or broker. We also proposed to define ``direct
enrollment technology providers'' as a type of web-broker that is not a
licensed agent, broker, or producer under state law and has been
engaged or created by, or is owned by, an agent or broker to provide
technology services to facilitate participation in direct enrollment as
a web-broker under Sec. Sec. 155.220(c)(3) and 155.221. The proposed
definition of web-broker reflected the inclusion of direct enrollment
technology providers. Therefore, references to ``web-brokers'' were
intended to include direct enrollment technology providers, as well as
licensed agents or brokers that develop and host non-Exchange websites
to facilitate QHP selection and enrollment, unless indicated otherwise.
Please see the preamble discussion related to Sec. 155.221 for further
details. As noted above, we are finalizing these definitions as
proposed.
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\124\ HHS previously defined the term ``web-broker'' as
including an individual agent or broker, a group of agents and
brokers, or a company that is interested in providing a non-
Federally-facilitated Exchange website to assist consumers in the
QHP selection and enrollment process as described in Sec.
155.220(c)(3).
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As described in the preamble to Sec. 155.221, we proposed
significant changes to Sec. 155.221 to streamline and consolidate the
requirements applicable to all direct enrollment entities--both issuers
and web-brokers--in one regulation. To reflect these changes, we also
proposed several amendments to Sec. 155.220. First, we proposed to
move certain requirements that apply to all direct enrollment entities
from Sec. 155.220 to Sec. 155.221. Specifically, we proposed to move
the requirements currently captured in Sec. 155.220(c)(3)(i)(K) and
(L), and to amend the requirement currently in (L), which as described
further below, are now at Sec. 155.221(b)(4) and (d), respectively. We
are finalizing these changes as proposed.
We proposed conforming edits throughout Sec. 155.220 to
incorporate the use of the term ``web-broker,'' as proposed to be
defined, in applicable paragraphs to more clearly identify which FFE
requirements extend to web-brokers. In the introductory text to
paragraphs (a), (c), and (d), and in paragraphs (c)(1), (c)(5), (e),
(f)(1), (f)(2), (f)(3), (f)(3)(i), (f)(4), (g)(1), (g)(2), (g)(2)(iii),
(g)(2)(iv), (g)(4), (g)(5)(i)(A), (g)(5)(i)(B), (g)(5)(ii),
(g)(5)(iii),\125\ (h)(1), (h)(2), (h)(3), (i), (j)(1), (j)(3), (k)(1),
(k)(2), and (l), we proposed to add a reference to web-broker each time
agents or brokers are referenced, to clarify that these paragraphs also
apply to all web-brokers, including direct enrollment technology
providers. In paragraphs (c)(3)(i), (c)(3)(i)(A), (c)(3)(ii), (c)(4),
(c)(4)(i), (c)(4)(i)(E), (c)(4)(i)(F), and (c)(4)(ii), we proposed to
replace some references to ``agent or broker'' with references to
``web-broker'' to clarify when these paragraphs apply to only web-
brokers, and not to other types of agents or brokers who do not host or
develop a non-Exchange website to assist consumers with direct
enrollment in QHPs offered through the FFEs or SBE-FPs. We also
proposed to revise the section heading for Sec. 155.220 to ``Ability
of States to permit agents, brokers, and web-brokers to assist
qualified individuals, qualified employers, or qualified employees
enrolling in QHPs'', as well as the section heading for paragraph (i)
to similarly add a reference to web-broker. We are finalizing these
changes as proposed. Please see the preamble discussion related to
Sec. 155.221 for further details on other proposed and finalized
changes related to streamlining these regulations and clarifying the
requirements applicable to web-brokers and other direct enrollment
entities.
---------------------------------------------------------------------------
\125\ We also proposed minor technical edits to the last
sentence of paragraph (g)(5)(iii) to more closely align this
provision with the language at paragraph (g)(4), which establishes
similar parameters following the termination of an agent's,
broker's, or web-broker's agreements and registration with the FFEs.
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We also proposed to amend Sec. 155.220(c)(3)(i) to add a new
paragraph (c)(3)(i)(K) that requires web-broker websites to comply with
the applicable requirements in Sec. 155.221 when an internet website
of a web-broker is used to complete the QHP selection. We noted this
new proposed requirement would also apply when an internet website of a
web-broker is used to complete the Exchange eligibility application,
through the existing cross reference to paragraph (c)(3)(i) in
paragraph (c)(3)(ii)(A), but the applicable requirements under Sec.
155.221 may differ depending on whether the non-Exchange website is
used to complete the Exchange eligibility application or is used to
complete the QHP selection. We are finalizing this amendment as
proposed. Please see the preamble discussion related to Sec. 155.221
for further details.
We also proposed to amend Sec. 155.220(c)(3)(i) to add a new
requirement at new paragraph (c)(3)(i)(L) that prohibits web-broker
websites from displaying recommendations for QHPs based on compensation
the web-broker, agent, or broker receives from QHP issuers. In the
proposed rule, the term ``compensation'' would include commissions,
fees, or other incentives as established in the relevant contract
between an issuer and the web-broker. In the proposed rule, we
recognized that web-broker websites often ask for certain information
from consumers to assist with the display and sorting of QHP options on
their non-Exchange websites. This may include estimated annual income,
preferences regarding health care providers, prescription drugs the
consumer takes, expected frequency of doctors' visits, or other
information. We also acknowledged that web-brokers sometimes display
QHP recommendations or assign scores to QHPs using the information they
collect. We expressed support for the development and use of innovative
consumer-assistance tools to help consumers shop for and select QHPs
that best fit their needs, consistent with applicable requirements.
However, we noted that we believe such recommendations should not be
based on compensation web-brokers, agents, or brokers may receive from
QHP issuers when consumers enroll in QHPs offered through Exchanges
using web-broker non-Exchange websites. We are finalizing this
amendment as proposed with the following clarification in response to
comments. The definition of the term ``compensation'' for this
[[Page 17516]]
purpose includes commissions, fees, or other incentives granted by an
issuer to a web-broker, agent, or broker. The inclusion of a reference
to agents and brokers in this definition more closely aligns with the
intent, which was to prohibit the display of QHP recommendations based
on compensation received by any of these three entities from QHP
issuers. The remaining revisions to the meaning of ``compensation'' are
intended to capture any remuneration or incentives granted by an
issuer, whether they be granted pursuant to the terms of a written
contract or otherwise.
We also proposed to amend Sec. 155.220(c)(4)(i)(A) to require a
web-broker to provide HHS with a list of the agents or brokers who,
through a contract or other arrangement, use the web-broker's non-
Exchange website to assist consumers with completion of QHP selection
or for the Exchange eligibility application, in a form or manner to be
specified by HHS. We explained that authority currently exists for HHS
to request this information for agents or brokers who, through a
contract or other arrangement, use the non-Exchange website to complete
the QHP selection process.\126\ However, due to the trend of increased
use and expansion of direct enrollment pathways for QHP enrollment, we
explained that we believe it was appropriate to collect this
information proactively and to also extend its collection to include
the use of web-broker non-Exchange websites for completion of the
Exchange eligibility application, so that we may investigate and
respond more efficiently and effectively to any potential instances of
noncompliance that may involve agents or brokers using a web-broker's
direct enrollment pathway. Having this information would, for example,
enable us to identify more quickly whether noncompliance is
attributable to a specific individual or individuals, instead of the
web-broker entity. We explained that we anticipate issuing further
guidance on the form and manner for these submissions and were
considering requiring the list must include, at minimum, each agent's
or broker's name, state(s) of licensure, and National Producer Number.
We further noted that we were considering adopting quarterly or monthly
submission requirements, except for the month before the individual
market open enrollment period and during the individual market open
enrollment period, during which we were considering adopting weekly or
daily submission requirements. We noted we were also considering
requiring the submission of this data via email using an encrypted file
format, such as a password-protected Excel spreadsheet, or
alternatively requiring submission through a secure portal. We invited
comments on the frequency and manner for these submissions, as well as
other data elements that we should consider for inclusion as part of
this required reporting. We also proposed to remove the final clause in
Sec. 155.220(c)(4) that limits the scope of that section to agents or
brokers using web-broker websites who are listed as the agent of record
on the enrollments. Several years of experience observing web-broker
operations has informed us that web-brokers often submit an entity-
level National Producer Number for all QHP enrollments completed
through their websites. Therefore the web-broker business entity is the
agent of record. However, the requirements stated in Sec.
155.220(c)(4) are intended to apply broadly to agents or brokers using
web-broker non-Exchange websites to assist with QHP selections and
enrollments. We explained that we believe the existing requirements for
web-brokers that provide access to their non-Exchange websites to other
agents and brokers, such as verifying agents or brokers are licensed in
the states in which they are assisting consumers and have completed the
FFE registration process (see Sec. 155.220(c)(4)(i)(B)), as well as
reporting to HHS and applicable state departments of insurance any
potential material breaches of applicable Sec. 155.220 standards (see
Sec. 155.220(c)(4)(i)(E)), should apply broadly to agents and brokers
using web-broker non-Exchange websites, and not only to those listed as
the agents of record. We are finalizing the changes to Sec.
155.220(c)(4)(i)(A) as proposed. We intend to issue guidance regarding
the form and manner for submission of information by web-brokers to HHS
regarding the agents or brokers who use the web-broker's non-Exchange
website to assist with the completion of QHP selection or the Exchange
eligibility application.
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\126\ See Sec. 155.220(c)(4)(i)(A).
---------------------------------------------------------------------------
Currently, Sec. 155.20 defines an ``agent or broker'' as a person
or entity licensed by the state as an agent, broker, or insurance
producer. Under Sec. 155.220(d), an agent or broker that enrolls
individuals in QHPs in a manner that constitutes enrollment through the
Exchange or assists individuals with applying for APTC or cost-sharing
reductions must execute an agreement with the Exchange, register with
the Exchange, receive training, and comply with the Exchange's privacy
and security standards. When these regulatory provisions were
originally drafted, it was anticipated that agents and brokers were
predominantly individuals. However, with the expansion of direct
enrollment, there are more FFE agents and brokers, including web-
brokers, that have obtained FFE registration in their capacities as
licensed business entities, and not in their individual capacities as
licensed agents or brokers (non-individual entities). As noted in the
proposed rule, certain regulatory requirements, such as those regarding
training are less suited for these non-individual types of licensed
agents or brokers. For example, to comply with the requirement to
complete training at Sec. 155.220(d)(2), we currently require agents
or brokers that are registered with the FFEs as non-individual entities
to designate an individual to take training on the entity's behalf,
even though all individual agents or brokers assisting FFE consumers
through the entity have to complete the training as individual agents
and brokers. Because the training is not designed for representatives
of a non-individual entity who are not providing direct assistance to
FFE consumers, we explained that we believed it is appropriate to
remove this requirement for licensed agent or broker non-individual
entities. Therefore, we proposed to amend Sec. 155.220(d)(2) to exempt
from the training requirement a licensed agent or broker entity that
registers with the FFE in its capacity as a business organized under
the laws of a state, and not as an individual person. We also explained
that we did not intend for this change to alter the requirement that
individual agents or brokers must complete training, as applicable, as
part of the annual FFE registration process. Therefore, all individual
agents and brokers interacting with individual market FFE or SBE-FP
consumers, whether working independently or with a non-individual agent
or broker entity, including web-brokers, would continue to be required
to complete annual training. Individual agents or brokers interacting
with FFE-SHOP or SBE-FP-SHOP consumers would continue to be encouraged
to take FFE training on an annual basis. We also proposed to include
language in Sec. 155.220(d)(2) to clarify that direct enrollment
technology providers will not be required to complete FFE annual
training because these non-individual entities will not be interacting
with individual market FFE or SBE-FP consumers without the assistance
of an individual agent or broker; they are
[[Page 17517]]
another example of a non-individual entity for which this training
requirement is less suited. We are finalizing these amendments as
proposed.
To improve program integrity, we proposed to delete the existing
Sec. 155.220(g)(3) and add new paragraphs (g)(3)(i) and (ii) to allow
HHS to immediately terminate an agent's or broker's agreement with the
FFEs for cause with notice to the agent or broker if an agent or broker
fails to comply with the requirement to maintain the appropriate
license under state law in every state in which the agent or broker
actively assists consumers with selecting or enrolling in QHPs offered
through the FFEs or SBE-FPs. We noted that the FFE agreements required
under Sec. Sec. 155.220(d) and 155.260(b) that agents and brokers
execute with the FFEs as part of the annual FFE registration process
include the requirement to maintain valid licensure in every state that
the agent or broker assists Exchange consumers. State licensure as an
agent, broker, or insurance producer is a critical consumer protection
to ensure that when assisting Exchange consumers these individuals and
entities are familiar with rules and regulations applicable in all
states in which they provide assistance to FFE or SBE-FP consumers.
Licensure in every state where the agent or broker is actively
assisting FFE or SBE-FP consumers is a predicate requirement to
registering with the FFEs to provide such assistance. We explained that
allowing for immediate termination of an agent's or broker's agreements
with the FFEs for failure to adhere to the applicable state licensure
requirements ensures that an unlicensed individual may not continue to
possess the agent/broker role that enables access to the FFEs or SBE-
FPs to provide assistance to Exchange consumers as an agent or broker
during the advance 30-day notice period that would otherwise apply
under the current Sec. 155.220(g)(3). We explained that we believed
allowing for immediate termination in these circumstances is
appropriate to protect consumers, as well as Exchange operations and
systems. Under this proposal, we would confirm information about
licensure (or the lack thereof) with the applicable state regulators
prior to taking action under the new paragraph (g)(3)(ii). In addition,
we proposed that an agent or broker whose agreements with the FFEs are
immediately terminated for cause under the new proposed paragraph
(g)(3)(ii) would be able to request reconsideration under Sec.
155.220(h). We further proposed amendments to paragraph (g)(4), such
that, consistent with other terminations for cause under paragraph
(g)(3), immediate terminations under the new proposed paragraph
(g)(3)(ii) would result in the agent or broker not being registered
with the FFEs or permitted to assist with or facilitate enrollment of
qualified individuals, qualified employers or qualified employees in
QHPs through the FFEs or SBE-FPs or assist individuals in applying for
APTC and cost-sharing reductions (CSRs) for QHPs after the applicable
period has elapsed. However, in these circumstances, the agent or
broker would be required to continue to protect any personally
identifiable information accessed during the term of his or her or its
agreements with the FFEs. We also proposed to create a new paragraph
(g)(3)(i) to retain the existing language describing the current
notification process and timelines for termination for cause under
paragraph (g) with advance 30-days' notice, except that we proposed a
clarifying edit to reflect that the new paragraph (g)(3)(ii) would
constitute an exception to the current process described in existing
paragraph (g)(3). As detailed earlier in this preamble, we also
proposed to add a reference to web-broker to the existing paragraph
(g)(3) (proposed as new paragraph (g)(3)(i)) to clarify this paragraph
also applies to web-brokers. We are finalizing these amendments as
proposed.
To promote information technology system security in the FFEs and
SBE-FPs, including the protection of consumer data, we proposed to
amend Sec. 155.220(k) by adding a new paragraph (k)(3) that would
continue to allow HHS to immediately suspend an agent's or broker's
ability to transact information with the Exchange if HHS discovers
circumstances that pose unacceptable risk to Exchange operations or
Exchange information technology systems until the incident or breach is
remedied or sufficiently mitigated to HHS' satisfaction. We noted that
this proposed language was identical to an existing provision that
applies when an internet website of an agent or broker is used to
complete QHP selection at current Sec. 155.220(c)(3)(i)(L) \127\ and a
similar provision applicable to QHP issuers participating in direct
enrollment at current Sec. 156.1230(b)(1).\128\ In proposed Sec.
155.220(k)(3), we noted our intent for this provision to apply to
agents and brokers who, once registered under Sec. 155.220(d)(1),
obtain credentials that provide access to FFE systems that may be
misused in a manner that threatens the security of the Exchange's
operations or information technology systems. We explained that we
believe this proposed change was necessary to ensure that HHS can
continue to take immediate action to stop unacceptable risks to
Exchange operations or systems posed by agents and brokers. Because the
potential risks posed by agents and brokers with access to FFE systems
are similar to those posed by web-brokers or QHP issuers participating
in direct enrollment, we explained that we believe this change was
necessary and appropriate to provide a uniform process and ability to
protect Exchange systems and operations from unacceptable risks, as
well as to protect sensitive consumer data. We noted that agents and
brokers whose ability to transact information with the Exchange is
suspended under this proposed authority would remain registered with
the FFEs and authorized to assist consumers using the Marketplace (or
side-by-side) pathway,\129\ unless and until their agreements are
suspended or terminated under Sec. 155.220(f) or (g). We are
finalizing this change as proposed.
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\127\ This provision also currently applies when an internet
website of an agent or broker is used to complete the Exchange
eligibility application through the existing cross reference to
paragraph (c)(3)(i) in Sec. 155.220(c)(3)(ii)(A).
\128\ As described elsewhere in this rule, we are finalizing the
proposed deletion of Sec. Sec. 155.220(c)(3)(i)(L) and
156.1230(b)(1) and replacement with similar authority in Sec.
155.221(d) that will be applicable to all direct enrollment
entities.
\129\ For more information on the Marketplace pathway, please
see the Health Insurance Marketplace Guidance: Role of Agents,
Brokers, and Web-brokers in Health Insurance Marketplace (November
8, 2016) Available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Role-of-ABs-in-Marketplace_Nov-2016_Final.pdf.
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To further improve program integrity, we proposed in a new Sec.
155.220(m) several additional areas in which we proposed to regulate
web-brokers differently from agents or brokers. We explained that we
believe these additional proposed changes in new paragraph (m) are
important to further protect against potential fraudulent enrollment
activities, including the improper payment of APTC and CSRs, to
safeguard consumer data and Exchange operations and systems, and to
ensure direct enrollment remains a safe and consumer-friendly
enrollment pathway.
At Sec. 155.220(m)(1), we proposed to allow a web-broker's
agreement(s) to be suspended or terminated for cause under Sec.
155.220(g), or a web-broker to be denied the right to enter into
agreements with the FFEs under Sec. 155.220(k)(1)(i), based on the
actions
[[Page 17518]]
of its officers, employees, contractors, or agents. For example, if the
actions of such individuals or entities are in violation of any
standard specified in Sec. 155.220, any terms or conditions of the
web-broker's agreements with the FFEs, or any applicable federal or
state statutory or regulatory requirements, whether or not the officer,
employee, contractor, or agent is registered with the FFEs as an agent
or broker, the web-broker's agreement(s) may be terminated under
paragraph (g)(3) if HHS determines the specific finding of
noncompliance or pattern of noncompliance is sufficiently severe.
Similarly, if HHS reasonably suspects that an officer, employee,
contractor, or agent of a web-broker may have engaged in fraud, whether
or not such individual or entity is registered with the FFEs as an
agent or broker, HHS may temporarily suspend the web-broker's
agreement(s) for up to 90 days consistent with Sec.
155.220(g)(5)(i)(A).
At Sec. 155.220(m)(2), we proposed to allow a web-broker's
agreement to be suspended or terminated under Sec. 155.220(g) or to
deny it the right to enter into agreements with the FFEs under Sec.
155.220(k)(1)(i), if it is under the common ownership or control, or is
an affiliated business, of another web-broker that had its agreement
suspended or terminated under Sec. 155.220(g). In general, for
purposes of this provision, we proposed to define ``common ownership or
control'' based on whether there is significant overlap in the
leadership or governance of the entities. We also proposed to collect
data during the web-broker onboarding process to assist with the
analysis of whether the web-broker is under the common ownership or
control, or is an affiliated business, of another web-broker that had
its agreement suspended or terminated under Sec. 155.220(g).
At Sec. 155.220(m)(3), we proposed allowing the Exchange to
collect information from a web-broker during its registration with the
Exchange, or at another time on an annual basis, in a form and manner
to be specified by HHS, sufficient to establish the identities of the
individuals who comprise its corporate leadership and to ascertain any
corporate or business relationships it has with other entities that may
seek to register with the FFE as web-brokers. We explained these
provisions were important to maintain program integrity, because they
will provide authority to collect information that will be used to
minimize the risk that an individual or entity can circumvent an
Exchange suspension or termination or other enforcement action related
to non-compliance. We are finalizing the amendments to create new
paragraphs (m)(1), (m)(2), and (m)(3) as proposed.
As noted in the proposed rule, the use of direct enrollment through
websites other than HealthCare.gov has expanded, as have the
requirements on web-brokers seeking to participate in FFEs and SBE-FPs.
For those reasons, we proposed to modify prior policy that prohibited
Navigators and certified application counselors (together referred to
here as ``assisters'') from using web-broker websites to assist with
QHP selection and enrollment. Our proposal would have permitted, but
not required, assisters in FFEs and SBE-FPs, to the extent permitted by
state law, to use web-broker websites to assist consumers with QHP
selection and enrollment, if the website met certain conditions
designed to ensure that assisters were able to use it while still
meeting their statutory and regulatory obligations to provide fair,
accurate, and impartial information and assistance to consumers. To
promote state flexibility and autonomy under this proposal, SBEs other
than SBE-FPs would have had discretion to permit their assisters to use
web-broker websites, so long as the web-broker websites that assisters
were permitted to use in SBEs, at a minimum, adhered to the standards
outlined in the proposal. Also, SBEs could instead have chosen to
preserve the prohibition on assister use of web-broker websites.
The expansion of direct enrollment and the implementation of
enhanced direct enrollment increased interest in allowing assisters to
use web-broker websites to assist consumers with selection and
enrollment in QHPs offered through Exchanges. As detailed in the
proposed rule, some web-brokers supported this idea, because of the
unique role assisters serve in many communities. Some assisters also
expressed a desire to use web-broker websites to provide an improved
consumer experience by leveraging unique consumer assistance tools many
web-brokers developed, such as those that provide access to real-time
information on the status of submitted applications and enrollments.
In the proposed rule, we explained that the implementation of
enhanced direct enrollment by some web-brokers also presents consumers
with an additional method of applying for insurance affordability
programs, selecting and enrolling in QHPs offered through Exchanges,
and receiving post-enrollment support services. We explained that we
believe this new option should be available to all FFE and SBE-FP
assisters who provide application and enrollment assistance, provided
that the information and assistance the assister provides will remain
fair, accurate, and impartial. We also expressed hope that allowing FFE
and SBE-FP assisters to use web-broker websites to enroll consumers
would encourage collaboration between assisters and web-brokers to the
benefit of consumers by providing consumers the most appropriate
support at each stage of the Exchange application and QHP selection and
enrollment processes. To further support the use of web-broker websites
by assisters, we also proposed to amend and replace Sec.
155.220(c)(3)(i)(D) with new requirements for web-broker websites to
display all QHP data provided by the Exchange, consistent with the
requirements of Sec. 155.205(b)(1) and (c), for such websites to be
eligible for use by assisters when otherwise permitted under state law.
For FFEs and SBE-FPs, we proposed an optional annual certification
process for web-brokers that would have been integrated into the
existing annual web-broker registration process, or could have occurred
during another time of year, during which a web-broker could have been
certified by the Exchange by attesting to its compliance with the QHP
data display requirements. We also proposed that if a web-broker
website did not facilitate enrollment in all QHPs, it would be required
to identify to consumers the QHPs, if any, for which the web-broker
website did not facilitate enrollment by prominently displaying a
standardized disclaimer provided by the Exchange, in a form and manner
specified by the Exchange, stating that the consumer could enroll in
such QHPs through the Exchange website, and display a link to the
Exchange website. However, after consideration of comments, we are not
finalizing the proposed modification to the prior policy that
prohibited assisters from using web-broker websites or the accompanying
proposals to amend and replace Sec. 155.220(c)(3)(i)(D). The current
policy, which prohibits the use of web-broker websites by assisters,
remains in effect. We are also retaining the existing requirement at
Sec. 155.220(c)(3)(i)(D), which requires the display of all QHP data
provided by the Exchange on non-Exchange websites used to complete QHP
selection and/or the Exchange eligibility application.
The following is a summary of the comments received on the proposed
amendments, policies and clarifications related to Sec. 155.220.
Comments related to the accompanying proposals under Sec. 155.221 are
discussed later in this rule.
[[Page 17519]]
Comment: Commenters that referred to the proposal at Sec.
155.220(c)(3)(i)(L) to prohibit web-broker websites from displaying QHP
recommendations based on compensation an agent, broker, or web-broker
receives from QHP issuers unanimously supported it. Some commenters
also supported prohibiting implicit recommendations based on
compensation received from issuers by requiring web-broker websites to
display all QHP information provided by the Exchange for all QHPs
offered through the Exchange instead of displaying limited details and
a standardized disclaimer as permitted under Sec. 155.220(c)(3)(i)(A).
One commenter recommended requiring web-broker websites to display the
rationale for any QHP recommendations they make.
Response: We are finalizing the amendment as proposed at Sec.
155.220(c)(3)(i)(L). As stated above, we are amending the definition of
the term ``compensation'' for this purpose to include commissions,
fees, or other incentives provided by a QHP issuer to the agent,
broker, or web-broker. This better aligns with our intent, as well as
comments received in support of the proposal, to prohibit the display
of QHP recommendations on web-broker websites based on compensation an
agent, broker, or web-broker receives from QHP issuers. While we
acknowledge that web-broker websites may implicitly recommend QHPs
based on compensation they receive from QHP issuers, we did not propose
and are not establishing standards in this final rule in this regard.
However, we intend to monitor implementation and effectiveness of the
new standard finalized at Sec. 155.220(c)(3)(i)(L), which prohibits
the display of QHP recommendations on web-broker websites based on
compensation received from QHP issuers, and may consider proposing
additional standards related to the display of QHP recommendations on
web-broker websites, including requiring the display of a rationale for
any QHP recommendations, in future rulemaking.
We also clarify that under Sec. 155.220(c)(3)(i)(A), a web-broker
website used to complete QHP selection or the Exchange eligibility
application must disclose and display all QHP \130\ information
provided by the Exchange, consistent with the requirements of Sec.
155.205(b)(1) and (c). If not directly provided by the Exchange, a web-
broker may obtain additional information on QHPs displayed on its
website directly from those QHP issuers with whom it has a contractual
relationship. In accordance with Sec. 155.220(c)(3)(i)(A), if a web-
broker does not have access to all of the comparative information
required under Sec. 155.205(b)(1) and (c) for a QHP offered through
the Exchange, such as premium or benefit information, it must display
the required standardized Plan Detail Disclaimer for the specific
QHP.\131\
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\130\ With some limited exceptions, stand-alone dental plans
(SADPs) are considered a type of QHP. See Patient Protection and
Affordable Care Act; Establishment of Exchanges and Qualified Health
Plans; Exchange Standards for Employers; Final Rule and Interim
Final Rule (77 FR 18310, 18315) (March 27, 2012). The same display
requirements extend to SADPs, including display of all applicable
SADPs offered through the Exchange and all available information
specific to each SADP on their websites, as well as including the
Plan Detail Disclaimer to the extent that all required SADP
comparative information is not displayed on the web-broker's
website.
\131\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-Web-brokers-Displaying-Disclaimers.pdf.
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Comment: Several commenters supported the proposal at Sec.
155.220(c)(4)(i)(A) to require web-brokers to provide HHS with a list
of agents and brokers who enter into a contract or other arrangement to
use the web-broker's website to assist consumers with Exchange
applications and QHP selections. One commenter recommended the list be
required annually and limited to include agents and brokers who have a
signed agreement and actually used a web-broker's website to assist
with QHP enrollment in the past year, and not any agents or brokers
that could potentially have used the web-broker's website for that
purpose but did not, in the interest of reducing burden. Another
commenter expressed concern about the scope of this proposal and
whether it extends beyond agents and brokers using a web-broker's
website to business development partners through which it receives
referrals.
Response: We are finalizing the amendment as proposed at Sec.
155.220(c)(4)(i)(A). As indicated above, we intend to issue guidance on
the form and manner for these submissions and appreciate the desire to
minimize the burden of this requirement. That is one of the reasons we
are considering adopting a measured, targeted approach to reporting
that would reduce the frequency of the submissions for most of the year
by adopting quarterly or monthly submission requirements. We continue
to believe that more frequent reporting, such as daily or weekly
submissions, are more appropriate for the time period spanning from the
month before through the entire individual market open enrollment
period because of the increased volume of enrollments and the
accompanying increased access to FFE systems and consumer information
during this time. For this requirement to enable us to more efficiently
and effectively investigate and respond to instances of noncompliance,
including those situations that may pose risks to Exchange data and
systems, we must have the information more frequently than annually.
For example, agents, broker, and web-brokers may enter into new
relationships and/or end existing agreements at any time during the
year. The adoption of an annual reporting schedule would not capture
these changes until the following year. As such, there is a risk that
the data would become obsolete quickly, hindering our oversight and
enforcement efforts. For these reasons, we decline to adopt an annual
reporting schedule.
We also believe the data collected must include information about
all agents and brokers that are able to use a web-broker's website for
direct enrollment, whether or not they have done so recently, since
agents and brokers with this access are equally able to access the
systems and engage in misconduct that we may need to investigate. In
terms of the scope of information that will have to be reported, we
clarify it extends only to those agents and brokers that have a current
contractual or other arrangement with a web-broker to use its website
to assist consumers with the completion of an Exchange eligibility
application or QHP selection in the FFE or SBE-FP. Persons or entities
only referring consumers to the web-broker's website would not be
subject to this requirement.
Comment: Several commenters supported the proposal at Sec.
155.220(g)(3)(ii) to allow for the immediate termination of agreements
with agents or brokers for cause if an agent or broker fails to
maintain the appropriate state license in every state in which the
agent or broker is actively assisting consumers with Exchange
applications and QHP enrollment. One commenter pointed out that some
national licensure databases contain inaccuracies and it is important
to ensure accurate information is used as the basis for termination.
Another commenter emphasized the importance of timely and accurate
communication between HHS and state regulators as it relates to this
proposal.
Response: We are finalizing the amendments to Sec. 155.220(g)(3)
as proposed. We appreciate the comments
[[Page 17520]]
expressing concerns about the potential for inaccurate data and the
need for timely communications with state regulators. We will develop
procedures to verify state licensure with applicable state regulators,
which may include confirming national database information with
information made publicly available by individual states, as well as
outreach to state regulators. We also will continue our general efforts
to coordinate oversight activities related to agents and brokers with
states. In addition, as detailed above, agents or brokers whose
agreements with the FFEs are immediately terminated under the new
paragraph (g)(3)(ii) will be able to request reconsideration under
Sec. 155.220(h).
Comment: We received several comments on the proposals at Sec.
155.220(m) related to the enforcement actions that may be taken against
web-brokers. One commenter supported the proposals. One commenter
requested we clarify the use of ``agent'' in proposed Sec.
155.220(m)(1), relating to the suspension or termination of a web-
broker's agreement with the Exchange under paragraph (g), and the
denial of the right for the web-broker to enter into agreements with
the FFE under paragraph (k)(1)(i) based on the actions of its officers,
employees, contractors or agents (regardless of whether these
individuals are registered with the Exchange as an agent or broker).
Another commenter expressed concern that these proposals appeared to
provide authority to suspend or terminate a web-broker's agreement
based on the actions of as few as one agent using the web-broker's
website. A fourth commenter stated that the proposals should apply to
non-web-broker agent or broker business entities and not only web-
broker business entities, and that HHS should provide examples of the
actions that could be grounds for termination or suspension of a web-
broker's agreements, including whether such actions would need to be
related to the operation of the web-broker's website.
Response: We are finalizing these amendments as proposed.
As explained in the proposed rule, the intent of these changes is
to provide additional tools for HHS to guard against fraudulent
activities, protect consumer data and Exchange operations and systems,
and address serious cases of misconduct. Web-broker business entities
participating or seeking to participate in direct enrollment are
proliferating. In addition, the complexity of web-brokers' technical
integrations with Exchange systems are increasing, providing greater
access to sensitive consumer data and growing dependencies between
Exchange and web-broker systems. After several years of experience
observing web-broker operations and participation in the FFEs and SBE-
FPs, we found it was necessary to update our oversight and enforcement
authority to add tools to combat fraud to align with these changes.
We do not expect this authority will be used against the vast
majority of web-brokers that make a good-faith effort to comply with
applicable requirements. Further, we anticipate these provisions will
have limited impact as they are designed to provide HHS greater
flexibility to address the limited instances where there is evidence of
significant misconduct or non-compliance by a web-broker, its officers,
employees, contractors, or agents. We clarify that ``agent'' as
referred to in Sec. 155.220(m)(1) is intended to refer to an
individual or entity with a business relationship with a web-broker
such that the entity or individual is authorized to act on behalf of
the web-broker. ``Agent'' in this context may or may not refer to a
licensed agent or broker registered with the FFEs to assist Exchange
consumers, unless the licensed agent or broker is also authorized to
act on behalf of the web-broker. We believe this new authority will
close some current gaps in oversight of web-brokers, such as those that
exist when an individual or entity registered with the FFEs is denied
the right to enter into FFE agreements for future benefit years under
Sec. 155.220(k)(1)(i) due to misconduct and the individual or entity
tries to avoid the implications of the enforcement action by creating a
new web-broker business entity that seeks to register with the FFEs
before the expiration of the penalty under Sec. 155.220(k)(1)(i).
Examples of the types of activities that could give rise to enforcement
action under these new authorities are a web-broker's officer
instructing his agent/broker employees to falsify data submitted on
consumers' Exchange applications, a documented pattern by a web-broker
entity of misusing Exchange consumer data, or the failure to adopt
procedures to properly secure data and comply with applicable privacy
and security requirements. As these examples illustrate, the activities
for which an enforcement action may be taken under this authority are
not limited to activities related only to the operation of a web-
broker's website.
While each enforcement action is fact-specific, we generally
clarify that if a registered agent or broker is believed to have
engaged in noncompliance that we discover through our oversight of web-
broker websites, and there is no evidence that the web-broker was part
of the noncompliance activities, we would take the enforcement action
against the agent or broker (and not the web-broker). However, if the
investigation reveals facts that indicate the web-broker was involved
in the non-compliance, then we may also take action under this new
authority against the web-broker (in addition to taking appropriate
action for the agent or broker involved). We may consider expanding
this authority to non-web-broker agent or broker business entities in
the future. However, the specific concerns and potential risks the
proposals were intended to mitigate are posed most acutely by web-
brokers by virtue of the more direct and expansive access they have to
Exchange systems and consumer data. Therefore, we proposed and are
finalizing this authority as limited to web-brokers at this time.
Comment: Numerous commenters opposed the proposal to allow
assisters to use web-broker websites and the proposed new regulations
that would have replaced the existing Sec. 155.220(c)(3)(i)(D).
Commenters were concerned about whether assisters could remain fair and
impartial if they were assisting consumers using web-broker websites
that did not offer enrollment into all QHPs offered through the
Exchange, or that included QHP recommendations. Some commenters
highlighted the confusion assisters and consumers may encounter when
using web-broker websites that include marketing for non-QHP products.
One commenter opposed any proposed expansion to the role of assisters.
Some commenters supported prohibiting web-broker websites from
recommending QHPs if this proposal was finalized. One commenter
suggested that assisters should only be permitted to use web-broker
websites that exclusively market QHPs, and web-brokers should not
receive commissions for consumers enrolled in QHPs through a web-broker
website if the consumers received support from assisters. Another
commenter advocated for mandatory certification of web-broker websites
before assisters may use them. One commenter supported requiring web-
broker websites to develop a separate pathway exclusively for assisters
to use. One commenter recommended allowing web-brokers to compensate
assisters to supplement federal funding for assisters, and noted that
the compensation should be unrelated to whether the web-broker received
a commission associated with the assistance provided to the consumer by
the assister, and should include
[[Page 17521]]
compensation for assistance provided to consumers who are determined
eligible for Medicaid.
Some commenters supported specific elements of the proposal.
Several commenters supported the flexibility proposed to be provided to
SBEs, other than SBE-FPs, to either permit their assisters to use web-
broker websites or to instead preserve the prohibition on assister use
of these non-Exchange websites. One commenter supported the proposed
requirement that web-broker websites display all QHP data provided by
the Exchange before assisters could use the websites. One commenter
that generally supported the proposal described a potential outcome of
the proposal would be the development of new consumer-assistance tools
that assisters would be able to leverage when using a web-broker
website to assist consumers.
Response: We agree with commenters that there are concerns related
to assister use of web-broker websites that warrant further
consideration, and therefore, we are not finalizing the proposed
modification to the prior policy that prohibits assisters from using
web-broker websites or the accompanying proposals to amend and replace
Sec. 155.220(c)(3)(i)(D) at this time. Adoption of approved enhanced
direct enrollment functionality by web-brokers remains limited and we
have decided to focus on the implementation and oversight of the
enhanced direct enrollment pathway before allowing the use of web-
broker websites by assisters. This approach also allows web-brokers
interested in participating in enhanced direct enrollment to focus on
implementing and complying with those new requirements at this time. In
addition, new insights may be gained about how best to approach and
implement this policy change as more web-brokers are approved to
participate in enhanced direct enrollment and we gain more experience
with enhanced direct enrollment pathways generally. We intend to
monitor these changes and may revisit the current policy regarding
assister use of these websites including comments received on the
policies in the proposed rule, at a later date. We believe assisters
remain a critical component of the options available for consumers to
receive support completing the Exchange eligibility application and
selecting and enrolling in QHPs, especially for certain vulnerable
populations that have historically unmet needs. The current policy,
which prohibits the use of web-broker websites by assisters, remains in
effect and we are also retaining the existing requirement at Sec.
155.220(c)(3)(i)(D).
e. Standards for Third-Party Entities To Perform Audits of Agents,
Brokers, and Issuers Participating in Direct Enrollment (Sec. 155.221)
Direct enrollment is a mechanism for third parties to directly
enroll consumers seeking QHPs through a non-Exchange website in a
manner considered to be through the Exchange. Direct enrollment was
created to provide consumers different options to shop for and enroll
in QHPs offered through the Exchange. The entities that have been
authorized to offer direct enrollment pathways to date are QHP issuers,
as well as agents and brokers that develop and host non-Exchange
websites to facilitate consumer selection of and enrollment in QHPs,
referred to as web-brokers. As described above, in this rule we
finalized a new definition for the term ``web-broker.'' Consistent with
this new definition, we use the term web-broker throughout this final
rule when we are referring to agents and brokers that develop and host
non-Exchange websites to facilitate consumer selection of and
enrollment in QHPs offered through an Exchange, otherwise known as
direct enrollment, as well as direct enrollment technology providers.
The original version of direct enrollment, or classic direct
enrollment, is still in operation. It utilizes a double redirect from a
direct enrollment entity's website where QHP shopping occurs, to
HealthCare.gov where the eligibility application is completed, and back
to the entity's website to finalize the selection of the QHP. Classic
direct enrollment allows QHP issuers and web-brokers who meet
applicable requirements to design and host a plan shopping experience,
and assist consumers with the QHP selection process using relatively
simple and limited application programming interfaces (APIs). The FFE
direct enrollment program has expanded beyond the classic (that is,
double-redirect) direct enrollment pathway as the FFEs' technical
capabilities have significantly increased, beginning with proxy direct
enrollment for plan year 2018 \132\ and continuing with the
implementation of enhanced direct enrollment for plan year 2019 and
beyond.\133\ The requirements and technical expertise needed to
participate in each new iteration of direct enrollment have similarly
increased as participants have greater access to and responsibility for
sensitive consumer data and Exchange systems. With enhanced direct
enrollment, HHS allows participants to create and host a dynamic
eligibility application and integrate several new APIs that facilitate
eligibility determinations, as well as the consumer's enrollment in a
QHP, and data sharing with the applicable Exchange. Enhanced direct
enrollment provides new options for consumers to receive more
comprehensive services through a non-Exchange website, without the need
to redirect to HealthCare.gov, for application and enrollment and
ongoing support throughout the plan year. We explained in the proposed
rule that we believe this will promote innovation and competition, and
ultimately lead to better experiences for more consumers. We also noted
that streamlining and consolidating regulatory requirements, when
possible, will simplify the otherwise complex requirements to
participate in direct enrollment and make it easier for direct
enrollment entities and organizations interested in participating in
direct enrollment to understand and comply with applicable
requirements. We also explained that the complex and evolving nature of
direct enrollment requires updates to accommodate innovation, ensure
program integrity, and protect sensitive consumer data.
---------------------------------------------------------------------------
\132\ Proxy direct enrollment was implemented on a temporary
basis for plan year 2018. More information is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Guidance-for-the-Proxy-Direct-Enrollment-Pathway-for-2018-Individual-Market-Open-Enrollment-Period.pdf.
\133\ 81 FR at 94118.
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As detailed in the proposed rule, the entities that have been
permitted to offer direct enrollment pathways to date have been QHP
issuers and web-brokers that develop and host non-Exchange websites to
facilitate selection of and enrollment in QHPs offered through an FFE
or SBE-FP. Direct enrollment regulatory provisions have likewise been
divided into sections separately applicable to QHP issuers
participating in direct enrollment and web-brokers. As direct
enrollment has evolved with the implementation of enhanced direct
enrollment, many of the requirements applicable to QHP issuers
performing direct enrollment and web-brokers have become increasingly
similar. Therefore, we proposed to revise Sec. 155.221 to apply to all
types of direct enrollment entities and to expand the requirements
captured in this regulation beyond audits of direct enrollment
entities. To reflect this change we also proposed to revise the section
heading of Sec. 155.221 to ``Standards for direct enrollment entities
and for third-parties to perform audits of direct enrollment
entities.''
[[Page 17522]]
As detailed above, we also proposed to amend Sec. 155.20 to
include definitions of several terms we proposed to use in Sec.
155.221 including: ``direct enrollment entity'' and ``web-broker.''
Specifically, we proposed to define ``direct enrollment entity'' as an
entity that an Exchange permits to assist consumers with direct
enrollment in QHPs offered through the Exchange in a manner considered
to be through the Exchange as authorized by Sec. Sec. 155.220(c)(3),
155.221, or 156.1230. We proposed to define ``web-broker'' as an
individual agent or broker, group of agents or brokers, or business
entity registered with an Exchange under Sec. 155.220(d)(1) that
develops and hosts a non-Exchange website that interfaces with an
Exchange to assist consumers with direct enrollment in QHPs offered
through the Exchange as described in Sec. Sec. 155.220(c)(3) and
155.221. As explained elsewhere in this preamble, we also proposed to
define the term ``web-broker'' to include direct enrollment technology
providers. We explained that it is important to distinguish ``web-
brokers'' from other agents and brokers utilizing a non-Exchange
website to assist consumers with direct enrollment in QHPs offered
through the Exchanges when they did not develop and do not host the
non-Exchange website. Stated differently, agents and brokers using a
non-Exchange website developed and hosted by a web-broker are not
themselves necessarily web-brokers. For the reasons outlined in the
preamble to Sec. 155.220, we are of the view that it is appropriate to
impose different requirements on web-brokers and agents and brokers who
are not web-brokers. The proposed definition and the proposed changes
to Sec. Sec. 155.220 and 155.221 reflect this approach and would
enable web-brokers, agents, and brokers to more clearly identify when
requirements are applicable to only web-brokers.
We also proposed to amend Sec. 155.20 to define ``direct
enrollment technology provider'' as a type of web-broker business
entity that is not a licensed agent, broker, or producer under state
law and has been engaged or created by, or is owned by, an agent or
broker to provide technology services to facilitate participation in
direct enrollment as a web-broker in accordance with Sec. Sec.
155.220(c)(3) and 155.221. This definition captures instances when an
individual agent or broker, a group of agents or brokers, or an agent
or broker business entity, engages the services of or creates a
technology company that is not licensed as an agent, broker, or
producer to assist with the development and maintenance of a non-
Exchange website that interfaces with an Exchange to assist consumers
with direct enrollment in QHPs offered through the Exchanges as
described in Sec. Sec. 155.220(c)(3) and 155.221. When the technology
company is not itself licensed as an insurance agency or brokerage, but
otherwise is functioning as a web-broker, we proposed that these
technology companies would be considered a type of web-broker that must
comply with applicable web-broker requirements under Sec. Sec. 155.220
and 155.221, unless indicated otherwise.\134\ The proposed definition
of ``web-broker'' reflects the inclusion of direct enrollment
technology providers. As detailed above, we are finalizing these
definitions as proposed. Please refer to the preamble for Sec. 155.20
for a summary of comments on the proposed definitions.
---------------------------------------------------------------------------
\134\ For example, amendments to Sec. 155.220(d)(2) exempt
direct enrollment technology providers from the training requirement
that is part of the annual FFE registration process for agents and
brokers.
---------------------------------------------------------------------------
We proposed to generally maintain the current requirements in Sec.
155.221 that describe the standards for third-parties to perform audits
of direct enrollment entities. However, to accommodate new content we
proposed to add to this regulation, we proposed to redesignate the
existing paragraphs (a) through (c) as paragraphs (e) through (g),
respectively.
We also proposed some amendments to existing requirements currently
captured in paragraphs (a) through (c), as described more fully below.
In addition, throughout the redesignated paragraphs (e), (f), (f)(2),
(f)(3), (f)(4), (f)(6), (f)(7), and (g), we proposed conforming edits
to change references to agents, brokers, and issuers to direct
enrollment entities. We also proposed to update the regulatory cross-
references in the redesignated paragraph (f)(6) and (f)(7) from Sec.
155.221(a) to Sec. 155.221(e) to align with other proposed
streamlining changes to this regulation. We also proposed to add
paragraph headings throughout this revised regulation for further
clarity. In paragraph (e), we also proposed to add language to require
that the third-party entities that conduct annual reviews of direct
enrollment entities to demonstrate operational readiness consistent
with new Sec. 155.221(b)(4) \135\ be independent of the entities they
are auditing. We proposed this change because we believe an independent
audit is less likely to be influenced by a direct enrollment entity's
business considerations and therefore is more reliable. We note that
current Sec. 155.221(b)(4) requires third-party auditors to disclose
to HHS any financial relationships they have with the entities they are
auditing. We explained in the proposed rule that we believe this
disclosure requirement remains relevant even with the proposed addition
to proposed paragraph (e) that will require auditors to be independent,
because an auditor may be independent while also contracting with the
entity it is auditing (and therefore having a financial relationship
with the entity) to perform audits or other activities unrelated to
those described in Sec. 155.221. We therefore proposed to retain this
disclosure requirement at new Sec. 155.221(f)(4).
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\135\ Direct enrollment operational readiness review
requirements are currently captured at Sec. 155.220(c)(3)(i)(K) for
web-brokers and Sec. 156.1230(b)(2) for QHP issuers.
---------------------------------------------------------------------------
We also proposed to clarify in paragraph (e) that an initial audit
is required, in addition to subsequent annual audits, and that these
audits must include review of the entity's compliance with applicable
direct enrollment requirements. These clarifications do not represent a
change from the current approach, as direct enrollment entities are
currently required to demonstrate operational readiness before their
websites may be used to complete QHP selections,\136\ and these audits
must confirm compliance with applicable requirements.\137\ In paragraph
(e), we proposed to add language to clarify that operational readiness
must be demonstrated prior to the direct enrollment entity's website
being used to complete an Exchange eligibility application or make a
QHP selection. This language is consistent with the operational
readiness review requirements currently captured at Sec.
155.220(c)(3)(i)(K) for web-brokers and Sec. 156.1230(b)(2) for QHP
issuers, which we proposed be moved to Sec. 155.221(b)(4), and
accounts for the fact that direct enrollment entities participating in
enhanced direct enrollment will host the eligibility application in
addition to QHP selection.
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\136\ See Sec. 156.1230(b)(2) for issuers participating in
direct enrollment and Sec. 155.220(c)(3)(i)(K) for web-brokers.
\137\ See Sec. 155.221(b)(5). Also see Sec. 156.1230(b)(2).
---------------------------------------------------------------------------
We proposed to maintain the last sentence that currently appears in
Sec. 155.221(a) as the last sentence of the new paragraph (e) that
states the third-party entity will be the downstream or delegated
entity of the agent, broker, or issuer that participates or wishes to
participate in direct enrollment, replacing the references to agent,
broker,
[[Page 17523]]
and issuer with direct enrollment entity. In paragraph (f), we proposed
to generally maintain the current requirement captured in Sec.
155.221(b) that a direct enrollment entity must satisfy the requirement
to demonstrate operational readiness by engaging a third-party entity
that complies with the specified requirements.
We also proposed to require under new paragraph (f) that a written
agreement must be executed between the direct enrollment entity and its
auditor stating that the auditor will comply with the standards
outlined in paragraph (f). We proposed this new requirement because we
believe the most effective way to ensure a direct enrollment entity has
the necessary control and oversight over its auditor to ensure
compliance with the applicable standards in Sec. 155.221 is for those
standards to be memorialized in a written agreement between the
parties. We proposed to delete the provision in current paragraph (c)
that refers to each third-party entity having to satisfy the standards
outlined in current paragraph (b), to avoid duplication with a nearly
identical provision in proposed paragraph (f).
We proposed to maintain, in the redesignated new paragraph (g), the
provision that clarifies that direct enrollment entities may engage
multiple third-party entities to conduct the operational readiness
audits under proposed Sec. 155.221(e).
We proposed a new paragraph (a) in Sec. 155.221 that will
establish the types of entities the FFEs will permit to assist
consumers with direct enrollment in QHPs offered through an Exchange in
a manner that is considered to be through the Exchange, to the extent
permitted by state law. We proposed to capture in Sec. 155.221(a) the
two types of entities that are already permitted by the FFEs to use and
offer a non-Exchange website to facilitate direct enrollment: QHP
issuers that meet the requirements in Sec. 156.1230 and web-brokers
that meet the requirements in Sec. 155.220. New proposed paragraph (a)
also reflected that these entities would be required to comply with the
applicable requirements outlined in the new proposed Sec. 155.221,
which we proposed to capture the direct enrollment requirements that
would apply to both web-brokers and QHP issuers participating in direct
enrollment. For the remaining requirements that only apply to web-
brokers or only apply to QHP issuers participating in direct
enrollment, we proposed to retain those requirements in Sec. Sec.
155.220 and 156.1230, respectively.
In the proposed rule, we described guidance that details several
existing display standards applicable to issuers or web-brokers
participating in direct enrollment.\138\
---------------------------------------------------------------------------
\138\ See, for example, section 4.3 of the Federally-facilitated
Marketplace and Federally-facilitated Small Business Health Options
Program Enrollment Manual, available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Enrollment-Manual-062618.pdf. Also see, section II.B of the Guidance for Web-brokers
Registered with the Federally-Facilitated Marketplaces (October 17,
2016), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/Guidance-Web-brokers-FFMs.pdf.
---------------------------------------------------------------------------
We explained that we received feedback from issuers and web-brokers
suggesting there was some confusion about the current standards and
guidance related to the display of QHPs and non-QHPs on non-Exchange
websites used to facilitate direct enrollment. In an effort to clarify
expectations, achieve greater uniformity in standards for all direct
enrollment entities, and provide flexibility for innovation, we
proposed to establish requirements under Sec. 155.221(b) for the FFEs,
which would apply to all FFE direct enrollment entities. As noted
elsewhere in preamble, some of the proposed requirements in Sec.
155.221(b) were intended to streamline existing web-broker and QHP
issuer direct enrollment requirements that are currently separately
imposed under Sec. Sec. 155.220 and 156.1230 by capturing these
similar requirements in one regulation. Other proposed standards in
Sec. 155.221(b) are new regulatory requirements and are proposed to
clarify or otherwise address compliance questions that have arisen
under the existing regulations and guidance.
At new Sec. 155.221(b)(1), we proposed to require direct
enrollment entities to display and market QHPs and non-QHPs on separate
website pages on their respective non-Exchange websites. We explained
that this proposal was intended to balance the goals of minimizing
consumer confusion about distinct products with substantially different
characteristics, and allowing marketing flexibility and opportunities
for innovation. At Sec. 155.221(b)(2), we proposed to require direct
enrollment entities to prominently display a standardized disclaimer in
the form and manner provided by HHS.\139\ Consistent with current
practice for the other standardized disclaimers provided by HHS under
Sec. Sec. 155.220 and 156.1230, we explained we would provide further
details on the text and other display details for the standardized
disclaimer in guidance, but noted its purpose would be to assist
consumers in distinguishing between direct enrollment entity website
pages that display QHPs and those that display non-QHPs, and for which
products APTC and CSRs are available, during a single shopping
experience. In new Sec. 155.221(b)(3), HHS proposed that direct
enrollment entities must limit the marketing of non-QHPs during the
Exchange eligibility application and QHP plan selection process in a
manner that will minimize the likelihood that consumers will be
confused as to what products are available through the Exchange and
what products are not. For example, under the proposed display
standards captured at Sec. 155.221(b)(1) through (b)(3), direct
enrollment entities would be required to offer an Exchange eligibility
application and QHP selection process that is free from advertisements
or information for non-QHPs and sponsored links promoting health
insurance-related products. However, it would be permissible for a
direct enrollment entity to market or display non-QHP health plans and
other off-Exchange products in a section of the entity's website that
is separate from the QHP web pages if the entity otherwise complied
with the proposed standardized disclaimer requirements. The proposed
requirements captured at Sec. 155.221(b)(1)-(3) are intended to
provide flexibility for direct enrollment entities to market valuable
additional coverage that complements QHP coverage, while also allowing
HHS to establish important parameters around the manner and type of
non-QHPs that direct enrollment entities may market as part of a single
shopping experience with QHPs. We explained that we believe marketing
some products in conjunction with QHPs may cause consumer confusion,
especially as it relates to the availability of financial assistance
for QHPs purchased through the Exchanges. But we also appreciate that
having flexibility to update these standards would allow us to adapt
the display guidance as new products come to market and as technologies
evolve that can assist with differentiating between QHPs offered
through the Exchange and other products consumers may be interested in.
We also noted our belief that the convenience of being able to purchase
additional products as part of a single shopping experience outweighs
potential consumer confusion, if proper safeguards can be put in place.
In Sec. 155.221(b)(4), we
[[Page 17524]]
proposed to move and consolidate the parallel requirements currently
captured in Sec. Sec. 155.220(c)(3)(i)(K) and 156.1230(b)(2) that web-
brokers and QHP issuers, respectively, demonstrate operational
readiness and compliance with applicable requirements prior to their
internet websites being used to complete a QHP selection. We also
included language in proposed Sec. 155.221(b)(4) to clarify that
operational readiness and compliance with applicable requirements must
also be demonstrated prior to their internet websites being used to
complete an Exchange eligibility application. We explained that this
clarification was important as enhanced direct enrollment is
implemented and approved direct enrollment entities are hosting the
Exchange eligibility application on their non- Exchange websites. We
proposed accompanying amendments to remove the operational readiness
requirements from Sec. Sec. 155.220 and 156.1230 as part of our
efforts to streamline the regulatory requirements applicable to direct
enrollment entities. Lastly, in Sec. 155.221(b)(5), we proposed to
capture the requirement for direct enrollment entities to comply with
all applicable federal and state requirements. This would include the
additional Exchange requirements in Sec. Sec. 155.220 and 156.1230
that apply to web-brokers and QHP issuers that participate in direct
enrollment, respectively.
---------------------------------------------------------------------------
\139\ As proposed, this new standardized disclaimer would be in
addition to the existing requirements at Sec. 155.220(c)(3)(i)(A)
and (G) for web-brokers and at Sec. 156.1230(a)(1)(iv) for QHP
issuers participating in direct enrollment.
---------------------------------------------------------------------------
In Sec. 155.221(c), we proposed FFE requirements related to direct
enrollment entity application assisters. Please see the preamble to
Sec. 155.415 for further details.
In Sec. 155.221(d), we proposed to consolidate and amend the
existing parallel provisions in Sec. Sec. 155.220(c)(3)(i)(L) and
156.1230(b)(1) to authorize HHS to immediately suspend the direct
enrollment entity's ability to transact information with the Exchange
if HHS discovers circumstances that pose unacceptable risk to the
accuracy of the Exchange's eligibility determinations, Exchange
operations or Exchange information technology systems until such
circumstances are resolved, remedied or sufficiently mitigated to HHS'
satisfaction. We proposed to remove the provisions from Sec. Sec.
155.220(c)(3)(i)(L) and 156.1230(b)(1) as part of our efforts to
streamline and consolidate the requirements applicable to direct
enrollment entities in one regulation. The proposal captured in Sec.
155.221(d) includes language that will extend the authority to suspend
the ability to transact information with the Exchange to also include
discovery of circumstances by HHS that pose unacceptable risk to the
accuracy of the Exchange's eligibility determinations. This addition
was necessary and appropriate as enhanced direct enrollment allows
direct enrollment entities to collect and transmit the application data
that the Exchanges use to complete eligibility determinations.
Lastly, to account for direct enrollment entities that may be
assisting consumers in SBE-FP states, we proposed a new Sec.
155.221(h) to clarify that such entities are also required to comply
with applicable standards in Sec. 155.221.
We sought comment on all of these proposals. After consideration of
the comments received, we are finalizing all of the amendments to Sec.
155.221, as proposed.
Comment: We received numerous comments on the proposals at
Sec. Sec. 155.221(b)(1) and (3) to respectively require that QHPs and
non-QHPs be displayed and marketed on separate website pages of non-
Exchange websites and to limit marketing of non-QHPs during the
Exchange application and QHP selection process. Many commenters
supported the proposal to require QHPs and non-QHPs be displayed and
marketed on separate website pages on non-Exchange websites. Some
commenters were opposed to any marketing of non-QHPs, even after the
Exchange application and QHP selection process, on non-Exchange
websites. One commenter stated that allowing this type of marketing
creates incentives for brokers to advise consumers to spend more money
on supplemental plans and less on QHPs, which the commenter was
concerned would not be in the consumer's interest. Some commenters
specifically cited concerns about the marketing of short-term, limited-
duration insurance plans. Some commenters recommended we adopt
requirements that help consumers understand the differences between
QHPs and non-QHPs, and the availability of financial assistance only
applying to QHPs. One commenter agreed with the goal of the proposal to
minimize consumer confusion, but was opposed to limiting the marketing
of non-QHP products until after the Exchange application and QHP
selection processes are complete, and claimed this limitation would
suppress web-broker participation. One commenter was opposed to most
limits on marketing non-QHPs, and wanted web-brokers to be able to
display and market non-QHP alternatives to QHPs, rather than just
complementary non-QHP products during the consumer's shopping
experience.
Response: We are finalizing the amendments to create new Sec.
155.221(b)(1) and (3) as proposed. As explained in the proposed rule,
we have consistently received feedback from QHP issuers and web-brokers
about confusion with respect to the current guidance and standards
related to the display and marketing of QHPs and non-QHPs on their
respective non-Exchange websites. We believe this approach provides
additional clarity and represents a balance that minimizes the chance
that consumers will be confused about the products being offered to
them, including which products APTC and CSRs are available for, while
also allowing some marketing of complementary non-QHP products after
the Exchange application and QHP selection is complete but during a
single shopping experience on non-Exchange websites. This provision
will not limit web-brokers or issuers from marketing non-QHP products
to consumers outside the Exchange application and QHP selection
processes, but if a consumer has decided to complete the Exchange
eligibility application or to shop for QHPs on a non-Exchange website,
we believe the marketing of non-QHP products to them during that time
would cause confusion about which products are offered through the
Exchange (and therefore subject to applicable requirements and eligible
for APTC and CSRs) and which are not. The disclaimer requirement
established at Sec. 155.221(b)(2) is intended to help consumers
understand the difference between QHPs and non-QHPs, and that financial
assistance is only available for QHPs. We do not believe this policy
creates new incentives for brokers to market non-QHP products instead
of QHPs. To the extent those incentives exist, they exist with or
without this policy. Similarly, we do not believe this policy has any
implications specific to the marketing of short-term, limited-duration
insurance plans generally. Under Sec. 155.221(b)(1) it is not
permissible to display or market any non-QHP plans, including short-
term, limited-duration insurance plans, on the same website pages as
QHPs.
As described in the proposed rule and above, the requirements at
Sec. 155.221(b)(1) through (3) are intended to provide flexibility for
direct enrollment entities to market valuable additional coverage that
complements QHP coverage, while also allowing HHS to establish
important parameters around the manner and type of non-QHPs that direct
enrollment entities may market as part of a single shopping
[[Page 17525]]
experience with QHPs offered through the Exchange. We may release
additional guidance, as may be necessary or appropriate, to further
clarify the new standards we are finalizing at Sec. 155.221(b)(1)
through (3) for direct enrollment entities that wish to display and
market non-QHPs on separate web pages but as part of a single shopping
experience with QHPs offered through the Exchange.
f. Certified Application Counselors (Sec. 155.225)
We proposed allowing, but not requiring, certified application
counselors to assist consumers with applying for eligibility for
insurance affordability programs and QHP enrollment through web-broker
websites under certain circumstances. We are not finalizing this
proposal. For a discussion of the provisions of this final rule related
to that proposal, please see the preamble to Sec. 155.220.
3. Exchange Functions in the Individual Market: Enrollment in Qualified
Health Plans
a. Allowing Issuer Application Assisters To Assist With Eligibility
Applications (Sec. 155.415)
In the first Program Integrity Rule,\140\ we finalized Sec.
155.415, which allows an Exchange, to the extent permitted by state
law, to permit issuer application assisters to assist consumers in the
individual market with an Exchange eligibility application if they met
certain requirements. At Sec. 155.20, we define issuer application
assister as an employee, contractor, or agent of a QHP issuer who is
not licensed as an agent, broker, or producer under state law and who
assists individuals in the individual market with applying for a
determination or redetermination of eligibility for coverage through
the Exchange or for insurance affordability programs. At current Sec.
156.1230(a)(2), when permitted by an Exchange under Sec. 155.415, and
to the extent permitted by state law, QHP issuers that elect to use
application assisters are required to ensure that each of their
application assisters at least: (1) Receives training on QHP options
and insurance affordability programs, eligibility, and benefits rules;
(2) complies with the Exchange privacy and security standards
consistent with Sec. 155.260; and (3) complies with applicable state
law related to the sale, solicitation, and negotiation of health
insurance products, including laws related to agent, broker, and
producer licensure, confidentiality, and conflicts of interest.
---------------------------------------------------------------------------
\140\ Patient Protection and Affordable Care Act; Program
Integrity: Exchange, SHOP, and Eligibility Appeals; Final Rule, 78
FR 54070 (August 30, 2013).
---------------------------------------------------------------------------
In adopting this approach, we recognized that, in some states, a
license may be required to assist an applicant applying for an
eligibility determination or redetermination. We deferred to existing
state laws related to enrollment assistance when deciding which
individuals may assist applicants and enrollees as authorized under
Sec. 156.1230(a)(2), and whether licensure would be required to
provide such assistance. We stated that if state law requires a license
to enroll applicants in coverage, then issuers and their application
assisters would need to follow state law for licensure requirements. We
also recognized that there were certain functions that issuers
generally had their staff perform prior to the issuance of the first
Program Integrity Rule, such as answering general information about
plans, and we wanted to allow those individuals to continue to perform
those functions, without meeting additional standards, if permitted by
state law. We indicated that, if an issuer wants those individuals to
perform additional functions, such as helping consumers as they apply
for an eligibility determination or redetermination for coverage
through the Exchange, or as they apply for insurance affordability
programs, or as they report changes to an Exchange, those individuals
could assist consumers with applications subject to the standards in
Sec. 156.1230(a)(2), so long as providing such assistance did not
otherwise conflict with state law. Additionally, we stated that
facilitating selection of a QHP may be a typical function of issuer
staff and issuer staff will be able to perform post-eligibility
functions such as plan compare and selection, if permitted by state
law, without being subject to the standards of Sec. 156.1230(a)(2). As
currently codified, the application assister definition and
accompanying requirements only apply to issuer application assisters.
As described in the proposed rule, we believe providing parity for
direct enrollment entities, when possible, promotes fair competition
and maximizes consumer choice. In addition, there was no apparent
reason why issuer staff are more qualified to assist consumers with the
Exchange eligibility application than the staff of other direct
enrollment entities, assuming all receive appropriate training and when
otherwise permitted under applicable state law. Therefore, we proposed
to expand the flexibility to employ or contract with application
assisters to all direct enrollment entities, to create parity between
issuers and other types of direct enrollment entities. Accordingly, we
proposed changes to several regulatory sections. Specifically, we
proposed to amend Sec. 155.20 by adding the term ``direct enrollment
entity application assister,'' which we proposed to define as an
employee, contractor, or agent of a direct enrollment entity who is not
licensed as an agent, broker, or producer under state law and who
assists individuals in the individual market with applying for a
determination or redetermination of eligibility for coverage through
the Exchange or for insurance affordability programs. We proposed to
adopt the same approach for direct enrollment entity application
assisters as the existing one for issuer application assisters. In
other words, under our proposal, these application assisters would need
to comply with applicable state law, including any licensure
requirements, and we would continue to defer to existing state laws
related to enrollment assistance when deciding which individuals may
assist applicants and enrollees and whether licensure is required to
provide such assistance.
We also proposed to revise Sec. 155.415(a) to authorize an
Exchange, to the extent permitted by state law, to permit issuer and
direct enrollment entity application assisters, as defined at Sec.
155.20, to assist individuals in the individual market with applying
for a determination or redetermination of eligibility for coverage
through the Exchange and insurance affordability programs.
Additionally, we proposed to maintain language in Sec. 155.415(a) to
mandate that all direct enrollment entities who seek to use application
assisters, and not just QHP issuers, must ensure that their application
assisters meet the standards currently captured in Sec.
156.1230(a)(2), which we proposed to move to new paragraphs (b)(1)
through (3) of Sec. 155.415, with two proposed amendments. Currently,
Sec. 156.1230(a)(2)(i) requires all QHP issuer application assisters
to receive training on QHP options and insurance affordability
programs, eligibility, and benefits rules and regulations. In the
proposed rule, we noted that licensed agents and brokers currently
assisting consumers with QHP enrollment through the FFEs and SBE-FPs
must have credentials to access FFE systems to offer that assistance.
Those credentials are obtained during the FFE registration and training
processes for agents and brokers. For application assisters to have
similar access to FFE systems, so that they are also able to assist
consumers as described in this
[[Page 17526]]
rule, they will need credentials similar to those obtained by agents
and brokers during the FFE registration and training processes.
Therefore, we proposed to require that application assisters providing
assistance in the FFEs and SBE-FPs complete a similar annual
registration and training process as to what is required for agents and
brokers under Sec. 155.220(d)(1) and (2), in a form and manner to be
specified by HHS, so that they will have the necessary training before
being provided credentials to assist consumers and access FFE systems.
This proposed new training and registration requirement for application
assisters is captured in the new proposed Sec. 155.415(b)(1).
Currently, Sec. 156.1230(a)(2)(iii) requires all QHP issuer
application assisters to comply with applicable agent, broker, and
producer licensure laws, which may not be applicable in a given
circumstance. For example, another state licensure law may exist for
professionals whose functions are more similar to application assisters
than licensed agents, brokers, and producers. We, therefore, proposed
to amend this standard (proposed to be redesignated at Sec.
155.415(b)(3)) to require all application assisters to comply with
applicable state law related to the sale, solicitation and negotiation
of health insurance products, including any state licensure laws
applicable to the functions to be performed by the application
assister; confidentiality; and conflicts of interest. We did not
propose any changes to the other standard for application assisters
that requires compliance with the Exchange's privacy and security
standards adopted consistent with Sec. 155.260 (proposed to be
redesignated from Sec. 156.1230(a)(2)(ii) to new Sec. 155.415(b)(2)).
We also proposed to delete and reserve Sec. 156.1230(a)(2) to reduce
redundancies, as QHP issuers subject to the current standards captured
at Sec. 156.1230(a)(2) would be subject to the requirements in Sec.
155.415(b) if they elect to use application assisters. We note that any
QHP issuers that are not direct enrollment entities, but use
application assisters, will also be subject to these requirements and
able to use application assisters, to the extent permitted by the
applicable Exchange and state law. Finally, consistent with the new
paragraphs at Sec. 155.221(c) and (h), we clarified that direct
enrollment entities participating in FFEs or SBE-FPs will be permitted
to use application assisters, to the extent permitted by state law.
We sought comment on these proposed changes. We are finalizing
these amendments as proposed, with technical edits to Sec.
155.415(b)(3) to clarify that the reference at the end of the
subparagraph to ``confidentiality and conflicts of interest'' is
referring to such standards as are imposed under State law. We further
note that HHS will permit application assisters to perform the
assistance functions outlined in Sec. 155.415 to assist consumers
using the FFEs and SBE-FPs, to the extent allowed under state law,
beginning with the 2021 open enrollment period. HHS needs additional
time to implement the registration and training processes necessary to
operationalize this proposal while maintaining safeguards to protect
consumer data and Exchange systems. SBEs that do not rely on the
federal platform can implement these provisions sooner, to the extent
otherwise permitted under state law. We intend to release future
guidance about the form and manner of the registration and training
processes under Sec. 155.415(b)(1) for application assisters
participating in the FFEs or SBE-FPs.
Comment: Two commenters supported this proposal. Two other
commenters questioned whether direct enrollment entity application
assisters would be subject to state laws applicable to licensed agents
or brokers, such as those pertaining to protecting consumer
information, conflicts of interest, and professional liability
insurance. Two commenters also suggested direct enrollment entity
application assisters should be subject to requirements similar to
those for agents or brokers under Sec. 155.220.
Response: We are finalizing this proposal as proposed, with a
clarifying edit to Sec. 155.415(b)(3) to clarify that the reference at
the end of the subparagraph to ``confidentiality and conflicts of
interest'' is referring to such standards as are imposed under state
law. We understand that in some states a license may be required for
application assisters to assist consumers applying for an eligibility
determination or redetermination. We defer to existing state laws
related to enrollment assistance when deciding which individuals may
assist applicants and enrollees as described in this rule, and whether
state licensure is required to provide such assistance. If state law
requires a license to engage in these activities, then application
assisters will need to follow state law for licensure requirements.
Since application assisters under the federal definition are not
licensed agents or brokers, we do not believe it is appropriate to
subject them to the same requirements imposed on licensed agents and
brokers under Sec. 155.220. Notably, application assisters are not
authorized to function in the same ways as licensed agents or brokers.
However, there are some requirements finalized in this rule applicable
to application assisters that are similar to those applicable to agents
or brokers assisting consumers in the FFEs and SBE-FPs, including
requirements to comply with Exchange privacy and security standards. In
addition, as described above, application assisters in the FFEs and
SBE-FPs will be required to complete registration and training similar
to agents or brokers who participate in Exchanges. We will release
future guidance about the form and manner for the registration and
training processes for application assisters who wish to participate in
FFEs and SBE-FPs. Also, as finalized in this rule at Sec.
155.415(b)(3), all application assisters must comply with applicable
state law related to the sale, solicitation and negotiation of health
insurance products, including any state licensure laws applicable to
the functions to be performed by the application assister, as well as
applicable state law related to confidentiality and conflicts of
interest.
b. Special Enrollment Periods (Sec. 155.420)
Under our current rules, individuals who are enrolled in employer-
sponsored coverage or coverage purchased through an Exchange are
eligible for a special enrollment period if they become newly eligible
for APTC. However, no comparable special enrollment period exists for
individuals who are enrolled in off-Exchange individual market
coverage. We believe this may present a significant barrier for some
individuals to remain in continuous coverage for the full plan year.
Therefore, we proposed to amend Sec. 155.420(d) to add new paragraph
(d)(6)(v) to authorize Exchanges, at their option, to provide a special
enrollment period to enroll in Exchange coverage for off-Exchange
individual market enrollees who experience a decrease in household
income and receive a new determination of eligibility for APTC by an
Exchange. We proposed to make this special enrollment period available
to qualified individuals and their dependents who experience
circumstances that result in a decrease in household income if the
qualified individual or his or her dependent are both (1) newly
determined eligible for APTC by an Exchange, and (2) had MEC in which
they were enrolled in and entitled to receive benefits as described in
26 CFR 1.5000A-1(b) for one or more days during the 60 days preceding
the change in circumstances. We cite 26
[[Page 17527]]
CFR 1.5000A-1(b) because it sets forth criteria for what it means to
``have MEC,'' including general requirements to be enrolled in and
entitled to receive benefits under a program or plan identified as MEC
under 26 CFR 1.5000A-2 and certain situations under which an individual
is not enrolled in MEC but is treated as ``having MEC.'' Under this
special enrollment period, qualified individuals and dependents will be
eligible for Exchange coverage following the regular prospective
coverage effective date rules described in paragraph (b)(1) of this
section, and must enroll within 60 days from the date of the financial
change, in accordance with paragraph (c)(1) of this section.
We sought to provide individuals with more health coverage options
and to empower them to enroll in the health coverage that best meets
their needs and the needs of their families. For individuals and
families with household incomes greater than 400 percent of the federal
poverty level (FPL) who are not eligible for APTC, this may mean that
they choose to purchase health insurance coverage outside of the
Exchange during the annual open enrollment period or another eligible
enrollment period, especially if the market outside of the Exchange
offers additional plan options at more affordable prices. However,
these individuals or families may experience a change in household
income during the benefit year that makes their current health coverage
no longer affordable. While paragraphs (d)(6)(iii) and (d)(6)(iv)
currently provide special enrollment periods for individuals whose
employer-sponsored coverage becomes unaffordable or does not provide
minimum value, resulting in the employee becoming newly eligible for
APTC, and for individuals previously in the coverage gap who become
newly eligible for APTC as a result of a change in household income or
move, respectively, there is no current pathway to Exchange coverage
for enrollees in off-Exchange individual market plans who are newly
eligible for APTC. Since no pathway to Exchange coverage currently
exists, we believe that unsubsidized individual market enrollees whose
household income has decreased may no longer be able to afford their
unsubsidized health plans and may decide to terminate coverage mid-
year. Therefore, the special enrollment period in paragraph (d)(6)(v)
will address this issue by establishing a pathway to Exchange coverage
for qualified individuals enrolled in off-Exchange coverage who
experience a decrease in household income and are newly determined
eligible for APTC. We believe that this policy will help promote
continuous enrollment in health coverage and bring additional stability
to the individual market risk pool, which will likely have a positive
impact on health insurance premiums.
Individuals seeking to access the special enrollment period will
not be current Exchange enrollees and will receive a new determination
of eligibility for APTC through the Exchange's consumer application.
For the FFEs, an individual's current household income and eligibility
for APTC will be verified through the FFE's eligibility system and data
matching issue resolution process, in accordance with the requirements
in Sec. 155.320(c). To ensure that the special enrollment period is
available to the intended population while mitigating risks of adverse
selection and inappropriate use, we proposed to require the individual
seeking access to the special enrollment period to provide evidence of
both a change in household income and of prior health coverage.
Verifying that a decrease in household income occurred will prevent
individuals who enrolled in health coverage off-Exchange, but have not
experienced a financial change, from attempting to use this special
enrollment period for the sole purpose of purchasing a more or less
comprehensive level of coverage mid-year. To protect the individual
market risk pool from adverse selection, as mentioned in this rule, we
proposed to include a prior coverage requirement, which will protect
against individuals who opted not to enroll in health coverage during
the annual open enrollment period from using this special enrollment
period to enroll in Exchange coverage mid-year. Additionally, this
prior coverage requirement will promote continuous coverage. The prior-
coverage requirement aligns with existing prior-coverage requirements
for special enrollment periods at Sec. 155.420(d)(2)(i) and (d)(7). We
envision leveraging existing pre-enrollment verification procedures
\141\ to confirm eligibility for the special enrollment period, either
through review of an individual's submitted documentation or through
use of electronic data sources, when available, prior to sending the
individual's plan selection to the issuer for enrollment. Consistent
with current practices, in cases where eligibility is not verified
electronically, individuals will be required to submit documentation
within 30 days of plan selection to verify their prior coverage and
their decrease in income. Consumer-submitted documents currently
accepted by the FFE for purposes of demonstrating prior coverage and
verifying attested income are currently identified on
HealthCare.gov,\142\ and we anticipate developing additional consumer
instructions relating to submitting documents to verify a decrease in
income.
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\141\ Instructions for consumers to verify their eligibility for
a special enrollment period are available at https://www.healthcare.gov/coverage-outside-open-enrollment/confirm-special-enrollment-period/.
\142\ Available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/.
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We recognize that State Exchanges maintain flexibility to determine
whether and how to implement pre-enrollment verification of eligibility
for special enrollment periods and may not have the operational
capacity to immediately implement and verify eligibility for this
special enrollment period. Some State Exchanges may also determine
there is insufficient need among off-Exchange consumers for this
special enrollment period because of the rating and pricing practices
specific to their state markets. Therefore, we proposed to make this
special enrollment period available at the option of the Exchange.
This special enrollment period is intended only for individuals not
currently enrolled in Exchange coverage, since current Exchange
enrollees who experience a decrease in household income mid-year may
already qualify for a special enrollment period under paragraphs
(d)(6)(i) and (ii), or may enroll in off-Exchange plans if they become
newly ineligible for APTC under Sec. 147.104(b)(2)(i)(B).
Paragraph (a)(4)(iii) of Sec. 155.420 generally limits the plans
into which an enrollee who qualifies for a special enrollment period or
is adding a dependent through a special enrollment period may enroll.
Several special enrollment periods are excluded from this limitation.
However, we proposed that the new special enrollment period will be
subject to the rule in paragraph (a)(4)(iii). Therefore, should a
qualified individual who qualifies for the special enrollment period in
paragraph (d)(6)(v) already have members of his or her household
enrolled in Exchange coverage and those enrollees do not qualify for
another special enrollment period at the same time that provides them
with additional plan enrollment flexibilities, the Exchange must allow
[[Page 17528]]
the qualified individual to be added to the same QHP as the Exchange
enrollees in his or her household, if the plan business rules allow. If
the plan's business rules do not allow the qualified individual to
enroll, the Exchange must allow the current enrollees to change to
another QHP within the same level of coverage (or one metal level
higher or lower if no such QHP is available), and to add the qualified
individual to the same plan as outlined under Sec. 156.140(b). As
always, and at the option of the qualified individual, he or she may
enroll in a separate QHP at any metal level, in accordance with Sec.
155.420(a)(4)(iii)(B). We anticipate that this situation will arise
relatively infrequently due to the availability of the special
enrollment periods at (d)(6)(i) and (d)(6)(ii) of Sec. 155.420 for
enrollees who become newly eligible for APTC or experience a change in
eligibility for cost-sharing reductions.
We also proposed to modify the types of coverage that may satisfy
the prior coverage requirement by amending Sec. 155.420(a)(5) to
include the coverage types described in paragraphs (d)(1)(iii) and (iv)
of this section, such as pregnancy Medicaid, CHIP unborn child, and
Medically Needy Medicaid, in addition to MEC described in 26 CFR
1.5000A-1(b). We believe that this clarification is necessary to ensure
consistency across our special enrollment period regulations for the
types of coverage that qualify an individual for a special enrollment
period. We already treat certain types of coverage, including pregnancy
Medicaid, CHIP unborn child, and Medically Needy Medicaid, although not
independently designated as MEC under 26 CFR 1.5000A-1(b), as MEC for
purposes of qualifying for the loss of MEC special enrollment period
described in Sec. 155.420(d)(1). However, individuals currently
enrolled in these types of coverage will not qualify for special
enrollment periods that require prior coverage. To avoid treating the
same types of coverage differently for purposes of eligibility for
different special enrollment periods, we proposed an aligning edit to
paragraph (a)(5).
Lastly, we proposed to clarify certain terms in Sec.
155.420(b)(2)(iv), which addresses the coverage effective dates that
apply to the special enrollment periods in Sec. 155.420(d)(1), (d)(3),
(d)(6)(iii), (d)(6)(iv), and (d)(7). Specifically, we proposed to
replace the word ``consumer'' with the phrase ``qualified individual,
enrollee, or dependent, as applicable,'' to align with the terminology
used at Sec. 155.420(d) to describe special enrollment period
triggering events. We do not anticipate that this wording change will
create additional cost or burden for Exchanges or for any other
stakeholders.
Comment: We received broad support from commenters for the
proposals at Sec. 155.420. Commenters noted the proposed special
enrollment period creates consistency with existing special enrollment
periods available to individuals who are enrolled in employer-sponsored
coverage or coverage purchased through an Exchange who become newly
eligible for APTC. Commenters noted the proposed special enrollment
period would promote continuous coverage among consumers and increase
access to care. We also received comments in support of the
modification to prior coverage requirements at Sec. 155.420(a)(5) to
include coverage types such as pregnancy Medicaid, CHIP unborn child,
and Medically Needy Medicaid, in addition to MEC described in 26 CFR
1.5000A-1(b).
Response: We are finalizing all policies under Sec. 155.420 as
proposed. We note that the proposed new special enrollment period under
Sec. 155.420(d)(6)(v) is available at the option of the Exchange. HHS
is determining the date on which this special enrollment period will be
implemented for Federally-facilitated Exchanges and State Exchanges
using the federal eligibility and enrollment platform, and anticipates
it will not be available until after January 1, 2020.
Comment: One commenter expressed support for the proposed new
special enrollment period under Sec. 155.420(d)(6)(v), but urged HHS
to reduce the overall number of special enrollment periods to align
with the private market and Medicare Advantage program.
Response: HHS is committed to making sure special enrollment
periods are available to those who are eligible for them, and equally
committed to avoiding any misuse or abuse of special enrollment
periods. Recently implemented special enrollment period policies, such
as pre-enrollment verification and plan category limitations, are
intended to promote continuous enrollment in coverage and protect the
risk pool from adverse selection that may have a destabilizing impact
on the market for existing enrollees. Given these mitigation
strategies, we do not believe it is necessary to reduce the number of
available special enrollment periods under Sec. 155.420 at this time.
Comment: Several commenters wrote in support of the proposed
requirement that the special enrollment period under proposed Sec.
155.420(d)(6)(v) be available to consumers who were previously enrolled
in MEC as defined at 26 CFR 1.5000A-1(b). These commenters wrote that
continuous enrollment in comprehensive coverage is important to
maintaining a stable risk pool, and expressed concern about adverse
selection should the special enrollment period be made available to
consumers enrolled in alternate types of coverage such as short-term,
limited-duration insurance or health care sharing ministry plans.
Response: We agree that the proposed prior coverage requirement is
important to promote continuous coverage and protect against adverse
selection, and note that MEC described in 26 CFR 1.5000A-1(b) excludes
the coverage types of primary concern to commenters.
Comment: Other commenters stated short-term, limited-duration
insurance and other coverage types not currently designated as MEC
should be considered to meet the prior coverage requirements for the
proposed special enrollment period. Some commenters referenced HHS
support for these coverage options in other rulemaking and guidance,
and other commenters expressed concern that consumers may be misled
into unintentional enrollment into short-term, limited-duration plans.
Response: The Administration seeks to make more coverage options
available to consumers, including short-term, limited-duration coverage
and other forms of coverage that may not constitute MEC. However, the
prior coverage requirements, as implemented in our other special
enrollment periods, are intended to promote continuous coverage in MEC
and protect the risk pool from adverse selection.
Comment: One commenter suggested we amend the proposed regulatory
text to reference prior coverage requirements at Sec. 155.420(a)(5) as
opposed to 26 CFR 1.5000A-1(b) to enhance clarity of the prior coverage
requirement.
Response: We believe this change, if implemented, would require
additional aligning edits for all special enrollment periods containing
a prior coverage requirement. We will consider this when making future
technical amendments to regulations at Sec. 155.420, but will not make
such changes at this time.
Comment: Other commenters stated eligibility for the proposed
special enrollment period under Sec. 155.420(d)(6)(v) should be
expanded to include consumers who were automatically re-enrolled in
either subsidized or unsubsidized health plans which become
unaffordable.
[[Page 17529]]
Response: Consumers in this scenario may be eligible for the
special enrollment period as proposed, provided that they experience a
decrease in income and that the plan in which they were automatically
re-enrolled meets the current definition of MEC. Consumers
automatically re-enrolled into Exchange coverage and who experience a
change in eligibility for financial assistance outside the annual open
enrollment period may also access the current special enrollment period
at Sec. 155.420(d)(6)(i) and (d)(6)(ii).
Comment: Another commenter questioned whether the proposed new
special enrollment period under Sec. 155.420(d)(6)(v) should be made
available to consumers who experience a change in tax household
composition or a resolution of a prior year tax return that causes an
individual to become newly eligible for APTC in an Exchange plan.
Response: We believe that many consumers who experience in change
in tax household composition may qualify for a special enrollment
period under existing regulations, such as in cases of marriage and
gaining or becoming a dependent. HHS offered a one-time special
enrollment period to consumers who did not enroll in Exchange coverage
because they failed to reconcile their APTC on their tax return during
the first year of implementation of this requirement. However, we do
not believe a permanent extension of this special enrollment period
through this proposal is appropriate, as consumers now have multiple
years of experience with the requirement that they must file a tax
return and reconcile APTC to remain eligible for future APTC. For these
reasons, we are finalizing the eligibility requirements for the special
enrollment period as proposed and will not expand eligibility as
suggested by the commenter.
Comment: Another commenter suggested that consumers should have 90
days, instead of 60 days, to report their financial change to the
Exchange.
Response: We believe the current window of 60 days provides ample
time for consumers to report triggering events to the Exchange and make
authorized plan changes and, in many instances, encourages consumers to
avoid extended lapses in health coverage. As a result, we will not
increase the time within which consumers must report triggering events
to qualify for a special enrollment period.
Comment: Several commenters expressed support for our proposal to
require consumers to submit evidence to demonstrate they have
experienced a decrease in household income and met the prior coverage
requirement. One commenter requested additional information on how
these measures would protect against fraud.
Response: We agree that requiring evidence of prior coverage and a
decrease in household income are important program integrity measures
that protect against fraud. We believe these requirements provide
sufficient mitigation against inappropriate use of the proposed special
enrollment period.
Comment: Other commenters expressed concern regarding the consumer
burden associated with verification requirements and requested more
information on what types of consumer documents would be accepted.
Another commenter stated that verifying a consumer's decrease in
household income creates an undue burden, and that there is no evidence
to support the notion that consumers will seek to switch plan category
levels mid-year due to health status.
Response: We appreciate that the proposed verification requirements
do require consumers to submit documents in most cases. However, our
experience with pre-enrollment verification for special enrollment
periods demonstrates that consumers are not significantly burdened by
these requirements, as the vast majority of special enrollment period
applicants who are required to submit documents to complete enrollment
are able to successfully verify their eligibility. We maintain that the
verification of a consumer's decrease in household income is an
important program integrity measure to ensure individual consumers are
not able to access this special enrollment period solely due to a
change in health status, and are finalizing this verification
requirement as proposed. To mitigate consumer burden, we intend to
utilize electronic data sources where possible and will leverage
existing processes to accept document types that are currently in use
by HHS to verify prior coverage and income information.\143\
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\143\ Consumer submitted documents currently accepted by the FFE
for purposes of demonstrating prior coverage and verifying attested
income are available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/, respectively.
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Comment: Many commenters supported making the proposed special
enrollment period at Sec. 155.420(d)(6)(v) at the option of the
Exchange. Other commenters urged HHS to require the special enrollment
period for all Exchanges and questioned whether HHS would promote the
new special enrollment period in its marketing and outreach materials.
Response: We believe State Exchanges are well positioned to assess
both the consumer need and the Exchange's operational capacity to
implement the proposed special enrollment period and its verification
requirements and we are finalizing the proposed special enrollment
period at the option of the Exchange. Given the importance of pre-
enrollment verification to protecting against adverse selection and
misuse of the proposed special enrollment period, we believe requiring
the special enrollment period to be implemented by State Exchanges
which have not fully implemented pre-enrollment verification may inject
adverse risk into the Exchange's marketplace. HHS intends to update
current technical assistance and training materials to include
information regarding the new special enrollment period and will
provide information to relevant stakeholder groups such as issuers,
agents and brokers, and consumer assisters.
Comment: Another commenter requested that State Exchanges who rely
on the federal eligibility and enrollment platform be granted
flexibility to choose to implement the special enrollment period.
Response: HHS intends to implement this special enrollment period
for all Exchanges currently using the federal eligibility and
enrollment platform, and currently lacks the operational capacity to
offer this flexibility.
4. Eligibility Standards for Exemptions (Sec. 155.605)
a. Eligibility for an Exemption Through the IRS (Sec. 155.605(e))
Individuals can claim hardship exemptions through the tax filing
process for hardships described in Sec. 155.605(e)(1) through (4),
which include most hardship exemptions, but not the general hardship
types described in paragraph (d)(1) of this section. Allowing the
general hardship exemption types to be claimed through the IRS will
increase flexibility and decrease burdens for individuals seeking
hardship exemptions. Therefore, we proposed to amend Sec. 155.605(e),
which describes the exemptions that can be claimed through the IRS tax
filing process without an individual having to obtain an exemption
certificate number from an Exchange, to add a new paragraph (e)(5) that
will allow individuals to claim through the tax filing process hardship
exemptions within all of the categories described in paragraph (d)(1)
of this section on a federal income tax return
[[Page 17530]]
for tax year 2018 only. We are finalizing this change as proposed.
This rule aligns with HHS guidance published on September 12, 2018,
entitled, ``Guidance on Claiming a Hardship Exemption through the
Internal Revenue Service (IRS)'' \144\ and with IRS Notice 2019-
05.\145\ We anticipate that the guidance and this rule will provide
individuals with additional flexibility for claiming a hardship
exemption by providing individuals the additional option of claiming
this exemption on their federal income tax return for 2018 only.
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\144\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf.
\145\ https://www.irs.gov/pub/irs-drop/n-19-05.pdf.
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Comment: Commenters generally supported the proposal for
individuals to claim hardship exemptions on their tax returns without
obtaining an exemption certification number from the Marketplace,
because it will reduce burden on individuals.
Response: We are finalizing this change as proposed. We agree that
this change will lessen the burden on individuals by allowing them to
claim the general hardship exemptions through the tax filing process
for tax year 2018. It will further reduce burden since individuals will
not be required to obtain an exemption certification number from the
Marketplace prior to filing their tax returns.
Comment: One commenter stated the proposal was unnecessary given
that tax filing season for 2018 returns is underway (this change only
applies to the 2018 tax year) and that HHS has not been transparent in
the past about the specifications for claiming each type of hardship
exemption.
Response: The PPACA grants authority to the Exchanges to grant all
exemptions. As a result, HHS has consistently codified in regulations
any grant of authority it has provided to the IRS in subregulatory
guidance for specific hardship exemptions. And although tax filing
season for the 2018 tax year has already begun, HHS plans to maintain
our prior practice of providing regulatory revisions when granting
authority to the IRS for individuals to claim specific exemptions
through the tax filing process. In 2018, HHS published guidance
allowing individuals to claim the general hardship exemptions through
the IRS on their 2018 tax returns.\146\ Also in 2018, we published
guidance that provided examples of general hardships that an individual
may claim, such as single-issuer county hardships.\147\ This guidance
did not alter the existing regulations and did not create any new
substantive requirements for people seeking a hardship exemption.
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\146\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf.
\147\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2018-Hardship-Exemption-Guidance.pdf.
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Comment: One commenter claimed the proposal undermines the original
intent of Congress in enacting the individual mandate by making it too
easy for individuals to claim a general hardship exemption.
Response: While we agree that the PPACA's provisions incentivize
consumers to obtain health insurance in many respects, the PPACA
provides statutory authority for hardship exemptions. Consistent with
its authority, HHS seeks to provide individuals with these exemptions
in a manner that minimizes burden.
b. Required Contribution Percentage (Sec. 155.605(d)(2))
Under section 5000A of the Code, an individual must have MEC for
each month, qualify for an exemption, or make an individual shared
responsibility payment. Under Sec. 155.605(d)(2), an individual is
exempt from the requirement to have MEC if the amount that he or she
will be required to pay for MEC (the required contribution) exceeds a
particular percentage (the required contribution percentage) of his or
her projected household income for a year. Although the Tax Cuts and
Jobs Act reduces the individual shared responsibility payment to $0 for
months beginning after December 31, 2018, the required contribution
percentage is still used to determine whether individuals above the age
of 30 qualify for an affordability exemption that will enable them to
enroll in catastrophic coverage under Sec. 155.305(h).
The initial 2014 required contribution percentage under section
5000A of the Code was 8 percent. For plan years after 2014, section
5000A(e)(1)(D) of the Code and Treasury regulations at 26 CFR 1.5000A-
3(e)(2)(ii) provide that the required contribution percentage is the
percentage determined by the Secretary of HHS that reflects the excess
of the rate of premium growth between the preceding calendar year and
2013, over the rate of income growth for that period. The excess of the
rate of premium growth over the rate of income growth is also used for
determining the applicable percentage in section 36B(b)(3)(A) of the
Code and the required contribution percentage in section 36B(c)(2)(C)
of the Code.
As discussed elsewhere in this preamble, we proposed as the measure
for premium growth a 2020 premium adjustment percentage of 1.2969721275
(or an increase of about 29.7 percent over the period from 2013 to
2019). We are finalizing the new premium growth measure that would be
composed of individual market premium growth and employer-sponsored
insurance premium growth. Therefore, as noted later in this preamble,
we are finalizing a premium adjustment percentage of 1.2895211380 for
the 2020 benefit year.\148\ This amount reflects an increase of about
3.02 percent over the 2019 premium adjustment percentage (1.2895211380/
1.2516634051).
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\148\ Note: As explained in the subsequent footnote, this amount
differs from the proposed premium adjustment percentage due to the
fact that we utilize the most recent NHEA data, which updated in
February 2019.
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As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we will use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice, using
the National Health Expenditure Account (NHEA) data, the rate of income
growth for 2020 is the percentage (if any) by which the most recent
projection of per capita PI for the preceding calendar year ($56,261
for 2019) exceeds per capita PI for 2013 ($44,922), carried out to ten
significant digits. The ratio of per capita PI for 2019 over the per
capita PI for 2013 is estimated to be 1.2524152976 (that is, per capita
income growth of about 25 percent).\149\ This reflects an increase of
approximately 3.9 percent relative to the increase for 2013 to 2018
(1.2524152976/1.2059028167) used in the 2019 Payment Notice. Per capita
PI includes government transfers, which refers to benefits individuals
receive from federal, state, and local governments (for example, Social
Security, Medicare, unemployment
[[Page 17531]]
insurance, workers' compensation, etc.).\150\
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\149\ The 2013 and 2019 per capita personal income figures used
for this calculation reflect the latest NHEA data, which was updated
between the publication of the proposed rule and this final rule, on
February 20, 2019. The series used in the determinations of the
adjustment percentages can be found in Tables 1 and 17 on the CMS
website, which can be accessed by clicking the ``NHE Projections
2018-2027--Tables'' link located in the Downloads section at the
following address: http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
\150\ U.S Department of Commerce Bureau of Economic Analysis
(BEA) Table 3.12 Government Social Benefits. Available at https://apps.bea.gov/iTable/iTable.cfm?reqid=19&step=3&isuri=1&categories=survey&nipa_table_list=110.
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Using the 2020 premium adjustment percentage finalized in this
final rule, the excess of the rate of premium growth over the rate of
income growth for 2013 to 2019 is 1.2895211380/1.2524152976, or
1.0296274251. This results in a required contribution percentage of
8.00* 1.0296274251 or 8.24 percent for the 2020 benefit year, which
when rounded to the nearest one-hundredth of one percent, represents a
decrease of 0.07 of a percentage point from 2019 (8.23702-8.30358).
We also requested comment on whether we should exclude any
government transfers (that is, Social Security, Medicare, unemployment
insurance, workers' compensation, etc.) from per capita PI, but we did
not receive any comments in response to this request.
Comment: Two commenters indicated that they oppose policies that
reduce access to health coverage, including the proposed required
contribution percentage increases resulting from the proposed change in
premium adjustment percentage. Another commenter noted that the
proposal would increase the number of individuals who are eligible for
catastrophic coverage, which should be adequate to address a patient's
needs and thereby not contribute to an expansion of short-term limited
duration insurance plans.
Response: HHS is required to update the required contribution
percentage annually for purposes of determining whether individuals
above the age of 30 qualify for an affordability exemption that will
enable them to enroll in catastrophic coverage under Sec. 155.305(h).
We note that as a result of the updated premium adjustment percentage
finalized elsewhere in this rule, the required contribution percentage
has decreased. For further discussion of the updated premium adjustment
percentage for 2020, refer to section F(3)(e) of this preamble.
F. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Definitions (Sec. 156.20)
We are defining the term ``generic'' in part 156 in response to
comments requesting a definition related to the proposal that amounts
paid toward cost sharing using any form of direct support offered by
drug manufacturers to insured patients to reduce or eliminate immediate
out-of-pocket costs for specific prescription brand drugs that have a
generic equivalent not be required to be counted toward the annual
limitation on cost sharing. For a discussion of that proposal and the
related definition we are finalizing at Sec. 156.20, please see the
preamble to Sec. 156.130.
2. FFE and SBE-FP User Fee Rates for the 2020 Benefit Year (Sec.
156.50)
Section 1311(d)(5)(A) of the PPACA permits an Exchange to charge
assessments or user fees on participating health insurance issuers as a
means of generating funding to support its operations. If a state does
not elect to operate an Exchange or does not have an approved Exchange,
section 1321(c)(1) of the PPACA directs HHS to operate an Exchange
within the state. Accordingly, in Sec. 156.50(c), we specified that a
participating issuer offering a plan through an FFE or SBE-FP must
remit a user fee to HHS each month that is equal to the product of the
annual user fee rate specified in the annual HHS notice of benefit and
payment parameters for FFEs and SBE-FPs for the applicable benefit year
and the monthly premium charged by the issuer for each policy where
enrollment is through an FFE or SBE-FP.
OMB Circular No. A-25R established federal policy regarding user
fees; it specifies that a user fee charge will be assessed against each
identifiable recipient of special benefits derived from federal
activities beyond those received by the general public. Activities
performed by the federal government that do not provide issuers
participating in an FFE with a special benefit are not covered by this
user fee. As in benefit years 2014 through 2019, issuers seeking to
participate in an FFE in the 2020 benefit year will receive two special
benefits not available to the general public: (1) The certification of
their plans as QHPs; and (2) the ability to sell health insurance
coverage through an FFE to individuals determined eligible for
enrollment in a QHP. For the 2020 benefit year, issuers participating
in an FFE will receive special benefits from the following federal
activities:
Provision of consumer assistance tools;
Consumer outreach and education;
Management of a Navigator program;
Regulation of agents and brokers;
Eligibility determinations;
Enrollment processes; and
Certification processes for QHPs (including ongoing
compliance verification, recertification, and decertification).
Based on estimated costs, enrollment, and premiums for the 2020
benefit year, we proposed a 2020 benefit year user fee rate for all
participating FFE issuers of 3.0 percent of total monthly premiums.
This rate is lower than the 3.5 percent FFE user fee rate that we had
established for benefit years 2014 through 2019. The lower user fee
rate for the 2020 benefit year reflects our estimates of premium
increases and enrollment decreases for the 2020 benefit year. We sought
comment on this proposal.
As discussed, OMB Circular No. A-25R established federal policy
regarding user fees, and specified that a user charge will be assessed
against each identifiable recipient for special benefits derived from
federal activities beyond those received by the general public. SBE-FPs
enter into a Federal platform agreement with HHS to leverage the
systems established for the FFEs to perform certain Exchange functions,
and to enhance efficiency and coordination between state and federal
programs. Accordingly, in Sec. 156.50(c)(2), we specified that an
issuer offering a plan through an SBE-FP must remit a user fee to HHS,
in the timeframe and manner established by HHS, equal to the product of
the monthly user fee rate specified in the annual HHS notice of benefit
and payment parameters for the applicable benefit year and the monthly
premium charged by the issuer for each policy where enrollment is
through an SBE-FP, unless the SBE-FP and HHS agree on an alternative
mechanism to collect the funds from the SBE-FP or state instead of
direct collection from SBE-FP issuers. The benefits provided to issuers
in SBE-FPs by the federal government include use of the federal
Exchange information technology and call center infrastructure used in
connection with eligibility determinations for enrollment in QHPs and
other applicable state health subsidy programs, as defined at section
1413(e) of the PPACA, and QHP enrollment functions under Sec. 155.400.
The user fee rate for SBE-FPs is calculated based on the proportion of
user fee eligible FFE costs that are associated with the FFE
information technology infrastructure, the consumer call center
infrastructure, and eligibility and enrollment services, and allocating
a share of those costs to issuers in the relevant SBE-FPs. Based on
this methodology, we proposed to charge issuers offering QHPs through
an SBE-FP a user fee rate of 2.5 percent of the
[[Page 17532]]
monthly premium charged by the issuer for each policy under plans
offered through an SBE-FP. This rate is lower than the 3.0 percent user
fee rate that we had established for benefit year 2019. The lower user
fee rate for SBE-FP issuers for the 2020 benefit year reflects our
estimates of premium increases and enrollment decreases for the 2020
benefit year. We sought comment on this proposal.
We are finalizing the FFE and SBE-FP user fee rates for the 2020
benefit year at 3.0 and 2.5 percent of monthly premiums, respectively,
as proposed.
Comment: The majority of commenters supported HHS' efforts to
reduce the costs of operating the FFE and reducing FFE and SBE-FP user
fee rates. Some commenters noted HHS should lower the user fee rates
further or even eliminate the user fee collection to promote increased
competition, improve access to coverage, and reduce issuer duplication
of effort in the off-Exchange market. However, other commenters did not
support the reduction of FFE and SBE-FP user fee rates, asking that HHS
maintain current user fee rates. Several of these commenters encouraged
HHS to either re-invest excess funds into consumer outreach and
education activities or otherwise restore funding of those activities
to 2017 levels. One commenter suggested HHS should use excess funds to
support outreach to the uninsured, especially in rural areas. Another
commenter noted that increased investments to marketing and outreach
will result in lower Exchange premiums due to an improved risk mix,
which would outweigh the costs of premium increases from a higher user
fee rate. Other commenters noted that HHS needs to ensure that it is
investing sufficient funds in improvements to FFE information
technology.
Response: We are finalizing the FFE and SBE-FP user fee rates for
the 2020 benefit year at 3.0 and 2.5 percent of monthly premiums,
respectively, as proposed. We will continue to examine cost estimates
for the special benefits provided to issuers offering QHPs on the FFEs
and SBE-FPs for future benefit years, and we will establish the user
fee rate that is reasonable and necessary to fully fund user fee
eligible Exchange operation costs. As we discussed in our proposal to
reduce the FEE and SBE-FP user fee rates for the 2020 benefit year, we
developed the user fee rates based upon estimated costs, enrollment,
and premiums. We specifically noted that the reduced user fee rates,
which we are finalizing as proposed, incorporate our estimates of
premium increases and enrollment decreases for the 2020 benefit year,
and are not solely a reflection of the total expenses estimated to
operate and maintain the Federal platform and FFE operations. We also
reiterate that any collections in excess of user fee eligible costs for
a given year are rolled over for spending to the subsequent year's user
fee eligible expenses. Finally, we note that outreach and education
efforts will continue to be evaluated annually and funded at the
appropriate level. HHS remains committed to providing a seamless
enrollment experience for Federal platform consumers. We are committed
to applying resources to cost-effective, high-impact outreach and
marketing activities that offer the highest return on investment.
Comment: One commenter noted HHS should further reduce user fees
for issuers who take on additional activities administered by the FFE,
such as direct enrollment and increased marketing and outreach.
Response: All issuers offering QHPs on the FFEs and SBE-FPs receive
the same respective special benefits HHS provides through the
activities associated with operating the Federal platform. The amount
of special benefits HHS offers issuers does not change even if an
issuer chooses to take on additional activities, which may overlap with
the Federal platform functions. Further, issuers who choose to
participate as an Enhanced Direct Enrollment partner still derive
special benefits from costs HHS incurs to operate the Federal platform.
As such, our analysis of user fee eligible costs does not justify an
additional reduction to the user fee rate beyond what is being
finalized in this rule for the 2020 benefit year. We continue to
annually review changes in estimated user fee eligible costs due to
economies and structural improvements being made to the federal
activities that work in concert to improve the enrollment and
eligibility determination functions for issuers offering QHPs through
FFEs and SBE-FPs, as well as the plan certification activities for
FFEs.
Comment: Several commenters requested more transparency from HHS on
how we set the FFE and SBE-FP user fee rates and urged HHS to make
available a breakdown of Exchange expenses by functional area.
Commenters noted more transparency would reduce uncertainty among SBE-
FP states, allow states to better ascertain the cost effectiveness of
transitioning to a different exchange model, and help identify areas
for additional cost savings. One commenter noted HHS should issue a
report outlining the use of Exchange user fees for past plan years and
annually moving forward. Another commenter noted HHS should provide its
specific assumptions for marketing and outreach budget levels through
the annual payment notice process. One commenter requested HHS ensure
no user fees are diverted to non-Exchange functions and urged HHS to
provide refunds or credits to issuers for funds collected in excess of
Exchange costs.
Response: The FFE and SBE-FP user fee rates for the 2020 benefit
year are based on expected total costs to offer the special benefits to
issuers offering plans on FFEs or SBE-FPs and evaluation of expected
enrollment and premiums for the 2020 benefit year. These estimates
yielded an FFE user fee rate of 3.0 percent of premiums, and an SBE-FP
user fee rate of 2.5 percent of premiums, based on the proportion of
FFE functions that apply to SBE-FPs. We expect these user fee rates to
result in adequate collections based on our current estimates of
enrollment, premiums, and user fee eligible costs.
User fee eligible costs are estimated in advance of the benefit
year and are based upon contract costs that are not yet finalized. We
will continue to outline user fee eligible functional areas in the
Payment Notice, and will evaluate contract activities related to
operation of the federal Exchange user fee eligible functions.\151\ The
categories that are considered user fee eligible include activities
that provide special benefits to issuers offering QHPs through the
Federal platform, and do not include activities that are provided to
all issuers. For example, functions related to risk adjustment program
operations, which are provided to all issuers in states where HHS
operates the risk adjustment program (all 50 states and the District of
Columbia for the 2020 benefit year), are not included in the FFE or
SBE-FP user fee eligible costs. However, costs related to Exchange-
related information technology, health plan review, management and
oversight, eligibility and enrollment determination functions including
the call center, and consumer information and outreach are incorporated
in the FFE user fee eligible costs. SBE-FPs conduct their own health
plan reviews and consumer information and outreach, and therefore, the
SBE-FP user fee rate is determined
[[Page 17533]]
based on the portion of FFE costs that are also applicable to issuers
offering QHPs through SBE-FPs.
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\151\ See the following FY2019 budget documents for a reference
to estimates provided for the President's budget. HHS FY2019 Budget
in Brief. Available at https://www.hhs.gov/sites/default/files/fy-2019-budget-in-brief.pdf; CMS FY2019 Justification of Estimates for
Appropriations Committees. Available at https://www.cms.gov/About-CMS/Agency-Information/PerformanceBudget/Downloads/FY2019-CJ-Final.pdf.
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Comment: One commenter noted HHS should lower the SBE-FP user fee
rate to 1.5 percent of premiums to better reflect the current stability
of the Exchange information technology and outreach and marketing
expenses borne by the SBE-FP states, and because HHS likely received
excess funds in the 2018 and 2019 benefit years due to the increases in
Exchange premiums attributable to the elimination of CSR payments and
introduction of silver loading.
Response: The final SBE-FP user fee rate for the 2020 benefit year
of 2.5 percent of premiums is based on HHS' calculation of the percent
of contract costs of the total FFE functions utilized by SBE-FPs--the
costs associated with the information technology, call center
infrastructure, and eligibility determinations for enrollment in QHPs
and other applicable State health subsidy programs. We have calculated
the total costs allocated to SBE-FP functions and enrollment and
premium estimates to yield a user fee rate of 2.5 percent for SBE-FP
issuers benefiting from functions provided by the Federal platform. We
believe issuers offering QHPs through the Federal platform, either the
FFEs or SBE-FPs, should be charged proportionally for the special
benefits provided by the Federal platform. As described in this rule,
user fee eligible cost estimates are reviewed on an annual basis and
developed in advance of the benefit year. If necessary, we will apply
an overcollection of user fee funds to user fee eligible expenses in
subsequent benefit years, as permissible. As noted in this rule,
anticipated Exchange premiums are one factor HHS considers when
developing the FFE and SBE-FP user fee rates. HHS agrees that increases
in premiums, all other factors being equal, should place downward
pressure on the FFE and SBE-FP user rates. Indeed, we are finalizing
our proposal to reduce both the FFE and SBE-FP user fee rates by 0.5
percentage points based upon estimates of increased premiums and
decreased enrollments for the 2020 benefit year. Although the commenter
is correct that HHS reduced its outreach and education costs in 2018
and 2019, we do not charge SBE-FPs for these costs as outreach and
education activities are SBE-FPs' responsibility. Therefore any further
reduction of outreach and education activities would not be reflected
in the SBE-FP user fee rate.
Comment: One commenter requested the user fee rate be charged as a
fixed dollar amount instead of a percent of premium because HHS'
Exchange costs are fixed.
Response: As we have stated in prior payment notices, the FFE and
SBE-FP user fee rates will continue to be assessed as a percent of the
monthly premium charged by participating issuers. Setting the user fee
as a percent of premium ensures that the user fee generally aligns with
the issuer's use of the enrollment and eligibility functions performed
by the FFE, and ensures that user fee charges reflect Exchange
enrollment.
3. Silver Loading
Section 1402 of the PPACA requires issuers to provide CSRs to help
make coverage affordable for certain low- and moderate-income consumers
who enroll in silver level QHPs, as well as Indians who enroll in QHPs
at any metal level. Section 1402 of the PPACA further states that HHS
will reimburse issuers for the cost of providing CSRs. Until October
2017, the federal government relied on the permanent appropriation at
31 U.S.C. 1324 as the source of funds for federal CSR payments to
issuers. However, on October 11, 2017, the Attorney General of the
United States provided HHS and the Department of the Treasury with a
legal opinion indicating that the permanent appropriation at 31 U.S.C.
1324 cannot be used to fund CSR payments to insurers. In light of this
opinion--and in the absence of any other appropriation that could be
used to fund CSR payments--HHS directed CMS to discontinue CSR payments
to issuers until Congress provides an appropriation. In response to the
termination of CSR payments to issuers, many issuers increased premiums
in 2018 and 2019 only on silver level QHPs to compensate for the cost
of CSRs--a practice sometimes referred to as ``silver loading'' or
``actuarial loading.'' Because premium tax credits are generally
calculated based on the second-lowest cost silver plan offered through
the Exchange, this practice has led to consumers receiving higher
premium tax credits. The cost of these higher premium tax credits are
being borne by taxpayers.
Silver loading is the result of Congress not appropriating funds to
pay CSRs, with the result being an increase to the premiums of
benchmark plans used to calculate premium tax credits, and the federal
deficit.\152\ The Administration supports a legislative solution that
would appropriate CSR payments and end silver loading.\153\ In the
absence of Congressional action, we sought comment on ways in which HHS
might address silver loading, for potential action in future rulemaking
applicable not sooner than plan year 2021. Consistent with our
discussion in the proposed rule, we are not finalizing any change in
policy for silver loading in this final rule.
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\152\ CBO estimates that, under current law, outlays for health
insurance subsidies and related spending will rise by about 60
percent over the projection period, increasing from $58 billion in
2018 to $91 billion by 2028. See CBO report The Budget and Economic
Outlook: 2018 to 2028, April 2018, page 51. Available at https://www.cbo.gov/system/files/115th-congress-2017-2018/reports/53651-outlook.pdf.
\153\ The President's Fiscal Year 2020 Budget includes a
legislative proposal to provide for a mandatory appropriation to
make CSR payments for calendar year 2020. The proposal also allows
for CSR payments to issuers who did not ``silver-load'' or ``broad-
load'' from the 4th quarter of 2017 through the end of 2019.
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Comment: All commenters supported silver loading as an option to
maintain consumer affordability and participation. The majority of
commenters urged HHS to continue to allow states to determine how to
implement CSR loading. Some commenters expressed opposition to the
practice of ``broad loading,'' in which issuers increase premiums on
all metal level plans (on- and off- Exchange) to mitigate the lack of
CSR reimbursement. Those commenters stated that increasing premiums for
all plans would force unsubsidized consumers to pay higher premiums and
would decrease APTC amounts. Commenters noted the reduction in
financial assistance, and large premium swings from year to year will
cause consumer confusion and instability in the Exchanges, and such
market disruption may lead to issuers leaving the Exchanges.
Some commenters suggested that HHS should phase in a limitation on
silver loading after permanent and stable funding is provided, to
mitigate significant out-of-pocket costs for eligible enrollees who
would see the amount of their premium tax credit reduced.
Response: We appreciate the comments received and will take them
into consideration in determining whether future action is appropriate.
4. Essential Health Benefits Package
a. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
After January 1, 2020 (Sec. 156.111)
In the 2019 Payment Notice, we finalized options for states to
select new EHB-benchmark plans starting with the 2020 benefit year.
Under Sec. 156.111, a state may modify its EHB-benchmark plan by:
[[Page 17534]]
(1) Selecting the EHB-benchmark plan that another state used for
the 2017 plan year;
(2) Replacing one or more EHB categories of benefits in its EHB-
benchmark plan used for the 2017 plan year with the same categories of
benefits from another state's EHB-benchmark plan used for the 2017 plan
year; or
(3) Otherwise selecting a set of benefits that would become the
state's EHB-benchmark plan.
Under any of these three options, the EHB-benchmark plan will also
have to meet additional standards, including scope of benefits
requirements. These options were intended to provide states with more
flexibility in the selection of their EHB-benchmark plan than had
previously existed. In the 2019 Payment Notice, we encouraged states to
consider the potential impact on vulnerable populations as they select
their new EHB-benchmark plans, and the need to educate consumers on
benefit design changes. We also remind states to inform issuers of such
changes should they select a new EHB-benchmark plan.
In the proposed rule, we stated that we believe that the three new
options--the third in particular--may provide states with additional
flexibility to address the opioid epidemic. For example, Illinois made
changes to its EHB-benchmark plan for plan year 2020 that aim to reduce
opioid addiction and overdose by including in its EHB-benchmark plan
alternative therapies for chronic pain, restricting access to
prescription opioids, and expanded coverage of mental health and
substance use disorder treatment and services.\154\ We continue to
encourage other states to explore whether modifications to their EHB-
benchmark plan would be helpful in fighting the opioid epidemic.
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\154\ IL DOI Press Release, ``Illinois becomes first and only
state to change Essential Health Benefit-benchmark plan,'' Aug. 27,
2018. Available at https://www2.illinois.gov/IISNews/18098-DOI_Essential_Health_Benefit-benchmark_plan_Release.pdf.
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Additionally, the 2019 Payment Notice stated that we would propose
subsequent EHB-benchmark plan submission deadlines in the HHS annual
Notice of Benefit and Payment Parameters. Accordingly, we proposed May
6, 2019 as the deadline for states to submit the required documents for
the state's EHB-benchmark plan selection for the 2021 plan year. We
noted that this deadline would be delayed, if necessary, to be on or
after the effective date of this final rule. To give advance notice to
states and issuers, we simultaneously proposed May 8, 2020 as the
deadline for states to submit the required documents for the state's
EHB-benchmark plan selection for the 2022 plan year. Although not a
requirement, we recommend states submit applications at least 30 days
prior to the submission deadlines to ensure completion of their
documents by the proposed deadlines. We recognize that these deadlines
are earlier in the year than the July 2, 2018 deadline for the state's
EHB-benchmark plan selection for the 2020 plan year. These deadlines
would allow for an earlier finalization of a state's EHB-benchmark plan
and a longer time period for issuers to develop plans that adhere to
their state's new EHB-benchmark plan. States would have to have
completed the required public comment period and submit a complete
application by the deadlines.
Comment: We received a number of comments supporting our
encouragement of states to explore whether modifications to their EHB-
benchmark plan would be helpful in fighting the opioid epidemic. Some
commenters supported such modifications, but only to the extent they do
not impose strict limits on the doses of opioids for treating pain,
which commenters stated could come at the expense of individuals who
need access to these medications to treat their conditions.
Response: We appreciate these comments, and continue to urge states
to consider taking all appropriate action to address the opioid
epidemic, including by making modifications to their EHB-benchmark
plans.
Comment: Several commenters supported the EHB-benchmark selection
submission deadline as proposed. A few commenters expressed their
desire for HHS to extend the submission deadline to allow states more
time to evaluate their EHB-benchmark plans, and consider submitting
changes to HHS.
Response: We are finalizing May 6, 2019 as the 2021 plan year EHB-
benchmark plan selection submission deadline and May 8, 2020 as the
2022 plan year EHB-benchmark plan submission deadline, as proposed. We
recognize the proposed submission deadline for plan year 2021 is
earlier in the year than the deadline for the previous plan year and
also before the rule's effective date. However, unlike the 2020
submission deadline, which we finalized in the 2019 Payment Notice
concurrently with the policy at Sec. 156.111(a), we are not finalizing
any new policy at Sec. 156.111(a) for 2021. Because states have now
had over a year to determine whether to make EHB-benchmark plan changes
for 2021, we believe that the deadline gives them ample time to submit
the required documents to HHS and that they have been preparing for
this deadline since proposed in the proposed rule. In having an earlier
submission date than for the 2020 plan year, issuers and other
stakeholders would have more time to understand benchmark plan changes
made by the state and for issuers to design plans that will comply with
changes to the benchmark. We do not believe that finalizing a later
date, including a date on or after the rule's effective date, would
give issuers sufficient time to design plans.
b. Provision of EHB (Sec. 156.115)
In the 2019 Payment Notice, we also finalized a policy through
which states may opt to permit issuers to substitute benefits between
EHB categories. In the preamble to that rule, we stated that the
deadlines applicable to state selection of a new benchmark plan would
also apply to this state opt-in process. We therefore proposed May 6,
2019 as the deadline for states to notify us that they wish to permit
between-category substitution for the 2021 plan year and May 8, 2020 as
the deadline for states to notify us that they wish to permit between-
category substitution for the 2022 plan year. We noted that the 2021
plan year deadline would be delayed, if necessary, to be on or after
the effective date of this final rule. States wishing to make such an
election must do so via the EHB Plan Management Community.
Comment: A few commenters supported the proposed submission
deadline.
Response: We are finalizing the submission deadlines as proposed.
The deadline for the 2021 plan year is May 6, 2019, and the deadline
for the 2022 plan year is May 8, 2020. Although the 2021 plan year
deadline is before the rule's effective date, we believe that this is
necessary in order for issuers to have sufficient time to design plans
that take into account any benefit substitution changes.
c. Prescription Drug Benefits (Sec. 156.122)
i. Mid-Year Formulary Change Reporting Requirement
At new Sec. 156.122(d)(3), we proposed that for plan years
beginning on or after January 1, 2020, QHP issuers in the FFEs would be
required to notify HHS annually in an HHS-specified format of any mid-
year formulary changes made in the prior plan year consistent with the
proposed changes to Sec. 147.106(e). QHP issuers in the FFEs would be
required to report the name of the drug being removed from the
formulary, dosage, name of the generic equivalent, the Rx Norm Concept
Unique Identifier
[[Page 17535]]
(RxCUI) associated with the brand and generic drug, if the brand drug
was moved to a higher cost sharing tier or removed from the formulary,
in a manner specified in the forthcoming PRA associated with this final
rule. We proposed to use this information to understand how the
proposed change would affect QHP enrollees. We sought comment on this
proposal.
Comment: Several commenters supported the collection as proposed.
Other commenters suggested expanding the submission to require issuers
to report to mid-yearly formulary changes to the state in addition to
HHS. Other issuers suggested HHS use existing data sources to collect
the information.
Response: We are not finalizing this collection because we are not
finalizing the proposal in this rule at Sec. 147.106(e). For more
information about that proposal, see the preamble to Sec. 147.106.
ii. Therapeutic Substitution
We solicited comments on two additional drug policies intended to
consider the potential of therapeutic substitution. First, the
prescription drug market became more efficient after several states
passed laws that allowed for generic substitution. Similarly,
therapeutic substitution, which consists of substituting chemically
different compounds within the same class for one another,\155\ could
be employed to improve the efficiency of the pharmaceutical market. We
acknowledged that many stakeholders are opposed to therapeutic
substitution and that there are concerns regarding efficacy, adverse
effects, drug interactions, and different indications for drugs within
a class. If therapeutic substitution were to become commonplace,
efficient systems that allow for seamless communication among
prescribers, pharmacies, and insurance companies would need to be in
place. Therapeutic substitution may help decrease drug costs if it can
be implemented in a way that does not negatively affect quality and
access to care. We solicited comment on whether therapeutic
substitution and generic substitution policies should both be pursued
since each of the two options might offset any potential premium impact
of the other, as well as whether certain drug categories and classes
are better suited to therapeutic substitution than others. We also
sought comment on any existing standards of practice for therapeutic
substitution and whether those standards are nationally recognized and
readily available for providers to use.
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\155\ Pengxiang, L., Sanford Shwartz, J., & Doshi, J.A. (2016).
Impact of Cost Sharing on Therapeutic Substitution: The Story of
Statins in 2006. Journal of the American Heart Association.
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Second, the majority of issuers, employers, and pharmacy benefit
managers negotiate price discounts and rebates from pharmaceutical
manufacturers by implementing tiered formularies, which link patients'
cost-sharing obligations to the list price of each drug. Tiered
formularies have been successful in attenuating the growth in
pharmaceutical spending and overall drug spending. However, in recent
years, drug spending has again increased. Reference-based pricing is
one strategy for attenuating increases in pharmaceutical spending.
Reference-based drug pricing occurs when an issuer in a commercial
market covers a group of similar drugs, such as within the same
therapeutic class, up to a set price, with the enrollee paying the
difference in cost if the enrollee desires a drug that exceeds the set
(reference) price.\156\ Implementation of reference-based pricing for
drugs could bring down overall health plan costs, and perhaps premium
increases, while increasing consumer out-of-pocket costs in some
instances. Durable medical equipment benefits like eyeglasses and
contacts are sometimes covered in a similar manner. Although reference-
based pricing is often discussed in the context of network adequacy and
using certain providers within a particular network who are willing to
accept a reference price, we do not intend for this drug policy to have
network implications, and issuers are currently free to impose lower
cost sharing for drugs obtained via mail order. We sought comment on
the opportunities and risks of implementing or incentivizing reference-
based pricing for prescription drugs.
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\156\ Robinson, J.C, Whaley, C.M., & Brown, T.T. (2017).
Association of Reference Pricing with Drug Selection and Spending.
New England Journal of Medicine, 377:658665. Doi:10.1065/
NEJMsa1700087.
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Comment: Some commenters did not support the implementation of a
policy related to therapeutic substitution due to concerns regarding
efficacy, adverse effects, drug interactions, different indications for
drugs within a class and the potential of such a policy to jeopardize
consumers' access to clinically indicated drugs. Commenters noted that
automatic therapeutic substitution overrides a treatment decision made
between the patient and provider, which could put patients' health at
risk. Additionally, commenters noted that they did not believe that the
current health care system possesses the operational capacity to
implement therapeutic substitution without jeopardizing the quality of
and access to care. Commenters who were supportive of therapeutic
substitution stated they appreciated HHS' efforts to allow additional
tools and flexibility to manage drug costs and recommended that
biosimilars and interchangeable biologics be therapeutically
substitutable as well.
One commenter supported the concept of reference-based pricing, but
noted that implementation must be carefully considered. Commenters who
opposed reference-based pricing stated they were not confident that
there were transparency measures in place to enable reference-based
pricing to be successful.
Two commenters requested that HHS postpone its consideration of
implementing reference-based pricing until greater transparency is
achieved throughout the entire pharmaceutical supply chain. One
commenter noted that if HHS were to implement reference-based pricing,
it should allow patients to request an exception from the balance
billing requirement if a medication is medically necessary but exceeds
the reference price. Two commenters were receptive to a policy related
to reference-based pricing, noting that implementation could have a
positive impact on pharmacy spending, but cautioned that because this
type of pricing model may be somewhat new in the pharmacy space, it
could initially cause member confusion. Some commenters cautioned that
implementation of this initiative would require extensive member
communication. Additionally, one commenter noted that HHS should study
the various ways group benefit plans are already employing reference-
based pricing before acting on regulatory requirements or incentives
and cautioned against defining reference-based pricing explicitly
before actually engaging in any formal regulatory activity concerning
this practice, as premature definitions can be limiting.
Response: We appreciate these comments and will take them under
consideration for any future rulemaking.
d. Prohibition on Discrimination (Sec. 156.125)
Opioid misuse and addiction is a serious national crisis that
affects public health, as well as social and economic welfare. More
than 115 people in the United States die each day from opioid
[[Page 17536]]
overdoses.\157\ The Centers for Disease Control and Prevention
estimates that the total costs of prescription opioid misuse alone in
the United States is $78.5 billion per year, including the costs of
health care, lost productivity, addiction treatment, and criminal
justice involvement.\158\ It has been an active Public Health
Emergency, as determined by the Secretary under 42 U.S.C. 247d, since
October 26, 2017.\159\
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\157\ CDC/NCHS, National Vital Statistics System, Mortality. CDC
Wonder, Atlanta, GA: US Department of Health and Human Services,
CDC; 2017. https://wonder.cdc.gov.
\158\ Florence C.S., Zhou C., Luo F., Xu L. The Economic Burden
of Prescription Opioid Overdose, Abuse, and Dependence in the United
States, 2013. Med Care. 2016; 54(10):901-906. doi:10.1097/
MLR.0000000000000625. Available at https://www.ncbi.nlm.nih.gov/pubmed/27623005.
\159\ As determined by Acting Secretary Eric D. Hargan.
``Determination that a Public Health Emergency Exists''. October 26,
2017. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioids.aspx. Renewed by Acting Secretary Hargan.
``Renewal of Determination that a Public Health Emergency Exists''.
January 19, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-24Jan2018.aspx. Renewed by Secretary
Alex M. Azar II. ``Renewal of Determination that a Public Health
Emergency Exists''. April 20, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-20Apr2018.aspx. Renewed by Secretary Azar. ``Renewal of
Determination that a Public Health Emergency Exists''. July 19,
2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-19July2018.aspx. Renewed by Secretary Azar.
``Renewal of Determination that a Public Health Emergency Exists''.
October 18, 2018. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-18Oct2018-aspx.aspx. Renewed by
Secretary Azar. ``Renewal of Determination that a Public Health
Emergency Exists''. January 17, 2019. Available at https://www.phe.gov/emergency/news/healthactions/phe/Pages/opioid-17jan2019.aspx.
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Several factors have influenced the opioid crisis, including: the
opioid pharmaceutical manufacturing and supply chain industry;
deficient patient and provider pain management education; rogue
pharmacies and unethical physician prescribing; and the insufficient
availability of treatment services, including Medication-Assisted
Treatment (MAT).\160\
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\160\ ``The President's Commission on Combating Drug Addiction
and the Opioid Crisis''. Pages 19-23. November 1, 2017. Available at
https://www.whitehouse.gov/sites/whitehouse.gov/files/images/Final_Report_Draft_11-1-2017.pdf.
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MAT is the use of medication approved by the FDA for addiction
detoxification, relapse prevention, or maintenance treatment, in
combination with counseling and behavioral therapies to treat substance
use disorders and prevent overdose through detoxification, relapse
prevention, and maintenance treatment.\161\ MAT has proven to be
clinically effective in treating opioid use disorder and to
significantly reduce the need for inpatient detoxification services for
individuals with opioid use disorder.\162\
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\161\ There are four drugs currently used in MAT: Buprenorphine;
naltrexone; buprenorphine in combination with naloxone; and
methadone.
\162\ ``Medication and Counseling Treatment''. September 28,
2015. Available at https://www.samhsa.gov/medication-assisted-treatment/treatment.
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Despite this evidence, and despite the attention paid to the
nationwide opioid Public Health Emergency, there is not comprehensive,
nationwide coverage of the drugs used in MAT, at least among QHP
issuers. A review of QHP issuer formularies in the 39 FFE and SBE-FP
states for which we have data reveals that, while many QHPs cover all
four MAT drugs, not all do. Specifically, for plan year 2018, 2,553
QHPs (95 percent) in these 39 FFE and SBE-FP states cover all four of
these drugs; 105 QHPs (4 percent) cover three; and 25 QHPs (<1 percent)
cover two. Given the effectiveness of MAT and the severity of the
nationwide opioid Public Health Emergency, we encourage every health
insurance plan to provide comprehensive coverage of MAT, even if the
applicable EHB-benchmark plan does not require the inclusion of all
four MAT drugs on a formulary. In the proposed rule, we encouraged
issuers to take every opportunity to address opioid use disorder,
including increasing access to MAT and destigmatizing its use.\163\
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\163\ ``For many people struggling with addiction, failing to
offer MAT is like trying to treat an infection without antibiotics .
. . We know that there is sometimes stigma associated with MAT--
especially with long term therapy. But someone on MAT, even one who
requires long-term treatment, is not an addict. They need medicine
to return to work; re-engage with their families; and regain the
dignity that comes with being in control of their lives. These
outcomes are literally the opposite of how we define addiction. Our
fellow citizens who commit to treatment should not be treated as
pariahs--they are role models.'' Azar, Alex. Plenary Address to
National Governors Association, February 24, 2018. Available at
https://www.hhs.gov/about/leadership/secretary/speeches/2018-speeches/plenary-addres-to-national-governors-association.html.
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In addition, we stated that we have become aware that a MAT drug's
inclusion on a formulary does not necessarily ensure coverage of that
drug when administered for MAT. We stated that we are aware that some
issuers utilize plan designs which exclude coverage of certain drugs
when used for MAT while the same drugs are covered for other medically
necessary purposes, such as analgesia or alcohol use disorder. Under
Sec. 156.125, which implements the provision prohibiting
discrimination, an issuer does not provide EHB if its benefit design,
or the implementation of its benefit design, discriminates based on an
individual's age, expected length of life, present or predicted
disability, degree of medical dependency, quality of life, or other
health conditions.
We reminded issuers that any indication of a reduction in the
generosity of a benefit in some manner for subsets of individuals that
is not based on clinically indicated, reasonable medical management
practices is potentially discriminatory. As is the case for any EHB,
issuers are expected to impose limitations and exclusions on the
coverage of benefits to treat opioid use disorder, including the drugs
used for MAT or any associated benefit such as counseling or drug
screenings, based on clinical guidelines and medical evidence, and are
expected to use reasonable medical management. If a plan excludes
certain treatment of opioid use disorder, but covers the same treatment
for other medically necessary purposes, the issuer must be able to
justify such an exclusion with supporting documentation explaining how
such a plan design is not discriminatory.
We noted that a similar standard is imposed under the Paul
Wellstone and Pete Domenici Mental Health Parity and Addiction Equity
Act of 2008 (MHPAEA) (section 2726 of the PHS Act).\164\ Under
regulations implementing the EHB requirements,\165\ the requirements of
MHPAEA are extended to issuers of non-grandfathered health insurance
coverage in the individual and small group markets, both on and off the
Exchange. Under HHS regulations at Sec. 146.136 implementing MHPAEA,
if a drug is offered under a plan for treatment of a medical condition
or surgical procedures but is excluded for MAT purposes to treat a
substance use disorder, that is considered to be a nonquantitative
treatment limitation.\166\ A nonquantitative treatment limitation
cannot be imposed on mental health or substance use disorder benefits
in any classification \167\ unless, under the terms of the plan (or
health insurance coverage) as written and in operation, any processes,
strategies, evidentiary standards or other factors used in applying the
limitation to the mental health or substance use disorder
[[Page 17537]]
benefits in the classification are comparable to, and are applied no
more stringently than the processes, strategies, evidentiary standards
and other factors used in applying the limitation to medical/surgical
benefits in the same classification. In other words, the issuer must
demonstrate that, as written and in operation, the processes,
strategies, evidentiary standards, and other factors it applied in
deciding that the drug is covered for medical/surgical purposes, are
comparable to those it used in deciding that the drug is not covered
for MAT purposes, and that there are no separate limitations that apply
only for mental health or substance use disorder benefits.\168\
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\164\ MHPAEA originally applied to large group health plans and
large group health insurance coverage, and PPACA extended it to
apply to individual health insurance coverage.
\165\ Sec. 156.115(a)(3).
\166\ For examples of nonquantitative treatment limitations, see
Sec. 146.136(c)(4)(ii).
\167\ Classifications under MHPAEA are as follows: Inpatient,
in-network; inpatient, out-of-network; outpatient, in-network;
outpatient, out-of-network; emergency care; and prescription drugs.
Sec. 146.136(c)(2)(ii).
\168\ See Sec. 146.136(c)(4)(iii), Ex. 10.
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We also noted that federal civil rights laws, such as title II of
the Americans with Disabilities Act and section 504 of the
Rehabilitation Act, prohibit discrimination against individuals who
participate in or have completed substance use disorder treatment,
including MAT.
Comment: Many commenters supported our continued interpretation of
the prohibition on discrimination as it applies to the coverage of
treatments for opioid use disorder. Many commenters supported our
recommendation that issuers provide comprehensive coverage of MAT,
thereby increasing access to MAT and destigmatizing its use. Several
commenters suggested that HHS require coverage of all four drugs used
in MAT, and a few commenters cautioned against such a requirement.
A number of comments outside the scope of this rule encouraged HHS
and states to take aggressive enforcement actions against all
discriminatory benefit designs, including plan designs that may violate
MHPAEA. A number of commenters suggested that discriminatory benefit
designs exist with regards to women's health benefits and benefits for
the treatment of sexually transmitted diseases.
Response: We appreciate these comments and will take them under
consideration as we continue to monitor and implement strategies to
address discriminatory benefit designs and the opioid epidemic.
e. Premium Adjustment Percentage (Sec. 156.130)
Section 1302(c)(4) of the PPACA directs the Secretary to determine
an annual premium adjustment percentage, a measure of premium growth
that is used to set the rate of increase for three parameters detailed
in the PPACA: (1) The maximum annual limitation on cost sharing
(defined at Sec. 156.130(a)); (2) the required contribution percentage
used to determine eligibility for certain exemptions under section
5000A of the Code (defined at Sec. 155.605(d)(2)); and (3) the
employer shared responsibility payment amounts under section 4980H(a)
and (b) of the Code (see section 4980H(c)(5) of the Code). Section
1302(c)(4) of the PPACA and Sec. 156.130(e) provide that 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, and the regulations provide that this percentage
will be published in the annual HHS notice of benefit and payment
parameters. To calculate the premium adjustment percentage for the 2020
benefit year, we calculate the percentage by which the average per
capita premium for health insurance coverage for 2019 exceeds the
average per capita premium for health insurance for 2013, and round the
resulting percentage to 10 significant digits. The resulting premium
index reflects cumulative, historic growth in premiums from 2013
onwards.
The 2015 Payment Notice (79 FR 13743) and 2015 Market Standards
Rule (79 FR 30240) established a methodology for estimating the average
per capita premium for purposes of calculating the premium adjustment
percentage for the 2015 benefit year and beyond. Beginning with the
2015 benefit year, the premium adjustment percentage was calculated
based on the estimates and projections of average per enrollee
employer-sponsored insurance premiums from the NHEA, which are
calculated by the CMS Office of the Actuary. In the proposed 2015
Payment Notice, we proposed that the premium adjustment percentage be
calculated based on the projections of average per enrollee private
health insurance premiums. Based on comments received, we finalized the
2015 Payment Notice to instead use per enrollee employer-sponsored
insurance premiums in the methodology for calculating the premium
adjustment percentage. We chose employer-sponsored insurance premiums
because they reflected trends in health care costs without being skewed
by individual market premium fluctuations resulting from the early
years of implementation of the PPACA market reforms. We adopted this
methodology in subsequent Payment Notices for 2016 through 2019, but
noted in the 2015 Payment Notice that we may propose to change our
methodology after the initial years of implementation of the market
reforms, once the premium trend is more stable.
As discussed in the 2015 Payment Notice, we considered four
criteria when finalizing the premium adjustment percentage methodology
for the 2015 benefit year: (1) Comprehensiveness--the premium
adjustment percentage should be calculated based on the average per
capita premium for health insurance coverage for the entire market,
including the individual and group markets, and both fully insured and
self-insured group health plans; (2) Availability--the data underlying
the calculation should be available by the summer of the year that is
prior to the calendar year so that the premium adjustment percentage
can be published in the annual HHS notice of benefit and payment
parameters in time for issuers to develop their plan designs; (3)
Transparency--the methodology for estimating the average premium should
be easily understandable and predictable; and (4) Accuracy--the
methodology should have a record of accurately estimating average
premiums. We continue to consider these criteria as we evaluate other
sources of premium data that could be used in calculating the premium
adjustment percentage.
To date, the NHEA projections of per enrollee employer-sponsored
insurance premiums have also been used by the Department of the
Treasury and the IRS for determining the applicable percentage in
section 36B(b)(3)(A) of the Code and the required contribution
percentage in section 36B(c)(2)(C) of the Code.\169\ The applicable
percentage in section 36B(b)(3)(A) of the Code is used to determine the
amount an individual must contribute to the cost of an Exchange QHP and
thus, relates to the amount of the individual's premium tax credit.
This is because, in general, an individual's premium tax credit is the
lesser of (1) the premiums paid for the Exchange QHP, and (2) the
excess of the premium for the benchmark plan over the contribution
amount. The contribution amount is the product of the individual's
household income and the applicable percentage.
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\169\ IRS Rev. Proc. 2014-37.
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The required contribution percentage in section 36B(c)(2)(C) of the
Code is used to determine whether an offer of employer-sponsored
insurance is considered affordable for an individual, which relates to
eligibility for the premium tax credit because an individual with an
offer of affordable employer-sponsored insurance that
[[Page 17538]]
provides minimum value is ineligible for the premium tax credit.
Specifically, an offer of employer-sponsored insurance is considered
affordable for an individual if the employee's required contribution
for employer-sponsored insurance is less than or equal to the required
contribution percentage (set at 9.5 percent in 2014) of the
individual's household income.\170\
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\170\ See also IRS Notice 2015-87, Q&A 12 for discussion of the
adjustment of the required contribution percentage as applied for
certain purposes under sections 4980H and 6056 of the Code.
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Section 36B(b)(3)(A)(ii) of the Code generally provides that the
applicable percentages are to be adjusted after 2014 to reflect the
excess of the rate of premium growth over the rate of income growth for
the preceding year. Section 36B(c)(2)(C) of the Code provides that the
required contribution percentage is to be adjusted after 2014 in the
same manner as the applicable percentages are adjusted in section
36B(b)(3)(A)(ii) of the Code. As noted in this rule, the Department of
the Treasury and the IRS have issued guidance providing that the rate
of premium growth for purposes of these section 36B provisions is based
on per enrollee spending for employer-sponsored insurance as published
in the NHEA.\171\
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\171\ See IRS Rev. Proc. 2014-37 (https://www.irs.gov/pub/irs-drop/rp-14-37.pdf).
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In the proposed rule, we proposed to modify the premium growth
measure that we used to calculate the premium adjustment percentage for
the 2020 benefit year and beyond. We proposed to use a more
comprehensive premium measure that captures increases across the
market, including individual market premiums and employer-sponsored
insurance premiums, for purposes of calculating the premium adjustment
percentage. Specifically, we proposed to calculate the premium growth
measures for 2013 and 2019 as private health insurance premiums minus
premiums paid for Medigap insurance and property and casualty
insurance, divided by the unrounded number of unique private health
insurance enrollees, excluding all Medigap enrollees.
This premium measure is an adjusted private individual and group
market health insurance premium measure, which is similar to NHEA's
private health insurance premium measure. NHEA's private health
insurance premium measure includes premiums for employer-sponsored
insurance, ``direct purchase insurance,'' which includes individual
market health insurance purchased directly by consumers from health
insurance issuers, both on and off the Exchanges, and Medigap
insurance, and the medical portion of accident insurance (``property
and casualty'' insurance). The measure we proposed to use is published
by NHEA and includes NHEA estimates and projections of employer-
sponsored insurance and direct purchase insurance premiums, but we
proposed to exclude Medigap and property and casualty insurance from
the premium measure since these types of coverage are not considered
primary medical coverage for individuals who elect to enroll. We
proposed to use per enrollee premiums for private health insurance
(excluding Medigap and property and casualty insurance) so that the
premium growth measure more closely reflects premium trends for all
individuals primarily covered in the private health insurance market
since 2013, and we anticipated that the proposed change to use per
enrollee premiums for private health insurance (excluding Medigap and
property and casualty insurance) would additionally reduce federal
premium tax credit expenditures, if the Department of the Treasury and
the IRS were to adopt the proposed change.
Using the private health insurance premium measure (excluding
Medigap and property and casualty insurance), we proposed that the
premium adjustment percentage for 2020 be the percentage (if any) by
which the most recent NHEA projection of per enrollee premiums for
private health insurance (excluding Medigap and property and casualty
insurance) for 2019 (when proposed, $6,468) exceeds the most recent
NHEA estimate of per enrollee premiums for private health insurance
(excluding Medigap and property and casualty insurance) for 2013 (when
proposed, $4,987).\172\ Using this formula, the proposed premium
adjustment percentage for the 2020 benefit year was 1.2969721275
($6,468/$4,987), which represented an increase in private health
insurance (excluding Medigap and property and casualty insurance)
premiums of approximately 29.7 percent over the period from 2013 to
2019.
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\172\ The 2013 and 2019 per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance)
figures used for this calculation reflect the latest NHEA data,
which was updated between the publication of the proposed rule and
this final rule, on February 20, 2019. The series used in the
determinations of the adjustment percentages can be found in Table
17 on the CMS website, which can be accessed by clicking the ``NHE
Projections 2018-2027--Tables'' link located in the Downloads
section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
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We are finalizing the proposal to use per enrollee private health
insurance premiums (excluding Medigap and property and casualty
insurance) in the premium adjustment percentage calculation. As we
discussed in the proposed rule, immediate application of this change
will result in a faster premium growth rate for the foreseeable future
than if we continued to use only employer-sponsored insurance premiums
as in prior benefit years. We anticipate that this change will have
several impacts on the health insurance market. As explained in this
rule, the premium adjustment percentage is used to set the rate of
increase for the maximum annual limitation on cost sharing, the
required contribution percentage used to determine eligibility for
certain exemptions under section 5000A of the Code, and the employer
shared responsibility payment amounts under section 4980H(a) and (b) of
the Code. Accordingly, a premium adjustment percentage that reflects a
faster premium growth rate would result in a higher maximum annual
limitation on cost sharing, a higher required contribution percentage,
and higher employer shared responsibility payment amounts than if the
current premium adjustment percentage premium measure (employer-
sponsored insurance only) were adopted for the 2020 benefit year.
In the proposed rule, we stated that, if we finalize a change to
the premium measure used in the premium adjustment percentage for the
2020 benefit year, we expect the Department of the Treasury and the IRS
to issue additional guidance to adopt the same premium measure for
purposes of future indexing of the applicable percentage and required
contribution percentage under section 36B of the Code. Additionally,
the Health Insurance Providers Fee established under section 9010 of
the PPACA also takes the measure of premium growth used for the
applicable percentage in section 36B(b)(3)(A)(ii) of the Code into
consideration for purposes of calculating the fee for 2019 and
beyond.\173\ We expect the Department of the Treasury and the IRS to
adopt the premium measure that results in a faster premium growth rate
that we are
[[Page 17539]]
finalizing, which will result in slightly higher Health Insurance
Providers Fees imposed on health insurance issuers that are required to
pay the fee, over the long term. We anticipate that health insurance
issuers subject to the Health Insurance Providers Fee generally would
pass the fee on to consumers, and that higher fees would increase
premiums in the individual, small, and large group markets, although we
anticipate that any premium increases would be very small.
Additionally, as stated in the proposed rule, a faster premium growth
measure and corresponding increase in the applicable percentage will
increase the amount that individuals receiving the premium tax credit
contribute towards premiums, thereby reducing federal outlays for the
premium tax credit that had increased significantly in the 2018 benefit
year as many issuers increased silver plan premiums to offset the cost
of providing cost-sharing reductions to eligible enrollees without
receiving cost-sharing reduction payments from the federal government.
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\173\ See PPACA section 9010(e)(2). However, under section 4003
of Public Law 115-120, Division D--Suspension of Certain Health-
Related Taxes, enacted on January 22, 2018, the collection of the
Health Insurance Providers Fee is suspended for the 2019 calendar
year.
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We have updated the impact estimates in the Regulatory Impact
Analysis of this final rule to reflect impact estimates provided by the
Department of the Treasury, pending their anticipated adoption of the
premium measure finalized in this rule.
Although commenters expressed concern about the impacts resulting
from this change, as discussed later in the preamble of this final
rule, we are finalizing the change as proposed--to use per enrollee
private health insurance premiums (excluding Medigap and property and
casualty insurance) as the premium growth measure for purposes of
calculating the premium adjustment percentage. This approach allows us
to achieve the statutory and regulatory goals of a more comprehensive
and accurate measure of premium costs across the private market.
Using the proposed premium measure, the premium adjustment
percentage is calculated as the difference between the percentage (if
any) by which the most recent NHEA projection of per enrollee premiums
for private health insurance (excluding Medigap and property and
casualty insurance) for 2019 ($6,436) exceeds the most recent NHEA
estimate of per enrollee premiums for private health insurance
(excluding Medigap and property and casualty insurance) for 2013
($4,991), carried out to 10 significant digits.\174\ Using this
formula, the final premium adjustment percentage for 2020, rounded to
10 significant digits, using per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance) is
1.2895211380 ($6,436/$4,991), which is an increase of approximately 29
percent over the period from 2013 to 2019.
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\174\ The 2013 and 2019 per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance)
used for this calculation reflect the latest NHEA data, which was
updated between the publication of the proposed rule and this final
rule, on February 20, 2019. The series used in the determinations of
the adjustment percentages can be found in Table 17 on the CMS
website, which can be accessed by clicking the ``NHE Projections
2018-2027--Tables'' link located in the Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. A detailed description of the
NHE projection methodology is available at https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/ProjectionsMethodology.pdf.
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Comment: All commenters on this topic expressed opposition to or
concerns about the proposed change, many of whom indicated HHS should
continue to use the current measure, employer-sponsored insurance
premiums, to measure premium growth. Almost all commenters were
concerned about the impact of the proposal on the health insurance
market and individuals and families, citing HHS' estimates of the
impacts in the Regulatory Impact Analysis, including a decrease in
enrollment and increase in premiums and out-of-pocket costs for
consumers.
Several commenters noted that individual market premiums should not
be used to measure premium growth since 2013 because premiums have
increased due to PPACA market reforms and federal policy and
legislative changes, including changes in the composition of the
individual market risk pool that occurred with the elimination of pre-
existing condition exclusions, the inclusion of a richer benefit
package and lower cost-sharing than typically provided in the
individual market in 2013, the cessation of CSR payments, the reduction
of the individual shared responsibility penalty to $0, and the ending
of the reinsurance program. Commenters stated these premium increases
should not be included in the measure of premium growth because they
are not based on utilization or cost of medical services.
Several commenters noted our methodology is flawed because the
proposal starts with 2013 as the base year, but the indexing provisions
of section 1401 of the PPACA start with ``the calendar year after
2014'' (2015) and then use the preceding year, or 2014 as the base
year. They state that since EHB did not go into effect until 2014,
utilizing a base year earlier than 2014 does not compare the prices of
like individual insurance products. Several commenters recommended HHS
use a base year no earlier than 2018 (rather than 2013) to avoid
inclusion of premium increases resulting from PPACA market reforms and
other federal policy and legislative decisions. Some commenters noted
that HHS considered and rejected adopting using individual market
premiums in the premium measure for the premium adjustment percentage
for the 2015 benefit year because the premium trend was not stable, and
the premium trend is still not stable, citing the PPACA policy and
legislative changes mentioned in this rule and that 2019 is the first
year new rules have taken effect regarding short-term, limited-duration
insurance (STLDI) plans and association health plans (AHP), which may
further disrupt the market and increase premiums. One commenter
recommended only using individual market premium increases for
underlying medical trends (in other words, not including premium
increases resulting from federal policy and legislative changes), while
a few commenters indicated that the change is not statutorily required,
and urged HHS to delay the change until the premium trend is more
stable.
Several commenters stated HHS's justification provided for this
change is inadequate and contrary to the legislative intent of the
financial assistance structure of the PPACA. One commenter noted that
the primary purpose of providing APTC to Exchange enrollees is so that
the federal government, rather than low-income individuals and
families, bears the burden of any premium increases in the individual
market. A few commenters urged HHS to consider other ways to reduce
federal expenditures, or to focus on efforts at lowering the overall
cost of health care, rather than placing the burden on households. One
commenter supported keeping federal costs reasonable, but was concerned
about HHS doing so by way of reducing PTC to consumers, which will
increase the number of uninsured individuals. Another commenter noted
that while the proposed change will result in federal PTC savings (a
decreased taxpayer burden), consumers receiving APTC are taxpayers, and
that the negative effects of reducing their APTC would outweigh the
benefits of lower tax burden.
Another commenter noted that the proposed change will impact the
coverage ``affordability'' percentages
[[Page 17540]]
that IRS releases each spring, which are used by applicable large
employers to determine the affordability of their offers of coverage
for purposes of the employer shared responsibility provisions. As such,
the commenter urged HHS to work closely with the IRS on the timing of
any change and recognize that employer plans rely on the timely release
of this data each spring for their annual plan-development processes.
Response: As stated earlier in this preamble, we are finalizing our
proposal to calculate the premium adjustment percentage using a measure
of premium growth that accounts for individual market health insurance
premiums, as well as employer-sponsored insurance. Section 1302(c)(4)
of the PPACA and Sec. 156.130(e) provide that 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.
The purpose of this index is to measure growth in premiums, and the
statute gives HHS flexibility to determine how to measure premium
growth. Because the individual market is much smaller than the group
market,\175\ the increase in the percentage amount due to the change in
methodology from measuring growth only in employer-sponsored insurance
to using the new measure, which includes individual market health
insurance, is quite small. Under the employer-sponsored insurance
measure, the premium adjustment percentage would have been
1.2551737602. As stated above, under the new premium measure, the
premium adjustment percentage is 1.2895211380, or a difference of
approximately 3.4 percentage points. Therefore the new premium measure
does not result in a significantly larger premium adjustment
percentage; however, it does more comprehensively reflect the actual
growth in premiums in the insurance markets.
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\175\ Note for example the differences in enrollment between
Employer-sponsored Insurance and Direct Purchase reflected in Table
17 of the ``NHE Projections 2018-2027--Tables'' available in the
Downloads section at http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NationalHealthAccountsProjected.html. In 2020, the Office of the
Actuary projects Employer-sponsored Insurance enrollment will be
176.6 million, and Direct Purchase enrollment will be 21.3 million.
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As stated in the 2015 Payment Notice, we previously excluded
premiums from the individual market because they were most affected by
the significant changes in benefit design and market composition in the
early years of implementation of the PPACA market rules and were most
likely to be subject to risk premium pricing. However, the PPACA is now
past the initial years of implementation and issuers have had the
opportunity to collect data on the risk composition of the individual
market and adjust pricing accordingly. We have concluded, based on the
general trend of stabilizing average premiums in the individual
market,\176\ that the likelihood of risk premium pricing has decreased.
We further believe that individual market premium increases going
forward will more accurately reflect true premium growth, thereby
addressing the bases we identified in the 2015 Payment Notice for
excluding individual market premiums from the premium adjustment
percentage calculation. Therefore, we are finalizing our proposal to
measure growth of premiums issuers charged enrollees more
comprehensively, by no longer excluding individual market premiums.
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\176\ ASPE Research Brief: 2019 Health Plan Choice and Premiums
in Healthcare.gov States, showing a decrease in silver plan premiums
for plan year 2019, available at https://aspe.hhs.gov/system/files/pdf/260041/2019LandscapeBrief.pdf.
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While the PPACA does contain financial assistance provisions that
shift costs from consumers to the federal government as noted by
commenters, it also requires the Secretary to measure premium growth,
so that the effects of premium growth can be reflected in other payment
parameters. As such, although we are sensitive to commenters' concerns
about the potential impact on consumers, we continue to believe that a
premium growth measure that affects cost-sharing and payment parameters
in the employer group markets and individual health insurance market
should comprehensively reflect premium growth in all affected markets,
and should not be limited to employer-sponsored insurance growth. In
effect, this change is a technical correction for measuring premium
growth, as the previous exclusion of individual market data was not the
most comprehensive method of premium growth measurement, but was deemed
necessary as a result of the premium instability in the individual
market immediately following implementation of the PPACA market
reforms.
Additionally, while we recognize comments noting that recipients of
PTC are also taxpayers, reducing federal expenditures is not strictly a
benefit to the federal government, but to all taxpayers, which includes
those who are not PTC recipients. Further, we understand that the
premium adjustment percentage is relevant to determine the
affordability of plans offered by applicable large employers for
purposes of the employer shared responsibility provisions. We will
continue to work closely with the Department of the Treasury and the
IRS to timely release information on the indexing of the various PPACA
provisions.
With respect to the comments requesting we use a different base
year, the applicable statute, section 1302(c)(4) of the PPACA, requires
the Secretary of HHS to establish a premium adjustment percentage that
measures premium growth between the preceding calendar year (2019, in
this case) and 2013. It is not legally permissible to change the base
year to any year other than 2013, including the base year reflected in
the PPACA section cited by commenters, section 1401.
Comment: Many commenters opposed the proposed change and indicated
HHS should continue to use the current premium measure; however, a few
of these commenters stated if HHS does adopt the proposed change it
should change some aspects of its approach. A few commenters
recommended that HHS consider a delayed or gradual phase in of
individual market premiums over several years.
Response: As noted earlier in this section of the preamble, we
believe that the growth of average premiums in the individual market
has stabilized, and the reasons for excluding individual market
premiums from the premium adjustment percentage calculation have been
addressed.\177\ Although we considered a phase-in approach, we do not
believe that further delay meets the statutory and regulatory goals of
using a comprehensive measure of premium growth. Additionally, as
stated above, we believe that the individual market is now sufficiently
stable to justify the immediate inclusion of individual market premium
growth in the indexing measure going forward. For example, in plan year
2019, premiums for the second lowest cost silver plan decreased 2
percent, the first decrease in that premium measure since the advent of
the PPACA.\178\ As such, we believe it is appropriate to prioritize
better achieving the goals of comprehensiveness and accuracy of the
premium adjustment percentage methodology over the limited effect on
mitigating impacts that implementing our proposal using a
[[Page 17541]]
phased-in approach would be likely to have.
---------------------------------------------------------------------------
\177\ See id.
\178\ Id.
---------------------------------------------------------------------------
Comment: One commenter provided a detailed explanation about what
they viewed to be legal deficiencies with our statutory analysis, our
justification for the proposed change, and the procedural approach. One
commenter indicated that HHS has underestimated the significance of the
proposed change's impact on the Health Insurance Providers Fee and the
increased premiums in the commercial and Medicare markets that may
result from the proposed change.
One commenter expressed that the proposed change will be doubly
punitive to its state residents because as part of the state's market
stabilization efforts, residents are subjected to a penalty for not
carrying insurance. Additionally, the commenter noted that states that
developed section 1332 waivers will be unduly penalized by this change
because it will result in a reduction of premium tax credits. Another
commenter noted that if more states implement section 1332 waivers,
then a premium adjustment percentage that incorporates individual
market premium changes would also reflect the impact of these waivers
(that is, reduced individual market premiums) and could result in
additional federal expenditures on premium tax credits through reduced
required contributions. The commenter noted there could be challenges
for states seeking new waivers to reflect the impact of this
consideration when evaluating compliance with the deficit neutrality
guardrail and the available amount of federal pass-through funding in
their waiver applications.
Response: We believe that section 1302(c)(4) of the PPACA provides
the Secretary of HHS with the authority to update and modify the
premium adjustment percentage and premium growth rate measure, and that
our proposal was within this authority. While we recognize that any
reductions to federal PTC spending could reduce the pass-through
amounts that are available to states that implement State Relief and
Empowerment Waivers under section 1332 of the PPACA, those reductions
in pass-through payments would be consistent with the reduction in the
federal savings attributable to such waivers. Additionally, as noted in
the regulatory impact section of this rule, we are aware that, if
adopted by the Department of the Treasury and the IRS, this change in
premium measures will likely have the effect of raising premiums, and
we understand that such increases could have additional consequences
for consumers in states where they may be penalized for not carrying
insurance. As explained in responses to other comments on this
proposal, we believe these impacts are outweighed by the goals of
achieving comprehensive and accurate calculations of premium growth. We
will continue to consider possibilities for appropriate modifications
to the calculation of the premium adjustment percentage that reflect
the changing health insurance markets, and we will consider these and
other comments as we develop future policy in this area.
Based on the final 2020 premium adjustment percentage, we are
finalizing the following cost-sharing parameters for benefit year 2020.
Maximum Annual Limitation on Cost Sharing for Plan Year 2020
Under Sec. 156.130(a)(2), for the 2020 calendar year, cost sharing
for self-only coverage may not exceed the dollar limit for calendar
year 2014 increased by an amount equal to the product of that amount
and the premium adjustment percentage for 2020. For other than self-
only coverage, the limit is twice the dollar limit for self-only
coverage. Under Sec. 156.130(d), these amounts must be rounded down to
the next lowest multiple of $50.
In the proposed rule, we proposed that the 2020 maximum annual
limitation on cost sharing would be $8,200 for self-only coverage and
$16,400 for other than self-only coverage, based on the previously
proposed premium adjustment percentage of 1.2969721275 for 2020, and
the 2014 maximum annual limitation on cost sharing of $6,350 for self-
only coverage, which was published by the IRS on May 2, 2013.\179\ As
stated in this rule, we are finalizing the change in premium measure
used to calculate the premium adjustment percentage as proposed, and
thus the final premium adjustment percentage for the 2020 benefit year
is 1.2895211380. Based on this premium adjustment percentage, and the
2014 maximum annual limitation on cost sharing of $6,350 for self-only
coverage, the final 2020 maximum annual limitation on cost sharing will
be $8,150 for self-only coverage ($6,350 * 1.2895211380 = $8,188.46;
rounded down to the next lowest multiple of 50 dollars is $8,150) and
$16,300 ($8,150 * 2) for other than self-only coverage. This represents
an approximately 3.16 percent increase above the 2019 parameters of
$7,900 for self-only coverage and $15,800 for other than self-only
coverage.
---------------------------------------------------------------------------
\179\ See http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------
Comment: Several commenters expressed opposition to the increased
maximum annual limitation on cost-sharing. Many commenters stated that
they oppose the proposed change in premium measure for the premium
adjustment percentage in part because of the effect it would have of
further increasing the maximum annual limitation on cost-sharing for
individuals and families. Multiple commenters suggested that if the
premium adjustment percentage is not finalized as proposed, given the
timing of the final rule, issuers should be allowed a safe harbor to
use the proposed maximum annual limitation on cost-sharing for 2020.
One commenter requested HHS lower the burden of out-of-pocket costs for
patients or keep current cost-sharing limits at 2019 levels. Another
commenter supported the flexibility to increase the out-of-pocket
maximum to a higher limit and requested that HHS coordinate with the
IRS in setting the maximum out-of-pocket limits for HSA-eligible HDHPs
so they match.
Response: We recognize commenters' concerns about the burden that
an increase in the maximum annual limitation on cost-sharing places on
consumers who meet the annual limit. However, the indexing of this
parameter is required under section 1302(c)(1)(B) of the PPACA, and
does not permit HHS to postpone updates to these parameters for the
applicable benefit year. Therefore, we are finalizing the 2020 maximum
annual limitation on cost sharing of $8,150 for self-only coverage and
$16,300 for other than self-only coverage, based on the premium
adjustment percentage for the 2020 benefit year that is finalized in
this rule. With regard to the maximum out-of-pocket limit that applies
for purposes of HSA-eligible HDHPs, annual adjustments are determined
under section 223(g) of the Code, which by statute provides a different
annual adjustment than the annual adjustment provided under section
1302(c) of PPACA. Further, we note that the Department of the Treasury
and the IRS have jurisdiction over HSAs and HSA-eligible HDHPs under
section 223 of the Code.
f. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
Sections 1402(a) through (c) of the PPACA direct issuers to reduce
cost sharing for EHBs for eligible individuals enrolled in a silver-
level QHP. In the 2014 Payment Notice, we established standards related
to the provision of these cost-sharing reductions. Specifically, in
part 156, subpart E, we
[[Page 17542]]
specified that QHP issuers must provide cost-sharing reductions by
developing plan variations, which are separate cost-sharing structures
for each eligibility category that change how the cost sharing required
under the QHP is to be shared between the enrollee and the federal
government. At Sec. 156.420(a), we detailed the structure of these
plan variations and specified that QHP issuers must ensure that each
silver-plan variation has an annual limitation on cost sharing no
greater than the applicable reduced maximum annual limitation on cost
sharing specified in the annual HHS notice of benefit and payment
parameters. Although the amount of the reduction in the maximum annual
limitation on cost sharing is specified in section 1402(c)(1)(A) of the
PPACA, section 1402(c)(1)(B)(ii) states that the Secretary may adjust
the cost-sharing limits to ensure that the resulting limits do not
cause the AV of the health plans to exceed the levels specified in
section 1402(c)(1)(B)(i) (that is, 73 percent, 87 percent, or 94
percent, depending on the income of the enrollee). Accordingly, we
proposed to continue to use the method we established in the 2014
Payment Notice for determining the appropriate reductions in the
maximum annual limitation on cost sharing for cost-sharing plan
variations.
As discussed in this rule, the finalized 2020 maximum annual
limitation on cost sharing will be $8,150 for self-only coverage and
$16,300 for other than self-only coverage. We analyzed the effect on AV
of the reductions in the maximum annual limitation on cost sharing
described in the statute to determine whether to adjust the reductions
so that the AV of a silver plan variation will not exceed the AV
specified in the statute. In this rule, we describe our analysis for
the 2020 plan year and our proposed results.
Consistent with our analysis in the Payment Notices for 2014
through 2019, we developed three test silver-level QHPs, and analyzed
the impact on AV of the reductions described in the PPACA to the
proposed estimated 2020 maximum annual limitation on cost sharing for
self-only coverage ($8,200). The test plan designs are based on data
collected for 2019 plan year QHP certification to ensure that they
represent a range of plan designs that we expect issuers to offer at
the silver level of coverage through the Exchanges. For 2020, the test
silver-level QHPs included a PPO with typical cost-sharing structure
($8,200 annual limitation on cost sharing, $2,575 deductible, and 20
percent in-network coinsurance rate); a PPO with a lower annual
limitation on cost sharing ($5,250 annual limitation on cost sharing,
$3,500 deductible, and 20 percent in-network coinsurance rate); and an
HMO ($8,200 annual limitation on cost sharing, $4,300 deductible, 20
percent in-network coinsurance rate, and the following services with
copayments that are not subject to the deductible or coinsurance: $500
inpatient stay per day, $500 emergency department visit, $25 primary
care office visit, and $55 specialist office visit). All three test
QHPs meet the AV requirements for silver level health plans.
We then entered these test plans into the proposed 2020 AV
Calculator and observed how the reductions in the maximum annual
limitation on cost sharing specified in the PPACA affected the AVs of
the plans. We found that the reduction in the maximum annual limitation
on cost sharing specified in the PPACA for enrollees with a household
income between 100 and 150 percent of FPL (\2/3\ reduction in the
maximum annual limitation on cost sharing), and 150 and 200 percent of
FPL (\2/3\ reduction), will not cause the AV of any of the model QHPs
to exceed the statutorily specified AV levels (94 and 87 percent,
respectively). In contrast, the reduction in the maximum annual
limitation on cost sharing specified in the PPACA for enrollees with a
household income between 200 and 250 percent of FPL (\1/2\ reduction),
will cause the AVs of two of the test QHPs to exceed the specified AV
level of 73 percent. As a result, we proposed that the maximum annual
limitation on cost sharing for enrollees with a household income
between 200 and 250 percent of FPL be reduced by approximately \1/5\,
rather than \1/2\, consistent with the approach taken for benefit years
2017 through 2019. We further proposed that the maximum annual
limitation on cost sharing for enrollees with a household income
between 100 and 200 percent of FPL be reduced by approximately \2/3\,
as specified in the statute, and as shown in Table 9. These proposed
reductions in the maximum annual limitation on cost sharing should
adequately account for unique plan designs that may not be captured by
our three test QHPs. We also note that selecting a reduction for the
maximum annual limitation on cost sharing that is less than the
reduction specified in the statute will not reduce the benefit afforded
to enrollees in the aggregate because QHP issuers are required to
further reduce their annual limitation on cost sharing, or reduce other
types of cost sharing, if the required reduction does not cause the AV
of the QHP to meet the specified level.
We tested again using the numbers based on the final premium
adjustment percentage, which are reflected below, and arrived at the
same conclusions. We are therefore not considering any changes to the
level of the reductions at this time.
In prior years we found, and we continue to find, that for
individuals with household incomes of 250 to 400 percent of FPL,
without any change in other forms of cost sharing, any reduction in the
maximum annual limitation on cost sharing will cause an increase in AV
that exceeds the maximum 70 percent level in the statute. As a result,
we did not propose to reduce the maximum annual limitation on cost
sharing for individuals with household incomes between 250 and 400
percent of FPL.
We note that for 2020, as described in Sec. 156.135(d), states are
permitted to submit for approval by HHS state-specific datasets for use
as the standard population to calculate AV. No state submitted a
dataset by the September 1, 2018 deadline.
Table 9--Reductions in Maximum Annual Limitation on Cost Sharing for
2020
------------------------------------------------------------------------
Reduced maximum
Reduced maximum annual limitation
annual limitation on cost sharing
Eligibility category on cost sharing for other than
for self-only self-only
coverage for 2020 coverage for 2020
------------------------------------------------------------------------
Individuals eligible for cost- $2,700 $5,400
sharing reductions under Sec.
155.305(g)(2)(i) (100-150 percent
of FPL)..........................
Individuals eligible for cost- 2,700 5,400
sharing reductions under Sec.
155.305(g)(2)(ii) (151-200
percent of FPL)..................
Individuals eligible for cost- 6,500 13,000
sharing reductions under Sec.
155.305(g)(2)(iii) (201-250
percent of FPL)..................
------------------------------------------------------------------------
[[Page 17543]]
Comment: One commenter noted that the proposal to reduce the
maximum annual limitation on cost sharing for enrollees with a
household income between 200 and 250 percent of FPL by approximately
\1/5\, rather than \1/2\, consistent with the approach taken for
benefit years 2017 through 2019, hurts their members. The commenter
recommended that HHS rescind its plan to go through with these
regulatory changes and asks that the Administration continue to support
legislation to appropriate CSR funding.
Response: We share the commenter's concern about the impact of a
smaller reduction in cost-sharing on individuals with a household
income between 200-250 percent of FPL. We will continue to monitor plan
AV and benefit design in future years for impact on premiums and out-
of-pocket costs. We are finalizing the reductions with modifications to
reflect the final premium adjustment percentage and maximum annual
limitation on cost-sharing.
g. Application to Cost-Sharing Requirements and Annual and Lifetime
Dollar Limitations (Sec. 156.130)
We proposed several policy changes to cost-sharing requirements,
including a policy change as to what is included as EHB, which would
affect the annual out-of-pocket limitation under PHS Act section
2707(b) and the annual and lifetime dollar limit prohibition under PHS
Act section 2711. Although large group market coverage and self-insured
group health plans are not required to cover all EHB, non-grandfathered
group health plans and health insurance issuers are subject to PHS Act
section 2707(b), and all group health plans and group health insurance
issuers are subject to PHS Act section 2711, which are incorporated by
reference in the Employee Retirement Income Security Act of 1974
(ERISA) and the Code.\180\ To comply with those sections, such plans
and issuers must choose a definition of EHB to determine which benefits
are subject to the annual out-of-pocket limitation and the prohibition
on lifetime and annual dollar limits.\181\ Therefore, these proposals
were relevant to, and would apply to, all health coverage and plans.
---------------------------------------------------------------------------
\180\ Sections 2707(b) and 2711 of the PHS Act apply the annual
cost-sharing limitation on EHBs and the prohibition on annual dollar
limits on EHBs to non-grandfathered non-federal governmental group
health plans of all sizes, and by implication, to large group health
insurance issuers through which such plan provide coverage.
Additionally, section 715 of ERISA and section 9815 of the Code
incorporates those provisions by reference, applying them to non-
grandfathered privately sponsored group health plans and their
health insurance issuers in the small and large group markets.
\181\ Generally, for this purpose, a group health plan or health
insurance issuer that is not required to provide EHB must define
such benefits in a manner that is consistent with--(1) one of the
EHB-benchmark plans applicable in a state under Sec. 156.110, and
including any additional required benefits that are considered EHB
under Sec. 155.170(a)(2) or (2) one of the three Federal Employees
Health Benefits Program plan options as defined by Sec.
156.100(a)(3), supplemented, as necessary, to meet the standards in
Sec. 156.110. For more information regarding the application of the
PHS Act section 2711 to group health plans and issuers, see the
Departments implementing regulations at 26 CFR 54.9815-2711, 29 CRF
2590.715-2711, and Sec. 147.126.
---------------------------------------------------------------------------
i. Cost-Sharing Requirements for Generic Drugs
In 2014, the Departments of Labor, HHS, and the Treasury \182\ (the
tri-departments) released an FAQ on the treatment by large group market
health insurance issuers and self-insured group health plans, with
regard to the annual out-of-pocket limitation, of an individual's out-
of-pocket costs for a brand drug when a generic equivalent is available
and medically appropriate. Because large group market health insurance
issuers and self-insured group health plans are not required to offer
EHB, the FAQ states that such plans may include only generic drugs, if
medically appropriate (as determined by the individual's personal
physician) and available as EHB, while providing a separate option (not
as part of EHB) of selecting a brand drug at a higher cost-sharing
amount, as non-EHB. Thus, such plans could choose not to count toward
the annual limit on cost sharing some or all of the amounts paid toward
the brand drugs that are not EHB, if the participant or beneficiary
selects a brand name prescription drug in circumstances in which a
generic was available and medically appropriate (as determined by the
individual's personal physician).\183\
---------------------------------------------------------------------------
\182\ FAQs About Affordable Care Act Implementation (Part XIX).
May 2, 2014. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs19.html. This FAQ remains in
effect for large group market and self-insured group health plans
despite the fact that the related proposed policy for the individual
and small group markets is not being finalized.
\183\ In determining whether a generic is medically appropriate,
the FAQ provides that a plan may use a reasonable exception process.
For example, the plan may defer to the recommendation of an
individual's personal physician, or it may offer an exceptions
process meeting the requirements of Sec. 156.122(c).
---------------------------------------------------------------------------
The FAQ also states that for non-grandfathered health plans in the
individual and small group markets that must provide coverage of EHB,
additional requirements apply.\184\ This reflects the implementation of
the EHB requirements as implemented in the Patient Protection and
Affordable Care Act (PPACA); Standards Related to Essential Health
Benefits, Actuarial Value and Accreditation; Final Rule (EHB Final
Rule),\185\ in which we stated that plans are permitted to go beyond
the number of drugs offered by the EHB-benchmark plan without exceeding
EHB. We further clarified in the 2016 Payment Notice that, if the plan
is covering drugs beyond the number of drugs covered by the EHB-
benchmark plan, all of these drugs are EHB and cost sharing paid for
the drugs must count toward the annual limitation on cost sharing.\186\
---------------------------------------------------------------------------
\184\ For example, these plans have to meet the EHB drug count
standard at Sec. 156.122(a) that sets a minimum threshold for drug
coverage and while the drug count standard is based on chemically
distinct drugs, these plans have to consider other factors in
establishing their prescription drug benefit.
\185\ 78 FR 12834, 12845 (February 25, 2013).
\186\ 80 FR 10817.
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Given the increase in the cost of prescription drugs, and
particularly brand drugs, in the proposed rule, we stated that HHS
believes additional flexibility is needed for health plans in the
individual and small group markets that must provide coverage of the
EHB to encourage consumers to use more cost effective generic drugs. We
proposed, subject to applicable state law, to allow a plan that covers
both a brand prescription drug and its generic equivalent, for plan
years beginning on or after January 1, 2020, to consider the brand drug
to not be EHB, if the generic drug is available and medically
appropriate for the enrollee, unless coverage of the brand drug is
determined to be required under an exception process at Sec.
156.122(c).
Under such circumstances, if an enrollee purchases the brand drug
when the generic equivalent was available and medically appropriate, we
proposed that the issuer would be permitted to not count the difference
in cost sharing between that which is paid for the brand drug and that
which would be paid for the generic equivalent drug toward the annual
limitation on cost sharing under Sec. 156.130, but would still be
required to attribute the cost sharing that would have been paid for
the generic equivalent toward the annual limitation on cost sharing
under Sec. 156.130. This would maintain a balance between
incentivizing the use of lower-cost drugs and the consumer protection
provided by the annual limitation on cost sharing.
We further proposed that for a plan to do so, the plan must have an
exception process in place in accordance with Sec. 156.122(c) for the
enrollee to request coverage of the brand drug.
[[Page 17544]]
If finalized, this interpretation would have permitted all group
health plans and group health insurance issuers to impose lifetime and
annual dollar limits on such brand drugs because they would no longer
be considered EHB and not be subject to the prohibition on such limits.
HHS also considered an alternate proposal, under which an issuer
would have been permitted to except the entire amount paid by a patient
for a brand drug for which there is a medically appropriate generic
alternative from the annual limitation on cost sharing at Sec.
156.130. Because this alternate proposal also relied on an
interpretation of what is considered EHB, the alternate proposal would
have also applied to non-grandfathered group health plans and health
insurance issuers subject to the annual limit on cost-sharing provision
under PHS Act 2707(b), and in ERISA section 715 and Code section 9815.
We proposed that these changes to the annual limitations on cost
sharing would be effective starting with the 2020 plan year. We
solicited comments on these alternatives, both of which we proposed to
apply to group health plans, group health insurance coverage, and
individual market coverage, regardless of whether they are required to
cover EHBs.
An issuer taking advantage of this proposed flexibility would be
excluding the brand drug from coverage as EHB. Therefore, the issuer
also could have imposed annual or lifetime dollar limits on coverage of
the brand drug under those circumstances. Additionally, PTC (and APTC)
could not be applied to any portion of the premium attributable to
coverage of brand name drugs not covered as EHB, so issuers of QHPs
would be required to calculate that portion of QHPs' premiums and
report it to the applicable Exchange.
We also solicited comments on any limitation on group health plans'
and health insurance issuers' information technology systems being able
to accumulate the cost sharing consistent with this policy, whether
this proposed policy should be subject to or preempt any state law
regarding the application of cost sharing between the generic and
branded version of a drug that would prevent the application of this
proposed policy, and whether an issuer not attributing cost-sharing to
the annual limitation on cost sharing under this approach should be
considered an adverse coverage determination and subject to the
coverage appeals processes under Sec. 147.136.
Finally, we sought comment regarding whether we should require,
instead of permit, issuers to exclude brand drugs from being EHB if the
generic drug is available and medically appropriate for the enrollee,
unless coverage of the brand drug is determined to be required under
the exception process under 156.122(c), and to exclude the cost sharing
for the brand name drug from accumulating toward the annual limitation
on cost sharing according to one of the proposed alternatives.
Comment: A few commenters supported the policy as proposed. Several
commenters suggested that we not finalize this policy due to the
administrative cost and burden of implementing the policy, and the
potentially harmful consequences for those with chronic medical
conditions. Several commenters also expressed concern about being able
to implement the policy for the 2020 plan year. Many commenters noted
the proposal would increase out-of-pocket expenses for enrollees. Some
commenters expressed concern regarding the policies' impact on
actuarial values, which are based on EHB for certain plans. Other
commenters were not in favor of the alternative proposal due to the
complexity and administrative burden of determining cost sharing under
the proposal. Commenters also stated that plans and issuers already
encourage enrollees to use generic drugs, and that the proposed policy
is unnecessary and undermines the definition of EHB. There were several
comments requesting clarification of the term ``generic drug.'' A few
commenters stated that the proposed policy should be optional for
issuers.
Response: In light of commenters' concerns about the complexity of
implementing this proposal, we are not finalizing this proposal at this
time, and will continue to review the points raised by commenters.
ii. Cost-Sharing Requirements and Drug Manufacturers' Coupons
Drug manufacturers often offer coupons to patients to reduce
patient out-of-pocket costs. Drug manufacturers may offer these coupons
for various reasons: To compete with another brand name drug in the
same therapeutic class, to compete with a generic equivalent when
released, or to assist consumers whose drug costs would otherwise be
extremely high due to a rare or costly condition.\187\ Some states
prohibit the use of such coupons if a generic alternative is
available.\188\
---------------------------------------------------------------------------
\187\ Van Nuys, K., Joyce, G., Ribero, R., & Goldman, D.P.
(2018). A Perspective on Prescription Drug Copayment Coupons. Los
Angeles, CA: Leonard D. Schaeffer Center for Health Policy &
Economics.
\188\ For example, see, https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXXII/Chapter175H/Section3.
---------------------------------------------------------------------------
We recognize that copayment support may help beneficiaries by
encouraging adherence to existing medication regimens, particularly
when copayments may be unaffordable to many patients. However, the
availability of a coupon may cause physicians and beneficiaries to
choose an expensive brand-name drug when a less expensive and equally
effective generic or other alternative is available. When consumers are
relieved of copayment obligations, manufacturers are relieved of a
market constraint on drug prices which can distort the market and the
true costs of drugs. Such coupons can add significant long-term costs
to the health care system that may outweigh the short-term benefits of
allowing the coupons, and counter-balance issuers' efforts to point
enrollees to more cost effective drugs.
The Administration has identified high and rising out-of-pocket
costs for prescription drugs, among other issues, as a challenge to
consumers. In some cases, manufacturer coupons may be increasing
overall drug costs and can lead to unnecessary spending by issuers,
which is passed on to all patients in the form of increased premiums
and reduced coverage of other potentially useful health care
interventions. While the PPACA does not speak directly to the
accounting and use of drug manufacturer coupons to the annual
limitation on cost sharing, we believe that the overall intent of the
law was to establish annual limitations on cost sharing that reflect
the actual costs that are paid by the enrollee. The proliferation of
drug coupons supports higher cost brand drugs when generic alternatives
are available which in turn supports higher drug prices and increased
costs to all Americans and for other federal health programs.
For these reasons, at new Sec. 156.130(h)(2), we proposed, for
plan years beginning on or after January 1, 2020, notwithstanding any
other provision of the annual limitation on cost sharing regulation,
that amounts paid toward cost sharing using any form of direct support
offered by drug manufacturers to insured patients to reduce or
eliminate immediate out-of-pocket costs for specific prescription brand
drugs that have a generic equivalent are not required to be counted
toward the annual limitation on cost sharing. Not counting such amounts
toward the annual limitation
[[Page 17545]]
on cost sharing would promote: (1) Prudent prescribing and purchasing
choices by physicians and patients based on the true costs of drugs and
(2) price competition in the pharmaceutical market.
We noted that this proposal, which is permissive, would also apply
to non-grandfathered group health plans, to which the annual out-of-
pocket limitation applies under PHS Act section 2707(b) as incorporated
into the Code and ERISA.
We sought comment on this proposal and whether states should be
able to decide how coupons are treated. Additionally, we sought comment
on whether it would be difficult for issuers to carve out direct
support offered by drug manufacturers from their calculation of
enrollees' payments toward their annual limitation on cost sharing, and
to carve out exceptions (for when a generic equivalent is not
available, for example), when cost sharing paid by direct support
offered by drug manufacturers will be counted toward the annual
limitation on cost sharing, including whether information technology
systems could be easily updated for this purpose. We also sought
comment on issuers' ability to differentiate between drug manufacturer
coupons and other drug coupons, whether their information technology
systems would need modifications to make such differentiation, what a
reasonable implementation date would be if implementation barriers
exist, and how drug discount programs (as opposed to coupons) should be
treated under this proposal. Finally, we sought comment regarding
whether this policy should be limited to QHPs only.
We are finalizing the policy as proposed, subject to the
modifications discussed in the following responses to comments and a
non-substantive grammatical correction. In addition, for consistency
with the terminology currently used in Sec. 156.130, we are making a
non-substantive modification to the finalized regulatory text from
``insured patients'' to ``enrollees''. This modification is not
intended to reflect a change in policy. Under this final rule, issuers
are permitted to utilize this policy only to the extent permissible by
applicable state law.
Comment: Many commenters supported HHS' proposal. Some commenters
recommended that all manufacturer support for cost sharing that is
provided directly to the patient be excluded from the annual limitation
on cost sharing, not just for brand drugs where generic equivalents are
available. Several commenters recommended that HHS update the policy so
that enrollees who indicate they may need a brand-name drug qualify for
the appeals process in Sec. 147.136 or the drug exception process
under Sec. 156.122(c). These commenters stated that if enrollees are
found to require a brand-name drug, the issuer should be required to
count brand drug coupons for that enrollee toward their cost-sharing
limits. Some commenters also noted that coupon and discount programs
are not transparent and recommended that HHS should standardize them to
make their financial aspects more visible to pharmacies and issuers for
purposes of implementing this proposal.
Response: We appreciate the important considerations raised by
commenters, in particular regarding the exclusion of all manufacturer
support for cost sharing that is provided directly to the patients from
the annual limitation on cost sharing. As noted in the proposed rule,
this policy is intended to address the distortion in the market caused
when consumers choose an expensive brand-name drug when a less
expensive and equally effective generic or other alternative is
available. Therefore, the final regulation limits the discretion to
exclude manufacturer coupons from counting towards the annual
limitation on cost sharing for specific prescription brand drugs that
have a generic equivalent, as the availability of a coupon may cause
physicians and patients to choose an expensive brand-name drug when a
less expensive and equally effective generic or other alternative is
available. Where there is no generic equivalent available or medically
appropriate, it is less likely that the manufacturer's coupon would
disincentivize a lower cost alternative and thereby distort the market.
Similarly, when an enrollee is determined through an appeals process in
Sec. 147.136 or the drug exception process under Sec. 156.122(c) to
require a brand drug because the generic or other alternative may not
be available or medically appropriate, the use of the manufacturer
coupon would not disincentivize a less expensive choice. Therefore,
under those circumstances, amounts paid toward cost sharing using any
form of direct support offered by drug manufacturers must be counted
toward the annual limitation on cost sharing. We have added language to
the regulation text to address this clarification.
We believe that standardizing drug manufacturer coupon and discount
programs is outside the scope of this rulemaking. We will consider
these and other comments as we develop future policy in this area.
Comment: Some commenters were concerned that explicitly allowing an
issuer to not count certain third-party payments towards the annual
limitation on cost sharing is contrary to the PPACA. They expressed
concerns that the proposal would increase out-of-pocket costs for
certain patients with serious conditions, make medically necessary
medication less affordable and accessible for them, and jeopardize
their health because they find it more difficult to adhere to their
drug regimen.
Response: We recognize commenters' concerns about the burden
associated with the exclusion of manufacturer coupons from counting
towards the deductible and annual limitation on cost sharing for
specific prescription brand drugs that have a generic equivalent.
However, the availability of a coupon may cause physicians and patients
to choose an expensive brand-name drug when a less expensive and
equally effective generic or other alternative are available. Such
coupons can add significant long-term costs to the health care system
that may outweigh the short-term benefits of allowing the coupons, and
counter-balance issuers' efforts to point enrollees to more cost
effective drugs.
Comment: Some commenters requested that HHS clarify the term
``generic equivalent.'' One commenter suggested the proposed rule be
limited to situations where the generic drug is rated as a therapeutic
equivalent to the branded drug under the FDA Orange Book. Another
commenter stated that the term ``generic equivalent'' was too broad and
failed to reference the FDA's process of testing and approving generic
drugs for use by consumers.
Response: We intended our proposal to refer to the term ``generic
equivalent'' under a commonly understood meaning. Generic drugs
primarily are regulated by the FDA under the Federal Food, Drug, and
Cosmetic Act (FDCA). Therefore, in response to comments, we are
finalizing regulation text to define ``generic'' for this purpose by
reference to the FDCA. This definition is consistent with the
definition of generic used for the Medicare Prescription Drug
Benefit.\189\
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\189\ 42 CFR 423.4.
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Comment: Several commenters were concerned that these changes
should be permissive, but not required for plans and issuers. They
highlighted that issuers may have difficulty in identifying when a
coupon is used by enrollees to purchase drugs at a retail pharmacy. It
may take issuers time to implement operational systems to track use of
coupons.
[[Page 17546]]
Response: We recognize commenters' concerns that use of these
coupons may be difficult to track. Under the regulation, issuers may,
but are not required to, undertake the option to exclude manufacturer
coupons from counting towards the annual limitation on cost sharing.
Comment: Several commenters noted that the final language should
expressly provide that these limitations on coverage only apply to the
extent consistent with state law.
Response: In response to comments, we clarify that the ability to
exclude amounts paid toward cost sharing using any form of direct
support offered by drug manufacturers to insured patients to reduce or
eliminate immediate out-of-pocket costs for specific prescription brand
drugs that have a generic equivalent from being counted toward the
annual limitation on cost sharing is subject to applicable state law.
This means that states can require that such amounts be counted toward
the annual limit on cost sharing. We are modifying the final regulation
text to state this explicitly.
5. Segregation of Funds for Abortion Services (Sec. 156.280)
At Sec. 156.280(c)(3), we proposed that, beginning with plan year
2020, if a QHP issuer provides coverage of non-Hyde abortion services
\190\ in one or more QHPs, the QHP issuer must also offer at least one
``mirror QHP'' that omits coverage of non-Hyde abortion services
throughout each service area in which it offers QHP coverage through
the Exchange, to the extent permissible under state law. We proposed
that a ``mirror QHP'' provide identical benefit coverage to one of the
QHPs with non-Hyde abortion coverage, with the exception of the
inclusion of the coverage of non-Hyde abortion services. We received
over 25,000 comments on this proposal, and are in the process of
reviewing them. As we are still reviewing the comments, we are not able
to finalize this proposal in the timeframe necessary to ensure that
issuers are able to implement such a change before the opening of the
QHP certification application window for the 2020 benefit year. We may
finalize it in a future rulemaking. If we finalize this provision in
future rulemaking, it would not take effect sooner than the 2021
benefit year.
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\190\ The Hyde Amendment as currently in effect permits federal
funds to be used for abortions only in the limited cases of rape,
incest, or if a woman suffers from a life-threatening physical
disorder, physical injury, or physical illness, including a life-
endangering physical condition caused by or arising from the
pregnancy itself, as certified by a physician. It further prohibits
the use of federal funds for health benefits coverage that includes
coverage of abortions in instances beyond those limited
circumstances. In this rule, those services falling outside the
scope of the Hyde Amendment are ``non-Hyde abortion services.''
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6. Quality Standards (Sec. Sec. 156.1120, 156.1125, 156.1130)
Regulatory reform and reducing regulatory burden are high
priorities for us. To lower health care costs, enhance patient care,
and reduce the regulatory burden on the health care industry, including
for health plan issuers and the providers who deliver services through
their plans, in October 2017, we launched the Meaningful Measures
Initiative.\191\ This initiative is one component of our agency-wide
Patients Over Paperwork Initiative.\192\
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\191\ ``Meaningful Measures Hub.'' May 5, 2018. Available at
https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/MMF/General-info-Sub-Page.html.
\192\ Remarks by Administrator Seema Verma at the Health Care
Payment Learning and Action Network (LAN) Fall Summit, as prepared
for delivery on October 30, 2017. Available at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2017-Fact-Sheet-items/2017-10-30.html.
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The Meaningful Measures Framework is a strategic tool for putting
patients over paperwork by identifying the highest priority areas for
quality measurement and quality improvement, to assess the core quality
of care issues that are most vital to advancing our work to improve
patient outcomes. This initiative is a new approach to quality measures
that will foster operational efficiencies that include decreasing data
collection and reporting burden while focusing on quality measurement
aligned with meaningful outcomes.
By including Meaningful Measures in our quality reporting and
quality improvement programs such as the Quality Rating System, QHP
Enrollee Experience Survey and the Quality Improvement Strategy, we
believe that we can also address the following cross-cutting measure
criteria:
Eliminating disparities;
Tracking measurable outcomes and impact;
Safeguarding public health;
Achieving cost savings;
Improving access for rural communities; and
Reducing burden.
We encourage QHP issuers to use performance measures aligned with
the Meaningful Measures Initiative in fulfilling their certification
requirement to implement a Quality Improvement Strategy that provides
increased reimbursement or other market-based incentives for improving
health outcomes of plan enrollees.
In addition, we will continue to assess quality measures in our
programs including the Quality Rating System and the QHP Enrollee
Experience Survey, to ensure that we are using a parsimonious set of
the most meaningful measures for patients, clinicians, and health plans
in those quality programs. If we propose any changes or removal of
measures, we will include those for public comment in the Annual Call
Letter for the QRS and QHP Enrollee Survey,\193\ as well as address
potential changes to information collection requirements to comply with
the Paperwork Reduction Act.
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\193\ Final 2018 Call Letter for the QRS and QHP Enrollee
Survey. Available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/2018-QRS-Call-Letter_July2018.pdf.
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Comment: Several commenters supported quality standards across the
Exchanges, as well as the Meaningful Measures initiative to help
streamline measures across quality reporting and quality improvement
programs. One commenter recommended the stratification of quality
measures by race, ethnicity, language, socioeconomic status, sex,
gender identity, sexual orientation, disability, and other demographic
factors and that we prioritize the inclusion of disparities-sensitive
and health equity measures in the Meaningful Measures areas across
domains. Some commenters mentioned that quality activities, such as the
Quality Rating System and the QHP Enrollee Survey, empower consumers,
promote high value care and are critical functions of an Exchange. Some
commenters urged transparency of both price and quality data to help
consumers choose high quality care.
Response: We did not propose updates to the Quality Rating System,
QHP Enrollee Survey or Quality Improvement System regulations in the
proposed rule. We appreciate the comments and will take them into
consideration as we continue implementing CMS quality reporting
programs such as the Quality Rating System, QHP Enrollee Survey and
Quality Improvement Strategy.
7. Direct Enrollment With the QHP Issuer in a Manner Considered To Be
Through the Exchange (Sec. 156.1230)
As described in the preamble to Sec. Sec. 155.220, 155.221, and
155.415, we proposed significant changes to these regulations to
streamline and consolidate the requirements applicable to all direct
enrollment entities--both QHP issuers and web-brokers. To reflect these
changes, we also proposed conforming changes in Sec. 156.1230(a)(2)
[[Page 17547]]
and (b). We proposed to amend Sec. 156.1230(b) to add a new paragraph
(b)(1) that will require issuers participating in direct enrollment to
comply with the applicable requirements in Sec. 155.221. We also
proposed to delete and reserve paragraph (a)(2) of Sec. 156.1230 to
reduce redundancies in light of the proposed changes to Sec. 155.415.
We did not receive any comments specific to the proposed changes to
Sec. 156.1230 and are finalizing these changes as proposed. For a more
thorough discussion of these changes, please see the preamble to
Sec. Sec. 155.220, 155.221, and 155.415.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), we are required to
provide 30-day notice in the Federal Register and solicit public
comment before a collection of information requirement is submitted to
OMB for review and approval. This final rule contains information
collection requirements (ICRs) that are subject to review by OMB. A
description of these provisions is given in the following paragraphs
with an estimate of the annual burden, summarized in Table 11. To
fairly evaluate whether an information collection should be approved by
OMB, section 3506(c)(2)(A) of the PRA requires that we solicited
comment on the following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We solicited public comment on each of the required issues under
section 3506(c)(2)(A) of the PRA for the following information
collection requirements.
A. Wage Estimates
To derive wage estimates, we generally used data from the Bureau of
Labor Statistics to derive average labor costs (including a 100 percent
increase for fringe benefits and overhead) for estimating the burden
associated with the ICRs.\194\ Table 10 in this final rule presents the
mean hourly wage, the cost of fringe benefits and overhead, and the
adjusted hourly wage.
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\194\ See May 2017 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates. Available at https://www.bls.gov/oes/current/oes_nat.htm.
---------------------------------------------------------------------------
As indicated, employee hourly wage estimates have been adjusted by
a factor of 100 percent. This is necessarily a rough adjustment, both
because fringe benefits and overhead costs vary significantly across
employers, and because methods of estimating these costs vary widely
across studies. Nonetheless, there is no practical alternative, and we
believe that doubling the hourly wage to estimate total cost is a
reasonably accurate estimation method.
Table 10--Adjusted Hourly Wages Used in Burden Estimates *
----------------------------------------------------------------------------------------------------------------
Fringe benefits
Occupation title Occupational Mean hourly and overhead ($/ Adjusted hourly
code wage ($/hr.) hr.) wage ($/hr.)
----------------------------------------------------------------------------------------------------------------
All Occupations............................. 00-0000 $24.34 $24.34 $48.68
----------------------------------------------------------------------------------------------------------------
* Note that only the occupations related to the ICRs being finalized are included in the table.
B. ICRs Regarding Risk Adjustment Data Validation Exemptions (Sec.
153.630(g))
In this final rule, we are codifying Sec. 153.630(g)(3), under
which an issuer will be exempt from risk adjustment data validation,
beginning with the 2018 benefit year of risk adjustment data
validation, if an issuer is in liquidation, or will enter liquidation
no later than April 30th of the benefit year that is 2 benefit years
after the benefit year being audited, provided that the issuer meets
certain requirements. To qualify for this exemption, the issuer must
provide to HHS, in a manner and timeframe to be specified by HHS, an
attestation that the issuer will enter liquidation no later than April
30th of the benefit year that is 2 benefit years after the benefit year
being audited that is signed by an individual who can legally and
financially bind the issuer. To qualify for the exemption, an issuer
also could not have been a positive error rate outlier in the prior
benefit year's risk adjustment data validation. We continue to
anticipate that fewer than 10 issuers will submit this information to
HHS annually. Under 5 CFR 1320.3(c)(4), this ICR will not be subject to
the PRA, as it will affect fewer than 10 entities in a 12-month period.
We are finalizing the proposal to codify at Sec. 153.630(g)(1) and
(2) two exemptions for certain issuers from risk adjustment data
validation that were finalized in the 2018 and 2019 Payment Notices.
The reduction in burden for issuers who meet the criteria to be
exempted under proposed Sec. 153.630(g)(1) and (2) was estimated in
those rules, and have been incorporated into OMB Control Number 0938-
1155 (CMS-10401--``Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment). Codifying these policies as part of HHS
regulations as finalized in this rulemaking will not affect current
burden estimates.
C. ICRs Regarding Agent or Broker Termination and Web Broker Data
Collection (Sec. 155.220)
We are finalizing the requirement at Sec. 155.220(c)(4)(i)(A), for
web-brokers to provide HHS a list of agents or brokers that by contract
or other arrangement use the web-broker's website to assist consumers
with QHP selection or completion of the Exchange eligibility
application, in a form and manner to be specified by HHS. Currently,
Sec. 155.220(c)(4)(i)(A) requires the provision of this information if
requested by HHS. The burden on a web-broker to comply with this
requirement is covered by the information collection currently approved
under OMB control number 0938-1349 (CMS-10650--State Permissions for
Enrollment in Qualified Health Plans in the Federally Facilitated
Exchange & Non-Exchange Entities).
We are finalizing the provision at Sec. 155.220(g)(3)(ii), to
allow HHS to immediately terminate an agent's or broker's agreement(s)
with the FFEs for cause with notice if an agent or broker fails to
comply with the requirement to maintain the appropriate licensure in
every state in which the agent or broker actively assists consumers
with enrolling in QHPs on the FFEs or SBE-FPs. An agent or broker whose
agreement(s) with the FFEs are immediately terminated for cause under
[[Page 17548]]
the new proposed paragraph (g)(3)(ii) will be able to request
reconsideration under Sec. 155.220(h). Although the process to request
reconsideration imposes a small burden on agents or brokers subjected
to terminations, we anticipate fewer than 10 terminations annually
under this new authority. Under 5 CFR 1320.3(c)(4), this ICR will not
be subject to the PRA as we anticipate it will affect fewer than 10
entities in a 12-month period.
We are finalizing the proposal at Sec. 155.220(m)(3), that the
Exchange may collect from a web-broker during its registration with the
Exchange under Sec. 155.220(d)(1) or at another time on an annual
basis, in a form and manner specified by HHS, information sufficient to
identify the individuals who comprise the entity's corporate leadership
or ownership, as well as any corporate or business relationships with
other entities that may seek to register with the FFE as a web-broker.
We believe the burden on a web-broker to comply with these requirements
is covered by the information collection currently approved under OMB
control number 0938-1349 (CMS-10650--State Permissions for Enrollment
in Qualified Health Plans in the Federally Facilitated Exchange & Non-
Exchange Entities). In the supporting statement for that information
collection, we stated web-brokers will also be required to provide
other documentation as requested in response to emerging compliance
issues, for HHS to monitor compliance. The information we proposed to
collect based on proposed Sec. 155.220(m)(3) is the type of
information we anticipated when we referenced other documentation in
response to emerging compliance issues.
D. ICRs Regarding Direct Enrollment Entity Standardized Disclaimer
(Sec. 155.221)
We are finalizing the proposed provision at Sec. 155.221(b)(2) to
require direct enrollment entities (both QHP issuers and web-brokers)
to prominently display a standardized disclaimer, in the form and
manner provided by HHS, to assist consumers in distinguishing between
direct enrollment entity website pages that display QHPs and those that
display non-QHPs during a single shopping experience. HHS will provide
the exact text for this disclaimer and the language will not need to be
customized. As described in the preamble, we will provide further
information on the text and other display details for the standardized
disclaimer in guidance. At that time, we will estimate the burden
associated with this requirement, solicit public comment, and request
OMB approval in accordance with the PRA, as may be necessary.
E. ICRs Regarding Special Enrollment Periods (Sec. 155.420)
We are finalizing the proposed special enrollment period at Sec.
155.420(d)(6)(v), which will be subject to pre-enrollment verification
of eligibility for the FFEs. Where possible, the FFE makes every effort
to verify an individual's eligibility for the applicable special
enrollment period through automated electronic means instead of through
an applicant's submission of documentation. Consistent with other
special enrollment periods subject to pre-enrollment verification,
individuals will be required to provide supporting documentation \195\
within 30 days of plan selection.
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\195\ Consumer submitted documents currently accepted by the FFE
for purposes of demonstrating prior coverage and verifying attested
income are available at https://www.healthcare.gov/help/prove-coverage-loss/ and https://www.healthcare.gov/verify-information/documents-and-deadlines/, respectively.
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We estimate an additional 4,700 consumers will submit documents
annually to verify their eligibility to enroll through the proposed
special enrollment period in the FFE, and that a consumer will, on
average, spend approximately 1 hour gathering and submitting required
documentation. Using the average hourly wage for all occupations (at an
hourly rate of $48.68), we estimate the opportunity cost to a consumer
completing this task to be approximately $48.68. We estimate the total
annual burden on those consumers submitting documentation will be
approximately 4,700 hours with an equivalent cost of approximately
$228,796.
We are revising the information collection currently approved under
OMB control number 0938-1207 (CMS-10468--Medicaid and Children's Health
Insurance Programs: Essential Health Benefits in Alternative Benefit
Plans, Eligibility Notices, Fair Hearing and Appeal Processes, and
Premiums and Cost Sharing; Exchanges: Eligibility and Enrollment) to
account for this additional burden. SBEs that choose to operationalize
the proposed special enrollment period are encouraged to follow the
same approach for pre-enrollment verification of special enrollment
period eligibility.
F. ICRs Regarding Eligibility Standards for Exemptions (Sec. 155.605)
We do not anticipate that the amendment to Sec. 155.605(e) will
create additional costs on, or burdens to, the Exchanges. We anticipate
it will decrease burden on those consumers who, when applying for a
hardship exemption, choose to apply for the exemption through the IRS
for 2018, saving them approximately 16 minutes since they will not be
required to complete the exemption application or submit supporting
documentation. HHS will continue to process exemptions under current
regulations for all SBEs that elect this option, and anticipates a
decrease in the volume of exemptions processed.
Based on historical data of the exemptions program and anticipating
a decrease in individuals applying for exemptions as a result of the
Tax Cuts and Jobs Act that reduced to $0 the individual shared
responsibility payment for months beginning after December 31, 2018, we
estimate that approximately 50,000 individuals will apply for a
hardship exemption annually through the FFE.\196\ We expect 60 percent
of those individuals will apply for a hardship exemption through the
IRS for 2018, totaling 30,000 requests.
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\196\ Although the Tax Cuts and Jobs Act reduces to $0 the
individual shared responsibility payment for months beginning after
December 31, 2018, individuals may still have a need to seek a
hardship exemption for 2019 and future years due to a lack of
affordable coverage based on projected income.
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We estimate that the annual reduction in burden for the expected
30,000 hardship exemptions through the IRS for 2018 will be
approximately 8,100 hours. Using the average hourly wage for all
occupations (at an hourly rate of $48.68 per hour) we estimate that the
annual reduction in cost for each consumer will be approximately $13,
and the annual cost reduction for all consumers applying for hardship
exemptions through the IRS for 2018 will be approximately $394,308.
We anticipate the burden will also be reduced for those consumers
who currently apply through Connecticut.\197\ Based on the population
of Connecticut, we expect 330 consumers from that state will apply for
a hardship exemption through the IRS for 2018, as opposed to through
the state Exchange. We estimate that the annual reduction in burden for
the 330 hardship exemptions through the IRS will be approximately 89
hours. Using the average hourly wage for all occupations (at an hourly
rate of $48.68 per hour) we estimate the annual reduction in cost for
each consumer will be approximately $13, and the annual cost reduction
for all consumers in Connecticut applying for a hardship
[[Page 17549]]
exemption through the IRS for 2018 will be approximately $4,337.
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\197\ HHS processes exemptions for all SBEs except Connecticut.
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We will revise the information collection currently approved under
OMB control number 0938-1190 (CMS-10466--Patient Protection and
Affordable Care Act: Exchange Functions Eligibility for Exemptions) to
account for this burden reduction.
G. Summary of Annual Burden Estimates for Requirements
Table 11--New Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per Hourly labor
Regulation section(s) OMB control No. Respondents Responses response Total annual cost of Total cost ($)
(hours) burden (hours) reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
155.420(d)(6)(v)................ 0938-1207............. 4,700 4,700 1 4,700 $48.68 $228,796
-----------------------------------------------------------------------------------------------
Total....................... ...................... 4,700 4,700 .............. 4,700 .............. $228,796
--------------------------------------------------------------------------------------------------------------------------------------------------------
* There are no capital/maintenance costs associated with the information collection requirements contained in this final rule; therefore, we have
removed the associated column from Table 11.
H. Submission of PRA-Related Comments
We have submitted a copy of this final rule to OMB for its review
of the rule's information collection and recordkeeping requirements.
These requirements are not effective until they have been approved by
the OMB.
To obtain copies of the supporting statement and any related forms
for the collections discussed in this rule, please visit CMS' website
at www.cms.hhs.gov/PaperworkReductionActof1995, or call the Reports
Clearance Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the ADDRESSES section of this final rule
and identify the final rule (CMS-9926-F), the ICR's CFR citation, CMS
ID number, and OMB control number.
ICR-related comments are due May 28, 2019.
V. Regulatory Impact Analysis
A. Statement of Need
This final rule finalizes standards related to the risk adjustment
program for the 2020 benefit year, clarifications and improvements to
the risk adjustment data validation program, as well as certain
modifications that will promote transparency, innovation in the private
sector, reduce burden on stakeholders, and improve program integrity.
The Premium Stabilization Rule, previous Payment Notices, and final
risk adjustment \198\ rules provided details on the implementation of
the risk adjustment program, including the specific parameters
applicable for the 2014, 2015, 2016, 2017, 2018, and 2019 benefit
years. This final rule finalizes additional standards related to cost-
sharing parameters; the Exchanges, including exemptions, eligibility
and enrollment; calculation of the premium adjustment percentage; and
FFE and SBE-FP user fees.
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\198\ Adoption of the Methodology for the HHS-Operated Permanent
Risk Adjustment Program Under the Patient Protection and Affordable
Care Act for the 2017 Benefit Year, Final Rule, 83 FR 36456 (July
30, 2018) and Patient Protection and Affordable Care Act; Adoption
of the Methodology for the HHS-Operated Permanent Risk Adjustment
Program for the 2018 Benefit Year, Final Rule, 83 FR 63419 (Dec. 10,
2018).
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B. Overall Impact
We have examined the impacts of this final rule as required by
Executive Order 12866 on Regulatory Planning and Review (September 30,
1993), Executive Order 13563 on Improving Regulation and Regulatory
Review (January 18, 2011), the Regulatory Flexibility Act (RFA)
(September 19, 1980, Pub. L. 96-354), section 202 of the Unfunded
Mandates Reform Act of 1995 (March 22, 1995, Pub. L. 104-4), Executive
Order 13132 on Federalism (August 4, 1999), the Congressional Review
Act (5 U.S.C. 804(2)), and Executive Order 13771 on Reducing Regulation
and Controlling Regulatory Costs (January 30, 2017).
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. A regulatory impact analysis (RIA) must be prepared for
rules with economically significant effects ($100 million or more in
any 1 year).
Section 3(f) of Executive Order 12866 defines a ``significant
regulatory action'' as an action that is likely to result in a rule:
(1) Having an annual effect on the economy of $100 million or more in
any 1 year, or adversely and materially affecting a sector of the
economy, productivity, competition, jobs, the environment, public
health or safety, or state, local or tribal governments or communities
(also referred to as ``economically significant''); (2) creating a
serious inconsistency or otherwise interfering with an action taken or
planned by another agency; (3) materially altering the budgetary
impacts of entitlement grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raising novel
legal or policy issues arising out of legal mandates, the President's
priorities, or the principles set forth in the Executive Order. A RIA
must be prepared for major rules with economically significant effects
($100 million or more in any 1 year), and a ``significant'' regulatory
action is subject to review by OMB. HHS has concluded that this final
rule is likely to have economic impacts of $100 million or more in at
least 1 year, and therefore, meets the definition of ``significant
rule'' under Executive Order 12866. Therefore, HHS has provided an
assessment of the potential costs, benefits, and transfers associated
with this final rule. In accordance with the provisions of Executive
Order 12866, this regulation was reviewed by the Office of Management
and Budget.
The provisions in this final rule aim to ensure taxpayer money is
more appropriately spent and that states have additional flexibility
and control over their insurance markets. They will reduce regulatory
burden, and reduce administrative costs for consumers and direct
enrollment entities.
HHS anticipates that the provisions of this final rule will help
further the HHS' goal of ensuring that all consumers have access to
quality and affordable health care and are able to make informed
[[Page 17550]]
choices, that the insurance market offers choices, and that states have
more control and flexibility over the operation and establishment of
Exchanges. Affected entities such as direct enrollment entities, and
QHP issuers will incur costs to comply with the proposed new
provisions, for example, those related to direct enrollment; and states
will incur costs if they choose to implement the new special enrollment
period. In accordance with Executive Order 12866, HHS believes that the
benefits of this regulatory action justify the costs.
C. Impact Estimates of the Payment Notice Provisions and Accounting
Table
In accordance with OMB Circular A-4, Table 12 depicts an accounting
statement summarizing HHS' assessment of the benefits, costs, and
transfers associated with this regulatory action.
This final rule implements standards for programs that will have
numerous effects, including providing consumers with access to
affordable health insurance coverage, reducing the impact of adverse
selection, and stabilizing premiums in the individual and small group
health insurance markets and in an Exchange. We are unable to quantify
all benefits and costs of this final rule. The effects in Table 12
reflect qualitative impacts and estimated direct monetary costs and
transfers resulting from the provisions of this final rule for health
insurance issuers and consumers. The annualized monetized costs
described in Table 12 reflect direct administrative costs and savings
to health insurance issuers and consumers as a result of the provisions
regarding special enrollment periods, use of direct enrollment entity
application assisters to carry out responsibilities currently performed
by agents or brokers, and applying for hardship exemptions. The
annualized monetized transfers described in Table 12 include changes to
costs associated with the risk adjustment user fee paid to HHS by
issuers, the potential increase in PTC for those qualifying individuals
that use the new special enrollment period, and the potential decrease
in PTC and increase in health insurance provider fees and employer
shared responsibility payments due to the change in the premium
adjustment percentage, and the corresponding changes the Department of
the Treasury and the IRS are expected to make with regard to their
policies on calculating these parameters. We are finalizing the risk
adjustment user fee of $2.16 per billable member per year for the 2020
benefit year to operate the risk adjustment program on behalf of
states,\199\ which we estimate to cost approximately $50 million in
benefit year 2020. We expect risk adjustment user fee transfers from
issuers to the federal government to increase by $10 million, compared
to the $40 million estimated for the 2019 benefit year; this increase
is included in Table 12. Additionally, we are finalizing an FFE user
fee rate of 3.0 percent of premiums for the 2020 benefit year, which is
lower than the 3.5 percent FFE user fee rate finalized for 2014 to 2019
benefit years. We are also finalizing an SBE-FP user fee rate of 2.5
percent of premiums for the 2020 benefit year, which is lower than the
3.0 percent SBE-FP user fee rate we finalized for the 2019 benefit
year. Also, we are updating the premium adjustment percentage for the
2020 benefit year, resulting in a final premium adjustment percentage
of 1.2895211380 percent.
---------------------------------------------------------------------------
\199\ As noted earlier in this final rule, no state has elected
to operate the risk adjustment program for the 2020 benefit year;
therefore, HHS will operate the program for all 50 states and the
District of Columbia.
Table 12--Accounting Table
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Benefits:
----------------------------------------------------------------------------------------------------------------
Qualitative:
Greater market stability resulting from updates to the risk adjustment methodology.................
Potential increased enrollment in the individual market stemming from lower premiums due to
expansion of direct enrollment opportunities, leading to improved access to health care for the previously
uninsured, especially individuals with medical conditions, which will result in improved health and
protection from the risk of catastrophic medical expenditures..............................................
Greater continuity of coverage for consumers related to the special enrollment period..............
Reduced Navigator training compliance burden and increased flexibility in training design for
Exchanges by streamlining the existing training topics into four broad categories..........................
Reduced burden to FFE Navigators by making the duties listed at Sec. 155.210(e)(9) permissible
for FFE Navigators, not required...........................................................................
Strengthened program integrity related to agents and brokers and direct enrollment entities........
Reduction in burden associated with risk adjustment data validation for issuers eligible for the
liquidation exemption......................................................................................
Potential reduction in economic distortions, and improvement in economic efficiency as a result of
the reduction in Exchange enrollment due to the change in the method of calculating the premium adjustment
percentage.................................................................................................
----------------------------------------------------------------------------------------------------------------
Costs: Estimate Year Discount Period
(million) dollar rate covered
(percent)
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... -$14.042 2018 7 2019-2023
-$14.037 2018 3 2019-2023
----------------------------------------------------------------------------------------------------------------
Quantitative:
Costs incurred by issuers and consumers to comply with provisions related to special enrollment
periods....................................................................................................
Reduction in burden and costs for consumers applying for hardship exemptions through IRS...........
Reduction in burden and cost for direct enrollment entities that choose to use direct enrollment
entity application assisters to carry out responsibilities currently performed by agents or brokers........
Regulatory familiarization costs...................................................................
----------------------------------------------------------------------------------------------------------------
Qualitative:
Costs to issuers due to increases in providing medical services if health insurance enrollment
increases..................................................................................................
Potential costs to Exchanges that opt to implement the special enrollment period for qualified
individuals who experience a decrease in household income and are newly determined eligible for APTC, and
to issuers for processing related enrollments and terminations.............................................
----------------------------------------------------------------------------------------------------------------
[[Page 17551]]
Transfers: Estimate Year Discount Period
(million) Dollar Rate Covered
(percent)
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized ($/year)........... $954 2018 7 2019-2023
$976.6 2018 3 2019-2023
----------------------------------------------------------------------------------------------------------------
Quantitative:
Transfer from health insurance issuers to the federal government of $50 million as risk adjustment
user fees for 2023 (the amount will increase by $10 million from that previously estimated for 2020-2022)..
Transfer from federal government of $15.3 million in premium tax credits to consumers enrolling
through special enrollment period..........................................................................
Health Insurance Providers Fees of approximately $50 million in 2020 and $70 million per year
between 2021 and 2023, which is a transfer from issuers to the federal government, and Employer Shared
Responsibility Payments of $100 million in 2020 and $110 million per year between 2021 and 2023, which is a
transfer from employers to the federal government..........................................................
Reductions in federal premium tax credit spending of approximately $980 million in 2020, $1.04
billion in 2021, $1.09 billion in 2022 and $1.15 billion in 2023, which is a transfer from consumers to the
federal government, due to the change in the method of calculating the premium adjustment percentage.......
Between 2020 and 2023, net premium increases of approximately 1 percent or $181 million in
additional net premiums per year, which is a transfer from consumers and the federal government to issuers.
----------------------------------------------------------------------------------------------------------------
Qualitative:
The net effect on premiums is uncertain............................................................
Potential increase in federal and state uncompensated care costs as a result of lower Exchange
enrollment due to the change in the method of calculating the premium adjustment percentage................
----------------------------------------------------------------------------------------------------------------
This RIA expands upon the impact analyses of previous rules and
utilizes the Congressional Budget Office's (CBO) analysis of the
PPACA's impact on federal spending, revenue collection, and insurance
enrollment. The PPACA transitional reinsurance and temporary risk
corridors programs ended after the 2016 benefit year. Therefore, the
costs associated with those programs are not included in Tables 12 or
13 for fiscal years 2020-2023. Table 13 summarizes the effects of the
risk adjustment program on the federal budget from fiscal years 2019
through 2023, with the additional, societal effects of this final rule
discussed in this RIA. We do not expect the provisions of this final
rule to significantly alter CBO's estimates of the budget impact of the
risk adjustment program that is described in Table 13. We note that
transfers associated with the risk adjustment program were previously
estimated in the Premium Stabilization Rule; therefore, to avoid
double-counting, we do not include them in the accounting statement for
this final rule (Table 12).
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
Based on this internal analysis, we anticipate that the quantitative
effects of the provisions in this final rule are consistent with our
previous estimates in the 2019 Payment Notice for the impacts
associated with the APTC, the premium stabilization programs, and FFE
user fee requirements.
Table 13--Estimated Federal Government Outlays and Receipts for the Risk Adjustment Programs From Fiscal Year 2019-2023
[In billions of dollars]
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 2019 2020 2021 2022 2023 2019-2023
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment Program Payments........................ 5 6 6 6 7 30
Risk Adjustment Program Collections *................... 5 6 6 7 7 31
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note 1: Risk adjustment program payments and receipts lag by one quarter. Receipts will fully offset payments over time.
Note 2: The CBO score reflects an additional $1 million in payments in FY 2018 that are collected in prior fiscal years. CBO does not expect a shortfall
in these programs.
Source: Congressional Budget Office. Federal Subsidies for Health Insurance Coverage for People Under Age 65: 2018 to 2028 Table 2. May 2018. Available
at https://www.cbo.gov/system/files?file=2018-06/51298-2018-05-healthinsurance.pdf.
1. Risk Adjustment
The risk adjustment program is a permanent program created by
section 1343 of the PPACA that collects charges from issuers with
lower-than-average risk populations and uses those funds to make
payments to issuers with higher-than-average risk populations in the
individual, small group, and merged markets (as applicable), inside and
outside the Exchanges. We established standards for the administration
of the risk adjustment program in subparts A, B, D, G, and H of 45 CFR
part 153.
A state approved or conditionally approved by the Secretary to
operate an Exchange may establish a risk adjustment program, or have
HHS do so on its behalf. Consistent with Sec. 153.610(f), if HHS
operates risk adjustment on behalf of a state, it will fund its risk
adjustment program operations by assessing a risk adjustment user fee
on issuers of risk adjustment covered plans. For the 2020 benefit year,
we estimated that the total cost for HHS to operate the risk adjustment
program on behalf of all states will be approximately $50 million, and
that the risk adjustment user fee will be approximately $2.16 per
billable member per year, or $0.18 PMPM. The updated cost estimates
attribute all costs related to the EDGE server data collection and data
evaluation (quantity and quality evaluations) activities to the risk
adjustment program, rather than sharing
[[Page 17552]]
them with the reinsurance program, which is no longer operational.
Previously, we had collected amounts for reinsurance administrative
expenses, which partially funded contracts that were used for both the
risk adjustment and reinsurance programs. Now, those costs are borne by
the risk adjustment program alone. Additionally, based on experience
with the risk adjustment data validation program's development and
execution, including development of the new risk adjustment data
validation audit tool and additional contractor support for processing
risk adjustment data validation discrepancies and appeals, we estimate
higher costs associated with the risk adjustment data validation
program. Finally, we are incorporating the full amount of eligible
personnel and administrative costs associated with risk adjustment
program development and operations, including indirect costs, in the
risk adjustment user fee for the 2020 benefit year. The personnel and
administrative costs included in the calculation of the 2019 benefit
year risk adjustment user fees in the 2019 Payment Notice final rule
incorporated only a portion of the eligible personnel costs, and
excluded indirect costs. Finally, we estimate similar billable member
month enrollment for the 2020 benefit year as the most recent 2017
benefit year individual and small group market enrollment.
We believe that the approach of blending (or averaging) 3 years of
separately solved coefficients from the 2016 and 2017 benefit year
enrollee-level EDGE data with the 2015 MarketScan[supreg] data will
provide stability within the risk adjustment program and minimize
volatility in changes to risk scores from the 2019 benefit year to the
2020 benefit year due to differences in the datasets' underlying
populations. Furthermore, we are finalizing the use of enrollee-level
EDGE data and reports extracted from issuer EDGE servers to calibrate
and operationalize HHS programs for the individual and small group
(including merged) market programs, as well as to more broadly conduct
policy analysis for the individual and small group (including merged)
markets.
2. Risk Adjustment Data Validation (Sec. 153.630)
Under Sec. 153.630, we proposed a few changes to the requirements
for risk adjustment data validation.
We are finalizing the changes to the pairwise means test that will
increase the second validation audit sample to the full 200 enrollee
sample size (rather than 100) in certain cases. We do not believe this
policy will increase the burden on issuers because the second
validation audit is conducted by HHS, not issuers, and issuers are
already required to provide the initial and second validation audit
entities with the documentation necessary to complete the audits for
all 200 enrollees sampled. Instead, we believe that increasing the
second validation audit sample size to the full initial validation
sample of 200 enrollees, in certain cases, may increase the costs to
the federal government of conducting the second validation audit, as
HHS will now review the documentation submitted for all 200 enrollees,
rather than only 100 in certain cases. However, we believe that the
benefits from improving the process for validating the second
validation audit results and the accompanying precision it will bring
to risk score error rate adjustments will outweigh the increased costs
to the federal government and better ensure the integrity of the risk
adjustment program.
We are finalizing our proposal to incorporate prescription drugs
into risk adjustment data validation as part of the data validation
process. We believe that it is important that prescription drugs are
validated as part of risk adjustment data validation, as the HHS-
operated risk adjustment methodology started incorporating prescription
drug factors beginning with the 2018 benefit year. HHS previously
estimated the burden of incorporating drugs in risk adjustment data
validation in the 2018 Payment Notice.
The exemptions in this final rule for risk adjustment data
validation codify two policies finalized in the 2018 and 2019 Payment
Notices and also include one new exemption policy for issuers in or
entering liquidation. The impact of the previously finalized exemptions
was addressed in the 2018 and 2019 Payment Notices. We believe that the
number of issuers that will qualify for the exemption for issuers in
liquidation will be very small each year, and therefore, we believe
that the overall reduction in burden will be limited. However, those
issuers that are exempted from risk adjustment data validation will
have less burden and administrative costs than an issuer subject to
these requirements.
3. Ability of States To Permit Agents and Brokers To Assist Qualified
Individuals, Qualified Employers, or Qualified Employees Enrolling in
QHPs (Sec. 155.220)
In Sec. 155.220(c)(3)(i), the new paragraph (c)(3)(i)(L) prohibits
web-brokers from displaying QHP recommendations on their websites based
on compensation a web-broker, agent, or broker receives from QHP
issuers. Web-brokers often collect certain information from consumers
and on the basis of that information display or sort QHPs, or apply a
score to all available QHPs, indicating which QHP they believe is the
best option for those consumers. We support the development and use of
innovative consumer-assistance tools that may help consumers select
QHPs that best fit their needs. However, we believe such
recommendations should be based on information consumers have provided
to web-brokers and not based on compensation received from QHP issuers
when consumers enroll in their plans. We are not aware of any web-
brokers currently recommending QHPs based on compensation received from
QHP issuers, so we expect the impact of this provision to be very
limited.
We are finalizing the requirement in Sec. 155.220(c)(4)(i)(A) for
web-brokers to provide HHS with a list of agents or brokers who,
through a contract or other arrangement, use the web-brokers' websites
to assist consumers with QHP selection or completion of the Exchange
eligibility application, in a form or manner to be specified by HHS.
The authority currently exists for HHS to obtain this information by
request. However, due to the trend of increased use and expansion of
direct enrollment pathways, we believe it is appropriate and necessary
to collect this information proactively, so that we may respond more
efficiently and effectively to any potential instances of noncompliance
that may involve use of a web-broker's direct enrollment pathway.
Having this information will, for example, enable us to identify more
quickly whether noncompliance is attributable to a specific individual
or individuals, instead of the web-broker entity. We will release
guidance that provides details on the form and manner of these
submissions. We anticipate that it will require the list to include, at
minimum, each agent's or broker's name, state(s) of licensure, and
National Producer Number. We believe the burden associated with this
data collection will be relatively limited, as we understand that web-
brokers collect and store this information as part of their normal
business operations to identify individual agents or brokers utilizing
their systems. The burden related to this provision is discussed
previously in the Collection of Information Requirements section.
Under new Sec. 155.220(g)(3)(ii), HHS is allowed to immediately
terminate an agent's or broker's agreement if the agent or broker fails
to maintain
[[Page 17553]]
applicable state licensure as an agent, broker, or insurance producer
in every state in which the agent or broker actively assists consumers
with applying for APTC or CSRs or with enrolling in QHPs through the
FFEs or SBE-FPs. State licensure for agents and brokers in every state
in which they are assisting consumers is a fundamental consumer
protection and critical for program integrity. It has been a
requirement in the FFE agreements with agents and brokers since the
inception of the FFEs, and is adhered to by the overwhelming majority
of agents and brokers. Therefore, we believe the impact of this
provision on agents and brokers will be minimal, but the proposal will
benefit consumers who might otherwise interact with unlicensed
individuals and will improve Exchange program integrity.
In Sec. 155.220(k) a new paragraph (k)(3) is added that will allow
HHS to immediately suspend an agent's or broker's ability to transact
information with the Exchange if HHS discovers circumstances that pose
unacceptable risk to Exchange operations or Exchange information
technology systems until the incident or breach is remedied or
sufficiently mitigated to HHS' satisfaction. This language is identical
to an existing provision that applies to web-brokers at Sec.
155.220(c)(3)(i)(L) and a similar provision applicable to QHP issuers
participating in direct enrollment at Sec. 156.1230(b)(1). Those
provisions are being replaced with a very similar new requirement that
applies to both types of direct enrollment entities in new Sec.
155.221(d). Because the potential risks posed by agents and brokers
with access to FFE systems are similar to those posed by web-brokers
and QHP issuers participating in direct enrollment, we believe this
change is necessary and appropriate to provide a uniform process and
ability to protect Exchange systems and operations from unacceptable
risks, as well as to protect sensitive consumer data. We note that
agents and brokers whose ability to transact information with the
Exchange is suspended under this authority will remain registered and
authorized to assist consumers using the Marketplace (or side-by-side)
pathway, unless and until their agreements are suspended or terminated
under Sec. 155.220(f) or (g). We believe this authority will be used
infrequently and only in cases where there will likely be the
reasonable basis to suspend their agreements under Sec.
155.220(g)(5)(i) but there is a need to take immediate action to
protect sensitive consumer data or Exchange systems and operations.
Therefore its effect on agents and brokers is expected to be relatively
limited.
In Sec. 155.220(m)(1), we are finalizing the provision to allow a
web-broker's agreement to be suspended or terminated for cause under
Sec. 155.220(g), and a web-broker to be denied the right to enter into
agreements with the FFEs under paragraph (k)(1)(i) of this section
based on the actions of its officers, employees, contractors, or
agents, even if those persons are not agents or brokers registered with
the FFE. In Sec. 155.220(m)(2), we are finalizing the provision to
allow a web-broker's agreement to be suspended or terminated under
Sec. 155.220(g), and for the entity to be denied the right to enter
into agreements with the FFEs under Sec. 155.220(k)(1)(i), if it is
under the common ownership or control, or is an affiliated business, of
another web-broker that has had its agreement suspended or terminated
for cause. We expect these provisions to have limited impact, as they
are designed to protect program integrity and will only be utilized in
limited cases when there is evidence of significant misconduct or non-
compliance. In those cases, we anticipate benefits to consumers
stemming from our enhanced ability to address program integrity
concerns and non-compliance issues. In Sec. 155.220(m)(3), we are
finalizing the requirement for the Exchange to collect information from
a web-broker sufficient to establish the identities of individuals who
comprise its corporate leadership and to determine any business
relationships with other entities that may seek to register with the
Exchange as web-brokers. These provisions are also intended to protect
program integrity by enabling the Exchange to have information
necessary to determine if any individuals seeking to be web-brokers are
attempting to circumvent a previous termination or suspension for cause
of FFE agreements. The burden related to this provision is discussed in
the Collection of Information Requirements section.
4. Direct Enrollment (Sec. Sec. 155.20, 155.220, 155.221, 155.415,
156.1230)
The changes to Sec. 155.220 are discussed above. In Sec. 155.221,
we amend and redesignate the existing paragraphs (a), (b) and (c) to
new paragraphs (e), (f), and (g). In new Sec. 155.220(e), we add
language to require that the third-party entities that conduct annual
reviews of direct enrollment entities to demonstrate operational
readiness consistent with new Sec. 155.221(b)(4) \200\ be independent
of the entities they are auditing. We believe an independent audit is
less likely to be influenced by a direct enrollment entity's business
considerations, and therefore, is more reliable. We expect no impact
from this provision as it was included as a requirement in the
agreements we executed with direct enrollment entities subject to these
audits for plan year 2019. We also clarify in Sec. 155.221(e) that an
initial audit is required, in addition to subsequent annual audits.
This clarification does not represent a change from the current
approach, as direct enrollment entities are currently required to
demonstrate operational readiness before their websites may be used to
complete QHP selections.\201\ Therefore we anticipate no impact of this
proposed change. In Sec. 155.221(f), we require that a written
agreement must be executed between a direct enrollment entity and its
auditor stating that the auditor will comply with the requirements of
paragraph (f). We believe the most effective way to ensure a direct
enrollment entity has the necessary control and oversight over its
auditor to ensure compliance with the applicable standards in Sec.
155.221 is for those standards to be memorialized in a written
agreement. We expect most, if not all, direct enrollment entities
already execute written agreements with their contractors that will
incorporate any regulatory requirements that fall within the scope of
the work the contractor is performing for the entity, so we expect
little to no impact from this change.
---------------------------------------------------------------------------
\200\ Direct enrollment operational readiness review
requirements are currently captured at Sec. 155.220(c)(3)(i)(K) for
web-brokers and Sec. 156.1230(b)(2) for QHP issuers.
\201\ See Sec. 156.1230(b)(2) for issuers participating in
direct enrollment and Sec. 155.220(c)(3)(i)(K) for web-brokers.
---------------------------------------------------------------------------
In the new Sec. 155.221(a), we are codifying in regulation the
types of entities the FFEs permit to offer non-Exchange websites to
facilitate direct enrollment in coverage offered through the Exchange
in a manner that is considered to be through the Exchange. There are
two types of entities that are authorized by the FFEs to offer direct
enrollment pathways: QHP issuers and web-brokers. We expect this
provision to have little or no impact as QHP issuers and web-brokers
are already authorized by the FFEs to participate in direct enrollment.
In the new Sec. 155.221(b), we establish and consolidate certain
requirements that apply to all direct enrollment entities.
Specifically, we add in Sec. 155.221(b)(1) that QHPs and non-
[[Page 17554]]
QHPs must be displayed and marketed on separate website pages on the
direct enrollment entity's non-Exchange website. We consider this a
clarification of existing standards that will have minimal impact on
direct enrollment entities, and will minimize the chance that consumers
are confused by the display or marketing of QHPs and non-QHPs on a
single website page. In the new Sec. 155.221(b)(2) we require the
prominent display of a standardized disclaimer in a form and manner
provided by HHS. Similar uniform disclaimer requirements already exist
for all direct enrollment entities. As a result, and because we will
provide the disclaimer text, we expect the overall impact of this
provision to be minimal. In the new Sec. 155.221(b)(3), we limit the
marketing of non-QHPs during the Exchange eligibility application and
QHP selection process on direct enrollment entities' websites in a
manner that minimizes the likelihood that consumers will be confused as
to what products are available through the Exchange and what products
are not. This will also assist consumers in understanding the
applicability of APTC and CSRs that they may be eligible for. Most
direct enrollment entities have refrained from marketing non-QHPs in
conjunction with QHPs citing a lack of clear guidance on what was
permissible. Therefore we expect the impact of this provision to be
minimal, and to be perceived as allowing increased flexibility. In the
new Sec. 155.221(b)(4), we consolidate a provision requiring direct
enrollment entities demonstrate operational readiness and compliance
with applicable requirements prior to the entities' websites being used
to complete an Exchange eligibility application or a QHP selection.
Because this is an existing requirement, we expect no impact.
In the new Sec. 155.221(c), the authority to use application
assisters and the corresponding requirements when doing so apply for
all issuers and direct enrollment entities and not solely QHP issuers.
We are finalizing a new definition of ``direct enrollment entity
application assister'' in Sec. 155.20 that mirrors the existing
definition of ``issuer application assister'', as well as finalizing
amendments to Sec. 155.415 to capture the requirements for entities
using application assisters that align with the existing requirements
currently in Sec. 156.1230(a)(2) for QHP issuer application assisters.
There is one significant deviation from the existing requirements for
application assisters. Currently, Sec. 156.1230(a)(2)(i) requires all
application assisters to receive training on QHP options and insurance
affordability programs, eligibility, and benefits rules and
regulations. Licensed agents and brokers currently assisting consumers
with QHP enrollment through the FFEs or SBE-FPs must have credentials
to access FFE systems to offer that assistance. Those credentials are
obtained during the FFE registration and training processes for agents
and brokers. For application assisters to have similar access to FFE
systems, so that they are also able to assist consumers as described
here and in the preamble in this rule, they will need credentials
similar to those obtained by agents and brokers during FFE registration
and training. Therefore, we require that application assisters
providing assistance in the FFEs and SBE-FPs comply with this training
requirement by completing a similar registration and training process,
in a form and manner to be specified by HHS, so that they will have the
necessary credentials to provide consumer assistance. This new training
and registration requirement for application assisters is captured in
the new Sec. 155.415(b)(1). The burden placed on application assisters
to complete the FFE training may exceed what may have otherwise existed
if direct enrollment entities were developing and managing their own
training programs. However, by requiring the FFE training to be
completed by application assisters assisting consumers in the FFEs and
SBE-FPs, it will relieve direct enrollment entities from the burdens
associated with having to develop and manage their own training
programs. Importantly, FFE systems will require this approach to comply
with system security requirements and to enable application assisters
to meaningfully be able to assist consumers in the FFEs and SBE-FPs.
Therefore, taken together, we believe the net burden associated with
this requirement will be minimal and will be acceptable to
participating direct enrollment entities that elect to use application
assisters, when permitted under state law. The reason we believe the
net burden will be minimal is because the bulk of time associated with
application assisters completing the training requirement will likely
be comparable whether the training is developed and administered by
direct enrollment entities or by HHS. However, there will likely be a
small increase in the amount of time application assisters will have to
devote to the registration process apart from training, specifically to
creating an FFE account and completing identity proofing. In contrast,
there will likely be a substantial reduction in burden on direct
enrollment entities, because they will not have to develop and manage
their own training programs. Instead they will be able to simply
confirm their application assisters have completed the FFE registration
and training process.
We anticipate that allowing QHP issuers to use application
assisters in the FFEs and SBE-FPs, and expanding that option to other
issuers and web-brokers will provide cost savings to these entities. It
is difficult to precisely estimate the number of applications for which
a direct enrollment entity application assister provided help may be
submitted. However, based on available data, we estimate that
approximately 980,000 agent or broker-assisted direct enrollment
applications will be submitted in plan year 2019. We estimate that it
will take an insurance sales agent \202\ (at an hourly rate of $64.42)
one hour to complete an application. We do not have information related
to the number of states that will allow for unlicensed application
assisters, as well as how many direct enrollment entities will hire
application assisters or train existing staff as application assisters.
Therefore, we estimate that half of assisted direct enrollment
applications will be completed with the assistance of an application
assister instead of an agent or broker. Based on these assumptions, we
estimate that it will take an insurance claims and policy processing
clerk \203\ (at an hourly rate of $39.52) one hour to complete each
application. Thus, we estimate that the applications for 490,000
applicants will result in an estimated total burden of approximately
490,000 hours with an associated cost of approximately $19,364,800. If
the applications are completed by an agent or broker instead, the total
cost will be approximately $31,565,800. Based on these assumptions, we
estimate an overall annual savings of approximately $12.2 million for
direct enrollment entities using application assisters instead of only
agents or brokers. In addition, we expect that the time that agents or
brokers may otherwise have spent assisting consumers with their
eligibility applications will often instead be devoted to assisting
more consumers with plan selection and finalizing their enrollments. As
a result, we expect this policy may also result in an overall increase
in enrollment
[[Page 17555]]
through the FFEs and SBE-FPs. Lastly, these provisions provide
increased flexibility and a level playing field to all direct
enrollment entities and issuers.
---------------------------------------------------------------------------
\202\ Bureau of Labor Statistics mean hourly wage for an
Insurance Sales Agent (Occupational Code 41-3021) at $32.21 an hour,
plus 100 percent fringe.
\203\ Bureau of Labor Statistics mean hourly wage for an
Insurance Claims and Policy Processing Clerk (Occupational Code 43-
9041) at $19.76 an hour, plus 100 percent fringe.
---------------------------------------------------------------------------
In the new Sec. 155.221(d), we consolidate existing authority to
immediately suspend a direct enrollment entity's ability to transact
information with the Exchange if HHS discovers circumstances that pose
unacceptable risk to the Exchange's ability to make accurate
eligibility determinations, or Exchange operations or systems until
such circumstances are remedied or sufficiently mitigated to HHS'
satisfaction. We expect little or no impact from this proposal, since
this is largely based on an existing authority.
We also codify new definitions for the following terms in Sec.
155.20: ``direct enrollment entity'', ``direct enrollment technology
provider'', and ``web-broker''. We define ``direct enrollment entity''
as an entity that an Exchange permits to assist consumers with direct
enrollment in QHPs offered through an Exchange in a manner considered
to be through the Exchange as authorized by Sec. Sec. 155.220(c)(3),
155.221, or 156.1230. We expect no impact from this provision as it
merely codifies a definition for the term in such a way that the
entities that are currently authorized by the FFE to host a direct
enrollment environment are direct enrollment entities. We also amend
Sec. 155.20 to define ``direct enrollment technology provider'' as a
type of web-broker business entity that is not a licensed agent,
broker, or producer under state law and has been engaged or created by,
or is owned by, an agent or broker, to provide technology services to
facilitate participation in direct enrollment as a web-broker in
accordance with Sec. Sec. 155.220(c)(3) and 155.221. There may be
instances when an individual agent or broker, a group of agents or
brokers, or an agent or broker business entity engages the services of
or creates a technology company that is not licensed as an agent or
broker to assist with the development and maintenance of a non-Exchange
website that interfaces with an Exchange to assist consumers with
direct enrollment in QHPs offered through the Exchanges as described in
Sec. Sec. 155.220(c)(3) and 155.221. In such cases, when the
technology company is not itself licensed as an insurance agency or
brokerage, these technology companies will be considered a type of web-
broker that must comply with applicable web-broker requirements under
Sec. Sec. 155.220 and 155.221, unless noted otherwise. We expect no
new burden associated with this requirement as it merely allows some
flexibility in terms of how licensed agents or brokers may organize
their businesses or pursue business relationships when seeking to
become web-brokers. We also codify a definition of ``web-broker'' as an
individual agent or broker, group of agents or brokers, or business
entity registered with an Exchange under Sec. 155.220(d)(1) that
develops and hosts a non-Exchange website that interfaces with an
Exchange to assist consumers with direct enrollment in QHPs offered
through the Exchanges as described in Sec. Sec. 155.220(c)(3) and
155.221. As explained in the preamble, we also define the term ``web-
broker'' to generally include direct enrollment technology providers.
Importantly, this definition will replace HHS' current web-broker
definition, which is slightly different. However, we expect no impact,
because all existing web-brokers will fall within the new proposed
definition of web-broker.
Conforming edits were also made to Sec. 156.1230 as part of the
effort to streamline and consolidate similar requirements that apply to
all direct enrollment entities in one regulation. We amend Sec.
156.1230(b) to add a new paragraph (b)(1) that requires issuers
participating in direct enrollment to comply with the applicable
requirements in Sec. 155.221. There were minimal substantive changes
to the underlying requirements applicable to issuers participating in
direct enrollment. We therefore expect no new impact to issuers except
to the extent previously discussed. We also delete and reserve Sec.
156.1230(a)(2) to align with the changes, described in this rule, to
Sec. 155.415 regarding application assisters.
5. Consumer Assistance Tools and Programs of an Exchange (Sec.
155.205)
Since implementing the direct-to-issuer enrollment system in plan
year 2018, we have seen a marked decrease (greater than fifty percent)
in the volume of SHOP Call Center calls. We anticipate that the SHOP
Call Center volume will continue to decrease in plan year 2020, as
employers will be in the third year of enrolling in SHOP directly with
issuers, often with the assistance of agents and brokers. In addition,
agents and brokers and small employers can now resolve most issues
directly with impacted issuers using well-established issuer call
centers and small group processes unique to each market. We anticipate
a minimal number of new appeals of SHOP eligibility and special
enrollment periods given anticipated employer participation and our
observation that very few employers ever appeal SHOP determinations.
In short, we will maintain a toll-free telephone hotline that the
statute requires (at present 12 full-time equivalent employees are
devoted to SHOP Call Center operations). We envision minimal contractor
and staff support to maintain the hotline content and to respond to
very few voicemail messages. Although we will maintain language
translation service and incur the associated costs, we anticipate that
such costs will be minimal given call volume. Moving to an interactive
voice response system will eliminate staffing for 12 full-time
equivalent employees required at the call center under the SHOP Plan
Aggregate and Call Center contract and will provide a net savings to
the government of approximately $2 million annually.
6. Navigator Program Standards (Sec. Sec. 155.210 and 155.215)
We provide more flexibility to FFE Navigators by making the
provision of certain types of assistance, including post-enrollment
assistance, permissible for FFE Navigators, not required. The amendment
of Sec. 155.210 to remove the requirement that Navigators in FFEs
provide the assistance specified at Sec. 155.210(e)(9) will reduce
regulatory burden and allow FFE Navigators to better prioritize work
according to consumer demand, community needs, and organizational
resources. Under the provision, Navigators in FFEs may continue to
provide the types of assistance listed at Sec. 155.210(e)(9), but will
not be required to do so.
The time FFE Navigators currently spend providing assistance with
the Sec. 155.210(e)(9) topics varies. To help quantify this burden
reduction, we requested comment on how many hours per month FFE
Navigator grantees and individual Navigators currently spend providing
the assistance activities in Sec. 155.210(e)(9), what percentage of
their current work involves providing these types of assistance, and
how that amount of work would be impacted if providing these types of
assistance would no longer be required. We also requested comment on
how Navigator grantees and individual Navigators might reprioritize
work and spend time fulfilling their other duties, if not required to
provide the types of assistance described under Sec. 155.210(e)(9). In
particular, we sought comment on what tasks Navigators might prioritize
and complete during the time they otherwise might have provided these
types of assistance.
Commenters stated that the amount of time Navigators reported that
they spent providing post-enrollment assistance varied widely. One
commenter stated
[[Page 17556]]
that a broad range of post-enrollment activities were among the most
common areas of assistance requested by consumers. Another commented
that while they did not spend much time on tax processes, forms,
appeals, or exemptions, the time they spent educating consumers about
basic health concepts and how to use their health coverage was
extensive. Another commented that, on average, Navigators visited each
enrolled consumer ten times, and that three of those visits were
dedicated to providing post-enrollment assistance. Another commenter
stated that one of their Navigators spent 6 months and more than 40
hours helping a consumer file an appeal.
We amend Navigator training requirements at Sec. Sec.
155.210(b)(2) and 155.215(b)(2) to provide greater flexibility to
Exchanges in designing their Navigator training programs to ensure
coverage of the most instructive and timely topics in a streamlined
fashion and to align the training with future changes in the Navigator
program or the operation of the Exchanges, while still ensuring that
Navigators are qualified to carry out their activities as required by
the Navigator statute and regulations. This additional flexibility will
allow Exchanges to focus on training areas they determine to be most
relevant to the populations in the Exchange service area, while still
addressing all required or authorized Navigator functions. Because it
will provide greater flexibility to tailor the training to current,
local conditions in each Exchange, the revised approach might also help
to ensure cost-effective use of Exchange Navigator funding.
Moreover, we believe these changes will also grant greater
flexibility to SBEs, including SBE-FPs, in designing their respective
Navigator training, since SBEs that decide to authorize or require
their Navigators to provide the assistance specified under Sec.
155.210(e)(9) will not have corresponding training topics prescribed,
but will have the flexibility to decide how best to prepare their
Navigators to provide such assistance. This is similar to the
flexibility SBEs have for creating training for other required
Navigator duties. We believe granting SBEs the flexibility to focus on
the topics they find best suited to prepare their Navigators for
assisting consumers will allow for a more effective training program,
and will reduce the regulatory compliance burden on these Exchanges.
However, the burden reduction that this will achieve cannot be
estimated since these changes are not intended to reduce the total
number of hours of Navigator training annually and we are uncertain how
each Exchange will choose to structure its respective Navigator
training given this increase in flexibility. We continue to believe
that each Exchange is in the best position to determine the training
that is most appropriate for the activities of its Navigators.
7. Special Enrollment Periods (Sec. 155.420)
We anticipate that amended Sec. 155.420 will impose moderate costs
on Exchanges that opt to implement the proposed special enrollment
period to update their user interfaces and make changes to their
eligibility systems, but also acknowledge that Exchanges may choose to
offer the special enrollment period through their call center or other
existing enrollment avenues that could greatly reduce implementation
costs to an Exchange. Additionally, we anticipate that verification
requirements will impose costs relating to special enrollment period
pre-enrollment verification systems, caseloads, and consumer messaging
for Exchanges that perform pre-enrollment verification of special
enrollment period eligibility. We expect utilization of the special
enrollment period may vary among Exchanges depending on total Exchange
enrollment and Exchange plan rates and pricing practices. Given these
variable factors, we requested comments regarding anticipated costs,
benefits and implementation approaches among Exchanges to assist in
forming a future estimate.
We do not anticipate this provision to significantly increase
regulatory burden on issuers, but acknowledge issuers may encounter
marginal costs associated with processing new enrollments and
terminations related to the special enrollment period, and direct
enrollment entities may also face minor implementation costs associated
with updating their applications and systems to include the new special
enrollment period. We estimate that it will take a mid-level software
developer \204\ (at an hourly rate of $107.48) approximately 10 hours
to make the required modifications to the direct enrollment entity's
applications and system logic. We estimate a one-time cost burden of
approximately $1,075 per direct enrollment entity. We further estimate
a total one-time burden for 35 direct enrollment entities will be
approximately 350 hours with an equivalent cost of approximately
$37,618.
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\204\ Bureau of Labor Statistics mean hourly wage for a Software
Developer, Systems Software (Occupational Code 15-1133) at $53.74 an
hour, plus 100 percent fringe.
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Because this policy provides improved pathways to continuous
coverage for special enrollment period-eligible consumers, we
anticipate that the proposal will promote continuous coverage for
consumers and thereby have a positive effect on the individual market
risk pool. Additionally, we anticipate that eligible consumers may
experience reduced out-of-pocket costs related to health care expenses
resulting from access to more affordable health plans and a new pathway
to maintaining continuous health care coverage, compared to if they had
to drop out of off-Exchange coverage and pay out-of-pocket for all
health care expenses incurred for the remainder of the year. We
estimate that approximately 4,700 new consumers will use this special
enrollment period on an annual basis to enroll in Exchange coverage,
and that these consumers will be enrolled for an average of 6 months of
Exchange coverage during the benefit year. Using the plan year 2019
average monthly APTC amount of $544, we estimate total APTC transferred
to consumers as a result of the proposed special enrollment period will
be approximately $15,340,800 annually.\205\
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\205\ ASPE ``2019 Health Plan Choice and Premiums in
HealthCare.gov states.'' https://aspe.hhs.gov/system/files/pdf/260041/2019LandscapeBrief.pdf.
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We invited comments on the potential costs and savings to
Exchanges, issuers, direct enrollment entities, and consumers
associated with the proposed special enrollment period. We did not
receive comments on the cost estimates contained in these proposal.
8. Eligibility Standards for Exemptions (Sec. 155.605)
We do not anticipate that the amendment to Sec. 155.605(e) will
create additional costs or burdens on Exchanges, and we anticipate it
will decrease burden on consumers. The addition of Sec. 155.605(e)(5)
will enable individuals to claim a general hardship exemption on their
federal income tax return for 2018 without an exemption certificate
number from an Exchange. This policy will allow for more flexibility
and will not result in any additional costs or burdens for issuers. The
reduction in burden to consumers is discussed in the Collection of
Information Requirements section.
9. FFE and SBE-FP User Fees (Sec. 156.50)
To support the operation of FFEs, we require in Sec. 156.50(c)
that a participating issuer offering a plan through an FFE or SBE-FP
must remit
[[Page 17557]]
a user fee to HHS each month equal to the product of the monthly user
fee rate specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year and the monthly premium
charged by the issuer for each policy under the plan where enrollment
is through an FFE or SBE-FP. In this final rule, for the 2020 benefit
year, we finalize an FFE user fee rate of 3.0 percent of the monthly
premium, and SBE-FP user fee rate of 2.5 percent of the monthly
premium. We estimate similar FFE and SBE-FP user fee transfers as those
estimated for prior benefit years, and therefore, we finalized no
changes to transfers from issuers to the federal government due to the
finalized lower FFE and SBE-FP user fee rates.
10. Prohibition on Discrimination (Sec. 156.125)
In the preamble to Sec. 156.125, we discuss a potentially
discriminatory benefit design under Sec. 156.125: the exclusion of MAT
drugs for the treatment of opioid use disorder while covering the same
drugs for other medically necessary purposes, such as analgesia or
alcohol use disorder. Because we did not propose a change to this
policy, we do not anticipate any additional burden on states or
issuers. However, to the extent this clarification causes issuers to
cease prohibited discriminatory practices, the clarification could help
consumers obtain needed MAT, lead to better health outcomes, and reduce
the burden and out-of-pocket costs individuals may have otherwise
incurred in attempts to obtain MAT.
11. Provisions Related to Cost-Sharing (Sec. 156.130)
We are finalizing a premium adjustment percentage of 1.2895211380
for the 2020 benefit year. The annual premium adjustment percentage is
used to set the rate of increase for several parameters detailed in the
PPACA, including: the annual limitation on cost sharing (defined at
Sec. 156.130(a)), the required contribution percentage used to
determine eligibility for certain exemptions under section 5000A of the
Code (defined at Sec. 155.605(d)(2)), and the employer shared
responsibility payments under sections 4980H(a) and 4980H(b) of the
Code.
Additionally, we finalized other cost-sharing parameters using an
index based on the final premium adjustment percentage for the 2020
benefit year. In Sec. 155.605(d)(2), we are finalizing a required
contribution of 8.24 percent for the 2020 benefit year, which reflects
the premium adjustment percentage calculation for the 2020 benefit year
detailed in preamble.\206\ In Sec. 156.130(a)(2), we are finalizing a
maximum annual limitation on cost sharing of $8,150 for self-only
coverage, and $16,300 for other than self-only coverage. The CMS Office
of the Actuary estimates that the proposed change in methodology for
the calculation of the premium adjustment percentage may have the
following impacts between 2019 and 2023: \207\
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\206\ As explained in Sec. 155.605(d)(2), for plan years after
2014, section 5000A(e)(1)(D) of the Code and Treasury regulations at
26 CFR 1.5000A-3(e)(2)(ii) provide that the required contribution
percentage is the percentage determined by the Secretary of HHS that
reflects the excess of the rate of premium growth between the
preceding calendar year and 2013, over the rate of income growth for
that period. To calculate the final required contribution, we used
the final premium adjustment percentage in the calculation: 8.00*
1.0296274251 (1.2895211380/1.2524152976), or 8.24 percent.
\207\ CMS Office of the Actuary's estimates are based on their
health reform model, which is an amalgam of various estimation
approaches involving federal programs, employer-sponsored insurance,
and individual insurance choice models that ensure consistent
estimates of coverage and spending in considering legislative
changes to current law.
Table 14--Impacts of Modifications to the 2020 Benefit Year Premium Adjustment Percentage
----------------------------------------------------------------------------------------------------------------
Calendar year 2019 2020 2021 2022 2023
----------------------------------------------------------------------------------------------------------------
Exchange Enrollment Impact N/A -70 -70 -70 -70
(enrollees, thousands).........
Premium Impacts:
Gross Premium Impact (change N/A 0% 0% 0% 0%
from 2018, %)..............
Net Premium Impact (change N/A 1% 1% 1% 1%
from 2018, %)..............
Federal Impacts (dollars,
millions):
Premium Tax Credits N/A -980 -1,040 -1,090 -1,150
(million, $)...............
Health Insurance Providers N/A 50 70 70 70
Fee Impact (million, $)....
Employer Shared N/A 100 110 110 110
Responsibility Payment
Impact (million, $)........
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Total Federal Impact .............. -1,130 -1,220 -1,270 -1,330
(million, $) *.........
----------------------------------------------------------------------------------------------------------------
* Note: While the premium tax credit impact figures are negative to signify reductions in Federal outlays, and
the Health Insurance Providers Fee and the employer shared responsibility payment figures are positive to
signify increased revenue to the Federal government, they are totaled together to indicate savings for the
Federal government.
As noted in Table 14, we expect that the proposed change in measure
of premium growth used to calculate the premium adjustment percentage
for the 2020 benefit year may result in:
Net premium increases of approximately $181 million per
year, which is approximately one percent of 2018 benefit year net
premiums, for the 2020 through 2023 benefit years. Net premiums are
calculated for Exchange enrollees as premium charged by issuers minus
APTC. Gross premiums will be virtually unchanged.
A decrease in federal PTC spending of $980 million to
$1.15 billion between 2020 and 2023, due to an increase in the PTC
applicable percentage and a decline in Exchange enrollment of
approximately 70,000 individuals in each benefit year, based on an
assumption that the Department of the Treasury and the IRS will adopt
the use of the same premium measure proposed for the calculation of the
premium adjustment percentage in this final rule for purposes of
calculating the indexing of the PTC applicable percentage and the
required contribution percentage under section 36B of the Code.
Increased Health Insurance Providers Fees on health
insurance issuers of approximately $50 million in 2020, and $70 million
in years 2021 to 2023, based on an assumption that the Department of
the Treasury and the IRS will adopt the use of the same premium measure
proposed for the calculation of the premium adjustment percentage in
this final rule for purposes of calculating the indexing of the Health
Insurance Providers Fee.
[[Page 17558]]
Increased Employer Shared Responsibility Payments of $100
million in 2020, and $110 million each year between 2021 and 2023.
Comment: One commenter, citing the Center on Budget and Policy
Priorities, suggests the proposal would reduce premium tax credits for
millions of consumers. For example, a family of four with an annual
income of $90,000 would pay $220 more for their coverage (the effect
would be smaller for premium tax credit recipients with lower household
incomes). The commenter noted that these changes would also mean more
people would be considered to have an ``affordable'' offer of employer
coverage, and therefore, would be ineligible for the premium tax
credit. These changes would reduce the overall affordability of
coverage and the number of people covered.
Response: As stated elsewhere in this rule, while we acknowledge
the impact of the decrease in premium tax credits, we believe this is a
technical adjustment to reflect premium growth in the entire individual
market. Moreover, the benefits due to the decrease in federal
expenditures outweigh those concerns and will be ultimately beneficial
to taxpayers. Furthermore, we note that the 2020 required contribution
percentage is lower than the 2019 required contribution percentage
under the finalized method for measuring premium growth.
Some of the 70,000 individuals estimated to not enroll in Exchange
coverage each year as a result of the proposed change in the measure of
premium growth used to calculate the premium adjustment percentage may
purchase short-term, limited-duration insurance or join a spouse's
plan, though a majority is likely to become uninsured. Either
transition may result in greater exposure to health care costs, which
previous research suggests reduces utilization of health care
services.\208\ Economic distortions may be reduced, and economic
efficiency and social benefits improved, because these individuals will
be bearing a larger share of the costs of their own health care
consumption, potentially reducing spending on health care services that
are personally only marginally valued but that imposes costs on the
federal government through subsidies. In addition, to the extent that
this final rule reduces federal outlays and thereby reduces the need to
collect taxes in the future, the distortionary effects of taxation on
the economy may be reduced. However, the increased number of uninsured
may increase federal and state uncompensated care costs.
---------------------------------------------------------------------------
\208\ Manning, W.G., Newhouse, J.P., Duan, N., Keeler, E.B., &
Leibowitz, A. (1987). Health insurance and the demand for medical
care: evidence from a randomized experiment. The American economic
review, 251-277; Keeler, E.B., & Rolph, J.E. (1988). The demand for
episodes of treatment in the health insurance experiment. Journal of
health economics, 7(4), 337-367; Finkelstein, A., et al. (2012). The
Oregon health insurance experiment: evidence from the first year.
The Quarterly journal of economics, 127(3), 1057-1106.
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As noted in this rule, the premium adjustment percentage is the
measure of premium growth that is used to set the rate of increase for
the maximum annual limitation on cost sharing, defined at Sec.
156.130(a). In Sec. 156.130(a)(2), we proposed a maximum annual
limitation on cost sharing of $8,200 for self-only coverage. We are
finalizing a maximum annual limitation on cost sharing of $8,150.
Additionally, we proposed and are finalizing reductions in the maximum
annual limitation on cost sharing for silver plan variations.
Consistent with our analyses in previous Payment Notices, we developed
three test silver level QHPs and analyzed the impact on their AVs of
the reductions described in the PPACA to the estimated 2020 maximum
annual limitation on cost sharing for self-only coverage. We do not
believe the finalized changes to the reductions in the maximum annual
limitation on cost sharing for silver plan variations will result in a
significant economic impact.
12. Regulatory Review Costs
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this final rule, we
should estimate the cost associated with regulatory review. Due to the
uncertainty involved with accurately quantifying the number of entities
that will review the final rule, we assume that the total number of
unique commenters on the proposed rule will be the number of reviewers
of this final rule. We acknowledge that this assumption may understate
or overstate the proposed rule in detail, and it is also possible that
some reviewers chose not to comment on the rule. For these reasons we
thought that the number of past commenters will be a fair estimate of
the number of reviewers of this final rule.
We are required to issue a substantial portion of this final rule
each year under our regulations and we estimate that approximately half
of the remaining provisions will cause additional regulatory review
burden that stakeholders do not already anticipate. We also recognize
that different types of entities are in many cases affected by mutually
exclusive sections of this final rule, and therefore, for the purposes
of our estimate we assume that each reviewer reads approximately 50
percent of the rule, excluding the portion of the rule that we are
required to issue each year.
Using the wage information from the BLS for medical and health
service managers (Code 11-9111), we estimate that the cost of reviewing
this final rule is $107.38 per hour, including overhead and fringe
benefits.\209\ We received 26,129 comments on the proposed rule, of
which 497 comments were unique and 25,632 comments were substantially
similar to one of eight different letters. We assume that for form
letters, only the staff at the organization that arranged for those
letters will review the final rule. Assuming an average reading speed,
we estimate that it would take approximately 1 hour for the staff to
review the relevant portions of this final rule that causes
unanticipated burden. We assume that 497 entities will review this
final rule. For each entity that reviews the rule, the estimated a cost
of approximately $107.38. Therefore, we estimate that the total cost of
reviewing this regulation is approximately $53,368 ($107.38 x 497
reviewers).
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\209\ https://www.bls.gov/oes/current/oes_nat.htm.
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D. Regulatory Alternatives Considered
In developing the policies contained in this final rule, we
considered numerous alternatives to the presented proposals. In this
rule, we discuss the key regulatory alternatives to the finalized
provisions that we considered.
In proposing the risk adjustment model recalibration in part 153,
we considered multiple alternatives such as maintaining the prior
year's recalibration methodology of recalibrating the models using 2
years of MarketScan[supreg] data and the most recent year of EDGE data.
We also considered recalibrating the models using the most recent year
of MarketScan[supreg] data available (2017) and the 2 most recent years
of enrollee-level EDGE data (2016 and 2017). However, we are finalizing
recalibration of the models using 3 years of blended data from the
following sources: the 2 most recent years of enrollee-level EDGE data
(2016 and 2017) available and 2015 MarketScan[supreg] data.
Regarding proposed changes to Sec. Sec. 155.210 and 155.215, we
considered taking no action to amend certain Navigator training
requirements and duties, but determined that the proposed changes
regarding training requirements will provide Exchanges
[[Page 17559]]
with needed flexibility, and the proposed changes regarding duties of
FFE Navigators will help reduce burden on FFE Navigators.
In proposing revisions to Sec. 155.221, we considered maintaining
the existing regulatory framework that established standards for
issuers and web-brokers participating in direct enrollment in separate
sections, but we believe streamlining and consolidating the
requirements applicable to all direct enrollment entities, when
possible, improves clarity and promotes fair competition. For the
display requirements at Sec. 155.221(b), we contemplated maintaining
the current standards in regulations and guidance, but based on
feedback received from direct enrollment entities, we believe the
current framework may have caused confusion and limited innovation.
Therefore, we determined that the establishment of clarified standards
for the marketing and display of QHPs and non-QHPs is the best way to
provide greater clarity for direct enrollment entities about what is
required to minimize the potential for consumer confusion, while
allowing direct enrollment entities more flexibility to be innovative
in the marketing of non-QHPs to consumers who are interested in those
products. For the addition of a new Sec. 155.221(c), we considered
continuing to limit the authority to use application assisters to QHP
issuers. However, to promote fair competition for all direct enrollment
entities and issuers, we believe a better approach is to expand this
authority to include all direct enrollment entities and all issuers.
In proposing revisions to Sec. 155.420 governing Exchange special
enrollment periods, we considered broader eligibility requirements for
the special enrollment period proposed at Sec. 155.420(d)(6)(v). We
considered if a special enrollment period could be offered without a
decrease in household income to all Exchange applicants who were
enrolled in MEC and determined eligible for APTC by the Exchange, or if
changes in the applicant's household size could be considered in the
eligibility criteria for this special enrollment period. We determined
that eliminating the criteria for a decrease in household income will
be problematic because it eliminates a triggering event for the special
enrollment period and could allow for consumers who are potentially
APTC-eligible to avoid the metal level restrictions in paragraph (a)(4)
of this section by initially enrolling in off-Exchange coverage and
then later choosing to buy a higher or lower level of coverage mid-
year. We also determined that verification of household size changes
will be operationally problematic, as electronic data sources will not
reflect recent changes to household size. Further, the special
enrollment periods at Sec. 155.420(d)(2)(i) are currently available to
qualified individuals whose household size changes due to gaining or
becoming a dependent and already provides a pathway to Exchange
coverage for individuals in this situation.
We also considered if the special enrollment period proposed at
Sec. 155.420(d)(6)(v) could be offered without a prior coverage
requirement and determined that this requirement is necessary to ensure
the special enrollment period is only available to the intended
population, to promote continuous coverage among individual market
enrollees, and to protect the individual market risk pools against
adverse selection. Finally we considered the impact of not proposing
this special enrollment period. Without the proposed special enrollment
period at Sec. 155.420(d)(6)(v), unsubsidized off-Exchange consumers
who experience a decrease in household income midyear and are
determined APTC eligible will remain without a pathway to Exchange
coverage. These consumers will remain at risk of terminating their
unsubsidized coverage midyear because it is unaffordable, rather than
maintaining continuous enrollment in health coverage by transitioning
to an Exchange plan.
Regarding the proposed change to Sec. 155.605(e) to allow
consumers to claim all general hardship exemptions through the federal
tax filing process for the 2018 tax year, we considered that without
the recommended revisions to Sec. 155.605(e), individuals may
experience a general hardship that prevents them from obtaining
qualifying health coverage, and may experience undue burden to apply
and qualify for an exemption from the individual shared responsibility
provision. This change allows for more flexibility for individuals to
claim these exemptions through the IRS tax filing process for the 2018
tax year.
We are finalizing our proposed change to the premium measure used
in the premium adjustment percentage calculation under Sec. 156.130 to
use a private health insurance premium measure (excluding Medigap and
property and casualty insurance) in addition to employer sponsored
health insurance premiums. However, we considered other alternatives to
the final premium measure and methodology for calculating the premium
adjustment percentage for the 2020 benefit year. We considered
finalizing our proposed method with a gradual phase-in. We also
considered maintaining our previous process of using employer-sponsored
insurance premium amounts. In addition, we considered using NHEA
estimates and projections of private health insurance premium measure,
which includes premiums for employer-sponsored insurance, direct
purchase insurance (which includes Medigap insurance), and property and
casualty insurance. However, we ultimately decided not to propose or
finalize the use of a private health insurance measure that included
Medigap insurance because we believed it was inappropriate to include
Medigap premiums in the measure as this type of coverage is not
considered primary coverage for those enrollees who supplement their
Medicare coverage with these plans. Moreover, although total spending
for private health insurance in the NHEAs includes the medical portion
of accident insurance (property and casualty insurance), we did not
believe it would be appropriate to include those expenditures for this
purpose as they are associated with policies that do not serve as a
primary source of health insurance coverage. For the reasons explained
in more detail in the preamble for Sec. 156.130, we ultimately decided
to finalize the proposal as proposed.
At Sec. 156.130 we also proposed that plans not be required to
count drug manufacturer coupons toward the annual limitation on cost
sharing, starting with plan years beginning on or after January 1,
2020. We considered not proposing this flexibility, as these coupons
may result in lower costs to individual consumers. However,
manufacturer coupons may incentivize selection of higher-cost drugs
when a less costly therapeutic equivalent is available which can
distort the market and the true costs of drugs, adding significant
long-term costs to the health care system.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act, (5 U.S.C. 601, et seq.), requires
agencies to prepare an initial regulatory flexibility analysis to
describe the impact of the rule on small entities, unless the head of
the agency can certify that the rule will not have a significant
economic impact on a substantial number of small entities. The RFA
generally defines a ``small entity'' as (1) a proprietary firm meeting
the size standards of the Small Business Administration (SBA), (2) a
not-for-profit organization that is not dominant in its field, or (3) a
small
[[Page 17560]]
government jurisdiction with a population of less than 50,000. States
and individuals are not included in the definition of ``small entity.''
HHS uses a change in revenues of more than 3 to 5 percent as its
measure of significant economic impact on a substantial number of small
entities.
In this final rule, the standards for the risk adjustment and risk
adjustment data validation programs are intended to stabilize premiums.
Because we believe that insurance firms offering comprehensive health
insurance policies generally exceed the size thresholds for ``small
entities'' established by the SBA, we do not believe that an initial
regulatory flexibility analysis is required for such firms.
We believe that health insurance issuers and group health plans
would be classified under the North American Industry Classification
System code 524114 (Direct Health and Medical Insurance Carriers).
According to SBA size standards, entities with average annual receipts
of $38.5 million or less would be considered small entities for these
North American Industry Classification System codes. Issuers could
possibly be classified in 621491 (HMO Medical Centers) and, if this is
the case, the SBA size standard would be $32.5 million or less.\210\ We
believe that few, if any, insurance companies underwriting
comprehensive health insurance policies (in contrast, for example, to
travel insurance policies or dental discount policies) fall below these
size thresholds. Based on data from MLR annual report \211\ submissions
for the 2016 MLR reporting year, approximately 85 out of over 520
issuers of health insurance coverage nationwide had total premium
revenue of $38.5 million or less. This estimate may overstate the
actual number of small health insurance companies that may be affected,
since almost 79 percent of these small companies belong to larger
holding groups, and many if not all of these small companies are likely
to have non-health lines of business that will result in their revenues
exceeding $38.5 million.
---------------------------------------------------------------------------
\210\ https://www.sba.gov/document/support--table-size-
standards.
\211\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
---------------------------------------------------------------------------
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis if a rule may have a significant impact on
the operations of a substantial number of small rural hospitals. This
analysis must conform to the provisions of section 604 of the RFA. For
purposes of section 1102(b) of the Act, we define a small rural
hospital as a hospital that is located outside of a metropolitan
statistical area and has fewer than 100 beds. This final rule will not
affect small rural hospitals. Therefore, the Secretary has determined
that this will not have a significant impact on the operations of a
substantial number of small rural hospitals.
F. Unfunded Mandates
Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA)
requires that agencies assess anticipated costs and benefits and take
certain other actions before issuing a rule that includes any federal
mandate that may result in expenditures in any 1 year by a state,
local, or Tribal governments, in the aggregate, or by the private
sector, of $100 million in 1995 dollars, updated annually for
inflation. In 2019, that threshold is approximately $154 million.
Although we have not been able to quantify all costs, we expect the
combined impact on state, local, or Tribal governments and the private
sector to be below the threshold.
G. Federalism
Executive Order 13132 establishes certain requirements that an
agency must meet when it issues a rule that imposes substantial direct
costs on state and local governments, preempts state law, or otherwise
has Federalism implications.
In compliance with the requirement of Executive Order 13132 that
agencies examine closely any policies that may have Federalism
implications or limit the policy making discretion of the states, we
have engaged in efforts to consult with and work cooperatively with
affected states, including participating in conference calls with and
attending conferences of the National Association of Insurance
Commissioners, and consulting with state insurance officials on an
individual basis.
While developing this final rule, we attempted to balance the
states' interests in regulating health insurance issuers with the need
to ensure market stability. By doing so, it is our view that we have
complied with the requirements of Executive Order 13132.
Because states have flexibility in designing their Exchange and
Exchange-related programs, state decisions will ultimately influence
both administrative expenses and overall premiums. States are not
required to establish an Exchange or risk adjustment program. For
states that elected previously to operate an Exchange, or risk
adjustment program, much of the initial cost of creating these programs
was funded by Exchange Planning and Establishment Grants. After
establishment, Exchanges must be financially self-sustaining, with
revenue sources at the discretion of the state. Current State Exchanges
charge user fees to issuers.
In our view, while this final rule will not impose substantial
direct requirement costs on state and local governments, this
regulation has Federalism implications because it finalizes a change to
the Alabama risk adjustment program in the small group market based
upon a proposal provided by the state. We also proposed to make the
special enrollment period at Sec. 155.420(d)(6)(v) at the option of
Exchanges, to give states flexibility in whether they choose to
implement it.
H. Congressional Review Act
This final rule is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801, et seq.), which specifies that before a rule can
take effect, the federal agency promulgating the rule shall submit to
each House of Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information,
and has been transmitted to Congress and the Comptroller for review.
I. Reducing Regulation and Controlling Regulatory Costs
Executive Order 13771, titled Reducing Regulation and Controlling
Regulatory Costs, was issued on January 30, 2017. Section 2(a) of
Executive Order 13771 requires an agency, unless prohibited by law, to
identify at least two existing regulations to be repealed when the
agency publicly proposes for notice and comment, or otherwise issues, a
new regulation. In furtherance of this requirement, section 2(c) of
Executive Order 13771 requires that the new incremental costs
associated with new regulations shall, to the extent permitted by law,
be offset by the elimination of existing costs associated with at least
two prior regulations.
This final rule is an E.O. 13771 deregulatory action.\212\
---------------------------------------------------------------------------
\212\ We estimate cost savings of approximately $14.3 million in
2019 and annual cost saving of approximately $14 million thereafter.
Thus the annualized value of cost savings, as of 2016 and calculated
over a perpetual time horizon with a 7 percent discount rate, is
$8.51 million.
---------------------------------------------------------------------------
J. Conclusion
The analysis in this rule, together with the remainder of this
preamble, provides a Regulatory Impact Analysis.
In accordance with the provisions of Executive Order 12866, this
regulation
[[Page 17561]]
was reviewed by the Office of Management and Budget.
List of Subjects
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 147
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 148
Administrative practice and procedure, Health care, Health
insurance, Insurance companies, Penalties, Reporting and recordkeeping
requirements.
45 CFR Part 153
Administrative practice and procedure, Health care, Health
insurance, Health records, Intergovernmental relations, Organization
and functions (Government agencies), Reporting and recordkeeping
requirements.
45 CFR Part 155
Administrative practice and procedure, Advertising, Brokers,
Conflict of interests, Consumer protection, Grants administration,
Grant programs--health, Health care, Health insurance, Health
maintenance organizations (HMO), Health records, Hospitals, Indians,
Individuals with disabilities, Intergovernmental relations, Loan
programs--health, Medicaid, Organization and functions (Government
agencies), Public assistance programs, Reporting and recordkeeping
requirements, Technical assistance, Women and youth.
45 CFR Part 156
Administrative practice and procedure, Advertising, Advisory
committees, Brokers, Conflict of interests, Consumer protection, Grant
programs--health, Grants administration, Health care, Health insurance,
Health maintenance organization (HMO), Health records, Hospitals,
Indians, Individuals with disabilities, Loan programs--health,
Medicaid, Organization and functions (Government agencies), Public
assistance programs, Reporting and recordkeeping requirements, State
and local governments, Sunshine Act, Technical assistance, Women,
Youth.
For the reasons set forth in the preamble, under the authority at 5
U.S.C. 301, the Department of Health and Human Services amends 45 CFR
as set forth below.
PART 146--REQUIREMENTS FOR THE GROUP HEALTH INSURANCE MARKET
0
1. The authority citation for part 146 continues to read as follows:
Authority: 42 U.S.C. 300gg-1 through 300gg-5, 300gg-11 through
300gg-23, 300gg-91, and 300-gg-92.
0
2. Section 146.152 is amended by revising paragraph (a) to read as
follows:
Sec. 146.152 Guaranteed renewability of coverage for employers in the
group market.
(a) General rule. Subject to paragraphs (b) through (f) of this
section, a health insurance issuer offering health insurance coverage
in the small or large group market is required to renew or continue in
force the coverage at the option of the plan sponsor or the individual,
as applicable.
* * * * *
PART 147--HEALTH INSURANCE REFORM REQUIREMENTS FOR THE GROUP AND
INDIVIDUAL HEALTH INSURANCE MARKETS
0
3. The authority citation for part 147 continues to read as follows:
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-91, and
300gg-92 as amended.
0
4. Section 147.106 is amended by revising paragraph (a) to read as
follows:
Sec. 147.106 Guaranteed renewability of coverage.
(a) General rule. Subject to paragraphs (b) through (e) of this
section, a health insurance issuer offering health insurance coverage
in the individual, small group, or large group market is required to
renew or continue in force the coverage at the option of the plan
sponsor or the individual, as applicable.
* * * * *
PART 148--REQUIREMENTS FOR THE INDIVIDUAL HEALTH INSURANCE MARKET
0
5. The authority citation for part 148 is revised to read as follows:
Authority: 42 U.S.C. 300gg through 300gg-63, 300gg-11 300gg-91,
and 300-gg92, as amended.
0
6. Section 148.122 is amended by revising paragraph (b)(1) to read as
follows:
Sec. 148.122 Guaranteed renewability of individual health insurance
coverage.
* * * * *
(b) * * *
(1) Except as provided in paragraphs (c) through (g) of this
section, an issuer must renew or continue in force the coverage at the
option of the individual.
* * * * *
PART 153--STANDARDS RELATED TO REINSURANCE, RISK CORRIDORS, AND
RISK ADJUSTMENT UNDER THE AFFORDABLE CARE ACT
0
7. The authority citation for part 153 is revised to read as follows:
Authority: 42 U.S.C. 18031, 18041, and 18061 through 18063.
0
8. Section 153.20 is amended by revising the definition of ``Risk
adjustment covered plan'' to read as follows:
Sec. 153.20 Definitions.
* * * * *
Risk adjustment covered plan means, for the purpose of the risk
adjustment program, any health insurance coverage offered in the
individual or small group market with the exception of grandfathered
health plans, group health insurance coverage described in Sec.
146.145(b) of this subchapter, individual health insurance coverage
described in Sec. 148.220 of this subchapter, and any plan determined
not to be a risk adjustment covered plan in the applicable Federally
certified risk adjustment methodology.
* * * * *
0
9. Section 153.320 is amended by revising paragraph (d) to read as
follows:
Sec. 153.320 Federally certified risk adjustment methodology.
* * * * *
(d) State flexibility to request reductions to transfers. Beginning
with the 2020 benefit year, States can request to reduce risk
adjustment transfers in the State's individual catastrophic, individual
non-catastrophic, small group, or merged markets risk pools by up to 50
percent in States where HHS operates the risk adjustment program.
(1) State requests. State requests for a reduction to transfers
must include:
(i) Supporting evidence and analysis demonstrating the State-
specific factors that warrant an adjustment to more precisely account
for the differences in actuarial risk in the State market risk pool;
(ii) The adjustment percentage of up to 50 percent requested for
the State individual catastrophic, individual non-catastrophic, small
group, or merged market risk pool; and
(iii) A justification for the reduction requested demonstrating the
State-specific factors that warrant an adjustment to more precisely
account
[[Page 17562]]
for relative risk differences in the State individual catastrophic,
individual non-catastrophic, small group, or merged market risk pool,
or demonstrating the requested reduction would have de minimis impact
on the necessary premium increase to cover the transfers for issuers
that would receive reduced transfer payments.
(2) Timeframe to submit reduction requests. States must submit
requests for a reduction to transfers in the individual catastrophic,
individual non-catastrophic, small group, or merged market risk pool by
August 1 of the benefit year that is 2 calendar years prior to the
applicable benefit year, in the form and manner specified by HHS.
(3) Publication of reduction requests. HHS will publish State
reduction requests in the applicable benefit year's HHS notice of
benefit and payment parameters rule and make the supporting evidence
available to the public for comment, except to the extent the State
requests HHS not publish certain supporting evidence because it
contains trade secrets or confidential commercial or financial
information as defined in HHS' Freedom of Information regulations under
45 CFR 5.31(d). HHS will publish any approved or denied State reduction
requests in the applicable benefit year's HHS notice of benefit and
payment parameters final rule.
(4) HHS approval. (i) Subject to paragraph (d)(4)(ii) of this
section, HHS will approve State reduction requests if HHS determines,
based on the review of the information submitted as part of the State's
request, along with other relevant factors, including the premium
impact of the transfer reduction for the State market risk pool, and
relevant public comments:
(A) That State-specific rules or other relevant factors warrant an
adjustment to more precisely account for relative risk differences in
the State's individual catastrophic, individual non-catastrophic, small
group, or merged market risk pool and support the percentage reduction
to risk adjustment transfers requested; or
(B) That State-specific rules or other relevant factors warrant an
adjustment to more precisely account for relative risk differences in
the State's individual catastrophic, individual non-catastrophic, small
group, or merged market risk pool and the requested reduction would
have de minimis impact on the necessary premium increase to cover the
transfers for issuers that would receive reduced transfer payments.
(ii) HHS may approve a reduction amount that is lower than the
amount requested by the State if the supporting evidence and analysis
do not fully support the requested reduction amount. HHS will assess
other relevant factors, including the premium impact of the transfer
reduction for the applicable State market risk pool.
0
10. Section 153.630 is amended by--
0
a. Revising paragraphs (b)(10) and (d)(2); and
0
b. Adding paragraph (g)
The revisions and addition read as follows:
Sec. 153.630 Data validation requirements when HHS operates risk
adjustment.
* * * * *
(b) * * *
(10) If an issuer of a risk adjustment covered plan fails to engage
an initial validation auditor or to submit the results of an initial
validation audit to HHS, HHS will impose a default data validation
charge.
* * * * *
(d) * * *
(2) Within 30 calendar days of the notification by HHS of the
findings of a second validation audit (if applicable) or the
calculation of a risk score error rate, in the manner set forth by HHS,
an issuer must confirm the findings of the second validation audit (if
applicable) or the calculation of the risk score error rate as a result
of risk adjustment data validation, or file a discrepancy report to
dispute the findings of a second validation audit (if applicable) or
the calculation of a risk score error rate as a result of risk
adjustment data validation.
* * * * *
(g) Exemptions. An issuer of a risk adjustment covered plan will be
exempted by HHS from the data validation requirement set forth in
paragraph (b) of this section for a given benefit year if:
(1) The issuer has 500 or fewer billable member months of
enrollment in the individual, small group and merged markets (as
applicable) for the applicable benefit year, calculated on a Statewide
basis;
(2) The issuer is at or below the materiality threshold as defined
by HHS and is not selected by HHS to participate in the data validation
requirements in an applicable benefit year under random and targeted
sampling conducted approximately every 3 years (barring any risk-based
triggers based on experience that will warrant more frequent audits);
or
(3) The issuer is in liquidation, or will enter liquidation no
later than April 30th of the benefit year that is 2 benefit years after
the benefit year being audited, provided that:
(i) The issuer provides to HHS, in the manner and timeframe
specified by HHS, an attestation that the issuer is in liquidation or
will enter liquidation no later than April 30th of the benefit year
that is 2 benefit years after the benefit year being audited that is
signed by an individual with the authority to legally and financially
bind the issuer; and
(ii) The issuer is not a positive error rate outlier under the
error estimation methodology in risk adjustment data validation for the
prior benefit year of risk adjustment data validation.
(iii) For purposes of this paragraph (g)(3), liquidation means that
a State court has issued an order of liquidation for the issuer that
fixes the rights and liabilities of the issuer and its creditors,
policyholders, shareholders, members, and all other persons of
interest.
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
11. The authority citation for part 155 is revised to read as follows:
Authority: 42 U.S.C. 18021-18024, 18031-18033, 18041-18042,
18051, 18054, 18071, and 18081-18083.
0
12. Section 155.20 is amended by adding definitions of ``Direct
enrollment entity,'' ``Direct enrollment entity application assister,''
``Direct enrollment technology provider,'' and ``Web-broker'' to read
as follows:
Sec. 155.20 Definitions.
* * * * *
Direct enrollment entity means an entity that an Exchange permits
to assist consumers with direct enrollment in qualified health plans
offered through the Exchange in a manner considered to be through the
Exchange as authorized by Sec. 155.220(c)(3), Sec. 155.221, or Sec.
156.1230 of this subchapter.
Direct enrollment entity application assister means an employee,
contractor, or agent of a direct enrollment entity who is not licensed
as an agent, broker, or producer under State law and who assists
individuals in the individual market with applying for a determination
or redetermination of eligibility for coverage through the Exchange or
for insurance affordability programs.
Direct enrollment technology provider means a type of web-broker
business entity that is not a licensed agent, broker, or producer under
State law and has been engaged or created by, or is owned by an agent
or broker, to provide technology services to facilitate
[[Page 17563]]
participation in direct enrollment under Sec. Sec. 155.220(c)(3) and
155.221.
* * * * *
Web-broker means an individual agent or broker, group of agents or
brokers, or business entity registered with an Exchange under Sec.
155.220(d)(1) that develops and hosts a non-Exchange website that
interfaces with an Exchange to assist consumers with direct enrollment
in qualified health plans offered through the Exchange as described in
Sec. Sec. 155.220(c)(3) and 155.221. The term also includes a direct
enrollment technology provider.
0
13. Section 155.205 is amended by revising paragraph (a) to read as
follows:
Sec. 155.205 Consumer assistance tools and programs of an Exchange.
(a) Call center. The Exchange must provide for operation of a toll-
free call center that addresses the needs of consumers requesting
assistance and meets the requirements outlined in paragraphs (c)(1),
(2)(i), and (3) of this section, unless it is an Exchange described in
paragraphs (a)(1) or (2) of this section, in which case, the Exchange
must provide at a minimum a toll-free telephone hotline that includes
the capability to provide information to consumers about eligibility
and enrollment processes, and to appropriately direct consumers to the
applicable Exchange website and other applicable resources.
(1) An Exchange described in this paragraph is one that enters into
a Federal platform agreement through which it relies on HHS to operate
its eligibility and enrollment functions, as applicable.
(2) An Exchange described in this paragraph is a SHOP that does not
provide for enrollment in SHOP coverage through an online SHOP
enrollment platform, but rather provides for enrollment through SHOP
issuers or agents and brokers registered with the Exchange.
* * * * *
0
14. Section 155.210 is amended by--
0
a. Revising paragraphs (b)(2) introductory text, (b)(2)(iii), and (iv);
0
b. Removing paragraphs (b)(2)(v) through (ix); and
0
c. Revising paragraph (e)(9) introductory text.
The revisions read as follows:
Sec. 155.210 Navigator program standards.
* * * * *
(b) * * *
(2) A set of training standards, to be met by all entities and
individuals carrying out Navigator functions under the terms of a
Navigator grant, to ensure the entities and individuals are qualified
to engage in Navigator activities, including training standards on the
following topics:
* * * * *
(iii) The range of QHP options and insurance affordability
programs; and
(iv) The privacy and security standards applicable under Sec.
155.260.
* * * * *
(e) * * *
(9) The Exchange may require or authorize Navigators to provide
information and assistance with any of the following topics. In
Federally-facilitated Exchanges, Navigators are required to provide
information and assistance with all of the following topics under
Navigator grants awarded in 2018, and will be authorized to provide
information and assistance with all of the following topics under
Navigator grants awarded in 2019 or any later year.
* * * * *
0
15. Section 155.215 is amended by revising paragraph (b)(2) to read as
follows:
Sec. 155.215 Standards applicable to Navigators and Non-Navigator
Assistance Personnel carrying out consumer assistance functions under
Sec. Sec. 155.205(d) and (e) and 155.210 in a Federally-facilitated
Exchange and to Non-Navigator Assistance Personnel funded through an
Exchange Establishment Grant.
* * * * *
(b) * * *
(2) Training module content standards. All individuals who carry
out the consumer assistance functions under Sec. Sec. 155.205(d) and
(e) and 155.210 must receive training consistent with standards
established by the Exchange consistent with Sec. 155.210(b)(2).
* * * * *
0
16. Section 155.220 is amended by--
0
a. Revising the section heading;
0
b. Revising paragraphs (a) introductory text, (c) introductory text,
(c)(1), (c)(3)(i) introductory text and (c)(3)(i)(A), (c)(3)(i)(K) and
(L), (c)(3)(ii) introductory text, (c)(4) introductory text, (c)(4)(i)
introductory text, (c)(4)(i)(A), (c)(4)(i)(E), (c)(4)(i)(F),
(c)(4)(ii), (c)(5), (d) introductory text, (d)(2), (e), (f)(1), (f)(2),
(f)(3) introductory text, (f)(3)(i), (f)(4), (g)(1), (g)(2)
introductory text, (g)(2)(iii), (g)(2)(iv), (g)(3), (g)(4), (g)(5)(i),
(g)(5)(ii), (g)(5)(iii), (h)(1), (h)(2), (h)(3), (i), (j)(1)
introductory text, (j)(3), (k)(1) introductory text, (k)(2);
0
c. Adding paragraph (k)(3);
0
d. Revising paragraph (l); and
0
e. Adding paragraph (m).
The additions and revisions read as follows:
Sec. 155.220 Ability of States to permit agents and brokers and web-
brokers to assist qualified individuals, qualified employers, or
qualified employees enrolling in QHPs.
(a) General rule. A State may permit agents, brokers, and web-
brokers to--
* * * * *
(c) Enrollment through the Exchange. A qualified individual may be
enrolled in a QHP through the Exchange with the assistance of an agent,
broker, or web-broker if--
(1) The agent, broker, or web-broker ensures the applicant's
completion of an eligibility verification and enrollment application
through the Exchange internet website as described in Sec. 155.405, or
ensures that the eligibility application information is submitted for
an eligibility determination through the Exchange-approved web service
subject to meeting the requirements in paragraphs (c)(3)(ii) and
(c)(4)(i)(F) of this section;
* * * * *
(3)(i) When an internet website of a web-broker is used to complete
the QHP selection, at a minimum the internet website must:
(A) Disclose and display all QHP information provided by the
Exchange or directly by QHP issuers consistent with the requirements of
Sec. 155.205(b)(1) and (c), and to the extent that not all information
required under Sec. 155.205(b)(1) is displayed on the web-broker's
internet website for a QHP, prominently display a standardized
disclaimer provided by HHS stating that information required under
Sec. 155.205(b)(1) for the QHP is available on the Exchange website,
and provide a Web link to the Exchange website;
* * * * *
(K) Comply with the applicable requirements in Sec. 155.221; and
(L) Not display QHP recommendations based on compensation the
agent, broker, or web-broker receives from QHP issuers.
(ii) When an internet website of a web-broker is used to complete
the Exchange eligibility application, at a minimum the internet website
must:
* * * * *
(4) When an agent or broker, through a contract or other
arrangement, uses the internet website of a web-broker to help an
applicant or enrollee complete a QHP selection or complete the Exchange
eligibility application in the Federally-facilitated Exchange:
(i) The web-broker who makes the website available must:
(A) Provide HHS with a list of agents and brokers who enter into
such a contract or other arrangement to use the
[[Page 17564]]
web-broker's website, in a form and manner to be specified by HHS;
* * * * *
(E) Report to HHS and applicable State departments of insurance any
potential material breach of the standards in paragraphs (c) and (d) of
this section, or the agreement entered into under Sec. 155.260(b), by
the agent or broker accessing the internet website, should it become
aware of any such potential breach. A web-broker that provides access
to its website to complete the QHP selection or the Exchange
eligibility application or ability to transact information with HHS to
another web-broker website is responsible for ensuring compliance with
applicable requirements in paragraph (c)(3) of this section for any web
pages of the other web-broker's website that assist consumers,
applicants, qualified individuals, and enrollees in applying for APTC
and CSRs for QHPs, or in completing enrollment in QHPs, offered in the
Exchanges.
(F) When an internet website of a web-broker is used to complete
the Exchange eligibility application, obtain HHS approval verifying
that all requirements in this section are met.
(ii) HHS retains the right to temporarily suspend the ability of a
web-broker making its website available to transact information with
HHS, if HHS discovers a security and privacy incident or breach, for
the period in which HHS begins to conduct an investigation and until
the incident or breach is remedied to HHS' satisfaction.
(5) HHS or its designee may periodically monitor and audit an
agent, broker, or web-broker under this subpart to assess its
compliance with the applicable requirements of this section.
(d) Agreement. An agent, broker, or web-broker that enrolls
qualified individuals in a QHP in a manner that constitutes enrollment
through the Exchange or assists individuals in applying for advance
payments of the premium tax credit and cost-sharing reductions for QHPs
must comply with the terms of an agreement between the agent, broker,
or web-broker and the Exchange under which the agent, broker, or web-
broker at least:
* * * * *
(2) Receives training in the range of QHP options and insurance
affordability programs, except that a licensed agent or broker entity
that registers with the Federally-facilitated Exchange in its capacity
as a business organized under the laws of a State, and not as an
individual person, and direct enrollment technology providers are
exempt from this requirement; and
* * * * *
(e) Compliance with State law. An agent, broker, or web-broker that
enrolls qualified individuals in a QHP in a manner that constitutes
enrollment through the Exchange or assists individuals in applying for
advance payments of the premium tax credit and cost-sharing reductions
for QHPs must comply with applicable State law related to agents,
brokers, or web-brokers including applicable State law related to
confidentiality and conflicts of interest.
(f) * * *
(1) An agent, broker, or web-broker may terminate its agreement
with HHS by sending to HHS a written notice at least 30 days in advance
of the date of intended termination.
(2) The notice must include the intended date of termination, but
if it does not specify a date of termination, or the date provided is
not acceptable to HHS, HHS may set a different termination date that
will be no less than 30 days from the date on the agent's, broker's, or
web-broker's notice of termination.
(3) Prior to the date of termination, an agent, broker, or web-
broker should--
(i) Notify applicants, qualified individuals, or enrollees that the
agent, broker, or web-broker is assisting, of the agent's, broker's, or
web-broker's intended date of termination;
* * * * *
(4) When the agreement between the agent, broker, or web-broker and
the Exchange under paragraph (d) of this section is terminated under
paragraph (f) of this section, the agent, broker, or web-broker will no
longer be registered with the Federally-facilitated Exchanges, or be
permitted to assist with or facilitate enrollment of qualified
individuals, qualified employers or qualified employees in coverage in
a manner that constitutes enrollment through a Federally-facilitated
Exchange, or be permitted to assist individuals in applying for advance
payments of the premium tax credit and cost-sharing reductions for
QHPs. The agent's, broker's, or web-broker's agreement with the
Exchange under Sec. 155.260(b) will also be terminated through the
termination without cause process set forth in that agreement. The
agent, broker, or web-broker must continue to protect any personally
identifiable information accessed during the term of either of these
agreements with the Federally-facilitated Exchanges.
(g) * * *
(1) If, in HHS' determination, a specific finding of noncompliance
or pattern of noncompliance is sufficiently severe, HHS may terminate
an agent's, broker's, or web-broker's agreement with the Federally-
facilitated Exchange for cause.
(2) An agent, broker, or web-broker may be determined noncompliant
if HHS finds that the agent, broker, or web-broker violated--
* * * * *
(iii) Any State law applicable to agents, brokers, or web-brokers,
as required under paragraph (e) of this section, including but not
limited to State laws related to confidentiality and conflicts of
interest; or
(iv) Any Federal law applicable to agents, brokers, or web-brokers.
* * * * *
(3)(i) Except as provided in paragraph (g)(3)(ii) of this section,
HHS will notify the agent, broker, or web-broker of the specific
finding of noncompliance or pattern of noncompliance made under
paragraph (g)(1) of this section, and after 30 days from the date of
the notice, may terminate the agreement for cause if the matter is not
resolved to the satisfaction of HHS.
(ii) HHS may immediately terminate the agreement for cause upon
notice to the agent or broker without any further opportunity to
resolve the matter if an agent or broker fails to maintain the
appropriate license under State law as an agent, broker, or insurance
producer in every State in which the agent or broker actively assists
consumers with applying for advance payments of the premium tax credit
or cost-sharing reductions or with enrolling in QHPs through the
Federally-facilitated Exchanges.
(4) After the applicable period in paragraph (g)(3) of this section
has elapsed and the agreement under paragraph (d) of this section is
terminated, the agent, broker, or web-broker will no longer be
registered with the Federally-facilitated Exchanges, or be permitted to
assist with or facilitate enrollment of a qualified individual,
qualified employer, or qualified employee in coverage in a manner that
constitutes enrollment through a Federally-facilitated Exchange, or be
permitted to assist individuals in applying for advance payments of the
premium tax credit and cost-sharing reductions for QHPs. The agent's,
broker's, or web-broker's agreement with the Exchange under Sec.
155.260(b)(2) will also be terminated through the process set forth in
that agreement. The agent, broker, or web-broker must continue to
protect any personally
[[Page 17565]]
identifiable information accessed during the term of either of these
agreements with the Federally-facilitated Exchanges.
(5) * * *
(i)(A) If HHS reasonably suspects that an agent, broker, or web-
broker may have may have engaged in fraud, or in abusive conduct that
may cause imminent or ongoing consumer harm using personally
identifiable information of an Exchange enrollee or applicant or in
connection with an Exchange enrollment or application, HHS may
temporarily suspend the agent's, broker's, or web-broker's agreements
required under paragraph (d) of this section and under Sec. 155.260(b)
for up to 90 calendar days. Suspension will be effective on the date of
the notice that HHS sends to the agent, broker, or web-broker advising
of the suspension of the agreements.
(B) The agent, broker, or web-broker may submit evidence in a form
and manner to be specified by HHS, to rebut the allegation during this
90-day period. If the agent, broker, or web-broker submits such
evidence during the suspension period, HHS will review the evidence and
make a determination whether to lift the suspension within 30 days of
receipt of such evidence. If the rebuttal evidence does not persuade
HHS to lift the suspension, or if the agent, broker, or web-broker
fails to submit rebuttal evidence during the suspension period, HHS may
terminate the agent's, broker's, or web-broker's agreements required
under paragraph (d) of this section and under Sec. 155.260(b) for
cause under paragraph (g)(5)(ii) of this section.
(ii) If there is a finding or determination by a Federal or State
entity that an agent, broker, or web-broker engaged in fraud, or
abusive conduct that may result in imminent or ongoing consumer harm,
using personally identifiable information of Exchange enrollees or
applicants or in connection with an Exchange enrollment or application,
HHS will terminate the agent's, broker's, or web-broker's agreements
required under paragraph (d) of this section and under Sec. 155.260(b)
for cause. The termination will be effective starting on the date of
the notice that HHS sends to the agent, broker, or web-broker advising
of the termination of the agreements.
(iii) During the suspension period under paragraph (g)(5)(i) of
this section and following termination of the agreements under
paragraph (g)(5)(i)(B) or (g)(5)(ii) of this section, the agent,
broker, or web-broker will not be registered with the Federally-
facilitated Exchanges, or be permitted to assist with or facilitate
enrollment of qualified individuals, qualified employers, or qualified
employees in coverage in a manner that constitutes enrollment through a
Federally-facilitated Exchange, or be permitted to assist individuals
in applying for advance payments of the premium tax credit and cost-
sharing reductions for QHPs. The agent, broker, or web-broker must
continue to protect any personally identifiable information accessed
during the term of either of these agreements with the Federally-
facilitated Exchanges.
* * * * *
(h) * * *
(1) Request for reconsideration. An agent, broker, or web-broker
whose agreement with the Federally-facilitated Exchange has been
terminated may request reconsideration of such action in the manner and
form established by HHS.
(2) Timeframe for request. The agent, broker, or web-broker must
submit a request for reconsideration to the HHS reconsideration entity
within 30 calendar days of the date of the written notice from HHS.
(3) Notice of reconsideration decision. The HHS reconsideration
entity will provide the agent, broker, or web-broker with a written
notice of the reconsideration decision within 30 calendar days of the
date it receives the request for reconsideration. This decision will
constitute HHS' final determination.
* * * * *
(i) Use of agents' and brokers' and web-brokers' internet websites
for SHOP. For plan years beginning on or after January 1, 2015, in
States that permit this activity under State law, a SHOP may permit
agents, brokers, and web-brokers to use an internet website to assist
qualified employers and facilitate enrollment of enrollees in a QHP
through the Exchange, under paragraph (c)(3) of this section.
(j) * * *
(1) An agent, broker, or web-broker that assists with or
facilitates enrollment of qualified individuals, qualified employers,
or qualified employees, in coverage in a manner that constitutes
enrollment through a Federally-facilitated Exchange, or assists
individuals in applying for advance payments of the premium tax credit
and cost-sharing reductions for QHPs sold through a Federally-
facilitated Exchange, must--
* * * * *
(3) If an agent, broker, or web-broker fails to provide correct
information, he, she, or it will nonetheless be deemed in compliance
with paragraphs (j)(2)(i) and (ii) of this section if HHS determines
that there was a reasonable cause for the failure to provide correct
information and that the agent, broker, or web-broker acted in good
faith.
(k) * * *
(1) If HHS determines that an agent, broker, or web-broker has
failed to comply with the requirements of this section, in addition to
any other available remedies, that agent, broker, or web-broker--
* * * * *
(2) HHS will notify the agent, broker, or web-broker of the
proposed imposition of penalties under paragraph (k)(1)(i) of this
section as part of the termination notice issued under paragraph (g) of
this section and, after 30 calendar days from the date of the notice,
may impose the penalty if the agent, broker, or web-broker has not
requested a reconsideration under paragraph (h) of this section. The
proposed imposition of penalties under paragraph (k)(1)(ii) of this
section will follow the process outlined under Sec. 155.285.
(3) HHS may immediately suspend the agent's or broker's ability to
transact information with the Exchange if HHS discovers circumstances
that pose unacceptable risk to Exchange operations or Exchange
information technology systems until the incident or breach is remedied
or sufficiently mitigated to HHS' satisfaction.
(l) Application to State Exchanges using a Federal platform. An
agent, broker, or web-broker who enrolls qualified individuals,
qualified employers, or qualified employees in coverage in a manner
that constitutes enrollment through a State Exchange using the Federal
platform, or assists individual market consumers with submission of
applications for advance payments of the premium tax credit and cost-
sharing reductions through a State Exchange using the Federal platform
must comply with all applicable Federally-facilitated Exchange
standards in this section.
(m) Web-broker agreement suspension, termination, and denial and
information collection. (1) A web-broker's agreement executed under
paragraph (d) of this section, may be suspended or terminated under
paragraph (g) of this section, and a web-broker may be denied the right
to enter into agreements with the Federally-facilitated Exchanges under
paragraph (k)(1)(i) of this section, based on the actions of its
officers, employees, contractors, or agents, whether or not the
officer, employee, contractor, or
[[Page 17566]]
agent is registered with the Exchange as an agent or broker.
(2) A web-broker's agreement executed under paragraph (d) of this
section may be suspended or terminated under paragraph (g) of this
section, and a web-broker may be denied the right to enter into
agreements with the Federally-facilitated Exchanges under paragraph
(k)(1)(i) of this section, if it is under the common ownership or
control or is an affiliated business of another web-broker that had its
agreement suspended or terminated under paragraph (g) of this section.
(3) The Exchange may collect information from a web-broker during
its registration with the Exchange under paragraph (d)(1) of this
section, or at another time on an annual basis, in a form and manner to
be specified by HHS, sufficient to establish the identities of the
individuals who comprise its corporate ownership and leadership and to
ascertain any corporate or business relationships it has with other
entities that may seek to register with the Federally-facilitated
Exchange as web-brokers.
0
17. Section 155.221 is amended by--
0
a. Revising the section heading;
0
b. Redesignating paragraphs (a), (b), and (c) as paragraphs (e), (f),
and (g), respectively;
0
c. Adding paragraphs (a), (b), (c), and (d);
0
d. Revising newly redesignated paragraph (e), paragraph (f)
introductory text, paragraphs (f)(2), (3), (4), (6) and (7), and
paragraph (g); and
0
e. Adding paragraph (h).
The revisions and additions read as follows:
Sec. 155.221 Standards for direct enrollment entities and for third-
parties to perform audits of direct enrollment entities.
(a) Direct enrollment entities. The Federally-facilitated Exchanges
will permit the following entities to assist consumers with direct
enrollment in QHPs offered through the Exchange in a manner that is
considered to be through the Exchange, to the extent permitted by
applicable State law:
(1) QHP issuers that meet the applicable requirements in this
section and Sec. 156.1230 of this subchapter; and
(2) Web-brokers that meet the applicable requirements in this
section and Sec. 155.220.
(b) Direct enrollment entity requirements. For the Federally-
facilitated Exchanges, a direct enrollment entity must:
(1) Display and market QHPs and non-QHPs on separate website pages
on its non-Exchange website;
(2) Prominently display a standardized disclaimer in the form and
manner provided by HHS;
(3) Limit marketing of non-QHPs during the Exchange eligibility
application and QHP plan selection process in a manner that minimizes
the likelihood that consumers will be confused as to what products are
available through the Exchange and what products are not;
(4) Demonstrate operational readiness and compliance with
applicable requirements prior to the direct enrollment entity's
internet website being used to complete an Exchange eligibility
application or a QHP selection; and
(5) Comply with applicable Federal and State requirements.
(c) Direct enrollment entity application assister requirements. For
the Federally-facilitated Exchanges, to the extent permitted under
state law, a direct enrollment entity may permit its direct enrollment
entity application assisters, as defined at Sec. 155.20, to assist
individuals in the individual market with applying for a determination
or redetermination of eligibility for coverage through the Exchange and
for insurance affordability programs, provided that such direct
enrollment entity ensures that each of its direct enrollment entity
application assisters meets the requirements in Sec. 155.415(b).
(d) Federally-facilitated Exchange direct enrollment entity
suspension. HHS may immediately suspend the direct enrollment entity's
ability to transact information with the Exchange if HHS discovers
circumstances that pose unacceptable risk to the accuracy of the
Exchange's eligibility determinations, Exchange operations, or Exchange
information technology systems until the incident or breach is remedied
or sufficiently mitigated to HHS' satisfaction.
(e) Third parties to perform audits of direct enrollment entities.
A direct enrollment entity must engage an independent, third-party
entity to conduct an initial and annual review to demonstrate the
direct enrollment entity's operational readiness and compliance with
applicable direct enrollment entity requirements in accordance with
paragraph (b)(4) of this section prior to the direct enrollment
entity's internet website being used to complete an Exchange
eligibility application or a QHP selection. The third-party entity will
be a downstream or delegated entity of the direct enrollment entity
that participates or wishes to participate in direct enrollment.
(f) Third-party auditor standards. A direct enrollment entity must
satisfy the requirement to demonstrate operational readiness under
paragraph (e) of this section by engaging a third-party entity that
executes a written agreement with the direct enrollment entity under
which the third-party entity agrees to comply with each of the
following standards:
* * * * *
(2) Adheres to HHS specifications for content, format, privacy, and
security in the conduct of an operational readiness review, which
includes ensuring that direct enrollment entities are in compliance
with the applicable privacy and security standards and other applicable
requirements;
(3) Collects, stores, and shares with HHS all data related to the
third-party entity's audit of direct enrollment entities in a manner,
format, and frequency specified by HHS until 10 years from the date of
creation, and complies with the privacy and security standards HHS
adopts for direct enrollment entities as required in accordance with
Sec. 155.260;
(4) Discloses to HHS any financial relationships between the entity
and individuals who own or are employed by a direct enrollment entity
for which it is conducting an operational readiness review;
* * * * *
(6) Ensures, on an annual basis, that appropriate staff
successfully complete operational readiness review training as
established by HHS prior to conducting audits under paragraph (e) of
this section;
(7) Permits access by the Secretary and the Office of the Inspector
General or their designees in connection with their right to evaluate
through audit, inspection, or other means, to the third-party entity's
books, contracts, computers, or other electronic systems, relating to
the third-party entity's audits of a direct enrollment entity's
obligations in accordance with standards under paragraph (e) of this
section until 10 years from the date of creation of a specific audit;
and
* * * * *
(g) Multiple auditors. A direct enrollment entity may engage
multiple third-party entities to conduct the audit under paragraph (e)
of this section.
(h) Application to State Exchanges using a Federal platform. A
direct enrollment entity that enrolls qualified individuals in coverage
in a manner that constitutes enrollment through a State Exchange using
the Federal platform, or assists individual market consumers with
submission of applications for
[[Page 17567]]
advance payments of the premium tax credit and cost-sharing reductions
through a State Exchange using a Federal platform must comply with all
applicable Federally-facilitated Exchange standards in this section.
0
18. Section 155.415 is revised to read as follows:
Sec. 155.415 Allowing issuer or direct enrollment entity application
assisters to assist with eligibility applications.
(a) Exchange option. An Exchange, to the extent permitted by State
law, may permit issuer application assisters and direct enrollment
entity application assisters, as defined at Sec. 155.20, to assist
individuals in the individual market with applying for a determination
or redetermination of eligibility for coverage through the Exchange and
insurance affordability programs, provided that such issuer application
assisters or direct enrollment entity application assisters meet the
requirements set forth in paragraph (b) of this section.
(b) Application assister requirements. If permitted by an Exchange
under paragraph (a) of this section, and to the extent permitted by
State law, an issuer may permit its issuer application assisters and a
direct enrollment entity may permit its direct enrollment entity
application assisters to assist individuals in the individual market
with applying for a determination or redetermination of eligibility for
coverage through the Exchange and for insurance affordability programs,
provided that such issuer or direct enrollment entity ensures that each
of its issuer application assisters or direct enrollment entity
application assisters at least--
(1) Receives training on QHP options and insurance affordability
programs, eligibility, and benefits rules and regulations, and for
application assisters providing assistance in the Federally-facilitated
Exchanges or a State Exchange using the Federal platform, the assisters
must fulfill this requirement by completing registration and training
in a form and manner to be specified by HHS;
(2) Complies with the Exchange's privacy and security standards
adopted consistent with Sec. 155.260; and
(3) Complies with applicable State law related to the sale,
solicitation, and negotiation of health insurance products, including
any State licensure laws applicable to the functions to be performed by
the issuer application assister or direct enrollment entity application
assister, as well as State law related to confidentiality and conflicts
of interest.
0
19. Section 155.420 is amended--
0
a. By revising paragraphs (a)(5) and (b)(2)(iv);
0
b. In paragraph (d)(6)(ii) by removing ``; or'' and adding in its place
``;'';
0
c. In paragraph (d)(6)(iii) by removing ``.'' and adding in its place
``;'';
0
d. In paragraph (d)(6)(iv) by removing ``;'' and adding in its place
``; or''; and
0
e. By adding paragraph (d)(6)(v).
The addition reads as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(5) Prior coverage requirement. Qualified individuals who are
required to demonstrate coverage in the 60 days prior to a qualifying
event can either demonstrate that they had minimum essential coverage
as described in 26 CFR 1.5000A-1(b) or demonstrate that they had
coverage as described in paragraphs (d)(1)(iii) or (iv) of this section
for 1 or more days during the 60 days preceding the date of the
qualifying event; lived in a foreign country or in a United States
territory for 1 or more days during the 60 days preceding the date of
the qualifying event; are an Indian as defined by section 4 of the
Indian Health Care Improvement Act; or lived for 1 or more days during
the 60 days preceding the qualifying event or during their most recent
preceding enrollment period, as specified in Sec. Sec. 155.410 and
155.420, in a service area where no qualified health plan was available
through the Exchange.
(b) * * *
(2) * * *
(iv) If a qualified individual, enrollee, or dependent, as
applicable, loses coverage as described in paragraph (d)(1) or
(d)(6)(iii) of this section, gains access to a new QHP as described in
paragraph (d)(7) of this section, becomes newly eligible for enrollment
in a QHP through the Exchange in accordance with Sec. 155.305(a)(2) as
described in paragraph (d)(3) of this section, or becomes newly
eligible for advance payments of the premium tax credit in conjunction
with a permanent move as described in paragraph (d)(6)(iv) of this
section, and if the plan selection is made on or before the day of the
triggering event, the Exchange must ensure that the coverage effective
date is the first day of the month following the date of the triggering
event. If the plan selection is made after the date of the triggering
event, the Exchange must ensure that coverage is effective in
accordance with paragraph (b)(1) of this section or on the first day of
the following month, at the option of the Exchange.
* * * * *
(d) * * *
(6) * * *
(v) At the option of the Exchange, the qualified individual, or his
or her dependent--
(A) Experiences a decrease in household income;
(B) Is newly determined eligible by the Exchange for advance
payments of the premium tax credit; and
(C) Had minimum essential coverage as described in 26 CFR 1.5000A-
1(b) for one or more days during the 60 days preceding the date of the
financial change.
* * * * *
0
20. Section 155.605 is amended by adding paragraph (e)(5) to read as
follows:
Sec. 155.605 Eligibility standards for exemptions.
* * * * *
(e) * * *
(5) General hardship. The IRS may allow an applicant to claim the
exemption specified in HHS Guidance published September 12, 2018,
entitled, ``Guidance on Claiming a Hardship Exemption through the
Internal Revenue Service (IRS)'' (see https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Authority-to-Grant-HS-Exemptions-2018-Final-91218.pdf) and in IRS Notice 2019-05 (see https://www.irs.gov/pub/irs-drop/n-19-05.pdf), for the 2018 tax year.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
21. The authority citation for part 156 is revised to read as follows:
Authority: 42 U.S.C. 18021-18024, 18031-18032, 18041-18042,
18044, 18054, 18061, 18063, 18071, 18082, and 26 U.S.C. 36B.
0
22. Section 156.20 is amended by adding the definition of ``Generic''
in alphabetical order to read as follows:
Sec. 156.20 Definitions.
* * * * *
Generic means a drug for which an application under section 505(j)
of the Federal Food, Drug, and Cosmetic Act (21 U.S.C. 355(j)) is
approved.
* * * * *
0
23. Section 156.130 is amended by adding paragraph (h) to read as
follows:
Sec. 156.130 Cost-sharing requirements.
* * * * *
(h) Use of drug manufacturer coupons. For plan years beginning on
or after January 1, 2020:
[[Page 17568]]
(1) Notwithstanding any other provision of this section, and to the
extent consistent with state law, amounts paid toward cost sharing
using any form of direct support offered by drug manufacturers to
enrollees to reduce or eliminate immediate out-of-pocket costs for
specific prescription brand drugs that have an available and medically
appropriate generic equivalent are not required to be counted toward
the annual limitation on cost sharing (as defined in paragraph (a) of
this section).
(2) [Reserved]
0
24. Section 156.1230 is amended by--
0
a. Removing and reserving paragraph (a)(2);
0
b. Revising paragraph (b)(1);
0
c. Removing paragraph (b)(2); and
0
d. Redesignating paragraph (b)(3) as (b)(2).
The revisions read as follows:
Sec. 156.1230 Direct enrollment with the QHP issuer in a manner
considered to be through the Exchange.
(a) * * *
(2) [Reserved]
(b) * * *
(1) The QHP issuer must comply with applicable requirements in
Sec. 155.221 of this subchapter.
* * * * *
Dated: March 26, 2019.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: April 2, 2019.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2019-08017 Filed 4-18-19; 4:15 pm]
BILLING CODE 4150-28-P