[Federal Register Volume 85, Number 94 (Thursday, May 14, 2020)]
[Rules and Regulations]
[Pages 29164-29262]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-10045]
[[Page 29163]]
Vol. 85
Thursday,
No. 94
May 14, 2020
Part III
Department of Health and Human Services
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45 CFR Parts 146, 149, et al.
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Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2021; Notice Requirement for Non-Federal
Governmental Plans; Final Rule
Federal Register / Vol. 85 , No. 94 / Thursday, May 14, 2020 / Rules
and Regulations
[[Page 29164]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 146, 149, 155, 156 and 158
[CMS-9916-F]
RIN 0938-AT98
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2021; Notice Requirement for Non-Federal
Governmental Plans
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 cost-sharing reductions; and user
fees for Federally-facilitated Exchanges and State-based Exchanges on
the Federal platform. It also finalizes changes related to essential
health benefits and will provide states with additional flexibility in
the operation and establishment of Exchanges. The rule includes changes
related to cost sharing for prescription drugs; notice requirements for
excepted benefit health reimbursement arrangements offered by non-
Federal governmental plan sponsors; Exchange eligibility and
enrollment; exemptions from the requirement to maintain coverage;
quality rating information display standards for Exchanges; and other
related topics. This final rule also repeals regulations relating to
the Early Retiree Reinsurance Program.
DATES: These regulations are effective July 13, 2020.
FOR FURTHER INFORMATION CONTACT: Usree Bandyopadhyay, (410) 786-6650,
Kiahana Brooks, (301) 492-5229, or Evonne Muoneke (301) 492-4402, for
general information.
David Mlawsky, (410) 786-6851, for matters related to excepted
benefit health reimbursement arrangements (HRAs).
Allison Yadsko, (410) 786-1740 or Krutika Amin, (301) 646-2420, for
matters related to risk adjustment.
Aaron Franz, (410) 786-8027, for matters related to Federally-
facilitated Exchange (FFE) and State-based Exchange on the Federal
platform (SBE-FP) user fees and sequestration.
Joshua Paul, (301) 492-4347 or Allison Yadsko, (410) 786-1740, for
matters related to risk adjustment data validation (RADV).
Joshua Paul, (301) 492-4347, for matters related to the premium
adjustment percentage.
Alper Ozinal, (301) 492-4178, for matters related to timely
submission of enrollment reconciliation data and dispute of HHS payment
and collections reports.
Rebecca Zimmermann, (301) 492-4396, for matters related to value-
based insurance plan design.
Becca Bucchieri, (301) 492-4341, for matters related to essential
health benefit (EHB)-benchmark plans and defrayal of state-required
benefits.
Jill Gotts, (202) 603-0480, for matters related to eligibility
appeals.
Emily Ames, (301) 492-4246, for matters related to coverage
effective dates and termination notices.
Marisa Beatley, (301) 492-4307, for matters related to employer-
sponsored coverage verification and periodic data matching (PDM).
Carolyn Kraemer, (301) 492-4197, for matters related to special
enrollment periods under part 155.
Kendra May, (301) 492-4477, for matters related to terminations.
LeAnn Brodhead, (410) 786-3943, for matters related to cost-sharing
requirements.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio (MLR) program.
Kevin Kendrick, (301) 492-4127, for matters related to the Early
Retiree Reinsurance Program (ERRP).
Jenny Chen, (301) 492-5156, Shilpa Gogna, (301) 492-4257 or Nidhi
Singh Shah, (301) 492-5110), for matters related to quality rating
information display standards for Exchanges.
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:
Excepted Benefit HRAs Offered by Non-Federal Governmental Plan
Sponsors
B. Part 149--Requirements for the Early Retiree Reinsurance
Program
C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Notice Requirement for Excepted Benefit HRAs
Offered by Non-Federal Governmental Plan Sponsors
C. ICRs Regarding Special Enrollment Periods
D. ICRs Regarding Quality Rating Information Display Standards
for Plan Years Beginning on or After January 1, 2021
E. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan
Years Beginning on or After January 1, 2020
F. ICRs Regarding Termination of Coverage or Enrollment for
Qualified Individuals
G. ICRs Regarding Medical Loss Ratio (MLR)
H. Summary of Annual Burden Estimate for Final Requirements
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
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 in qualified health plans (QHPs).
Many individuals who enroll in QHPs through individual market Exchanges
are eligible to receive a premium tax credit (PTC) 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, which is intended to increase the workability of the PPACA
regulatory changes in the individual and small group markets, both on
and off Exchanges.
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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
[[Page 29165]]
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. In this final rule, we are, within the
limitations of current law, finalizing provisions to reduce fiscal and
regulatory burdens across different program areas and to provide
stakeholders with greater flexibility.
In previous rulemakings, we established provisions and parameters
to implement many PPACA requirements and programs. In this final rule,
we are amending some of these provisions and parameters, with a focus
on maintaining a stable regulatory environment. These changes are
intended to provide issuers with greater predictability for upcoming
plan years, while simultaneously enhancing the role of states in these
programs. The provisions will also provide states with additional
flexibilities, reduce unnecessary regulatory burdens on stakeholders,
empower consumers, ensure program integrity, and improve affordability.
In the proposed rule, we solicited comments on modifying the automatic
re-enrollment process for enrollees who would be automatically re-
enrolled with advance payments of the premium tax credit (APTC) that
would cover the enrollee's entire premium. We also announced that,
pending such future rulemaking, HHS will not take enforcement action
against Exchanges that do not implement a random sampling methodology
during plan years 2020 and 2021.
Risk adjustment continues to be a core program in the individual
and small group markets both on and off Exchanges, and we are
finalizing the proposals to recalibrate the risk adjustment models used
in the state payment transfer formula of the HHS-operated risk
adjustment methodology, among other updates. As a refinement to the
risk adjustment program, we are finalizing changes intended to improve
the reliability of risk adjustment data validation (RADV).
As we do every year in the HHS notice of benefit and payment
parameters, we are finalizing the user fee rates for issuers offering
plans through the Exchanges using the Federal platform. For the 2021
plan year, we are maintaining the Federally-facilitated Exchange (FFE)
and State-based Exchange on the Federal platform (SBE-FP) user fees at
the current 2020 plan year rates, 3.0 and 2.5 percent of total monthly
premiums, respectively, in order to preserve and ensure that the FFE
has sufficient funding to cover the cost of all special benefits
provided to FFE issuers during the 2021 plan year.
As we do every year, we are updating the maximum annual limitation
on cost sharing for the 2021 benefit year, including those for cost-
sharing reduction (CSR) plan variations. These updates, which are
required by law, will raise the annual limit on cost sharing, thereby
increasing cost sharing and out-of-pocket spending for consumers who
have out-of-pocket spending close to the annual cost-sharing limit.
We are committed to promoting a consumer-driven health care system
in which consumers are empowered to select and maintain health care
coverage of their choosing. To this end, we provide information to QHP
issuers on ways in which they can implement value-based insurance plan
designs that would empower consumers to receive high value services at
lower costs. These value-based insurance plan designs will empower
consumers and their providers to make evidence-based health decisions.
We also finalize new rules related to special enrollment periods.
We will allow Exchange enrollees and their dependents who are enrolled
in silver plans and become newly ineligible for CSRs to change to a QHP
one metal level higher or lower, if they choose. We will require
Exchanges to apply plan category limitations to dependents who are
currently enrolled in Exchange coverage and whose non-dependent
household member qualifies for a special enrollment period to newly
enroll in coverage. We will also shorten the time between the date a
consumer selects a plan through certain special enrollment periods and
the effective date of that plan. In addition, we will allow all
enrollees granted retroactive coverage through a special enrollment
period the option to select a later effective date and pay for only
prospective coverage. We also finalize the proposals to allow
individuals and their dependents who are provided a qualified small
employer health reimbursement arrangement (QSEHRA) on a non-calendar
year basis to qualify for the existing special enrollment period for
individuals enrolled in any non-calendar year group health plan or
individual health insurance coverage. We will also allow enrollees
whose requests for termination of their coverage were not implemented
due to an Exchange technical error to terminate their coverage
retroactive to the date they attempted the termination, at the option
of the Exchange.
To increase transparency in terminations of Exchange coverage or
enrollment, we will require termination notices be provided in all
scenarios where Exchange coverage or enrollment is terminated. We also
will require excepted benefit health reimbursement arrangements (HRAs)
sponsored by non-Federal governmental entities to provide a notice to
participants that contains specified information about the benefits
available under the excepted benefit HRA.
In addition, we are finalizing changes to the quality rating
information display requirements for Exchanges. To continue providing
flexibility for State Exchanges, we are codifying in regulation the
option for State Exchanges that operate their own eligibility and
enrollment platforms to display the quality rating information provided
by HHS or to display quality rating information based upon certain
state-specific customizations of the quality rating information
provided by HHS.
Stable and affordable Exchanges with healthy risk pools are
necessary for ensuring consumers maintain stable access to health
insurance options. We are sharing our future plans for rulemaking to
allow Exchanges to conduct risk-based employer sponsored coverage
verification and to remove the requirement that Exchanges select a
statistically random sample of applicants when no electronic data
sources are available. In order to make it easier for issuers to offer
wellness incentives to enrollees and promote a healthier risk pool, we
are finalizing the proposal that explicitly allows issuers to include
certain wellness incentives as quality improvement activities (QIA) in
the individual market for MLR reporting and calculation purposes.
We are also finalizing annual state reporting of state-required
benefits that are in addition to essential health benefits (EHB), for
which states are required to defray the costs. This will help to ensure
that federal APTC dollars are protected and states are appropriately
compensating enrollees or issuers for services that are in addition to
EHB.
We are finalizing changes to the policy regarding whether drug
manufacturer coupons must be applied towards the annual limitation on
cost sharing. Specifically, we are revising Sec. 156.130(h) to state
that, to the extent consistent with applicable state law, amounts paid
toward reducing the cost
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sharing incurred by an enrollee using any form of direct support
offered by drug manufacturers for specific prescription drugs may be,
but are not required to be, counted toward the annual limitation on
cost sharing. However, we are not finalizing any change to the
definition of cost sharing.
We are finalizing additional steps to ensure the proper execution
of PPACA requirements and to safeguard and conserve federal funds. To
protect against unnecessary overpayments of APTC funds, we will
streamline the process for terminating coverage of enrollees who die
while enrolled in Exchange coverage. In order to ensure that MLR
reporting and rebate calculations are accurate, we are finalizing the
proposal that issuers must report expenses for functions outsourced to
or services provided by other entities consistently with issuers' non-
outsourced expenses, and require issuers to deduct prescription drug
rebates and price concessions from MLR incurred claims, not only when
such rebates and price concessions are received by the issuer, but also
when they are received and retained by an entity that provides pharmacy
benefit management services to the issuer. Further, we are finalizing
that where enrollees provide consent for the Exchange to end their QHP
coverage if they are found to be dually enrolled in other qualifying
coverage during the Exchange's periodic data matching (PDM) process,
the Exchange will not be required to redetermine the enrollee's
eligibility for financial assistance and may discontinue coverage
consistent with the consent given by the enrollee.
Finally, we are repealing regulations currently set forth at 45 CFR
part 149, governing the Early Retiree Reinsurance Program (ERRP)
program and its implementation. The program sunset by law as of January
1, 2014.
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.
These provisions of the PHS Act were later augmented by other laws,
including the PPACA. 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. The term ``group
health plan'' includes both insured and self-insured group health
plans.\2\
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\2\ The term ``group health plan'' is used in title XXVII of the
PHS Act and is distinct from the term ``health plan'' as used in
other provisions of title I of PPACA. The term ``health plan'' does
not include self-insured group health plans.
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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 1302 of the PPACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary),
cost-sharing limits, and the levels of coverage for plans subject to
the EHB requirements, according to their AV. 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 1302(d) of the PPACA describes the various levels of coverage
based on their 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(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 qualified
individuals and qualified employers in the state. 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.\3\
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\3\ The Indian Health Care Improvement Act (IHCIA), the
cornerstone legal authority for the provision of health care to
American Indians and Alaska Natives, was made permanent when
President Obama signed the bill on March 23, 2010, as part of the
Patient Protection and Affordable Care Act.
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Section 1311(c)(3) of the PPACA provides the Secretary with
authority to develop a system to rate QHPs offered through an Exchange,
based on relative quality and price. Section 1311(c)(4) of the PPACA
authorizes the Secretary to establish an enrollee satisfaction survey
that evaluates the level of enrollee satisfaction of members with QHPs
offered through an Exchange, for each QHP with more than 500 enrollees
in the prior year. Further, sections 1311(c)(3) and 1311(c)(4) of the
PPACA require an Exchange to provide this quality rating information
\4\ to individuals and employers on the Exchange's website.
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\4\ The term ``quality rating information'' includes the Quality
Rating System (QRS) scores and ratings and the results of the
enrollee satisfaction survey (which is also known as the ``Qualified
Health Plan (QHP) Enrollee Experience Survey'').
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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 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.
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-
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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.
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. 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 and to allocate and manage those funds in order to support
Exchange operations. Office of Management and Budget (OMB) Circular No.
A-25 establishes Federal policy regarding user fees and specifies 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.
Section 1321(d) of the PPACA provides that nothing in title I of
the PPACA must 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 1411(c) of the PPACA requires the Secretary to submit
certain information provided by applicants under section 1411(b) of the
PPACA to other Federal officials for verification, including income and
family size information to the Secretary of the Treasury.
Section 1411(d) of the PPACA provides that the Secretary must
verify the accuracy of information provided by applicants under section
1411(b) of the PPACA for which section 1411(c) does not prescribe a
specific verification procedure, in such manner as the Secretary
determines appropriate.
Section 1411(f) of the PPACA requires the Secretary, in
consultation with the Treasury and Homeland Security Department
Secretaries and the Commissioner of Social Security, to establish
procedures for hearing and making decisions governing appeals of
Exchange eligibility determinations.
Section 1411(f)(1)(B) of the PPACA requires the Secretary to
establish procedures to redetermine eligibility on a periodic basis, in
appropriate circumstances, including eligibility to purchase a QHP
through the Exchange and for APTC and CSRs.
Section 1411(g) of the PPACA allows the exchange of applicant
information only for the limited purposes of, and to the extent
necessary to, ensure the efficient operation of the Exchange, including
by verifying eligibility to enroll through the Exchange and for APTC
and CSRs.
Sections 2722 and 2763 of the PHS Act provide that the requirements
of title XXVII of the PHS Act generally do not apply to excepted
benefits. Excepted benefits are described in section 2791 of the PHS
Act. This provision establishes four categories of excepted benefits.
One such category is limited excepted benefits, which may include
limited scope vision or dental benefits, and benefits for long-term
care, nursing home care, home health care, or community based care.
Section 2791(c)(2)(C) of the PHS Act, section 733(c)(2)(C) of the
Employee Retirement Income Security Act (ERISA), and section
9832(c)(2)(C) of the Internal Revenue Code (the Code) authorize the
Secretary of Health and Human Services, with the Secretaries of Labor
and the Treasury (collectively, the Secretaries), to issue regulations
establishing other, similar limited benefits as excepted benefits. To
be excepted under the category of limited excepted benefits, section
2722(c)(1) of the PHS Act provides that limited benefits must either:
(1) Be provided under a separate policy, certificate, or contract of
insurance; or (2) otherwise not be an integral part of the plan.
Section 2718 of the PHS Act, as added by the PPACA, generally
requires health insurance issuers to submit an annual MLR report to
HHS, and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 5000A of 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.\5\ Notwithstanding that reduction, certain exemptions are
still relevant to determine whether individuals age 30 and above
qualify to enroll in catastrophic coverage under Sec. 155.305(h).
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\5\ Public Law 115-97, 131 Stat. 2054 (2017).
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1. Premium Stabilization Programs \6\
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\6\ 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
[[Page 29168]]
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 FY 2015 sequestration rate for the risk adjustment
program was 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 our risk adjustment models, and amendments to the
RADV 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 RADV 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 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 recalibration related to an update to the 2016
enrollee-level External Data Gathering Environment (EDGE) dataset.\7\
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\7\ ``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
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 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.\8\
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\8\ ``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.
In the January 24, 2019 Federal Register (84 FR 227), we published
a proposed rule outlining updates to the calibration of the risk
adjustment methodology, the use of EDGE data for research purposes, and
updates to RADV audits. We published the 2020 Payment Notice final rule
in the April 25, 2019, Federal Register (84 FR 17454).
On December 6, 2019, we published the HHS Risk Adjustment Data
Validation (HHS-RADV) White Paper (2019 RADV White Paper).\9\
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\9\ The 2019 RADV White Paper is available at https://www.cms.gov/files/document/2019-hhs-risk-adjustment-data-validation-hhs-radv-white-paper.
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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). In the November 9, 2018 Federal Register (83 FR 56015), we
published a proposed rule that proposed to amend standards relating to
oversight of Exchanges established by states, periodic data matching
frequency and authority, the length of a consumer's authorization for
the Exchange to obtain updated tax information, and requirements for
certain issuers related to the collection of a separate payment for the
premium portion attributable to coverage for certain abortion services.
Many of the provisions in the proposed rule were finalized (2019
Program Integrity rule) in the December 27, 2019 Federal Register (84
FR 71674).
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
[[Page 29169]]
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 Market Stabilization final rule that
was published in the April 18, 2017 Federal Register (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 Small Business Health Options Program (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).
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), we set
forth standards related to Exchange user fees. 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 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. In the April 25, 2019 Federal Register (84
FR 17454), the final 2020 Payment Notice established a new special
enrollment period.
5. Essential Health Benefits
On December 16, 2011, HHS released a bulletin \10\ that outlined an
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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\10\ ``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. Cost-Sharing Requirements
In the 2020 Payment Notice, published in the April 25, 2019 Federal
Register (84 FR 17454), we added Sec. 156.130(h)(1) to clarify that
issuers are not required to count toward the annual limitation on cost
sharing any forms of direct support offered by drug manufacturers to
reduce out-of-pocket costs for brand drugs when a generic drug is
available and medically appropriate.
7. Excepted Benefit Health Reimbursement Arrangements
In the October 29, 2018 Federal Register (83 FR 54420), the
Departments of Health and Human Services, Labor, and the Treasury (the
Departments) published proposed regulations on HRAs and other account-
based group health plans, including a new excepted benefit referred to
as an excepted benefit HRA. In the June 20, 2019 Federal Register (84
FR 28888), the Departments published final regulations on HRAs and
other account-based group health plans, including excepted benefit HRAs
(the HRA rule).
8. Medical Loss Ratio (MLR)
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program in the December 1, 2010 Federal Register (75 FR 74863). A final
rule with a 30-day comment period was published in the December 7, 2011
Federal Register (76 FR 76573). An interim final rule with a 60-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76595). A final rule was published in the Federal Register on
May 16, 2012 (77 FR 28790). The MLR program requirements were amended
in final rules published in the March 11, 2014 Federal Register (79 FR
13743), the May 27, 2014 Federal Register (79 FR 30339), the February
27, 2015 Federal Register (80 FR 10749), the March 8, 2016 Federal
Register (81 FR 12203), the December 22, 2016 Federal Register (81 FR
94183), and the April 17, 2018 Federal Register (83 FR 16930).
9. Early Retiree Reinsurance Program (ERRP)
In the May 5, 2010 Federal Register (75 FR 24450), we published an
interim final rule with comment period governing the ERRP. In the April
5, 2011 Federal Register (76 FR 18766), we published a notice informing
the public that as of May 5, 2011, the ERRP would stop accepting
applications for new participants in the program due to the
availability of funds. In the December 13, 2011 Federal Register (76 FR
77537), we published a notice informing the public that, due to the
availability of funds, the ERRP would deny reimbursement requests that
include claims incurred after December 31, 2011. In the March 21, 2012
Federal Register (77 FR 16551), we published a notice establishing a
timeframe within which plan sponsors participating in the program were
expected to use ERRP reimbursement funds. Specifically, the notice
informed participating plan sponsors that reimbursement funds should be
used as early as possible, but not later than January 1, 2014.
10. Quality Rating System (QRS) and Enrollee Satisfaction Survey
Sections 1311(c)(3) of the PPACA directs the Secretary of HHS to
develop a quality rating for each QHP offered through an Exchange,
based on relative quality and price. Further, section 1311(c)(4) of the
PPACA requires the Secretary to establish an enrollee satisfaction
survey that evaluates the level of enrollee satisfaction of members
with QHPs offered through the Exchanges for each QHP with more than 500
enrollees in the prior year. Exchanges are also required to make
quality rating and enrollee satisfaction information available to
individuals and
[[Page 29170]]
employers on their respective websites. Consistent with these statutory
provisions, in May 2014, HHS issued regulation at Sec. Sec. 155.1400
and 155.1405 to establish the Quality Rating System (QRS) and the QHP
Enrollee Experience Survey display requirements for Exchanges and has
worked towards requiring nationwide the prominent display of quality
rating information on Exchange websites.\11\ As a condition of
certification and participation in the Exchanges, HHS requires that QHP
issuers submit QRS clinical measure data and QHP Enrollee Survey
response data for their respective QHPs offered through an Exchange in
accordance with HHS guidance, which has been issued annually for each
forthcoming plan year.\12\
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\11\ Patient Protection and Affordable Care Act; Exchange and
Insurance Market Standards for 2015 and Beyond, Final Rule, 79 FR
30240 at 30352 (May 27, 2014). Also see the CMS Bulletin on display
of Quality Rating System (QRS) quality ratings and Qualified Health
Plan (QHP) Enrollee Survey results for QHPs offered through
Exchanges (August 15, 2019), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
\12\ See, for example, Center for Clinical Standards & Quality,
CMS, The Quality Rating System and Qualified Health Plan Enrollee
Experience Survey: Technical Guidance for 2020 (October 2019),
available at https://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/QualityInitiativesGenInfo/Downloads/QRS-and-QHP-Enrollee-Survey-Technical-Guidance-for-2020-508.pdf.
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B. Stakeholder Consultation and Input
HHS has consulted with stakeholders on policies related to the
operation of Exchanges and the risk adjustment and RADV programs. We
have held a number of listening sessions with consumers, providers,
issuers, employers, health plans, advocacy groups and the actuarial
community to gather public input. We have solicited input from state
representatives on numerous topics, particularly EHBs, state mandates
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 are codified in 45 CFR
parts 146, 149, 153, 155, 156 and 158.
The changes to 45 CFR part 146 establish a notice requirement for
non-Federal governmental plan sponsors that offer an excepted benefit
HRA.
The changes to 45 CFR part 149 will delete the regulations related
to the ERRP, which ended on January 1, 2014.
The provisions related to 45 CFR part 153 relate to recalibration
of the risk adjustment models consistent with the approach outlined in
the 2020 Payment Notice to transition away from the use of
MarketScan[supreg] data and incorporate the most recent benefit years
of enrollee-level EDGE data that are available for 2021 and beyond, as
well as the ICD-10 HHS-HCC reclassification updates. The updates to the
risk adjustment program also relate to the risk adjustment user fee for
the 2020 benefit year, and modifications to RADV requirements for the
states where HHS operates the risk adjustment program.
We are finalizing an amendment to the definitions applicable to 45
CFR part 155. We discuss future changes to part 155 that would allow
Exchanges to implement a verification process for enrollment in or
eligibility for an eligible employer-sponsored plan based on the
Exchange's assessment of risk for inappropriate payments of APTC/CSR.
We also clarify that an Exchange will not redetermine eligibility for
APTC/CSRs for enrollees found to be dually enrolled in Medicare and QHP
coverage who direct the Exchange to end their QHP coverage; clarify
that when an Exchange identifies deceased enrollees via PDM, the
Exchange will terminate coverage retroactively to the date of death;
allow enrollees and their dependents eligible for a special enrollment
period due to becoming newly ineligible for CSRs and are enrolled in a
silver-level QHP, to change to a QHP one metal level higher or lower if
they elect to change their QHP enrollment through an Exchange;
establish that an Exchange must apply plan category limitations to
currently enrolled dependents whose non-dependent household member
qualifies for a special enrollment period to newly enroll the non-
dependent household member in Exchange coverage; provide that in the
FFE, special enrollment periods currently following regular effective
date rules would instead be effective on the first of the month
following plan selection; align retroactive effective date and binder
payment rules; establish that qualified individuals and dependents who
are provided a QSEHRA with a non-calendar year plan year would qualify
for the existing special enrollment period for individuals enrolled in
any non-calendar year group health plan or individual health insurance
coverage; and allow enrollees blocked from termination due to an
Exchange technical error to terminate their coverage retroactive to the
date they attempted the termination.
As we do every year in the HHS notice of benefit and payment
parameters, we are updating 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 are maintaining the FFE and SBE-FP user fees at the
current 2020 plan year rates, 3.0 and 2.5 percent of total monthly
premiums, respectively, to preserve and ensure that the FFE has
sufficient funding to cover the cost of all special benefits provided
to FFE and SBE-FP QHP issuers during the 2021 plan year. Further, we
are finalizing a change to 45 CFR part 156 to require QHP issuers to
send to enrollees a termination notice for all termination events. We
also are amending the regulation addressing state selection of EHB-
benchmark plans to require the reporting of state-required benefits. We
also offer QHP issuers the option to design value-based insurance plans
that would empower consumers to receive high value services at lower
cost. We are revising Sec. 156.130(h) in its entirety to address how
any direct support offered by drug manufacturers to enrollees for
specific prescription drugs may be treated with regard to accrual
towards the annual limitation on cost sharing.
The changes to 45 CFR part 158 require issuers, for MLR purposes,
to report expenses for functions outsourced to or services provided by
other entities consistently with issuers' non-outsourced expenses, and
to deduct from incurred claims prescription drug rebates and other
price concessions received and retained by the issuer and other
entities providing pharmacy benefit management services to the issuers.
The changes to the MLR regulations would also explicitly allow issuers
to report certain wellness incentives as QIA in the individual market.
III. Provisions of the Final Regulations and Analysis and Responses to
Public Comments
In the February 6, 2020 Federal Register (85 FR 7088), we published
the ``Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2021; Notice Requirement for Non-Federal
Governmental Plans'' proposed rule (proposed 2021 Payment Notice or
proposed rule). We received 1,082
[[Page 29171]]
comments. 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 are not addressed in this final rule.
In this final rule, we provide a summary of proposed provisions, a
summary of the public comments received that directly related to those
proposals, our responses to these comments, and a description of the
provisions we are finalizing.
We first address comments regarding the publication of the proposed
rule and the comment period.
Comment: Multiple commenters criticized the length of the comment
period, stating that a longer comment period is necessary to allow
stakeholders to review the proposed rule and provide thoughtful
comments.
Response: The timeline for publication of this final rule
accommodates issuer filing deadlines for the 2021 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 operating under strict deadlines related to approval of
products.
Comment: Multiple commenters criticized the timing of the release
of the proposed rule, stating that publishing the proposal for this
annual rule in February 2020 creates challenges for states, Exchanges,
issuers, and other entities in implementing changes for plan year 2021.
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 in implementing the changes in this final rule in a
timely fashion.
A. Part 146--Requirements for the Group Health Insurance Market:
Excepted Benefit HRAs Offered by Non-Federal Governmental Plan Sponsors
We proposed to add a new paragraph (b)(3)(viii)(E) to Sec. 146.145
to establish notice requirements for excepted benefit HRAs offered by
non-Federal governmental plan sponsors. We are finalizing the notice
requirements as proposed, except that we are modifying the
applicability date so the new notice requirement applies to excepted
benefit HRAs offered by non-Federal governmental plan sponsors for plan
years beginning on or after 180 days following the effective date of
the final rule.
Excepted benefit HRAs are a new type of excepted benefit the
Departments recently established in the HRA rule.\13\ As proposed, the
new paragraph would require sponsors of non-Federal governmental plans
that offer excepted benefit HRAs to provide a notice to eligible
participants that contains specified information about the benefits
available under the excepted benefit HRA.
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\13\ 84 FR 28888 (June 20, 2019).
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In the preamble to the HRA rule, the Departments noted that
longstanding notice requirements under Part 1 of ERISA already apply to
private-sector, employment-based plans. The Departments explained that
under those notice requirements, excepted benefit HRAs that are subject
to ERISA generally should provide information on eligibility to receive
benefits, annual or lifetime caps or other limits on benefits under the
plan, and a description or summary of the benefits. Accordingly, the
HRA rule included a cross-reference to existing ERISA notice provisions
for excepted benefit HRAs that are subject to ERISA, to help ensure
that sponsors of such excepted benefit HRAs are aware of their
obligations under those provisions. However, the HRA rule did not
finalize any notice requirements in addition to those ERISA already
imposes on ERISA-covered plans. It also did not subject plans that are
not subject to ERISA, such as excepted benefit HRAs sponsored by non-
Federal governmental employers, to similar notice requirements.
We proposed to add new paragraph (b)(3)(viii)(E) to Sec. 146.145
under which an excepted benefit HRA offered by a non-Federal
governmental plan sponsor would be required to provide a notice that
describes conditions pertaining to eligibility to receive benefits,
annual or lifetime caps or other limits on benefits under the excepted
benefit HRA, and a description or summary of the benefits available
under the excepted benefit HRA. We explained that this is generally
consistent with the content requirements of Department of Labor (DOL)
summary plan description regulations that apply to excepted benefit
HRAs that are subject to ERISA at 29 CFR 2520.102-3(j)(2) and (3),
although the proposed excepted benefit HRA notice provided by a non-
Federal governmental plan sponsor would be required to be provided
annually and would not necessarily have to include every data element
specified in those DOL regulations. We also proposed that the notice
must be provided in a manner reasonably calculated to ensure actual
receipt by participants eligible for the excepted benefit HRA, such as
by providing the notice in the same manner in which the plan sponsor
provides other notices or plan documents to plan participants.
Under existing DOL regulations at 29 CFR 2520.104b-2(a), ERISA-
covered plans, including ERISA-covered excepted benefit HRAs, generally
are required to furnish a copy of the notice to each participant no
later than 90 days after the employee becomes a participant in the
plan. Given that ERISA-covered plans and non-Federal governmental plans
often contract with the same service providers to administer their
health plans, to increase efficiencies and minimize costs and
confusion, we proposed that the notice provided by non-Federal
governmental excepted benefit HRAs must be provided no later than 90
days after the first day of the excepted benefit HRA plan year, or in
the case of an employee who becomes a participant after the start of
the plan year, no later than 90 days after the employee becomes a
participant in the excepted benefit HRA.
We further proposed that the notice requirement would be applicable
to excepted benefit HRA plan years beginning on or after 30 days
following the effective date of the final rule.
We solicited comment on all aspects of the proposal, including
whether to apply a different timing standard than the one proposed for
the notices for non-Federal governmental excepted benefit HRAs, and any
logistical, cost, and other challenges that would ensue from applying a
different timing standard for the notice for such excepted benefit HRAs
than for those regulated by ERISA. We also solicited comments on the
proposed applicability date and on ways to mitigate the potential costs
and burdens this notice requirement may impose on non-Federal
governmental plan sponsors interested in offering excepted benefit
HRAs. We also sought comment on whether sponsors of non-Federal
governmental excepted benefit HRAs should be required to provide the
notice annually after the initial notice, or whether, after providing
the initial notice, they should only be required to provide the notice
with respect to plan years for which the terms of the excepted benefit
HRA change from the
[[Page 29172]]
previous plan year, and if so, what type or magnitude of change should
trigger such a subsequent notice.
We are finalizing the notice requirement as proposed, except for
the applicability date, which we are extending based on comments
received. This new notice requirement applies to excepted benefit HRAs
offered by non-Federal governmental plan sponsors for plan years
beginning on or after 180 days following the effective date of the
final rule.
Comment: We received a relatively small number of comments
regarding this proposal. Several commenters generally supported a
notice requirement on excepted benefit HRAs sponsored by non-Federal
governmental employers, without objecting to the proposed timing of the
initial notice. Several commenters, while supporting the proposal
generally, stated that contrary to the proposal, the notice should be
provided before enrollment in the excepted benefit HRA, so consumers
can make an informed decision about their coverage.
Response: We understand that many non-Federal governmental sponsors
of excepted benefit HRAs may use the same third-party administrators as
used by sponsors of excepted benefit HRAs that are subject to ERISA's
timing requirements for excepted benefit HRA notices. In such cases,
for administrative efficiency, non-Federal governmental sponsors of
excepted benefit HRAs may prefer to send the notices to participants
following their enrollment, within 90 days after they enroll in the
excepted benefit HRA. Therefore, we are finalizing the notice timing
standard as proposed. Furthermore, we agree that receiving the notices
before enrollment may be useful for employees. Thus, we clarify that
the timing standard in Sec. 146.145(b)(3)(viii)(E) does not prohibit
non-Federal governmental sponsors of excepted benefit HRAs from
delivering the notice prior to enrollment. For example, a non-Federal
governmental sponsor of an excepted benefit HRA may provide the notice
on the 30th day before the start of the plan year and satisfy its
obligation to provide the notice no later than 90 days after an
employee becomes a participant. In this example, for employees who are
not eligible for the excepted benefit HRA on the date the notice is
otherwise provided, the notice must be provided no later than 90 days
after the employee becomes a participant. We are not finalizing a limit
on how early a non-Federal governmental plan sponsor may send the
notice, but we encourage sponsors that opt to send the notice before
the start of the excepted benefit HRA plan year to send the notice in a
timeframe that is reasonably calculated to ensure employees receive the
notice at a time that would enable them to make an informed decision
about their coverage.
Comment: One commenter supported the proposal that non-Federal
governmental sponsors of excepted benefit HRAs be required to provide
the notice annually. Another commenter recommended that a subsequent
notice should be required only when there is a material change to the
excepted benefit HRA from the previous plan year because without a
material change, the subsequent notice would be unnecessary and unduly
burdensome. Another commenter suggested that rather than require an
annual notice, the regulations should track current ERISA requirements
regarding subsequent notices, notices of material modifications of
coverage, and notices of material reductions in covered services.
Response: We believe that an annual notice will benefit employees
by ensuring that employees stay informed of their coverage options and
helping employees understand how to utilize their excepted benefit HRA.
Although we recognize that an annual notice may be somewhat more
burdensome than if the notice were only required in certain
circumstances in subsequent plan years, we do not believe the annual
requirement will pose a significant burden on non-Federal governmental
plan sponsors that would outweigh the benefit to employees. Further, to
the extent there are no changes in the plan design, the burdens
associated with development of the notice would be minimized for
subsequent plan years. Therefore, we finalize the requirement that the
notice be provided annually, as proposed.
Comment: One commenter stated that the notice requirement should be
applicable for excepted benefit HRA plan years beginning on or after 1
year from the effective date of the final rule. The commenter asserted
that understanding the scope of the notice requirements, identifying
affected participants, developing the notice language, and delivering
the notice would take more than 30 days.
Response: We do not agree that these tasks identified by the
commenter are so complex as to justify delaying the proposed
applicability date for 11 months. However, after considering comments
received, in order to provide additional flexibility and time for non-
Federal governmental plan sponsors to develop and send the notice, we
are finalizing a later applicability date. As finalized, the notice
provision is applicable to excepted benefit HRAs offered by non-Federal
governmental plan sponsors for plan years beginning on or after 180
days following the effective date of this final rule.
B. Part 149--Requirements for the Early Retiree Reinsurance Program
(ERRP)
We proposed to delete part 149 of title 45 of the CFR, which sets
forth requirements for participating in the ERRP, established by
section 1102 of the PPACA. We will delete part 149 as proposed.
The ERRP provided financial assistance in the form of reinsurance
to employment-based health plan sponsors--including for-profit
companies, schools and educational institutions, unions, state and
local governments, religious organizations, and other nonprofit plan
sponsors--that made coverage available to early retirees, their spouses
or surviving spouses, and dependents, for specified claims incurred
prior to January 1, 2014, or until funding was depleted, whichever were
to occur sooner. The goal of the program was to encourage and support
comprehensive, quality health care for early retirees at least 55 years
of age, and their spouses and dependents, not otherwise eligible for
Medicare during the period preceding the effective date of the
Exchanges and many of the market-wide rules created by the PPACA.
Under section 1102(a)(1) of the PPACA, the ERRP expired January 1,
2014. All ERRP payments have been made and there are no outstanding
claims or disputes. A portion of the original appropriation remains,
and will be returned to the Treasury when the appropriation is closed
out in due course. Therefore, we proposed to delete the regulations in
part 149 and reserve part 149 for future use, which would reduce the
volume of Federal regulations.
We received no comments concerning the proposal. Therefore, we are
repealing the regulations as proposed.
C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment
1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2020,\14\ both the transitional
reinsurance program and the permanent risk adjustment program are
subject to the fiscal year
[[Page 29173]]
(FY) 2020 sequestration. The Federal Government's 2020 fiscal year
began October 1, 2019. While the 2016 benefit year was the final year
of the transitional reinsurance program, there could be reinsurance
payments in FY 2020 for close-out activities. Therefore, the risk
adjustment and reinsurance programs will be sequestered at a rate of
5.9 percent for payments made from FY 2020 resources (that is, funds
collected during FY 2020).
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\14\ Available at https://www.whitehouse.gov/wp-content/uploads/2019/03/2020_JC_Sequestration_Report_3-18-19.pdf.
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HHS, in coordination with 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 December 12, 1985), as amended, and the
underlying authority for the reinsurance and risk adjustment program,
the funds that are sequestered in FY 2020 from the risk adjustment or
reinsurance programs will become available for payment to issuers in FY
2021 without further Congressional action.
Additionally, in accordance with the OMB Report to Congress on the
Joint Committee Reductions for Fiscal Year 2021,\15\ the permanent risk
adjustment program is subject to the FY 2021 sequestration. The Federal
Government's 2021 fiscal year will begin October 1, 2020. Therefore,
the risk adjustment program will be sequestered at a rate of 5.7
percent for payments made from FY 2021 resources (that is, funds
collected during FY 2021).
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\15\ Available at https://www.whitehouse.gov/wp-content/uploads/2020/02/JC-sequestration_report_FY21_2-10-20.pdf.
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HHS, in coordination with 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 December 12, 1985), as amended, and the
underlying authority for the risk adjustment program, the funds that
are sequestered in FY 2021 from the risk adjustment program will become
available for payment to issuers in FY 2022 without further
Congressional action. If Congress does not enact deficit reduction
provisions that replace the Joint Committee reductions, the program
would be sequestered in future fiscal years, and any sequestered
funding would 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 2021 benefit
year. Therefore, HHS will operate risk adjustment in every state and
the District of Columbia for the 2021 benefit year.
Among other things, we proposed changes to recalibrate the risk
adjustment models consistent with the methodology we finalized for the
2020 benefit year. For the 2021 benefit year, we proposed to
incorporate the 3 most recent benefit years of enrollee-level EDGE data
that are available, and to rely only on enrollee-level EDGE data for
2021 and beyond for purposes of recalibrating the HHS risk adjustment
models. We also proposed the risk adjustment user fee for the 2021
benefit year, and modifications to certain RADV requirements.
a. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on age, sex, and diagnoses (grouped into
hierarchical condition categories (HCCs)), producing a risk score. The
current structure of these models is described in the 2020 Payment
Notice.\16\ 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 CSR adjustment that accounts for differences in induced
demand at various levels of cost sharing.
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\16\ See 84 FR 17454 at 17463.
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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) within a geographic rating area is one of the
inputs into the risk adjustment state payment transfer formula, which
determines the payment or charge that an issuer will receive or be
required to pay for that plan for the applicable state market risk
pool. 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.
(1) Updates to Data Used for Risk Adjustment Model Recalibration
We proposed to discontinue our reliance on MarketScan[supreg] data
to recalibrate the risk adjustment models. Previously, 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) with 2016 enrollee-level EDGE
data. The 2019 benefit year was the first recalibration year that
enrollee-level EDGE data was used for this purpose. In keeping with our
previously-stated intention to transition away from the
MarketScan[supreg] commercial database, we further reduced our use of
MarketScan[supreg] data in 2020 benefit year model recalibration by
using only 1 year of MarketScan[supreg] data (2015), and the 2 most
recent years of available enrollee-level EDGE data (2016 and 2017).
During all prior recalibrations, we implemented an approach that used
blended, or 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.
Consistent with the policy announced in the 2020 Payment
Notice,\17\ we proposed to no longer incorporate MarketScan[supreg]
data in the recalibration process beginning with the 2021 benefit year.
Rather, we proposed for the 2021 benefit year and beyond to blend the 3
most recent years of available enrollee-level EDGE data. Specifically,
we proposed for the 2021 benefit year to blend the enrollee-level EDGE
data from benefit years 2016, 2017, and 2018 to recalibrate the risk
adjustment models. We also proposed to maintain the approach of using
the 3 most recent years of available enrollee-level EDGE data for
recalibration of the risk
[[Page 29174]]
adjustment models for future benefit years beyond 2021, unless changed
through rulemaking. We sought comment on these proposals.
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\17\ 84 FR 17454 at 17464.
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After reviewing the public comments, we are finalizing our proposal
to determine coefficients for the 2021 benefit year based on a blend of
separately solved coefficients from the 2016, 2017, and 2018 benefit
years' enrollee-level EDGE data. This approach will incorporate the
most recent years' claims experience that is available while
maintaining stability in risk scores, as the recalibration will
maintain 2 years of EDGE data that were used in the previous years'
models. It also will continue our efforts to recalibrate the risk
adjustment models using data from issuers' individual and small group
(including merged) market populations and complete the transition away
from the MarketScan[supreg] commercial database that approximates
individual and small group (including merged) market populations.
Additionally, we are finalizing our proposal for future benefit years
beyond 2021 to blend the 3 most recent years of available enrollee-
level EDGE data.
Due to the timing of the proposed rule, we noted in the proposed
rule that we were unable to incorporate the 2018 benefit year enrollee-
level EDGE data in the calculation of the proposed coefficients in that
rule. Therefore, consistent with the proposed 2017 and 2019 payment
notices, the draft coefficients in the proposed rule were based on the
2 most recent years of data available at the time the proposed rule was
drafted--the 2016 and 2017 benefit year enrollee-level EDGE data.
Considering that 2 of the 3 years of enrollee-level EDGE data that we
proposed to use to recalibrate the final 2021 risk adjustment models
were reflected in the draft coefficients in the proposed rule, we
explained that we believe that the draft coefficients listed in the
proposed rule would provide a reasonably close approximation of what
could be anticipated from blending the 2016, 2017, and 2018 benefit
years' enrollee-level EDGE data. We noted in the proposed rule that if
we finalize the proposed recalibration approach, but are unable to
incorporate the 2018 benefit year EDGE data in time to publish the
final coefficients in the final rule, we would publish the final
coefficients for the 2021 benefit year in guidance after the
publication of the final rule, consistent with our approach in previous
benefit years.\18\ We were unable to incorporate the 2018 benefit year
EDGE data in time to publish the final coefficients in this final rule.
Therefore, consistent with Sec. 153.320(b)(1)(i), we will release the
final coefficients in guidance by June 2020 to allow for the
incorporation in final rates for the 2021 benefit year.
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\18\ For example, see the HHS Notice of Benefit and Payment
Parameters for 2018 Final Rule (the 2018 Payment Notice), 81 FR
94058 (December 22, 2016). Also see 45 CFR 153.320(b)(1)(i).
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We summarize and respond to public comments received on these
proposals below.
Comment: Most commenters supported the proposal to determine
coefficients for the 2021 benefit year based on a blend of separately
solved coefficients from the 2016, 2017, and 2018 benefit years'
enrollee-level EDGE data. Most commenters also supported maintaining
the approach of using the 3 most recent years of available enrollee-
level EDGE data for recalibration of the risk adjustment models for
future benefit years beyond 2021.
A few commenters expressed concern about when final blended
coefficients for the risk adjustment models would be published. One
commenter did not support HHS waiting until the release of the final
payment notice to publish the final 2021 blended coefficients, and
suggested HHS use coefficients developed from the 2 most recent years
of available enrollee-level EDGE data, instead of the 3 most recent
years, in order to provide two-year blended factors much earlier,
perhaps even before the proposed rule. Another commenter also suggested
HHS consider using only the 2 most recent years of data or, if using 3
years, weighting the most recent year more heavily given the lag in the
data relative to how quickly changes in medical practice and technology
impact the cost of care. Other commenters pointed out that issuers need
the information on proposed coefficients for modeling and pricing much
earlier than the timing of the proposed payment notice, especially
given that many states require rate filings as early as May of the
prior year. Another commenter requested confirmation that HHS will
continue to publish the proposed coefficients in the proposed rule.
Response: We believe blending multiple years of data promotes
stability and certainty for issuers in rate setting, helping to reduce
year-to-year changes in risk scores and smooth significant differences
in coefficients solved from any one year's dataset, particularly for
conditions with small sample sizes. We also believe using the latest
data available, especially with new drugs and technology coming to
market, is the best approach to improve overall model accuracy.
As we explained when finalizing the amendments to Sec.
153.320(b)(1)(i), due to the fact that some data used to finalize
coefficients may not be available until after publication of the
applicable benefit year's final payment notice, we may not be able to
provide finalized coefficients in the payment notice rulemaking.\19\
Instead, in these circumstances, we adopted an approach to release
draft coefficients based on the 2 most recent years of data available,
identify the datasets that would be used to calculate the final
coefficients, and incorporate the additional, more recently available
year's data in the final coefficients in subsequent guidance. This
approach was followed in 2017 and 2019, and will also be followed for
the 2021 benefit year.
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\19\ See 81 FR at 94084-94085.
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We anticipate publishing the final coefficients for the 2021
benefit year by June 2020, which is prior to the deadline for final
rate submissions,\20\ to provide issuers with an opportunity to update
their rate submissions, if necessary. In determining which data years
to use, we seek to balance stability in risk scores year-over-year with
the desire to incorporate the most recent data available on enrollees'
risk. As some commenters noted, incorporating the most recent available
year's data allows the risk adjustment models to reflect any changes in
medical practice and technology (including newer or cheaper
treatments). Particularly given recent rapid changes in treatment
costs, we continue to believe incorporating the most recent years of
data available more accurately reflects enrollees' risk. Using three
years of data allows stability in model factors from the two prior
benefit years' recalibration. However, in response to comments, we
intend to consider whether overweighing the factors solved from the
most recent data year available is warranted for future benefit years,
as well as assess using factors solved from only 2 years of enrollee-
level EDGE data available at the time of the proposed rule for future
benefit years.
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\20\ See, for example, https://www.cms.gov/files/document/2020-final-rate-review-timeline-bulletin.pdf.
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We also recognize the comments about the impact of delaying
publication of blended coefficients and the comments requesting the
final coefficients be made available by the time of initial state rate
filing submissions. We will continue to look for opportunities to
update our processes to provide draft and final
[[Page 29175]]
recalibrated coefficients earlier, but we did not propose and are not
making changes to the current schedule or approach for publication of
the recalibrated coefficients at this time.
Comment: Commenters agreed that exclusively using enrollee-level
EDGE data to recalibrate the HHS risk adjustment models better reflects
the risk in the individual and small group (including merged) markets.
One commenter encouraged HHS to continuously monitor and analyze
potential long-term impacts of using enrollee-level EDGE data. Another
commenter asked HHS to provide additional information about its
blending methodology, including whether HHS adjusts the coefficients
for expected one-time price hikes that would occur in the benefit year
and not the data experience year or vice versa (for example, patent
protection on brand drugs, or drugs losing a patent).
Response: We agree with commenters that exclusively using enrollee-
level EDGE data to recalibrate the risk adjustment models will more
closely reflect the relative risk differences of individuals in the
individual and small group (including merged) markets compared to
MarketScan[supreg] data, which generally reflects the large group
market and was used in past years before enrollee-level EDGE data was
available to approximate the HHS risk adjustment covered population.
As with every recalibration year, we continue to monitor the year-
to-year changes in risk scores related to the data used, and will
continue to monitor the potential long-term impacts of exclusively
using enrollee-level EDGE data. HHS trends expenditures in each year's
data to the applicable benefit year. Beginning with the 2017 benefit
year, we trended medical services, preventive services, traditional
(including brand and generic) prescription drug and specialty
prescription drug expenditures separately based on varying growth rates
observed in data available, in consultation with actuaries and industry
reports.\21\ Except for the Hepatitis C drug pricing adjustment,
discussed below, we do not currently adjust the model coefficients for
one-time price changes that could occur in the benefit year.
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\21\ For further details on trending, see the 2017 Payment
Notice final rule (81 FR 12204 at 12218), and also the March 31,
2016 HHS Risk Adjustment Models White Paper, available at https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
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To further explain our blending methodology, the coefficients are
separately solved from each of the three years of data used in
recalibration with applicable trend factors to account for anticipated
cost changes between the data year and the applicable risk adjustment
benefit year. The final blended coefficients for the applicable benefit
year are created by averaging the separately solved coefficients across
each of the three data years. The blending methodology is an average of
three years' separately solved factors for each of the models, with
each of the data years' factors equally weighted in the average as one-
third of the final blended coefficients.\22\
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\22\ For further details on blending, see the 2016 Payment
Notice (80 FR 10760), and also the March 31, 2016 HHS Risk
Adjustment Models White Paper, available at https://www.cms.gov/cciio/resources/forms-reports-and-other-resources/downloads/ra-march-31-white-paper-032416.pdf.
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(2) Updates to Risk Adjustment Model Recalibration
i. Payment Hierarchical Condition Categories (HCCs)
The HHS-HCC clinical classification is the foundation of the models
used in calculating transfers under the state payment transfer formula
in the HHS-operated risk adjustment program established under section
1343 of the PPACA. Except for annual diagnosis code updates and the
reconfiguration of one HCC,\23\ the HHS-HCC clinical classification in
terms of diagnosis code mappings has not been modified since it was
implemented in the 2014 benefit year.
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\23\ As detailed in the 2018 Payment Notice, beginning with the
2018 benefit year, HCC 37 Chronic Hepatitis was split into two HCCs
to distinguish the treatment costs of chronic hepatitis C: HCC 37_1
Chronic Viral Hepatitis C and HCC 37_2 Chronic Hepatitis, Except
Chronic Viral Hepatitis C. See 81 FR 94058 at 94085 (December 22,
2016).
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In preparation for proposing the changes in the proposed rule, we
released a paper on June 17, 2019 entitled ``Potential Updates to the
HHS-HCCs for the HHS-operated Risk Adjustment Program'' (HHS-HCC
Updates Paper).\24\ This paper described our methodology for reviewing
and restructuring the HHS-HCC classification to incorporate ICD-10
diagnosis codes, and our intention to evaluate potential changes to the
HHS-HCC model classification using enrollee-level EDGE data, which is
representative of the population for which the models are targeted. Our
main goal for reclassifying HHS-HCCs is to use them to update the HHS-
HCC models to better incorporate coding changes made in the transition
to the ICD-10 diagnosis classification system. We also used this
opportunity to review and use the newly available 2016 and 2017 benefit
years' enrollee-level EDGE claims data, which reflect the first 2 full
years of ICD-10 diagnosis coding on claims. While this analysis did not
consider updates to the RXCs,\25\ it examined other components of the
clinical classification, including payment and non-payment HCCs,
certain clinical hierarchies, HCC groups and a priori constraints on
HCC coefficients, and other HCC interactions affected by potential
changes.
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\24\ The Potential Updates to HHS-HCCs for the HHS-operated Risk
Adjustment Program (June 17, 2019) paper is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downoads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf.
\25\ RXCs were not implemented in the HHS-operated risk
adjustment models until the 2018 benefit year and they currently
only apply to the adult models.
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In the HHS-HCC Updates Paper, we explained our considerations for
examining potential changes to HCCs and in determining which diagnosis
codes should be included, how they should be grouped, and how the
diagnostic groupings should interact for risk adjustment purposes,
which is a critical step in the development of the HHS-HCC risk
adjustment models. To guide the reclassification process, we used 10
principles that were discussed in the proposed 2014 Payment Notice that
guided the creation of the original HHS-HCC diagnostic classification
system,\26\ and that were used to develop the HCC classification system
for the Medicare risk adjustment model.\27\ These principles included:
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\26\ See the HHS Notice of Benefit and Payment Parameters for
2014, Proposed Rule, 77 FR 73118 at 73128 (December 7, 2012).
\27\ Report to Congress: Risk Adjustment in Medicare Advantage
(December 2018) also discusses these principles in Section 2.3 under
``Principle for Risk Adjustment Models'' from pages 14-16 and is
available at https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/RTC-Dec2018.pdf.
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Principle 1--Diagnostic categories should be
clinically meaningful.
Principle 2--Diagnostic categories should
predict medical (including drug) expenditures.
Principle 3--Diagnostic categories that will
affect payments should have adequate sample sizes to permit accurate
and stable estimates of expenditures.
Principle 4--In creating an individual's
clinical profile, hierarchies should be used to characterize the
person's illness level within each disease process, while the effects
of unrelated disease processes accumulate.
Principle 5--The diagnostic classification
should encourage specific coding.
[[Page 29176]]
Principle 6--The diagnostic classification
should not reward coding proliferation.
Principle 7--Providers should not be penalized
for recording additional diagnoses (monotonicity).
Principle 8--The classification system should be
internally consistent (transitive).
Principle 9--The diagnostic classification
should assign all diagnosis codes (exhaustive classification).
Principle 10--Discretionary diagnostic
categories should be excluded from payment models.
Using these principles, we conducted a multi-step analysis of the
current HHS-HCC classification to develop the list of HCC changes that
we proposed.
We began by conducting a comprehensive review of the current HHS-
HCC full classification and risk adjustment model classification,
including an examination of disease groups with extensive ICD-10 code
classification changes, HCCs whose counts had changed considerably
following ICD-10 implementation, clinical areas of interest (for
example, substance use disorders), and model under-prediction or over-
prediction as identified by predictive ratios. We then examined HCC
reconfigurations, payment HCC designation, HCC Groups, and hierarchies
to develop the preliminary regression analyses using 2016 data.\28\ We
also conducted a series of clinical reviews to inform potential
changes. Next, we reviewed the payment model and full classification
regressions to compare frequencies and predicted incremental costs of
HCCs. Then, we repeated the preliminary regression analyses using 2017
data, reviewed regression results, and developed the new potential HHS-
HCC reclassification.\29\
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\28\ Payment HCCs are those included in the HHS-HCC risk
adjustment models. The full classification includes both payment and
non-payment HCCs. HCC Groups refers to payment HCCs that are grouped
together in the HHS-HCC risk adjustment models.
\29\ To further clarify, in the HHS-HCC Updates Paper, V05
reflects the current classification model, V06 is the initial
assessment of potential revisions to the classification model
developed using the 2016 benefit year data, and V06a is the
reassessment of potential revisions to the classification model that
included 2017 benefit year data. In this rule, V06b is the revised
HCC changes in the proposed rule and V07 is the revised
classification model being finalized.
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During our analysis, for some disease groups such as substance use
disorders and pregnancy, we explored multiple model variations. For
substance use disorders, we tested different configurations to add new
drug use disorder HCCs and alcohol use disorder HCCs to the HHS-HCC
risk adjustment models--a single hierarchy approach; two hierarchies
(drug and alcohol HCCs being additive); interaction terms; and for each
of these iterations, grouping HCCs or leaving them ungrouped. For
pregnancy, we tested different configurations for adding ongoing
pregnancy HCCs to the model, which already includes miscarriage HCCs
and completed pregnancy HCCs. These configurations included a single
hierarchy or separate additive HCCs to distinguish pregnancy care from
delivery; interactions between completed and ongoing pregnancy HCCs to
account for when in the episode of care complications occur; and
removal of or changes to HCC groups to better reflect cost
distinctions. In evaluating options for reclassification, we considered
their predictive power, model complexity, and coding incentives.
Based on this analysis, we proposed to incorporate the HCC changes
identified in the HHS-HCC Updates Paper beginning with the 2021 benefit
year risk adjustment models.\30\ As discussed in the proposed rule, the
main purpose of the proposed HCC changes is to update the HCCs based on
availability of more recent diagnosis code information and the
availability of more recent claims data. To provide risk adjustment
factors that best reflect more recent treatment patterns and costs, we
proposed to update the HHS-HCC clinical classification in the V05 HHS-
HCC risk adjustment models by using more recent claims data to develop
updated risk factors, as part of our continued assessment of
modifications to the HHS-operated risk adjustment program for the
individual, small group, and merged markets.
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\30\ As explained in the proposed rule, we proposed one
modification to the child models from the potential updates
described in the HHS-HCC Updates Paper. We proposed and are
finalizing below in this rule that the removal of a constraint for
HCC 159 Cystic Fibrosis to allow it to have higher predicted costs
than HCC 158 Lung Transplant Status/Complications.
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We proposed to apply all of the HHS-HCC changes at one time for the
2021 benefit year and beyond to account for all of the ICD-10 coding
changes. Additionally, to assist commenters in reviewing the code level
changes, we provided a crosswalk of ICD-10 codes to the proposed HCCs
under the ``Draft ICD-10 Crosswalk for Potential Updates to the HHS-HCC
Risk Adjustment Model for the 2021 Benefit Year'', which is available
at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html.\31\ While we recognized that the number of HHS-HCC changes
we proposed was significantly higher than in previous annual notices of
benefit and payment parameters, we noted in the proposed rule that we
do not expect to make significant HHS-HCC changes each year. We
solicited comment on all of the proposed HHS-HCC updates. Following our
review of public comments, we are finalizing our proposal to update the
HHS-HCC classifications to incorporate ICD-10 diagnosis codes with
slight modifications to specific payment HCCs as outlined further
below, referred to as the Version 07 (``V07'') classification.
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\31\ The Draft ICD-10 Crosswalk for Potential Updates to the
HHS-HCC Risk Adjustment Model for the 2021 Benefit Year reflects
changes proposed in the 2021 Payment Notice proposed rule as
referenced in this rule as ``V06b.'' This draft crosswalk included
Table 3, which crosswalks ICD-10 codes to the Condition Categories
(CCs) in the risk adjustment models, and Table 4, which provides the
hierarchy rules to apply to the CCs to create HCCs. These Tables are
similar to the Tables 3 and 4 that HHS includes as part of the HHS-
Developed Risk Adjustment Model Algorithm ``Do It Yourself (DIY)''
Software. We expect to replace the draft crosswalk with an updated
crosswalk based on the V07 changes being finalized in this rule in
the future, and will make it available on our website as well.
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Specifically, we carefully considered comments received regarding
the HHS-HCC reclassifications and are finalizing certain modifications
to our proposals in response. First, although we are finalizing our
proposal to revise the current HCCs 81 (Drug Psychosis) and 82 (Drug
Dependence) and add separate HCCs related to alcohol use (HCC 83 and
84), we are not finalizing our proposal to create a fifth HCC, HCC 85
(Drug Use Disorder, Mild, Uncomplicated, Except Cannabis), in the
adult, child, or infant models. We agree with commenters that further
review of HCC 85 is necessary, including within the context of RADV,
prior to adding to that HCC.
As also recommended by commenters, we are finalizing the grouping
of the two drug use disorders (revised HCCs 81 and 82 together) and the
two alcohol use disorders (HCC 83 and 84 together) in the adult models,
consistent with the approach proposed for the child models.
Because we proposed to update the hierarchy positions for mental
health HCCs, we also proposed to switch the numbering for HCC 88 and
HCC 89, while also renaming both HCCs. Commenters found the proposed
number switches for these two HCCs in the child and adult models
confusing; therefore, we are finalizing the proposed change in
hierarchy position of these HCCs and the proposed renaming of both
HCCs, but we are finalizing a modified numbering of these HCCs in V07
from those proposed in V06b as
[[Page 29177]]
shown in Table 1. Specifically for V07, we are retaining the numbering,
but renaming HCC 88 (Major Depressive Disorder, Severe, and Bipolar
Disorders), renumbering and renaming proposed HCC 89 (Reactive and
Unspecified Psychosis, Delusional Disorders) as HCC 87.2 (Delusional
and Other Specified Psychotic Disorders, Unspecified Psychosis) because
it would place HCC 87.2 above HCC 88 in the hierarchy. To accommodate
this change, we are also renumbering Schizophrenia from HCC 87 to HCC
87.1 to maintain its place in the hierarchy.
Table 1--Modified V07 Numbering of These HCCs From Those Proposed in V06b
--------------------------------------------------------------------------------------------------------------------------------------------------------
V05 HCC V05 HCC label V06b HCC V06b HCC label V07 HCC V07 HCC label
--------------------------------------------------------------------------------------------------------------------------------------------------------
87................................. Schizophrenia......... 87.................... Schizophrenia........ 87_1................. Schizophrenia.
88.................... Delusional and Other 87_2................. Delusional and Other
Specified Psychotic Specified Psychotic
Disorders, Disorders,
Unspecified Unspecified
Psychosis. Psychosis.
88................................. Major Depressive and 89.................... Major Depressive 88................... Major Depressive
Bipolar Disorders. Disorder, Severe, Disorder, Severe,
and Bipolar and Bipolar
Disorders. Disorders.
89................................. Reactive and
Unspecified
Psychosis, Delusional
Disorders.
--------------------------------------------------------------------------------------------------------------------------------------------------------
In addition to the above modifications, and consistent with HHS's
commitment to continuously assess the HHS-operated risk adjustment
program based on analysis of more recent available data and the
objectives in the HHS-HCC Updates Paper, we further analyzed the HCC
classifications using 2018 enrollee-level EDGE data once it was
available. Based on this review, we determined the costs related to two
HCCs in the infant models were better aligned with severity level four,
rather than the proposed classification of severity level three.\32\ In
addition, we identified two clinically-related HCCs in the child models
that have small sample sizes. Therefore, consistent with the general
policy that the models should avoid creating HCCs with low sample sizes
and possibly unstable estimates, we will group them to improve the
predictive power and stability of the child models. We also identified
one new proposed HCC in the child model that has a sufficient sample
size, and therefore, we will be not be grouping it, as proposed.
Details on these changes to the infant and child models are described
below. We note that these additional modifications relate to certain
HCCs in the infant and child models to further improve the risk
prediction and stability of the models. These shifts in placement do
not change the number or type of HCCs included in the infant and child
models beyond what was proposed. We believe that each change described
below, while small in effect, will improve risk prediction and ensure
stability of the models. Therefore, we are finalizing the following
additional HCC classification changes to the infant and child models:
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\32\ The infant models use a categorical approach because
infants (ages 0-1) have low frequencies for most HCCs, which leads
to unstable parameter estimates in an additive model. Infants are
assigned a birth maturity (by length of gestation and birth weight
as designated by their newborn payment HCC) or age 1 category, and a
disease severity category (based on HCCs other than birth maturity).
There are five maturity categories and five disease severity
categories (based on clinical severity and associated costs).
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In the infant models, we are not finalizing the proposed
move of HCC 73 (Combined and Other Severe Immunodeficiencies) from
severity level four to severity level three; it will remain classified
as severity level four. The costs for HCC 73 are better aligned with
severity level four upon further review of an additional data year.
In the infant models, we are also moving HCC 30 (Adrenal,
Pituitary, and Other Significant Endocrine Disorders) from severity
level three to level four. Upon review of an additional data year, we
concluded that the costs for HCC 30 are better aligned with severity
level four.
In the child models, we are grouping HCC 131 (Acute
Myocardial Infarction) and HCC 132 (Unstable Angina and Other Acute
Ischemic Heart Disease) because our review of an additional data year
identified small sample sizes for these HCCs.
In the child models, we are finalizing, as proposed, the
grouping of HCC 210 ((Ongoing) Pregnancy without Delivery with Major
Complications) with HCC 211 ((Ongoing) Pregnancy without Delivery with
Complications) due to the small sample sizes associated with these HCCs
for this population. However, we are not finalizing the proposal to
group these two HCCs with the proposed new HCC 212 ((Ongoing) Pregnancy
without Delivery with No or Minor Complications). Upon review of the
additional data year, we determined the sample size for HCC 212 in the
child models is sufficient such that grouping it with HCC 210 and HCC
211 is not necessary.
Lastly, we are also finalizing one additional diagnosis coding
update to the adult risk adjustment models in light of the finalized
updates to the HCCs in this rulemaking. We are including the proposed
HCC 35.1 (Acute Liver Failure/Disease, Including Neonatal Hepatitis) in
the RXC-HCC interaction term for RXC 02 (Anti-Hepatitis C (HCV)
Agents). RXC 02 (Anti-Hepatitis C (HCV) Agents) was previously paired
with HCC 37.1 (Chronic Viral Hepatitis C), HCC 36 (Cirrhosis of Liver),
HCC 35.2 (V05 HCC 35, End-Stage Liver Disease), and HCC 34 (Liver
Transplant Status/Complications), listed in ascending order of position
in the V05 hierarchy. Anti-Hepatitis C (HCV) Agents are primarily
prescribed for HCC 37.1 (Chronic Viral Hepatitis C); however, because
of clinical hierarchies, other HCCs that are clinically more severe
than the HCC primarily associated with the RXC (HCC 37.1) are also
included in the RXC-HCC interaction. In the proposed rule, HHS proposed
to move HCC 38 (Acute Liver Failure/Disease Including Neonatal
Hepatitis) above HCC 35 (End Stage Liver Disease) in the related HCC
hierarchy to address cost implications of chronic versus acute liver
failure. Due to the change in hierarchy positions, we proposed to
renumber these HCCs to HCC 35.1 (Acute Liver Failure/Disease, Including
Neonatal Hepatitis), and HCC 35.2 (Chronic Liver Failure/End Stage
Liver Disorders), respectively. Because HCC 35.1 (Acute Liver Failure/
Disease, Including Neonatal Hepatitis) was proposed and is being
finalized in the hierarchy above the HCC most closely related to RXC 02
(Anti-Hepatitis C (HCV) Agents), HCC 37.1 (Chronic Viral Hepatitis C),
we are adding HCC 35.1 to the RXC 02 interaction term as part of
[[Page 29178]]
the updates finalized in this rulemaking. Therefore, in addition to
finalizing the below revisions to the liver HCC hierarchy, we are also
finalizing the addition of this HCC for the RXC 02 interaction term in
the adult models.
In the proposed rule, we also proposed one modification to the
child models from the potential updates described in the HHS-HCC
Updates Paper. In the paper, we noted that we may re-examine the
hierarchy violation constraints for non-transplant HCCs in the child
models that affect the predicted costs of the transplant set. We
explained that HCC 159 (Cystic Fibrosis) in the child models, which has
high associated drug costs, has higher predicted costs than HCC 158
(Lung Transplant Status/Complications). For this reason, a hierarchy
violation was occurring whereby the higher-cost HCC 159 (Cystic
Fibrosis) was being constrained to the lower-cost transplant
coefficients. To improve cost prediction, we proposed to not impose a
hierarchy violation constraint in the child models beginning with the
2021 benefit year coefficients for HCC 159 (Cystic Fibrosis), allowing
it to have higher predicted costs than HCC 158 (Lung Transplant Status/
Complications). We are finalizing this proposed change, and are also
adding a similar change for parallel reasons. We also will not impose a
hierarchy violation constraint in the child models beginning with the
2021 benefit year coefficients for HCC 35.1 (Acute Liver Failure
Disease, Including Neonatal Hepatitis) and HCC 35.2 (Chronic Liver
Failure/End-Stage Liver Disorders), allowing them to have higher
predicted costs than the liver transplant HCC 35 (Liver Transplant
Status/Complications). Thus, we are finalizing in V07 not to impose
hierarchy violation constraints in the child models for two sets of
non-transplant HCCs that have higher associated costs than the
transplant HCC above them in their hierarchy: (1) Liver failure HCC
35.1 (Acute Liver Failure Disease, Including Neonatal Hepatitis) and
HCC 35.2 (Chronic Liver Failure/End-Stage Liver Disorders) and HCC 34
(Liver Transplant Status/Complications); and (2) HCC 159 (Cystic
Fibrosis) and HCC 158 (Lung Transplant Status/Complications).
All of the final payment HCC changes for the 2021 benefit year risk
adjustment models and beyond, including these additional modifications,
are reflected in Table 2 and referred to as ``V07'' below. The HCC
classification for the 2020 benefit year is referred to as ``V05'', the
classification changes discussed in the HHS-HCC Updates Paper are
referred to as ``V06a,'' and the classification changes proposed in the
2021 Payment Notice proposed rule are referred to as ``V06b.''
Table 2--Summary of Final Payment HCC Risk Adjustment Model Changes
[V07]
----------------------------------------------------------------------------------------------------------------
Summary of final payment HCC
Condition Payment HCC final change changes
----------------------------------------------------------------------------------------------------------------
Payment HCC Changes
----------------------------------------------------------------------------------------------------------------
Substance Use Disorders................ +2..................................... Add 2 new HCCs for
alcohol use disorders for all
models \1\ to risk adjust for
a larger number of substance
use diagnoses.
Reconfigure drug
dependence HCC to include
drug use disorders with non-
psychotic complications and a
subset of drug poisoning
(overdose) codes to reflect
the revised conceptualization
of substance use disorders in
ICD-10.
Group the drug use
HCCs (81 and 82) into one
group and the alcohol use
HCCs (83 and 84) in another
group for adult and child
models.
Impose a new combined
hierarchy on drug use and
alcohol use HCCs due to the
high prevalence of both drugs
and alcohol use among those
with alcohol or drug use
disorders.
Pregnancy.............................. +3..................................... Add 3 (ongoing)
pregnancy-without-delivery
HCCs to child and adult
models. Leave them ungrouped
in the adult models to
reflect differences in costs
by level of complications.
Group the two higher HCCs
(210 and 211) in the child
models to address small
sample sizes and unstable
estimates.
Revise two existing
pregnancy HCC Groups in both
adult and child models,
separating out the ectopic/
molar pregnancy HCC and the
uncomplicated pregnancy-with-
delivery HCC to better
distinguish incremental
costs.
Diabetes............................... +1..................................... Add a diabetes type 1
additive HCC to the adult
models to distinguish
additional costs for diabetes
type 1.
Remap hyperglycemia
and hypoglycemia codes from
the ``chronic complications''
HCC to the ``without
complication'' HCC based on
clinical input.
Asthma................................. +1..................................... Split current asthma
HCC into two severity-
specific HCCs for all models
given new clinical
distinctions for severity
levels in the ICD-10 and to
distinguish costs by
severity.
Continue to group
asthma HCCs with chronic
obstructive pulmonary disease
HCC in adult models and leave
the 3 HCCs ungrouped to
distinguish costs in child
models.
Fractures.............................. -1, +1................................. Delete an HCC
(pathological fractures) for
all models to address a
clinical distinction that may
be inconsistently diagnosed/
coded.
Reconfigure an
existing HCC (hip fractures)
to better distinguish
fracture codes by site.
Add a new HCC
(vertebral fractures) for all
models to better predict
vertebral fractures, which
may be indicative of chronic
disease and frailty.
Third Degree Burns and Major Skin +2..................................... Reconfigure and add 2
Conditions. HCCs (extensive third degree
burns; major skin burns or
conditions) for all models in
an imposed hierarchy because
these HCCs are currently
being under-predicted,
contain chronic conditions or
are burns that involve long-
term follow up care.
Impose an a priori
constraint \2\ between
extensive third degree burns
and severe head injury in
child models due to small
sample size.
Coma and Severe Head Injury............ +1..................................... Add a new severe head
injury HCC (represents a
condition with ongoing care
costs; similar to the
inclusion of other injury
HCCs) for all models in a
hierarchy above the coma/
brain compression HCC.
Impose an a priori
constraint between extensive
third degree burns and severe
head injury in the child
models due to small sample
size.
[[Page 29179]]
Traumatic Amputations.................. +1..................................... Add a new HCC in a
hierarchy with the current
amputation status HCC for all
models and reconfigure codes
between the new HCC and
current amputation status HCC
to better distinguish early
treatment and complication
costs from long-term costs.
Leave HCCs ungrouped
in the adult models; group
them in the child models for
coefficient stability
purposes due to small sample
size.
Narcolepsy and Cataplexy............... +1..................................... Add a new HCC to both
child and adult models
because these conditions are
currently under-predicted and
have associated treatment
costs.
Exudative Macular Degeneration......... +1..................................... Add a new HCC to
adult models because the
condition is currently under-
predicted; costs are
primarily related to drug
treatments.
Congenital Heart Anomalies............. new to adult........................... Add 3 new HCCs to
adult models (already in the
child and infant models)
because the conditions are
currently under-predicted.
Group them in the adult
models only.
----------------------------------------------------------------------------------------------------------------
Changes in HCC Groups, Hierarchies
----------------------------------------------------------------------------------------------------------------
Metabolic and Endocrine Disorders...... N/A.................................... Group HCCs 26 and 27
together in both the child
and adult models to
distinguish their
significantly higher
incremental costs from other
HCCs (HCCs 28-30) previously
in the full group (HCCs 26
and 27 are currently under-
predicted in these models due
to grouping).
Ungroup HCCs 29 and
30 in the adult models as
they have adequate sample
sizes and clinical and cost
distinctions.
Group HCCs 28 and 29
in the child models due to
small sample sizes, clinical
similarity, and similar
predicted costs.
Leave HCC 30
ungrouped in the child models
because it is clinically
distinct from HCCs 28 and 29.
Necrotizing Fasciitis.................. N/A.................................... Ungroup the
necrotizing fasciitis HCC
(HCC 54) in the adult models
to better predict higher
incremental costs compared to
HCC 55 (the condition that is
currently grouped with this
HCC).
Blood Disorders........................ N/A.................................... Revise groups in both
adult and child models to
move HCC 69 from its previous
grouping with HCCs 70 and 71
to the group with HCCs 67 and
68 to better reflect clinical
severity and associated
costs.
Reconfigure HCCs 69
and 71 based on clinical
input.
Acute Myocardial Infarction and N/A.................................... Group HCCs 131 and
Unstable Angina. 132 in the child models for
coefficient stability
purposes due to small sample
size.
Mental Health.......................... N/A.................................... Move delusional
disorders/psychosis HCC above
major depressive disorders/
bipolar disorders HCC in the
hierarchy (the HCCs switch
position in the hierarchy)
because the costs and
diagnoses associated with the
delusional disorders/
psychosis HCC are more
aligned with the
schizophrenia HCC. Renumber
the two highest HCCs in the
hierarchy: HCC 87_1
Schizophrenia (had been 87)
and HCC 87_2 Delusional and
Other Specified Psychotic
Disorders, Unspecified
Psychosis (had been 89). HCC
88 Major Depressive Disorder,
Severe, and Bipolar Disorders
retains its same number.
Relabel HCCs to align
with ICD-10 categorizations.
Cerebral Palsy and Spina Bifida........ N/A.................................... Refine hierarchies to
exclude paralysis HCCs for
enrollees with cerebral palsy
HCCs, as ICD-10 coding
guidelines prohibit these
conditions from coding
together.
Refine hierarchies to
exclude hydrocephalus HCC for
enrollees with spina bifida
HCC for similar coding
restriction purposes.
Pancreatitis........................... N/A.................................... Reconfigure the acute
pancreatitis HCC to move
pancreatic disorders and
intestinal malabsorption out
of the acute pancreatitis HCC
to differentiate higher cost
conditions.
Revise the hierarchy
for pancreas transplant HCC
to remove exclusion of
pancreatitis HCCs because
pancreas transplants are done
primarily for diabetes and
insulin conditions rather
than pancreatitis.
Liver.................................. N/A.................................... Reconfigure codes in
liver HCCs to reflect
clinical distinctions.
Move acute liver
failure HCC above chronic
liver failure HCC in the
hierarchy and renumber HCCs
to address cost implications
of chronic versus acute liver
failure.
----------------------------------------------------------------------------------------------------------------
Summary of the Adult Model Specific Changes
----------------------------------------------------------------------------------------------------------------
Payment HCC change..................... +16.................................... Net change of 16
HCCs; 17 HCCs added and 1 HCC
deleted (for details see the
above portion of this table).
Severe Illness Interactions............ -1 (other model variable).............. Remove medium cost
severe illness interaction
term from model because its
parameter estimate is usually
very low or negative.
----------------------------------------------------------------------------------------------------------------
Summary of the Child Model Specific Changes
----------------------------------------------------------------------------------------------------------------
Payment HCC change..................... +11.................................... Net change of 11
HCCs; 12 HCCs added and 1 HCC
deleted (for details see the
above portion of this table).
Transplant A Priori Constraints........ N/A.................................... Revise a priori
constraints applied to the
transplant HCCs to better
distinguish costs while
improving estimate stability
due to small sample sizes.
Do not impose
hierarchy violation
constraints for two sets of
non-transplant HCCs that have
higher associated costs than
the transplant HCC above them
in their hierarchy: (1) Liver
failure HCCs 35.1 and 35.2
and HCC 34 Liver Transplant
Status/Complications; and (2)
HCC 159 Cystic Fibrosis and
HCC 158 Lung Transplant
Status/Complications.
----------------------------------------------------------------------------------------------------------------
[[Page 29180]]
Summary of the Infant Model Specific Changes
----------------------------------------------------------------------------------------------------------------
Payment HCC change..................... +7..................................... Net change of 7; 8
HCCs added and 1 HCC deleted
(for details see the above
portion of this table).
Categorical Model...................... N/A.................................... Revise severity level
assignments of a subset of
HCCs to better reflect
clinical severity and costs
and assign new HCCs to
severity levels.
Reconfigure code
assignments to newborn HCCs
for subset of codes whose
weeks gestation
classification in ICD-10
differed from ICD-9.
----------------------------------------------------------------------------------------------------------------
\1\ References to ``all models'' in Table 2 refers to the adult, child and infant models.
\2\ In a priori constraints, the HCC estimates are constrained to be equal to each other. These are applied to
stabilize high cost estimates that may vary greatly due to small sample size.
The following is a summary of the public comments we received on
the proposed ICD-10 HHS-HCC reclassification updates to the HHS risk
adjustment models.
Comment: Some commenters requested that HHS provide additional
transparency about the data used in updating the HCCs, such as the
alternatives we considered, the criteria used to develop our proposals
and the impact of changes. Other comments requested that HHS
demonstrate the contribution of each specific updated or modified HCC
to the model and how it improves the accuracy of identifying risk
selection compared to the existing model. Some commenters request that
the HCC change be tested with the most recent year of EDGE data.
Response: We agree with commenters about the importance of
transparency in developing and finalizing HCC updates. We refer
commenters to the HHS-HCC Updates Paper, released on June 17, 2019, in
which we provided a preview of the proposed changes with detailed
estimated costs between the current classification and the proposed
classification, as well as the impact of the changes on the adult,
child and infant risk adjustment models. In the HHS-HCC Updates Paper
and the proposed rule, we outlined the principles (or criteria) used to
develop the proposed ICD-10 HHS-HCC reclassifications updates.\33\ In
both documents, we also explained the process we used to develop the
proposed updates.
---------------------------------------------------------------------------
\33\ These principles are also repeated earlier in this rule.
---------------------------------------------------------------------------
We began this process by conducting a comprehensive review of the
current HHS-HCC full classification and risk adjustment model
classification, including an examination of disease groups with
extensive ICD-10 code classification changes, HCCs whose counts had
changed considerably following ICD-10 implementation, clinical areas of
interest (for example, substance use disorders), and model under-
prediction or over-prediction as identified by predictive ratios. We
then examined HCC reconfigurations, payment HCC designation, HCC
Groups, and hierarchies to develop the preliminary regression analyses
using 2016 enrollee-level EDGE data.\34\ We also conducted a series of
clinical reviews to inform potential changes. Next, we reviewed the
payment model and full classification regressions to compare
frequencies and predicted incremental costs of HCCs. To validate our
initial reclassifications, we repeated the preliminary regression
analyses using 2017 enrollee-level EDGE data, as well as 2016 and 2017
MarketScan[supreg] data. Results of the initial and validation analyses
informed the proposed HHS-HCC reclassifications in model V06a, which
were based on 2016 and 2017 enrollee-level EDGE data. We analyzed
proposed V06b HCCs on 2018 enrollee-level EDGE data once it became
available.
---------------------------------------------------------------------------
\34\ Payment HCCs are those included in the HHS-HCC risk
adjustment models. The full classification includes both payment and
non-payment HCCs. HCC Groups refers to payment HCCs that are grouped
together in the HHS-HCC risk adjustment model.
---------------------------------------------------------------------------
In the HHS-HCC Updates Paper, we estimated that the impact of
moving from V05 to V06a \35\ would result in a slight improvement in
model prediction and a slight increase in the number of enrollees with
one or more payment HCCs in the adult and child models. Although some
commenters requested data showing specifically how changes impact
state-level transfers, we note that we do not extract state identifiers
in the enrollee-level EDGE data, and therefore, we are unable to
directly assess state level impacts. Instead, we evaluated impacts at
the national level. Between the proposed and final rules, we conducted
an additional analysis of our proposed V06b classifications and the
resulting impact on average national enrollee risk scores. We estimated
an increase in national enrollee risk scores of approximately one
percent.\36\
---------------------------------------------------------------------------
\35\ To further clarify, in the HHS-HCC Updates Paper, V05
reflects the current classification model, V06 is the initial
assessment of potential revisions to the classification model
developed using the 2016 benefit year data, and V06a is the
reassessment of potential revisions to the classification model that
included 2017 benefit year data. V06b is the revised HCC changes in
the proposed rule and V07 is the revisions to the classification
model being finalized in this rule. The changes in the proposed rule
(V06b) were reflected in the ``Draft ICD-10 Crosswalk for Potential
Updates to the HHS-HCC Risk Adjustment Model for the 2021 Benefit
Year'', which is available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html. We expect to replace the draft
crosswalk with an updated crosswalk based on the V07 changes being
finalized in this rule in the future, and will make it available on
our website as well.
\36\ The estimated difference in risk scores was calculated
between the 2020 benefit year factors and the 2021 benefit year
factors using the 2017 benefit year enrollee-level EDGE data.
---------------------------------------------------------------------------
In addition to the HHS-HCC Updates Paper that was posted in June
2019, we released a crosswalk alongside the proposed rule to allow
issuers to assess the impact of the proposed changes on the risk scores
for their plans or enrollees. Commenters did not indicate that they had
used the crosswalk to analyze claims data.
Comment: Some commenters requested that we maintain the original
numbering assignments and labels for certain HCCs or supported using
decimals for renumbering. In particular, one commenter cited our
proposal regarding HCCs 88 and 89, where we proposed to rearrange the
hierarchy between V05 HCC 89 (Reactive and Unspecified Psychosis,
Delusional Disorders) and HCC 88 (Major Depressive and Bipolar
Disorders) to reflect higher cost similarities between the V05 HCC 89,
which described psychotic disorders, and HCC 87 which described
schizophrenia. In addition to proposing changes to the hierarchy and
modifications to the names of the HCCs, we also proposed switching the
numbers for HCCs 88 and 89 so that the numbering sequence between 87,
88, and 89 would reflect the change in
[[Page 29181]]
hierarchy and the incremental cost differences between schizophrenia,
delusional disorders, and depression, respectively. This commenter
recommended that we rename these HCCs using decimals (instead of the
proposed renumbering).
Response: As explained above and in Table 1, we proposed to switch
the numbering for HCC 88 and HCC 89 in response to other updates to the
hierarchy positions for mental health HCCs. However, after
consideration of comments received, we are not finalizing the proposed
renumbering. We agree with commenters that changing the numbering or
associated labeling of existing HCCs can be confusing and potentially
lead to unnecessary errors in certain circumstances. In response, we
are finalizing the revised hierarchy and name changes for these
conditions as proposed, but we are not finalizing the renumbering of
these HCCs as proposed. Instead, in V07, we are retaining the previous
V05 numbering for HCC 88 (Major Depressive and Bipolar Disorders), but
are renaming it as proposed (Major Depressive Disorder, Severe, and
Bipolar Disorders), and are renumbering and renaming previous V05 HCC
89 (Reactive and Unspecified Psychosis, Delusional Disorders) as HCC
87.2 (Delusional and Other Specified Psychotic Disorders, Unspecified
Psychosis) to retain its proposed position above HCC 88 in the
hierarchy. To accommodate these changes, we are also renumbering
Schizophrenia from the previous V05 numbering of HCC 87 to HCC 87.1 to
maintain its place in the hierarchy.
Comment: Some commenters objected to some of the newly added HCCs,
including those for fractures, third degree burns and major skin
conditions, coma and severe head injury, traumatic amputations,
necrotizing fasciitis, and pancreatitis, on the basis that these
conditions reflect ``acute'' diagnoses that issuers are unable to
select against and whose associated costs are (or should be)
incorporated into all issuers' pricing assumptions. A subset of these
commenters suggested that HHS separate acute and chronic spending in
the risk adjustment models if HHS finalizes the HCCs for acute
conditions as proposed.
Some comments also suggested that adding or revising HCCs to
include the costs associated with acute conditions would be contrary to
the risk adjustment program's fundamental principles because they
represent unpredictable risk that issuers cannot adversely select
against. One of these commenters stated that the costs associated with
acute conditions are (or should be) already incorporated into all
issuers' pricing assumptions. The commenter further stated that adding
these acute condition HCCs to risk adjustment would likely increase the
scope of conditions that might affect an issuer's transfer burden,
especially given the national-level predictions of these conditions.
The commenter also raised concern that these proposed changes would
reduce issuer pricing accuracy, thereby, incentivizing issuers to
increase premiums higher than necessary to ensure risk is mitigated.
This commenter stated that the incorporation of the cost of acute
conditions in demographic factors was more consistent with the
principles of risk adjustment and would reflect the more random
distribution of acute conditions. One commenter, who supported the
proposed changes, noted that traumatic amputation is commonly miscoded
by providers as traumatic when it should have been captured as
acquired.
Response: We continue to believe that the conditions identified by
these commenters (fractures, third degree burns and major skin
conditions, coma and severe head injury, traumatic amputations,
necrotizing fasciitis, and pancreatitis) should be included in the risk
adjustment models and are finalizing these additions and revisions as
proposed. Based on our analysis, these conditions indicate the presence
of underlying chronic conditions and frailty, are underpredicted in the
models, and have high costs in the year after the diagnosis. Therefore,
we do not agree that including the new and revised HCCs for fractures,
third degree burns and major skin conditions, coma and severe head
injury, traumatic amputations, necrotizing fasciitis, and pancreatitis
challenges the foundational principle of the risk adjustment program.
There is evidence of ongoing chronic costs associated with these
conditions, and issuers can potentially adversely select against
enrollees with a higher risk of developing these conditions in a given
benefit year. In addition, many of these HCCs are also incorporated in
Medicare's prospective CMS-HCC models.
Several HHS-HCCs related to these conditions were reconfigured or
newly added to the risk adjustment models to better predict costs for
conditions that have near-term ongoing costs. These included HCC 226
(Hip and Pelvic Fractures), HCC 228 (Vertebral Fractures without Spinal
Cord Injury), HCC 218 (Extensive Third Degree Burn), HCC 219 (Major
Skin Burn or Condition), and HCC 223 (Severe Head Injury). Because
there are ongoing costs of care for these conditions that present risk
of adverse selection for plans in the following benefit year, we
believe that it is important to reconfigure and add these HCCs to the
risk adjustment models given the coding changes made between the ICD-9
and ICD-10 and our review of the enrollee-level EDGE data. We also note
that the proposed adoption of the new or reconfigured HCCs for the
conditions identified by commenters as ``acute conditions'' aligns with
the general approach in the current models, which separates out acute
and chronic spending, if possible, when necessary to improve risk
prediction. In addition, isolating and omitting the near-term ongoing
costs for these conditions would reduce the predictive accuracy of the
model without any benefit in reduced model complexity, as the costs for
the excluded near-term codes would end up in the associated longer term
HCCs.
For example, for the traumatic amputation HCC, which we are
finalizing for inclusion in the risk adjustment models as proposed, we
analyzed and considered different configurations of the amputation-
related HCCs during the reclassification process. We proposed and are
finalizing two amputation related HCCs: HCC 234 (Traumatic Amputations
and Amputations and Amputation Complications), which is newly added in
V07, and HCC 254 (Amputation Status, Upper Limb or Lower Limb), which
was a payment HCC in V05. These HCCs were reconfigured to better
account for the cost distinctions between the initial treatment, early
follow-up, and potential early complications, and the much lower long-
term ongoing costs of amputated limbs. Conditions with both acute
treatment and permanent ongoing care, such as spinal cord injuries and
major limb amputations, have sets of HCCs containing both initial
encounter injury codes and additional care and status codes. Since the
V05 classification included only the amputation status and
complications payment HCC, some costs of the omitted initial episode
codes were pulled in via subsequent encounter codes in HCC 254. For
example, 38 percent of adult enrollees with HCC 234 also had HCC 254,
and therefore, the prediction for enrollees with only amputation status
codes were overpredicted, and enrollees with the initial encounter
codes were underpredicted. To address underprediction of the initial
encounter codes for traumatic amputations of upper limb or lower limb
and to better delineate costs between the initial
[[Page 29182]]
episode and those for complications and care for ongoing status care,
we are finalizing the amputation HCCs as proposed. Additionally, the
inclusion of HCC 234 is consistent with the Medicare HCC risk
adjustment models.
Another example of a payment HCC in the current risk adjustment
models that reflects what commenters identified as ``acute conditions''
is Necrotizing Fasciitis, which is a life-threatening condition that
may require ongoing care related to the tissue damage. Because of the
severity of the condition and intensity of treatment, HCC 54
(Necrotizing Fasciitis) has always been distinguished from the lower
severity conditions in HCC 55 (Bone/Joint/Muscle Infections/Necrosis)
but due sample size issues, these HCCs were grouped in the V05
classification. As noted in the HHS-HCC Updates Paper, we found that
HCC 54 (Necrotizing Fasciitis) is clinically distinct and has been
underpredicted in the adult and child models with its incremental
expenditures that when ungrouped are approximately twice as high as HCC
55 (Bone/Joint/Muscle Infections/Necrosis), and now HCC 54 (Necrotizing
Fasciitis) has a sufficient sample size to remove the HCC Group between
HCC 55 (Bone/Joint/Muscle Infections/Necrosis) and HCC 54 (Necrotizing
Fasciitis) in the adult models. For these reasons, we proposed and are
finalizing ungrouping HCC 54 (Necrotizing Fasciitis) and HCC 55 (Bone/
Joint/Muscle Infections/Necrosis) in the adult models to better
distinguish costs for both HCCs. However, because HCC 54 (Necrotizing
Fasciitis) has a low sample size in the child models, we are retaining
the HCC Group for HCC 54 (Necrotizing Fasciitis) and HCC 55 (Bone/
Joint/Muscle Infections/Necrosis) in the child models.
For the pancreatitis HCCs, on the other hand, we proposed and are
finalizing a reconfiguration to HCC 47 (Acute Pancreatitis) to
differentiate higher cost conditions within the HCC and a revision to
HCC 18 (Pancreas Transplant Status/Complications) to remove the
pancreatitis HCCs from HCC 18's hierarchy exclusions. We are finalizing
this exclusion change because pancreas transplants are done primarily
for diabetes and insulin conditions rather than pancreatitis, and ICD-9
had a pancreas-specific code for transplant complications, whereas the
ICD-10 code set for other transplant complications is not restricted to
pancreas transplants. Additionally, we are relabeling HCC 18 (Pancreas
Transplant Status/Complications) to HCC 18 (Pancreas Transplant Status)
to accurately reflect its ICD-10 code content. As described in the HHS-
HCC Updates Paper, these changes resulted in significant changes in the
count and estimated costs for the pancreatitis HCCs in all models.
Specifically, the removal of the intestinal malabsorption and other
pancreatic disorders from the HCC 47 (Acute Pancreatitis) led to large
shifts in sample size and costs, but we believe this reconfiguration of
the HCC more accurately captures the risk and costs of acute
pancreatitis events that may cause adverse selection issues. We are
therefore finalizing the changes to the pancreatitis HCCs as proposed.
We also assessed whether HCCs associated with several of the
proposed HCC conditions \37\ should be added to the models by analyzing
enrollees with the given HCC in 2009 MarketScan[supreg] data and the
costs associated with those enrollees in the subsequent year's data,
2010 Marketscan[supreg] data. The purpose of this analysis was to
assess whether the enrollee costs for these conditions, including
several conditions that commenters identified as ``acute conditions,''
persisted over both benefit years. We found that enrollees with these
conditions were characterized by persistently higher costs in the
subsequent year, 2010.\38\ This analysis further supports our position
that certain HCCs, including several conditions that commenters
identified as ``acute conditions,'' involve ongoing follow-up care,
were identified as being persistently underpredicted in the current
models and should be modified to improve model prediction and better
capture the longer-term costs associated with the conditions. This
evidence of ongoing chronic costs associated with these conditions,
reaffirms that issuers can potentially adversely select against the
risk of enrollees with these conditions. Thus, because we believe it is
important and consistent with the objectives of the risk adjustment
program to improve model prediction and mitigate risk of adverse
selection when possible, we believe the newly added or reconfigured
HCCs discussed above are consistent with our prior framework for
payment HCCs, and we are finalizing the updates related to ICD-10
reclassifications of HCCs that are described in this final rule in
Table 2.
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\37\ This analysis assessed the following HCCs: HCC 18 (Diabetes
with Chronic Complications), HCC 19 (Diabetes without Complication),
HCC 20 (Type I Diabetes Mellitus), HCC 80 (Coma, Brain Compression/
Anoxic Damage), HCC 161 (Chronic Ulcer of Skin, Except Pressure),
HCC 162 (Severe Skin Burn or Condition), HCC 163 (Moderate Skin Burn
or Condition), HCC 166 (Severe Head Injury), HCC 167 (Major Head
Injury), HCC 169 (Vertebral Fractures without Spinal Cord Injury),
HCC 170 (Hip Fracture/Dislocation), HCC 173 (Traumatic Amputations
and Complications), HCC 189 (Amputation Status, Lower Limb/
Amputation Complications), and HCC 190 (Amputation Status, Upper
Limb).
\38\ We used MarketScan[supreg] data for this analysis as we
currently are unable to link enrollees year over year in enrollee-
level EDGE data. In the future, we expect to be able to link
enrollees year over year in the enrollee-level EDGE data, if the
individuals are enrolled with the same issuer over the years.
---------------------------------------------------------------------------
Comment: One commenter stated that severe head injury HCC 223
(Severe Head Injury) should not be added to the adult and child risk
adjustment models because associated chronic costs are captured in
existing HCC 122 (Coma/Brain Compression). Another commenter agreed
with including the new HCC 223 (Severe Head Injury) but requested that
we exclude the acute costs from the chronic costs associated with the
underlying diagnoses.
Response: We disagree with the comment that HCC 223 (Severe Head
Injury) should not be added in the models because existing HCC 122
(Non-Traumatic Coma and Brain Compression/Anoxic Damage) already
captures the applicable chronic costs associated with these conditions.
Although there is overlap between HCC 122 and HCC 223, the inclusion of
HCC 122 alone is not sufficient in representing the costs of Severe
Head Injury.
We also note that due to difficulty in distinguishing between acute
and chronic costs for these HCCs, we are not separating the acute costs
from chronic costs for these HCCs. We also believe that by including
the acute costs for these conditions, we are also accounting for the
ongoing costs of care during the first year.
In the HHS-HCC Updates Paper, we noted that HCC 223 represents a
condition with ongoing care costs, similar to other injury HCCs
currently included in the current risk adjustment models (for example,
hip fractures and vertebral fractures). We explained that the new HCC
223 would be included in a hierarchy above HCC 122 (Coma/Brain
Compression, Anoxic Damage).\39\ In the child models, due to small
sample size, HCC 223 (Severe Head Injury) would be constrained with a
priori logic to HCC 218 (Extensive Third Degree Burns) so that the HCCs
are counted individually, but have the same coefficient. We continue to
believe that the proposed addition of HCC 223, along with the
constraints described, are appropriate updates to the HHS-HCC
reclassification and are similar to the payment HCCs under the Medicare
risk
[[Page 29183]]
adjustment models. We are therefore finalizing these changes as
proposed.
---------------------------------------------------------------------------
\39\ In all models, HCC 122 would be relabeled to ``Coma/Brain
Compression, Anoxic Damage'' to account for the ongoing inclusion of
coma codes that may be associated with a traumatic injury.
---------------------------------------------------------------------------
Comment: While one commenter supported the inclusion of two new
HCCs for third degree burns with the recommendation to separate acute
costs from ongoing costs, other commenters opposed the proposed
changes. Commenters noted that these are random acute events and that
the chronic costs associated with third degree burns are separately
identifiable. One commenter also suggested that the inclusion of burn
HCCs as payment HCCs would lead to upcoding due to higher acute costs
than ongoing costs.
Response: In the HHS-HCC Updates Paper, we noted that HCC 218
(Severe Skin Burn or Condition) and HCC 219 (Moderate Skin Burn or
Condition) were identified as being underpredicted in the current
models and contain chronic conditions or burns that involve long-term
follow-up care. To further explore the relationship between these HCCs
(HCC 218 and HCC 219) and long term costs, we analyzed
Marketscan[supreg] data, and found that the presence of these HCCs in
2009 was associated with persistently higher costs in the subsequent
year, 2010. The addition of these HCCs to the payment models, as
proposed, is also consistent with our goals to improve model prediction
and keep with the risk adjustment goal of identifying chronic or
systematic conditions that represent insurance risk selection or risk
segmentation. However, the ability to separate costs associated with
the acute event and chronic condition can be complex for certain HCCs,
and in the case of the burn-related HCCs, the enrollees may have
chronic conditions or burns that require ongoing follow-up care that is
difficult to separate out. For this reason, we are not separating out
the costs between the initial acute event and chronic condition.
We are also finalizing the labeling of these HCCs as proposed to
reflect the reconfiguration of these HCCs consistent with the ICD-10
updates. Specifically, we reconfigured HCC 218 (Extensive Third Degree
Burns, formerly Severe Skin Burn or Condition) to only contain
extensive third burns and HCC 219 (Major Skin Burn or Condition,
formerly Moderate Skin Burns or Conditions) to contain less extensive
third degree burns by site, extensive non-third degree burns, and other
serious and chronic skin condition. For these reasons, we are
finalizing these changes as proposed.
Comment: While one commenter appreciated the proposed updates to
the substance use HCCs, other commenters opposed the proposed substance
use HCC changes. Some of the commenters observed that some providers
are reluctant to use complete and accurate coding for substance use
disorders due to the sensitive nature of the diagnoses. Other
commenters also stated that separating out the current V05 HCC 81 (Drug
Psychosis) and HCC 82 (Drug Dependence) into five separate HCCs with
distinct, ungrouped, coefficients in the adult models rewards poor
quality of care and may increase incentives for providers to report
additional diagnoses. For example, one commenter noted that an issuer
with a high number of enrollees with proposed HCC 85 (Mild and
Uncomplicated Drug Use Disorder) to an issuer with some enrollees with
proposed HCC 82 (Moderate Drug Use Disorder or with Non-Psychotic
Complications), could be a case where differences with complications
could be the result of members' selection behavior, poor quality care
or issuers' ability to influence provider coding or market
segmentation. Some commenters supported retaining the two current
substance use HCCs (with constrained coefficients), noting concerns
that collecting adequate provider documentation at a new more detailed
level of specificity will be a challenge given that the current two
HCCs have high error rates in RADV. These commenters also expressed the
belief that the proposed changes would not add value in measuring an
issuer's risk level.
Response: We understand issuers' concerns regarding challenges in
coding substance use disorders. We do, however, believe it is important
to distinguish among different types of drug and alcohol use. Our
analysis of the data (for example, the 2016 and 2017 enrollee-level
EDGE data) indicates that there is a large difference in the costs
associated with treatment for an individual with a general,
nonpsychotic drug use disorder compared with an individual with alcohol
use disorder, either with or without psychosis. Therefore, we are
finalizing the proposed revisions to update HCC 81 from Drug Psychosis
to Drug Use with Psychotic Complications, to update HCC 82 from Drug
Dependence to Drug Use Disorder, Moderate/Severe, or Drug Use with Non-
Psychotic Complications, as well as to add the new HCC 83 (Alcohol Use
with Psychotic Complications) and new HCC 84 (Alcohol Use Disorder,
Moderate/Severe, or Alcohol Use with Specified Non-Psychotic
Complications), with the exception of modifications described below
with respect to grouping these HCCs in the adult models. Nevertheless,
we also agree with commenters that there appears to be limited
additional benefit at the present time to distinguish mild drug use
disorder, proposed HCC 85 (Drug Use Disorder, Mild, Uncomplicated,
Except Cannabis), from other substance use disorders in the revised
adult, child, and infant models. We also share commenters' concerns
about the possibility of creating incentives for increased reporting of
additional diagnoses. We also agree with commenters who suggested that
further review of HCC 85 is necessary, including within the context of
RADV, prior to adding to this HCC. Therefore, after consideration of
comments received, we are not finalizing the addition of HCC 85 in any
of the models (adult, child, infant).
In further acknowledgement of commenters' concerns, we are not
finalizing our proposal to omit grouping of substance use codes in the
adult models and are instead finalizing the grouping parallel to what
was proposed for these HCCs in the child models. In both the child and
adult models that are being finalized in this rule, HCC 81 (Drug Use
with Psychotic Complications) and HCC 82 (Drug Use Disorder, Moderate/
Severe, or Drug Use with Non-Psychotic Complications) will be grouped,
and HCC 83 (Alcohol Use with Psychotic Complications) and HCC 84
(Alcohol Use Disorder, Moderate/Severe, or Alcohol Use with Specified
Non-Psychotic Complications) will be grouped.\40\ We believe that the
grouping of drug use and alcohol use HCCs, as finalized in this rule,
will help to mitigate any potential incentives that could influence
provider coding of these HCCs.
---------------------------------------------------------------------------
\40\ Proposed group number G09B included proposed HCCs 83, 84
and 85.
---------------------------------------------------------------------------
Comment: Some commenters did not agree with mapping P040 (Newborn
affected by maternal anesthesia analgesia in pregnancy, labor, and
delivery) to the revised HCC 82 (Drug Use Disorder, Moderate/Severe, or
Drug Use with Non-Psychotic Complications), stating that, unlike the
effects on infants of opioid addiction or fetal alcohol syndrome,
complications from anesthesia exposure are the product of poor quality
of care, and that adding it to the models eliminates incentives to
reduce complications from anesthesia such as reducing unnecessary use.
One commenter stated that the inclusion of P040 will dilute the
predictive value of the coefficient when applied to newborns that were
exposed to opioids or alcohol, potentially creating more selection
issues.
[[Page 29184]]
Response: Consistent with the discussion in the HHS-HCC Updates
Paper, we proposed to continue to include all substance use disorder
payment HCCs in the infant models. Although most infants who are
affected by the mother's substance use via placenta or breast milk are
coded with a newborn-specific ICD-10 code from the P04 set, which in
the finalized reclassified HHS-HCC updates maps to HCC 82, some infants
are coded with substance use codes from the ICD-10 F10-F19 code sets,
which map to payment HCCs 81-84 or to non-payment HCCs in the finalized
V07 reclassified HHS-HCC updates. To be complete and map the entire set
of P04 codes consistently, the diagnosis code P040 Newborn affected by
maternal anesthesia and analgesia in pregnancy, labor and delivery was
proposed to be added to the infant model within a payment HCC. The
substance use disorder HCCs include substance use disorder codes and
codes related to effects of noxious substances on infants. Therefore,
we are finalizing the substance use disorder payment HCCs with the P040
code mapped to HCC 82 in the infant models to account for these costs
and associated risks.
Comment: One commenter specifically opposed the addition of drug
poisoning diagnoses to HCC 82 because, they stated, it reflects an
acute condition with different patterns of claims, costs, and clinical
behavior than other diagnoses in HCC 82. According to the commenter,
the majority of drug poisoning diagnoses result from addiction to non-
prescribed opioids, and the absence of a prior claim in such
circumstances makes the diagnosis difficult to predict. The commenter
further observed that an episode of drug poisoning offers a unique
opportunity for the enrollee to receive coordinated, high quality care
that can help prevent another drug poisoning diagnosis. Lastly, the
commenter stated that, because a drug poisoning diagnosis is sometimes
the byproduct of a drug addiction associated with treatment for a
serious condition, such as cancer, the cost profile for such enrollees
will differ from other drug poisoning diagnoses.
Response: We recognize that enrollees with substance use disorders
require varied and complicated care. As we showed in the HHS-HCC
Updates Paper, however, our estimate of the cost parameter for the
revised HCC 82, which includes drug poisoning diagnoses, was not
markedly different from the estimate for the current HCC 82 from the
same analysis. We do not agree, therefore, that drug poisoning
diagnoses are necessarily substantively different in terms of costs
from other drug use disorders in that HCC. Additionally, the risk
adjustment models adjust for the costs of additional complicating
diagnoses, such as cancer, by including HHS-HCCs related to those
conditions.
We agree with the commenter that a drug poisoning diagnosis is an
opportunity for improving care management and coordination for an
enrollee. The primary objective of the risk adjustment program is to
improve model prediction and mitigate risk of adverse selection when
possible and, insofar as the addition of drug poisoning diagnoses to
HCC 82 represents avoidable risk, we believe it is important to include
these diagnoses in the models.
Comment: Some commenters appreciated our proposed modifications to
HCCs related to pregnancy, in which we added several HCCs to recognize
ongoing care for pregnancy, distinguishing between severity of
complications. One commenter requested more data from HHS to
substantiate the addition of several new HCCs for ongoing pregnancy
(HCCs 210-212) \41\ with and without delivery, stating that it is
unclear how this will impact risk selection and future year premiums.
Another commenter stated that, along with changes to acute conditions,
the proposed modifications to HCCs related to pregnancy may incentivize
upcoding. However, this commenter also stated that pregnancy as a
condition is often planned, and as such, may allow costs associated
with pregnancy to be predicted early enough that a person has an
opportunity to enroll or change coverage, providing a rationale for
including HCCs associated with pregnancy as payment HCCs.
---------------------------------------------------------------------------
\41\ The new pregnancy related HCCs include HCC 210 for
(Ongoing) Pregnancy without Delivery with Major Complications, HCC
211 for (Ongoing) Pregnancy without Delivery with Complications and
HCC 212 for (Ongoing) Pregnancy without Delivery with No or Minor
Complications.
---------------------------------------------------------------------------
Response: We appreciate the comments agreeing with the proposed
modifications to HCCs related to pregnancy and are finalizing these
HCCs as proposed. We reconfigured the pregnancy HCCs in the adult and
child models to reflect the changes in ICD-10 classification systems
over the prior ICD-9 classification related to episode of care,
multiple gestation, and ectopic or molar pregnancy complications, as
described in the HHS-HCC Updates Paper. Our analysis found that the
current set of pregnancy HCCs in the existing models do not account
well for a variety of pregnancy scenarios. For example, if an enrollee
was pregnant during a plan year, with a complicated pregnancy as her
only HCC, under the current models, she only receives the age-sex
coefficient, which results in an underprediction of risk. If an
enrollee had a low severity miscarriage HCC or completed pregnancy HCC,
she receives one average HCC coefficient (in addition to an age-sex
coefficient) in the current models, which results in a slight
overprediction of risk. The primary purpose of the changes to the
pregnancy HCCs, including the ungrouping of the ectopic/miscarriage-
related HCCs and the delivery and post-partum related HCCs and the
addition of new HCCs 210-212, is to more precisely account for the
costs associated with the pregnancy and with delivery/postpartum, as
complications during pregnancy could be unrelated to complications in
delivery/postpartum. We are therefore finalizing these changes as
proposed for the adult models. For the child models, as explained
above, we are finalizing these changes as proposed, except for the
removal of HCC 212 from the ongoing pregnancy group because it has
sufficient sample size for this population.
Comment: Some commenters generally supported the proposed HCC
updates, however other commenters did not support the HCC changes to
the risk adjustment models. Some of these commenters requested that HHS
delay the implementation of the HCC changes until issuers receive
additional data to estimate the impact of specific HCC updates, such as
on statewide average risk scores and payment transfers, and if
finalized, one commenter suggested that we phase-in the updates.
Comments also suggested that HHS develop an ongoing monitoring policy
with respect to claim submissions to identify any possible gaming of
the revised classifications. Others comments were concerned that the
HCC changes may only serve to add more volatility to RADV. One
commenter generally opposed all changes to HCCs and requested that we
revisit whether the proposed changes violate the principles of risk
adjustment.
Some commenters supported specific HCC changes or supported
specific HCC changes contingent on additional data analysis. For
example, one commenter asked that HHS provide further information on
the change to HCC 47, which filters out all but acute pancreatitis.
Additionally, some commenters wanted analysis on the blood disorder HCC
changes and metabolic and endocrine disorder changes contingent on
additional analysis of expensive new treatments
[[Page 29185]]
(such as gene therapy). Some commenters supported the addition of the
Diabetes Type 1 HCC to the adult models while one commenter did not.
Likewise, some commenters supported the asthma HCC change, but one
commenter was concerned that splitting the asthma HCC might create
opportunities for gaming.
Response: In considering these concerns, we weighed the competing
goals of improving predictive power and limiting discretionary coding.
We believe it is important to implement these changes as soon as
possible to better reflect the HHS-HCCs with the ICD-10 coding changes,
which were implemented in 2015. Additionally, some of these changes are
already in effect for the Medicare risk adjustment program, and the HHS
classification has lagged in the classification changes associated with
the ICD-10 coding changes. As such, we are finalizing these changes as
proposed, with the exception of modifications described above.
As previously discussed, we provided stakeholders with advance
notice of potential HCC changes in the HHS-HCC Updates Paper, released
on June 17, 2019. This paper previewed potential HCC changes with
detailed estimated costs between the V05 and the V06a classification,
as well as the impact of the changes on the adult, child and infant
risk adjustment models. With the proposed rule, we also provided
stakeholders with a crosswalk of ICD-10 codes to the proposed HCCs
under the ``Draft ICD-10 Crosswalk for Potential Updates to the HHS-HCC
Risk Adjustment Model for the 2021 Benefit Year,'' which is available
at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.html.\42\ Furthermore, in the HHS-HCC Updates Paper, we detailed
the impact of the V06a HCC changes in counts of enrollees with and
without HCCs. For all of these reasons, we do not believe delaying the
implementation of these HCCs for additional data is needed.
---------------------------------------------------------------------------
\42\ The Draft ICD-10 Crosswalk for Potential Updates to the
HHS-HCC Risk Adjustment Model for the 2021 Benefit Year includes
Table 4, which crosswalks ICD-10 codes to the Condition Categories
(CCs) in the risk adjustment models, and Table 5, which provides the
hierarchy rules to apply to the CCs to create HCCs. These Tables are
similar to the Tables 3 and 5 that HHS includes as part of the HHS-
Developed Risk Adjustment Model Algorithm ``Do It Yourself (DIY)''
Software.
---------------------------------------------------------------------------
We do not extract state identifiers in the enrollee-level EDGE
data, and therefore, we are unable to directly assess state level
impacts. However, we will consider for future rulemaking proposing to
extract state identifiers in the enrollee-level EDGE data to conduct
analyses commenters requested and evaluate changes in risk adjustment
models.
With respect to monitoring changes in claims submissions associated
with revised HHS-HCC classifications to identify possible gaming, we
agree on the importance of maintaining the integrity of the risk
adjustment program. We note that there are several existing processes
and programs that are intended to ensure program integrity. In addition
to RADV, whose principal objective is to identify instances in which a
diagnosis submitted to an issuer's EDGE server for risk adjustment is
not supported by clinical documentation, we conduct ongoing quality and
quantity review of EDGE submissions, and we carefully analyze annual
enrollee-level EDGE data for shifts in diagnoses and spending. In
addition, Sec. 153.620(b)(9)(iii) and (iv) provides HHS authority to
impose civil money penalties for misconduct, as well as the intentional
or reckless misrepresentation or falsification of information furnished
to HHS, which could be leveraged if there is evidence of gaming of the
revised classifications. Should we determine that any changes to the
HHS-HCC classification or other program requirements are necessary to
address gaming concerns, we would pursue those modifications through
notice-and-comment rulemaking.
In response to comments, we clarify that the V07 changes finalized
in this rule will not be applicable in RADV until the 2021 benefit year
(consistent with the adoption of the changes for the 2021 benefit year
of risk adjustment). As noted above, we believe it is important to
implement these changes as soon as possible to align the HHS-operated
risk adjustment models with the ICD-10 coding changes, which were
implemented in 2015, and do not believe the changes will add more
volatility to RADV.
ii. Other Updates to Risk Adjustment Model Recalibration
As discussed in the proposed rule, for the 2020 benefit year adult
models, we made a pricing adjustment for one RXC coefficient for
Hepatitis C drugs.\43\ In the 2020 Payment Notice, we stated that we
intend to reassess this pricing adjustment in future benefit years'
model recalibrations with additional years of enrollee-level EDGE
data.\44\ For the 2021 benefit year model recalibration, we reassessed
the Hepatitis C RXC to consider whether the adjustment was still
needed, or needed to be modified. We found that the current data for
the Hepatitis C RXC still does not take into account the significant
pricing changes due to the introduction of new Hepatitis C drugs and,
therefore, it does not precisely reflect the average cost of Hepatitis
C treatments applicable to the benefit year in question. We also
continue to be cognizant that issuers might seek to influence provider
prescribing patterns if a drug claim can trigger a large increase in an
enrollee's risk score and, therefore, make the risk adjustment transfer
results more favorable for the issuer. For these reasons, we noted that
we continue to believe that a pricing adjustment is needed for this RXC
coefficient and proposed to adjust the Hepatitis C RXC for the 2021
benefit year model recalibration. For the proposed RXC coefficients
listed in Table 2 of the proposed rule, we constrained the Hepatitis C
coefficient to the average expected costs of Hepatitis C drugs. Similar
to the adjustment for the 2020 benefit year model recalibration, this
has the material effect of reducing the Hepatitis C RXC, and the RXC-
HCC interaction coefficients. For the final 2021 benefit year Hepatitis
C factors in the adult models, we proposed to make an adjustment to the
plan liability associated with Hepatitis C drugs to reflect future
market pricing of these drugs before solving for the adult model
coefficients. We sought comment on this proposal.
---------------------------------------------------------------------------
\43\ 84 FR 17454 at 17463 through 17466.
\44\ Ibid.
---------------------------------------------------------------------------
In light of the recent recommendation by the U.S. Preventive
Services Task Force (USPSTF) to expand the use of pre-exposure
prophylaxis (PrEP) as a preventive service that must be covered without
cost sharing by applicable health plans for persons who are at high
risk of HIV acquisition,\45\ we also proposed to incorporate PrEP as a
preventive service in the simulation of plan liability for HHS's adult
and child risk adjustment models in the final 2021 benefit year model
recalibration.\46\ Although preventive services are incorporated in the
simulation of plan
[[Page 29186]]
liability, they do not directly affect specific HCCs. We incorporate
preventive services into the models to ensure that 100 percent of the
cost of those services is reflected in the simulation of plan
liability; preventive services are applied under relevant recommended
conditions or groups. We proposed including PrEP as a preventive
service along with our general updates to preventive services in the
simulation of plan liability for the HHS risk adjustment models in the
final 2021 benefit year adult and child models. We sought comment on
this proposal.
---------------------------------------------------------------------------
\45\ Final Recommendation Statement on ``Prevention of Human
Immunodeficiency Virus (HIV) Infection: Preexposure Prophylaxis.
U.S. Preventive Services Task Force. June 2019. https://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis.
\46\ The June 11, 2019 ``Preexposure Prophylaxis for the
Prevention of HIV Infection: US Preventive Services Task Force
Recommendations Statement'' published in JAMA states that
adolescents at high risk of HIV acquisition could benefit from PrEP
and it is approved for adolescents who weigh at least 35kg (~77
pounds). https://jamanetwork.com/journals/jama/fullarticle/2735509.
---------------------------------------------------------------------------
As part of the proposed 2021 model recalibration, we also
considered whether to add an additional age-sex category for enrollees
age 65 and over as part of the recalibration of the adult models.
MarketScan[supreg] data does not include enrollees who are age 65 and
over, but the enrollee-level EDGE data does. Currently, the risk
adjustment program incorporates the risk and costs of enrollees age 65
and over using the 60-64 age-sex coefficients. We originally excluded
enrollees age 65 and over from recalibration to prevent having
different methodologies for the MarketScan[supreg] and the enrollee-
level EDGE datasets that were used to solve for the blended
coefficients for the risk adjustment models.
Since we proposed to no longer use the MarketScan[supreg] data to
recalibrate the risk adjustment models beginning with the 2021 benefit
year, we explained in the proposed rule that we considered whether new
age-sex coefficients should be created for enrollees age 65 and over
beginning with the 2021 benefit year adult models. In reviewing the
enrollee-level EDGE data, we found that over 70 percent of the
enrollees age 65 and over are within the 65-66 age range, and we
believe these enrollees are likely transferring into Medicare coverage
once eligible. Our analysis also found that the enrollees ages 65-66
have lower average annual expenditures than those enrollees between
ages 60 and 64. In contrast, we found that enrollees age 67 and over
have higher average annual expenditures than those between ages 60 and
64. Due to these two different trends in the age 65 and over
population, we did not propose to add new age-sex coefficients to the
adult models at this time and would continue to exclude enrollees age
65 and over in the adult models' calibration for the 2021 benefit year.
We also noted that we would continue to monitor expenditures for
enrollees age 65 and over to determine whether the addition of new age-
sex coefficients to the adult models in a future year is appropriate.
After reviewing the comments we received, we are finalizing our
proposal to apply an adjustment to the plan liability for the final
2021 benefit year Hepatitis C factors in the adult models to ensure
that enrollees can continue to receive incremental credit for having
both the RXC and HCC for Hepatitis C, and allow for differential plan
liability across metal levels. We will release the final RXC
coefficients that reflect constraining the Hepatitis C coefficient to
the average expected costs of Hepatitis C drugs in guidance, along with
the other final 2021 benefit year coefficients, by June 2020 to allow
for incorporation in final rates for the 2021 benefit year, consistent
with Sec. 153.320(b)(1)(i).
We are also finalizing our proposal to incorporate PrEP as a
preventive service in the simulation of plan liability for HHS's adult
and child risk adjustment models in the final 2021 benefit year model
recalibration. We did not propose to add new age-sex coefficients to
the adult models and are not making any changes to age-sex coefficients
for enrollees age 65 and over at this time.
The following is a summary of the public comments we received on
the proposed pricing adjustment for the Hepatitis C RXC for the adult
models, the proposal to incorporate PrEP as a preventive service in the
simulation of plan liability for the adult and child models, and the
discussion of the age-sex coefficients in the adult models. We also
respond to other comments suggesting additional modifications to the
HHS risk adjustment models.
Comment: Most commenters supported the pricing adjustment for the
Hepatitis C RXC. These commenters reasoned that this pricing adjustment
would more accurately reflect the average cost of treatment in the risk
adjustment models, ensure enrollees can continue to receive incremental
credit for having both the Hepatitis C RXC and HCC, and account for the
introduction of new Hepatitis C drugs. One commenter did not support
this proposal, and suggested HHS avoid artificially constraining plan
payment until prescription denial rates decrease and to account for
potential adverse selection associated with treatment for Hepatitis C
Virus (HCV). This commenter also expressed concern about HHS manually
adjusting the risk adjustment coefficients downwards, potentially
penalizing plans that provide better coverage for innovative drugs.
Another commenter recommended HHS clarify the data source and approach
it is using to constrain the Hepatitis C RXC coefficient, and cautioned
against reducing the coefficient more than the expected decrease in
cost.
Response: In response to comments, we reassessed the pricing
adjustment for the Hepatitis C RXC for the 2021 benefit year model
recalibration and found that the most recent year of data (2018
enrollee-level EDGE data) for the Hepatitis C RXC still does not take
into account the significant pricing changes expected due to the
introduction of newer and cheaper Hepatitis C drugs. Therefore, the
data that will be used to recalibrate the models does not precisely
reflect the average cost of Hepatitis C treatments applicable to the
2021 benefit year. We also continue to be cognizant that issuers might
seek to influence provider prescribing patterns if a drug claim can
trigger a large increase in an enrollee's risk score, and therefore,
make the risk adjustment transfer results more favorable for the
issuer. Due to the high cost of these drugs reflected in the 2016, 2017
and 2018 enrollee-level EDGE datasets, without a pricing adjustment to
plan liability, issuers would be overcompensated for the Hepatitis C
RXC in the 2021 benefit year, and could be incentivized to encourage
overprescribing practices and game risk adjustment such that the
issuer's risk adjustment payment is increased or risk adjustment charge
is decreased. This pricing adjustment helps avoid perverse incentives,
and leads to Hepatitis C RXC coefficients that better reflect
anticipated actual 2021 benefit year plan liability associated with
Hepatitis C drugs. It is also consistent with the approach adopted for
the 2020 benefit year recalibration to address these concerns.
As such, we are finalizing our proposal to make a pricing
adjustment to more closely reflect the expected average additional plan
liability of the Hepatitis C RXC for the 2021 benefit year adult risk
adjustment models. In making this determination, we consulted our
clinical and actuarial experts, and analyzed the most recent enrollee-
level EDGE data available (2018 benefit year) to further assess whether
lower cost Hepatitis C drugs can be substituted to ensure that plans
that cover various treatments would continue to be compensated for
their incremental plan liability. We intend to continue to reassess
this pricing adjustment in future benefit years' model recalibrations
using additional years of available enrollee-level EDGE data.
Comment: Some commenters asked HHS to monitor the market of new
expensive therapies and treatments, such as gene therapy drugs, and
[[Page 29187]]
incorporate them into the risk adjustment model factors due to the
anticipated high costs of these drugs and associated services. These
commenters expressed concern about adequate issuer compensation for
these drugs and the potential for adverse selection. The comments noted
that the costs of very new, high cost treatments will not be reflected
in prior year EDGE claims data.
Response: We did not propose to update the risk adjustment model
factors to reflect the costs of gene therapy drugs in the proposed rule
and are not finalizing such updates in this rule. We intend to assess
this issue as additional data becomes available and consider whether
model updates should be made to address their anticipated costs in the
future. We note that if an enrollee in an issuer's risk adjustment
covered plans has gene therapy or other expensive treatments, that
enrollee would be eligible for the high-cost risk pool payments if
claims for that enrollee are over $1 million. Therefore, this issuer
would receive compensation for these high-cost treatments under the
HHS-operated risk adjustment program in the 2021 benefit year.
Comment: Most commenters supported our proposal to incorporate PrEP
as a preventive service in the simulation of plan liability for HHS's
adult and child risk adjustment models in the final 2021 benefit year
model recalibration. One commenter sought clarity as to whether issuers
can offer both the generic and brand drug at $0 cost sharing. Another
commenter requested more information about the incorporation of PrEP
into the risk adjustment models, such as how HHS will identify PrEP
therapies, given the rapid development of new therapies. Several
commenters recommended incorporating PrEP as a prescription drug factor
(RXC) in the adult models to adequately compensate plans that
disproportionately enroll individuals using PrEP and prevent risk
selection, and one commenter requested that HHS disclose any
operational issues such as the ability to distinguish between
antiretroviral therapy that is provided as a result of HIV acquisition
and antiretroviral therapy that is provided as PrEP using logic that
would make it difficult to implement an RXC for PrEP. Two commenters
also encouraged including recommended ancillary services as part of the
PrEP intervention in the risk adjustment models.
Response: We proposed to incorporate PrEP as a preventive service
in the simulation of plan liability in the risk adjustment adult and
child models with zero cost sharing after careful analysis of
preventive drugs that are recommended at grade A or B by the USPSTF. We
were able to distinguish enrollees that met the ``at risk''
recommendation in the USPSTF recommendation and were receiving
antiretroviral therapy for PrEP, rather than as treatment for HIV/AIDS,
in our analysis of the enrollee-level EDGE datasets. We chose not to
propose incorporating PrEP as an RXC because, as a general principle,
RXCs are incorporated into the HHS risk adjustment adult models to
impute a missing diagnosis or indicate severity of a diagnosis.\47\
Currently, PrEP is not incorporated into RXC 1 (Anti-HIV) because PrEP
does not indicate an HIV/AIDS diagnosis.\48\ Unlike the other
prescription drugs that we have included in RXCs, PrEP does not
adequately represent risk due to an active condition. However, we
proposed and are finalizing the incorporation of 100 percent of the
PrEP costs for enrollees without HIV diagnosis or treatment in the
simulation of plan liability for the adult and child models.
---------------------------------------------------------------------------
\47\ See 81 FR 94058 at 94075. Also see March 31, 2016, HHS-
Operated Risk Adjustment Methodology Meeting Questions & Answers.
June 8, 2016. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf.
\48\ See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf; https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf.
---------------------------------------------------------------------------
The expected upcoming release of a generic version of PrEP will
enable issuers to offer both the generic and brand drug at $0 cost
sharing. We recognize that using past enrollee-level EDGE data may not
properly predict future costs given the rapid development of new drugs.
However, we are only able to analyze the enrollee-level EDGE claims
data we have available when developing our proposals to incorporate new
preventive services into the risk adjustment models, and do not have
claims data on the expected new generic PrEP or any other drugs in
development for use for the 2021 benefit year models. Therefore, while
our modeling may not identify new PrEP therapies at this time, we were
able analyze the data to identify enrollees taking PrEP without HCC 1
(HIV/AIDS) to attribute those costs at 100 percent of simulation of
plan liability.
We did not propose and are not finalizing the addition of PrEP as
an RXC to the adult risk adjustment models. It is difficult to model
the impact of adding PrEP as an RXC at this time because we expect an
increase in the number of people taking PrEP after the recent
recommendation by the USPSTF Task Force to expand the use of PrEP as a
preventive service, and we anticipate price changes with the expected
upcoming release of a generic version of PrEP. Further, as noted above,
as a general principle, RXCs are incorporated into the adult risk
adjustment models to impute a missing diagnosis or indicate severity of
a diagnosis. Since the use of PrEP is currently recommended as a
preventive service for persons who are not infected with HIV and are at
high risk of HIV infection, the use of PrEP does not indicate a
diagnosis, and it would be inconsistent with this principle to add it
as an RXC at this time.
Additionally, we did not propose changes to the risk adjustment
methodology related to ancillary services associated with PrEP as
requested by two commenters. Therefore, we are not finalizing any
changes to the treatment of ancillary services under the risk
adjustment models for the 2021 benefit year, but will consider the
comments as we consider further refinements to the risk adjustment
models for future years.
We are finalizing our proposal to incorporate PrEP as a preventive
service in the simulation of plan liability for HHS's adult and child
risk adjustment models in the final 2021 benefit year model
recalibration and will continue to explore potentially including PrEP
as an RXC in future benefit years.
Comment: One commenter requested HHS propose adding new age-sex
coefficients to the adult risk adjustment models for enrollees age 65
and over in a future rulemaking, as HHS moves to using exclusively
enrollee-level EDGE data to recalibrate the models. Another commenter
recommended further analysis of age-sex coefficients for enrollees age
65 and over and noted factors may need to differ by market or by
Medicare status.
Response: We appreciate these comments and intend to continue to
monitor expenditures for enrollees age 65 and over to determine whether
the addition of new age-sex coefficients for this cohort of the
population to the adult models in a future year is appropriate.
However, we did not propose and are not making any changes to age-sex
coefficients for enrollees age 65 and over at this time. We will
continue to exclude enrollees age 65 and over in the adult models'
calibration for the 2021 benefit year because we believe most of these
enrollees are likely transferring into Medicare coverage once eligible.
[[Page 29188]]
(3) Improving Risk Adjustment Model Predictions
In the proposed rule, we solicited comment on different options to
modify the risk adjustment models to improve model prediction for
enrollees without HCCs or enrollees with low actual expenditures for
future benefit years as follow-up from our consideration of these
issues in the 2018 Payment Notice. More precisely, in the proposed
rule, we discussed how, based on the use of the MarketScan[supreg]
data, the HHS-HCC models under-predict for enrollees without HCCs,
slightly over-predict for enrollees with low HCC counts and under-
predict for enrollees with the highest HCC counts. In the proposed
rule, we explained that we continued to evaluate potential future
options to address these issues and the tradeoffs that would need to be
made in model predictive power among subgroups of enrollees under these
options and that we continued to believe that further evaluation is
appropriate before pursuing these options. However, we also recognized
that additional stakeholder comment was a critical aspect to this
analysis. Therefore, we outlined and solicited comment on various
options that we were continuing to consider to improve the models'
predictive ability for certain subgroups of enrollees in light of
experience and currently available information.
The first option that was detailed in the 2018 Payment Notice \49\
and in the proposed rule involved a constrained regression approach,
under which we would estimate the adult risk adjustment models using
only the age-sex variables, and then, we would re-estimate the models
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. In the
2018 Payment Notice, we stated that we believed that this two-step
estimation approach would result in age-sex coefficients of greater
magnitude, potentially helping us predict the risk of the healthiest
subpopulations more accurately. However, as noted in the proposed rule,
we also found upon further analysis that the mean expenditures of
individual HCCs under this approach were under-predicted compared to
the current adult models and the mean expenditures of extremely
expensive enrollees were more under-predicted under this approach than
in the current adult models.
---------------------------------------------------------------------------
\49\ Ibid.
---------------------------------------------------------------------------
The second option discussed in the proposed rule involved directly
adjusting plan liability risk scores outside of the models for the
impacted sub-populations. This approach would involve directly
increasing underestimated plan liability risk scores or reducing
overestimated plan liability risk scores in an attempt to better match
the relative risks of these sub-populations.\50\ Specifically, we
evaluated using a post-estimation adjustment to the current models'
individual-level risk scores to address the observed patterns of over-
and under-prediction for certain sub-populations. In the proposed rule,
we stated that while we believed modifications of this type could
improve the model's performance along this specific dimension (deciles
of predicted expenditures), there was a risk that such modifications
could unintentionally worsen model performance along other dimensions
on which the model currently performs well. As described in the
proposed rule, we recently reassessed this adjustment option given the
availability of the more recent enrollee-level EDGE data and the
implementation of several updates to the HHS risk adjustment
methodology beginning with the 2018 benefit year.\51\ We did not find
improvements in the predictive ratios when compared to the predictive
ratios of the current approach. Our analysis of this adjustment option
showed that the estimates for the lowest-cost decile and top two
highest-cost deciles of enrollees were more underpredicted under this
approach as compared to the current model. Additionally, this approach
resulted in worse prediction along other dimensions, such as for
subgroups of enrollees with no HCCs and those with 1 or more payment
HCCs.
---------------------------------------------------------------------------
\50\ Ibid.
\51\ For example, we incorporated the high costs risk pool
parameters into the HHS risk adjustment methodology, added RXCs into
the adult risk adjustment models, and applied an administrative cost
reduction to the statewide average premiums in the state payment
transfer formula starting with the 2018 benefit year. See the 2018
Payment Notice, 81 FR 94058 (December 22, 2016).
---------------------------------------------------------------------------
Given the shortcomings with both of these approaches, we ultimately
did not propose or adopt either of them. However, in the proposed rule,
we explained that we have continued to consider other potential
approaches to address the under-prediction of risk for low-cost
enrollees and over-prediction for high-cost enrollees. In particular,
we have also been examining non-linear and count model specifications
to improve the current adult models' predictive power.
Our initial analysis of the non-linear and count model
specifications had shown that these alternatives can improve prediction
in the adult models. For the non-linear model, we were considering an
option that would add a coefficient-weighted sum of payment HCCs raised
to a power to the linear specification. Under this approach, the non-
linear term would be added as the exponentiated p term as shown in the
following formula:
Plan liability = Current Model +
([Sigma][beta]iHCCi)\p\
Where:
[Sigma][beta]iHCCi = the sum of payment HCCs
weighted by their parameter estimates;
p = an exponential factor estimated by the model.
This type of non-linear model would measure the total disease burden by
a weighted count of HCCs rather than a simple count of the payment
HCCs, while only requiring one additional parameter. This approach
would also allow the demographic terms for enrollees with no payment
HCCs to be better estimated, while using a nonlinearity for the disease
burden that could keep the model reasonably simple. As such, we
believed that adding a non-linear term to the models could be a
reasonable approach to potentially improve the prediction of the
models.
For the count model, we considered adding eight indicator variables
corresponding to 1 to 8-or-more payment HCCs. Under this option, the
incremental predictions would vary with a person's count of HCCs (from
1 to 8-or-more payment HCCs) as the incremental predictions for HCCs in
a HCC count model have two components, the HCC coefficient and the
change in the number of HCCs (from 1 to 8-or-more payment HCCs). This
option would also generally be more consistent with other programs
(Medicare Advantage) than the non-linear model, and has yielded similar
results in model performance and improvements in the prediction in the
adult models as the non-linear model. However, similar to the non-
linear model, the count model may not improve the prediction for all
subpopulations in the models.
Additionally, in the proposed rule, we discussed potential
adjustments to the enrollment duration factors in the adult models, as
well as an assessment of whether such factors should be incorporated
into the child and infant models. Using the 2016 and 2017 enrollee-
level EDGE data, we investigated heterogeneity in the relationship
between partial-year enrollment and predicted expenditures. We explored
heterogeneity according to the presence of certain diagnoses,
[[Page 29189]]
market (individual or small group),\52\ and enrollment circumstances,
such as enrollment beginning later in the year or ending before the end
of the year. Our preliminary analysis of 2017 enrollee-level EDGE data
found that current enrollment duration factors are driven mainly by
enrollees with HCCs, that is, partial year enrollees with HCCs have
higher per member per month (PMPM) expenditures on average as compared
to full year enrollees with HCCs, whereas partial year enrollees
without HCCs have similar PMPM expenditures compared to their full year
counterparts. In comparison to the effect of the presence of HCCs on
enrollment duration factors, enrollment timing (for example, enrollment
at the beginning of the year compared to enrollment after open
enrollment period, or drop in enrollment before the end of the year)
did not appear to affect PMPM expenditures on average. Our analysis
also found that separate enrollment duration factors by market in the
adult models may be warranted, given the differences in risk profiles
of partial year enrollees between the individual and small group
markets.\53\ However, due to limitations with the extracted enrollee-
level EDGE data for the 2016 and 2017 benefit years that do not permit
us to connect non-calendar year enrollees in the small group market
across plan years within the same calendar year, we are unable to
develop and propose separate enrollment duration factors by market at
this time. Based on these analyses, because partial-year enrollees with
HCCs seem to have the most distinctive additional expenditures, we
explained in the proposed rule that we believed that eliminating the
enrollment duration factors and replacing them with monthly enrollment
duration factors (up to 6-months), for those with HCCs, would most
improve model prediction.
---------------------------------------------------------------------------
\52\ In the enrollee-level EDGE data, merged market enrollees
are assigned to the individual or small group market indicator based
on their plan.
\53\ In the enrollee-level EDGE data, merged market enrollees
are assigned to the individual or small group market indicator based
on their plan.
---------------------------------------------------------------------------
Additionally, in the proposed rule, we analyzed incorporating
enrollment duration factors in the child and infant models in the same
manner as the adult models. We found that partial year enrollees in the
child models did not have the same risk differences as partial year
enrollees in the adult models, and partial year enrollees in the child
models tended to have similar risk to full year enrollees in the child
models. In the infant models, we found that partial year infants have
higher expenditures on average compared to their full year
counterparts. However, we found that the incorporation of enrollment
duration factors created interaction issues with the current severity
and maturity factors in the infant models and did not have a meaningful
impact on the general predictive accuracy of the infant models. As
such, we did not propose to add partial year factors to the child or
infant models.
We solicited comments on all of the alternative modeling approaches
to help inform our evaluation of the important trade-offs in making
improvements to risk prediction for these sub-populations and providing
consistency year-to-year for issuers, but did not propose to
incorporate any of them as part of the 2021 benefit year risk
adjustment model recalibration. We also generally solicited comments
but did not propose any changes to the enrollment duration factors
(including the potential addition of such factors to the child and
infant models) for the 2021 benefit year. Instead, as outlined in the
proposed rule, we intend to use stakeholder comments on these issues to
aid in consideration of future model updates as we also continue to
analyze these options using additional years of enrollee-level EDGE
data, once available. The following is a summary of the public comments
we received in response to the solicitation of comments on potential
approaches to improve risk adjustment model prediction.
Comment: Commenters generally appreciated or supported HHS's
solicitation of comments on revisions to the risk adjustment models to
improve model prediction. Some commenters supported evaluating count
and non-linear models to address the under- and over-prediction of
costs in the current models or generally supported making changes to
risk adjustment to better account for enrollees without HCCs and
enrollees with the highest number of HCCs in the future. Other
commenters expressed concerns about the count and non-linear methods
introducing more complexity to the risk adjustment models and creating
uncertainty in pricing.
Most commenters wanted additional analyses and various types of
data, such as issuer and beneficiary level data, on the impact of any
potential model changes on the current risk adjustment program and the
improvements in accuracy and predictive power that these models could
provide to inform whether these types of changes should be pursued.
Some commenters recommended that HHS release a White Paper on its
analyses and data prior to rulemaking. Others wanted continued HHS
engagement with stakeholders on model changes aimed at improving the
risk adjustment models' predictions. Some commenters recommended more
interaction and severity terms, such as a diabetes and asthma
interaction term, in the risk adjustment models as a simpler and more
stable change to improve model prediction, compared to the count or
non-linear model specifications. One commenter supported finding viable
alternative methodologies but urged caution in quickly adopting the
count or non-linear models before analysis can be fully validated and
another commenter expressed concern about the count and non-linear
models given that individual and small group market enrollees have less
HCCs that could result in smaller sample sizes and bring volatility to
the models. One commenter did not think that any of the approaches
described in the proposed rule would impact coding incentives in the
risk adjustment program beyond those incentives that already inherent
to the risk adjustment program. One commenter supported including the
model changes in the 2022 risk adjustment models if the prediction for
low-risk enrollees is better and stated that it would be helpful if the
methodology used was similar to Medicare, while another commenter
suggested providing several years lead time before implementing the
model change options discussed in the proposed rule.
Response: We agree with commenters who suggested that further
evaluation is needed of the model performance before proposing these
types of changes to the risk adjustment models. Although we did not
receive many comments that were specific to the model options
considered, we intend to continue to evaluate alternative modeling
approaches to improve model prediction as described in the proposed
rule, and would propose any modifications through future rulemaking.
As explained in the proposed rule, our initial analyses suggested
that the non-linear and count models may yield considerable gains in
predictive accuracy across several groups in the adult models when
compared to the current linear model. Based on the initial testing of
both the count and non-linear models' impact on the adult silver risk
adjustment models, we found that the enrollees with the lowest costs
have better predictive ratios under both the count and non-linear
models than under the current model, with the non-linear model slightly
over-predicting the costs of those enrollees. We also noted that we do
not believe that the count or non-
[[Page 29190]]
linear models would impact coding incentivizes to code additional HCCs
in comparison to the current risk adjustment models.
However, we intend to balance the associated trade-offs of making
improvements to the models and providing consistency year-to-year for
issuers in the HHS-operated risk adjustment program. As such, we intend
to further test the model specifications, incorporating the non-linear
and count options described above and consider whether we should
analyze other options that could address model prediction, with an
additional year of data before considering these model changes for
future years and will take into consideration the additional analyses
recommended by commenters. Based on those results, and in response to
comments, we will also consider what types of analyses or data we could
release to help stakeholders assess these options and models for any
potential future incorporation into the risk adjustment models.
Comment: Commenters generally supported making updates to the
enrollment duration factors to prevent adverse selection with one
commenter supporting removal of the enrollment duration factors,
suggesting it would simplify risk adjustment. Some commenters wanted
additional analyses and data on the potential changes to the enrollment
duration factors before modifications were made to the existing
factors. Some comments supported separate enrollment duration factors
by market since the adverse selection considerations differ in the
individual and small group markets or supported applying adjustments
only to enrollees with HCCs believing this adjustment could help to
differentiate enrollees selecting coverage during a Special Enrollment
Period (SEP) from those enrolling during open enrollment and dropping
coverage early in the year without claims. However, one commenter
wanted HHS to apply enrollment duration values to the 2021 benefit year
for the individual market (but not small group market enrollees) to
capture adverse selection and the differences in churn between markets.
Some commenters expressed support for incorporation of enrollment
duration factors in the infant models since partial-year infants have
higher expenditures on average compared to their full-year
counterparts.
Response: As discussed in the proposed rule, due to certain data
limitations in the 2016 and 2017 enrollee-level EDGE data, we did not
propose changes to 2021 benefit year existing enrollment duration
factors for the adult models. However, we intend to continue to review
the use of enrollment duration factors in the HHS risk adjustment
models, both with respect to the current factors in the adult models
and the potential incorporation of such factors in the child and infant
models. With the availability of more benefit years of enrollee-level
EDGE data, we will consider potential changes to the enrollment
duration factors for future benefit years, including whether to make
changes to the enrollment duration factors to distinguish market type
differences or to distinguish partial year enrollees with HCCs. As part
of that analysis, we will also continue to assess the infant models'
characteristics, and whether we should consider incorporating
enrollment duration factors into those models. We intend to consider
recommendations and considerations shared by commenters in response to
the proposed rule as part of this analysis.
(4) List of Factors To Be Employed in the Risk Adjustment Models (Sec.
153.320)
We noted in the proposed rule that if we finalize the proposed
recalibration approach, we would incorporate the 2018 benefit year
enrollee-level EDGE data in the final rule or in guidance after
publication of the final rule, consistent with our approach in previous
benefit years.\54\ As noted above, we were unable to incorporate the
2018 benefit year EDGE data in time to publish the final coefficients
in this final rule. Therefore, for the 2021 benefit year, we will
release the final list of coefficients, incorporating the 2018 benefit
year enrollee-level EDGE data, in guidance by June 2020, to allow the
factors to be incorporated into final rates for the 2021 benefit year.
---------------------------------------------------------------------------
\54\ See 45 CFR 153.320(b)(1)(i).
---------------------------------------------------------------------------
(5) Cost-Sharing Reduction Adjustments
We proposed to continue including an adjustment for the receipt of
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 2021 benefit year, to maintain stability and certainty for
issuers, we proposed to maintain the CSR factors finalized in the 2019
and 2020 Payment Notices.\55\ Consistent with the approach finalized in
the 2017 Payment Notice,\56\ we also proposed to continue to use a CSR
adjustment factor 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 AVs above 94 percent.
---------------------------------------------------------------------------
\55\ See 83 FR 16930 at 16953 and 84 FR 17454 at 17478 through
17479.
\56\ See 81 FR 12203 at 12228.
---------------------------------------------------------------------------
We are finalizing the CSR factors as proposed and will maintain the
same CSR factors finalized for the 2019 and 2020 benefit years for the
2021 benefit year as shown in Table 3.
Table 3--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
[[Page 29191]]
<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
------------------------------------------------------------------------
The following is a summary of the public comments we received on
the proposed CSR factors in the risk adjustment models.
Comment: Many commenters supported the CSR adjustment factors for
the 2021 benefit year and continuing the CSR adjustment factor of 1.12
for all Massachusetts wrap-around plans. Some commenters wanted HHS to
analyze the CSR adjustment factors and induced demand factors for
future benefit years to consider whether changes are needed.
Response: We are finalizing the CSR adjustment factors as proposed.
Consistent with the approach finalized in the 2017 Payment Notice,\57\
we will continue to use a CSR adjustment factor of 1.12 for all
Massachusetts wrap-around plans in the risk adjustment plan liability
risk score calculation for the 2021 benefit year, as all of
Massachusetts' cost-sharing plan variations have AVs above 94 percent.
We have previously reviewed the induced utilization factors with the
availability of the enrollee-level EDGE data, and we continue to
believe the current CSR adjustments are adequate. However, we will
continue to reexamine whether changes to the induced demand factors and
CSR adjustments are warranted in the future.
---------------------------------------------------------------------------
\57\ See 81 FR 12203 at 12228.
---------------------------------------------------------------------------
(6) 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 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 would 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.\58\ Because we blended
the coefficients from separately solved models based on the 2016 and
2017 benefit years' enrollee-level EDGE data that were available at the
time of the proposed rule, we published the R-squared statistic for
each model separately to verify their statistical validity. We noted in
the proposed rule that if the proposed 2021 benefit year model
recalibration data was finalized, we intended to publish updated R-
squared statistics to reflect results from the blending of the 2016,
2017, and 2018 benefit years' enrollee-level EDGE datasets used to
recalibrate the models for the 2021 benefit year. For the 2021 benefit
year, we will release the final R-squared statistics along with the
final coefficients, incorporating the 2018 benefit year enrollee-level
EDGE data, in guidance by June 2020.
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\58\ Winkleman, Ross and Syed Mehmud. ``A Comparative Analysis
of Claims-Based Tools for Health Risk Assessment.'' Society of
Actuaries. April 2007.
---------------------------------------------------------------------------
b. Overview of the Risk Adjustment Transfer Methodology (Sec. 153.320)
We previously 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.\59\
This 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 via a cost scaling factor. In the
absence of additional funding, we established, through notice and
comment rulemaking,\60\ 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. 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.\61\
---------------------------------------------------------------------------
\59\ The state payment transfer formula refers to the part of
the HHS risk adjustment methodology that calculates payments and
charges at the state market risk pool level prior to the calculation
of the high-cost risk pool payment and charge terms that apply
beginning with the 2018 benefit year.
\60\ 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; and 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).
\61\ See the 2020 Payment Notice for further details on other
reasons why statewide average premium is the cost-scaling factor in
the state payment transfer formula. See 84 FR 17454 at 17480 through
17484.
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Risk adjustment transfers (total payments and charges, including
high-cost risk pool payments and charges) are calculated after issuers
have completed their risk adjustment EDGE data submissions for the
applicable benefit year. Transfers (payments and charges) under the
state payment transfer
[[Page 29192]]
formula are 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 follows the
formula:
[GRAPHIC] [TIFF OMITTED] TR14MY20.026
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 denominators are summed across all risk adjustment covered
plans in the risk pool in the market in the state. The state payment
transfer formula also includes a 14 percent administrative cost
reduction to the statewide average premium.\62\
---------------------------------------------------------------------------
\62\ This adjustment applied beginning with the 2018 benefit
year. See 84 FR 17454 at 17486 for a visual illustration of the
equation for this adjustment.
---------------------------------------------------------------------------
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
would be assessed a charge or receive a payment--even if the risk score
is greater than 1.0, it is possible that the plan would be assessed a
charge if the premium 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 risk pool level, and catastrophic plans are treated
as a separate risk pool for purposes of the risk adjustment state
payment transfer calculations.\63\ This resulting PMPM plan payment or
charge is multiplied by the number of billable member months to
determine the plan payment or charge based on plan liability risk
scores for a plan's geographic rating area for the risk pool market
within the state. The payment or charge under the state payment
transfer formula is thus calculated to balance the state market risk
pool in question.
---------------------------------------------------------------------------
\63\ As detailed elsewhere in this final rule, catastrophic
plans are considered part of the individual market for purposes of
the national high-cost risk pool payment and charge calculations.
---------------------------------------------------------------------------
To account for costs associated with exceptionally high-risk
enrollees we previously added a high-cost risk pool adjustment to the
HHS risk adjustment transfer methodology. As finalized in the 2020
Payment Notice,\64\ we intend to maintain the high-cost risk pool
parameters with a threshold of $1 million and a coinsurance rate of 60
percent for benefit years 2020 and beyond, unless amended through
notice-and-comment rulemaking. We did not propose any changes to the
high-cost risk pool parameters for the 2021 benefit year.
---------------------------------------------------------------------------
\64\ 84 FR 17454 at 17466 through 17468.
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The high-cost risk pool adjustment amount is 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 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 are calculated as
the product of the plan's PMPM 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 payment transfer
formula are 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.
We proposed to continue to use the HHS state payment transfer
formula that was finalized in the 2020 Payment Notice with no
changes.\65\ We noted in the proposed rule that although the proposed
HHS state payment transfer formula for the 2021 benefit year is
unchanged from what was finalized for the previous benefit year, we
believed it is useful to republish the formula in its entirety in the
proposed rule. Additionally, we noted that we republished 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 the proposed rule.\66\
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\65\ 84 FR 17454 at 17480 and 17485.
\66\ Ibid.
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We are finalizing our proposal to use the risk adjustment state
payment transfer formula finalized in the 2020 Payment Notice for 2021
benefit year risk adjustment. This includes maintaining the 14 percent
administrative cost reduction to the statewide average premium for the
2021 benefit year. We also did not propose and are therefore
maintaining the threshold of $1 million and coinsurance rate of 60
percent as the high-cost risk pool parameters for the 2021 benefit
year. Below is a summary of comments we received on maintaining the
risk adjustment state payment transfer formula and high-cost risk pool
parameters finalized in the 2020 Payment Notice.
Comment: Most commenters supported maintaining the high-cost risk
pool parameters to promote stability in the risk adjustment program and
to fulfill its goals of preventing adverse selection while maintaining
a level playing field and facilitating fair market competition on the
basis of efficiency and quality of care provided. One commenter did not
support maintaining the high-cost risk pool due to concerns that
issuers may try to ``game'' the system by inflating the costs of high-
cost services to push payments over the threshold, and stated that the
methodology creates another level of uncertainty that issuers will need
to factor into their premiums. This commenter stated that if HHS wants
to
[[Page 29193]]
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.
Another commenter supported exempting new issuers from risk adjustment,
applying a creditability approach to risk adjustment participation or
placing an upper bound on risk adjustment transfer charges.
Response: We did not propose to make changes to the high-cost risk
pool adjustment or parameters in the proposed rule. In the 2020 Payment
Notice, we finalized the high-cost risk pool parameters and the
additional terms to account for the high-cost risk pool in the risk
adjustment transfer methodology for the 2020 benefit year and for
future benefit years unless changed in notice-and-comment rulemaking.
These parameters will therefore continue to apply in the HHS risk
adjustment methodology until HHS proposes to change them. As explained
in prior rulemakings, we added a high-cost risk pool adjustment in the
HHS risk adjustment methodology to better account for the risk
associated with high-cost enrollees and to allow the risk adjustment
factors to be 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.\67\ We did not propose nor are we
finalizing the creation of a new, separate reinsurance program.
---------------------------------------------------------------------------
\67\ See, for example, 84 FR at 17466-17467 and 81 FR at 94080-
94082.
---------------------------------------------------------------------------
Furthermore, we continue to believe a $1 million threshold and 60
percent coinsurance rate for the 2021 benefit year and beyond are
appropriate to incentivize issuers to control costs while improving
risk prediction under the HHS risk adjustment models and prevent any
potential gaming of issuers to inflate costs. We also 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. Lastly, we believe that maintaining the
same threshold and coinsurance rate from year-to-year will help promote
stability and predictability for issuers.
As detailed further below, HHS established a new process, beginning
with the 2020 benefit year, for states to request reductions in
transfers calculated under the HHS state payment transfer formula.\68\
This process was intended in part to aid smaller issuers that owed
substantial risk adjustment charges that they did not anticipate.\69\
However, HHS previously considered and otherwise declined to adopt a
cap on risk adjustment charges.\70\ We remain concerned that a general
cap on risk adjustment transfers would reduce the necessary risk
adjustment payments to issuers with higher-risk enrollees and undermine
the risk adjustment program's effectiveness.\71\ More specifically,
given the budget-neutral nature of the HHS program, a cap on charges
would result in lower payments to issuers with plans with higher-than-
average actuarial risk. The cap may also incentivize small issuers with
plans that attract healthier-than-average enrollees to underprice
premiums because they would know their charges would be capped to a
percentage of premium. As described in a previous section of this
rulemaking, we are continuing to consider future policy options to
improve the predictability and accuracy of the risk adjustment models.
Modifications that improve predictably and accuracy would ultimately
help new and small issuers. We did not propose and are not finalizing
exemptions for new issuers or the adoption of a creditability approach
to participation in the HHS-operated risk adjustment program.
---------------------------------------------------------------------------
\68\ 83 FR at 16955.
\69\ 83 FR at 16956.
\70\ 81 FR at 94101.
\71\ Ibid.
---------------------------------------------------------------------------
(1) 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 would be
published in the respective benefit year's proposed notice of benefit
and payment parameters, and the supporting evidence would be made
available for public comment.\72\
---------------------------------------------------------------------------
\72\ 2019 Payment Notice Final Rule, 83 FR 16930 (April 17,
2018) and 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------
As finalized in the 2020 Payment Notice, 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 Freedom of
Information Act (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.\73\
---------------------------------------------------------------------------
\73\ See 45 CFR 153.320(d)(3).
---------------------------------------------------------------------------
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).
For the 2021 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 2021 benefit year would
not exceed 1 percent, the de minimis premium increase threshold set
forth in Sec. 153.320(d)(1)(iii) and (d)(4)(i)(B). We solicited
comment on this request to reduce risk adjustment transfers in the
Alabama small group market by 50 percent for the 2021 benefit year. The
request and additional documentation submitted by Alabama are posted
under the ``State Flexibility Requests'' heading at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/index.html.
Based on our review of the comments received and HHS's analysis of
the request submitted by Alabama, HHS is granting Alabama's request to
reduce transfers in the small group market by 50 percent for the 2021
benefit year. The following is a summary of the public
[[Page 29194]]
comments we received on Alabama's 2021 state flexibility request.
Comment: Multiple commenters claimed that waivers diminish the
effectiveness of the risk adjustment program, and recommend that states
should implement their own risk adjustment programs instead of seeking
state flexibility in the HHS-operated risk adjustment program.
Response: 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 2021 benefit year. Alabama state regulators noted
they do not assert that the HHS formula is flawed, only that it results
in imprecise results in Alabama's small group market that could further
reduce competition and increase costs for consumers. The state
regulators provided information demonstrating that the request would
have a de minimis impact on necessary premium increase for payment
issuers, consistent with Sec. [thinsp]153.320(d)(1)(iii).
We note that HHS reviewed the state's unredacted supporting
analysis in evaluating Alabama's request, along with other plan-level
data available to HHS. We found the supporting analysis submitted by
Alabama to be sufficient for us to evaluate the market-specific
circumstances validating Alabama's request.
We agree with Alabama's assessment that any necessary premium
increase for issuers likely to receive reduced payments as a result of
the requested reduction to risk adjustment transfers in the Alabama
small group market for the 2021 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. [thinsp]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 2021 benefit year plan PMPM payment or
charge transfer amount (Ti in the state payment transfer
calculation above) for the Alabama small group market.
Comment: Several commenters asked HHS to consider a multi-year
approval process as it could provide stability to state market risk
pools seeking these flexibility requests.
Response: Our regulations currently provide a process for the
annual review of requests by 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.\74\ Therefore, we review any requests received on an
annual basis, and currently do not have a process by which a multi-year
approval process could be evaluated. It is also unclear if a state
would have the necessary information to be able to submit the required
justification under Sec. 153.320(d)(1)(iii) in support of a multi-year
request (as opposed to a request focused only on one upcoming benefit
year). However, we appreciate the comment and intend to consider
whether multi-year approval processes are appropriate in the future,
and would propose any changes to this process in future rulemaking.
---------------------------------------------------------------------------
\74\ See 45 CFR 153.320(d)(3), requiring HHS to publish state
requests in the applicable benefit year's notice of benefit and
payment parameters rulemaking.
---------------------------------------------------------------------------
Comment: A commenter suggested that when repeat waiver requests
occur that data from years where such a waiver has already occurred
that data from past years be released to the public for analysis.
Response: As explained in the 2020 Payment Notice, we are concerned
that releasing unredacted information from state flexibility requests
can reveal market conditions and issuers' private financial data.\75\
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. [thinsp]5.31(d) and
therefore will not post information the state requests HHS not make
publicly available because it contains such trade secrets or
confidential commercial or financial information. We note that the 2020
benefit year is the first year for which a state flexibility request
was requested and approved (Alabama in the small group market) and we
will publish more information, such as issuers' transfers amounts, and
the state average factors, including premiums, in the permanent risk
adjustment transfers summary report for the 2020 benefit year issued by
June 30, 2021. As such, this report will reflect the reduced transfers
in Alabama, and stakeholders will be able to assess the impact of the
transfers reduction on transfers as a percent of state average premiums
for Alabama's small group market. We further note that Alabama's
request for the 2020 benefit year remains posted on the CMS
website,\76\ such that stakeholders could review it alongside the
state's new request for the 2021 benefit year.
---------------------------------------------------------------------------
\75\ See 84 FR at 248-249. Also see 84 FR at 17484-17485
\76\ https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs.
---------------------------------------------------------------------------
c. Risk Adjustment User Fee for 2021 Benefit Year (Sec. 153.610(f))
As noted above, if a state is not approved to operate, or chooses
to forgo operating, its own risk adjustment program, HHS will operate
risk adjustment on its behalf. For the 2021 benefit year, HHS will
operate a risk adjustment program in every state and the District of
Columbia. As described in the 2014 Payment Notice, HHS's operation of
risk adjustment on behalf of states is funded through a risk adjustment
user fee.\77\ Section 153.610(f)(2) provides that, where HHS operates a
risk adjustment program on behalf of a state, 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 specified in the annual HHS notice of
benefit and payment parameters for the applicable benefit year.
---------------------------------------------------------------------------
\77\ See 78 FR at 15416-15417.
---------------------------------------------------------------------------
Our authority to operate risk adjustment on the state's behalf
arises from sections 1321(c)(1) and 1343 of the PPACA. The authority to
charge this user fee can be found under sections 1343, 1311(d)(5), and
1321(c)(1) of the PPACA, and under 31 U.S.C. 9701, which permits a
Federal agency to establish a charge for a service provided by the
agency. OMB Circular No. A-25 established Federal policy regarding user
fees, and specifies that a user charge will be assessed against each
identifiable recipient for special benefits derived from Federal
activities beyond
[[Page 29195]]
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-25 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 2020 Payment Notice, we calculated the Federal
administrative expenses of operating the risk adjustment program for
the 2020 benefit year to result in a risk adjustment user fee rate of
$0.18 per member per month (PMPM) based on our estimated costs for risk
adjustment operations and estimated billable member months for
individuals enrolled in risk adjustment covered plans. For the 2021
benefit year, we used the same methodology to estimate our
administrative expenses to operate the program. These costs cover
development of the model 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 program activities. To calculate the user
fee, we divided HHS's projected total annual costs for administering
the risk adjustment programs on behalf of states by the expected number
of billable member months in risk adjustment covered plans in states
where the HHS-operated risk adjustment program will apply in the 2021
benefit year.
In the proposed rule, we estimated that the total cost for HHS to
operate the risk adjustment program on behalf of states for 2021 will
be approximately $50 million, and the risk adjustment user fee would be
$0.19 PMPM. We sought comments on the proposed risk adjustment user fee
rate.
We received several comments in support of the proposed risk
adjustment user fee rate, however, we are not finalizing the 2021
benefit year risk adjustment user fee amount as proposed. At the time
of the proposed rule, we estimated the 2021 benefit year risk
adjustment user fee using the best information available on costs,
allocations, and enrollment projections. However, as explained below,
in light of new information, we are finalizing the risk adjustment user
fee amount of $0.25 PMPM for the 2021 benefit year, which reflects our
updated estimate of $60 million in total costs for HHS to operate the
2021 benefit year risk adjustment program on behalf of states.
Based on our analysis of newly available data and further
evaluation of eligible costs, we now expect estimated risk adjustment
user fee costs for the 2021 benefit year to increase, resulting in
total estimated costs of $60 million for program operations for the
2021 benefit year. We periodically reexamine user fee eligible costs,
and we reevaluated our allocation of risk adjustment costs after the
publication of the proposed rule. HHS re-assessed contracts after the
publication of the proposed rule to evaluate portions of contracts
spent on risk adjustment program activities. As a result of this
reexamination, we determined that additional costs were attributable to
risk adjustment program operations. This includes costs related to
information technology technical assistance and support, cloud
computing, collections, payments, program support, data validation,
program integrity and audit functions, operational and fraud analytics,
stakeholder training, and operational support activities. Additionally,
our analysis of interim 2019 benefit year risk adjustment data, which
was not available prior to publication of the proposed rule, revealed
enrollment in 2019 benefit year risk adjustment covered plans that were
lower than previously estimated based on the billable member month
enrollment observed for the prior benefit years. The combination of the
decline in enrollment estimates and the increase in risk adjustment
user fee eligible costs altered our estimates and projections of both
costs and collections for the 2021 benefit year risk adjustment
program, resulting in an increase to the risk adjustment user fee
required to cover the estimated costs of operating the program from the
amount proposed. We are therefore finalizing a risk adjustment user fee
amount of $0.25 PMPM for the 2021 benefit year, reflecting our updated
estimate of $60 million in total costs to operate the program on behalf
of states for the 2021 benefit year and the estimated decline in
enrollment in risk adjustment covered plans. We believe finalizing a
risk adjustment user fee amount of $0.25 PMPM for the 2021 benefit year
is necessary to ensure the HHS-operated risk adjustment program is
fully funded with no risk of a shortfall. We also note risk adjustment
user fee collections are spent on risk adjustment user fee eligible
costs only, and while we have not had significant funds remaining in
prior years, any amount collected in excess of those required to fund
eligible activities would be spent on future years' eligible activities
and considered in future risk adjustment user fee rate estimates.
3. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (Sec. 153.630)
We conduct RADV under Sec. Sec. 153.630 and 153.350 in any state
where HHS is operating risk adjustment on a state's behalf, which for
the 2021 benefit year includes all 50 states and the District of
Columbia. The purpose of RADV is to ensure issuers are providing
accurate and complete risk adjustment data to HHS, which is crucial to
the purpose and proper functioning of the HHS-operated risk adjustment
program. The RADV program also ensures that risk adjustment transfers
reflect verifiable actuarial risk differences among issuers, rather
than risk score calculations that are based on poor data quality,
thereby helping to ensure 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.
RADV 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 the issuer's
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 proposed amendments and clarifications to the RADV program that
stemmed from issuer feedback and HHS's examination of results from the
first 2 pilot years and first transfer adjustment year of the program.
The following is a summary of the general public comments received
related to RADV. Additional comments related to the application of RADV
results when HCC counts are low and the designation of a second pilot
year for the data validation of prescription drugs are discussed later
in this rule.
Comment: Many commenters urged HHS to implement certain policy
options discussed in the ``HHS Risk Adjustment Data Validation (HHS-
[[Page 29196]]
RADV) White Paper,'' \78\ published on December 6th, 2019, with some
commenters requesting that white paper policy options be incorporated
into this final rule or that separate rulemaking be initiated to enable
these provisions to be effective for 2019 RADV. Some of the policy
options frequently advocated for include policies related to: (1) The
``payment cliff'' effect that occurs in the current methodology, which
results in some issuers with similar RADV findings experiencing
different risk score and transfer adjustments; (2) negative failure
rates; and (3) the interaction between risk adjustment HCC hierarchies
and HCC failure rate groups in RADV. One commenter also asked that the
initial validation audit sample size be varied based on issuer-specific
parameters or prior RADV results. Another commenter wanted to ensure
the proposals outlined in the 2019 HHS-RADV White Paper will not impact
2018 benefit year RADV.
---------------------------------------------------------------------------
\78\ See https://www.cms.gov/files/document/2019-hhs-risk-adjustment-data-validation-hhs-radv-white-paper.
---------------------------------------------------------------------------
We also received several comments encouraging HHS to modify RADV
beyond options discussed in the white paper or in the proposed rule.
These include subdividing the RADV process so that the individual and
small group markets are each assessed separately; changing the
materiality threshold criteria to a percentage of statewide premiums;
using the current method for determining outliers, but basing
adjustments on divergence from a state mean rather than a national
mean; and applying additional scrutiny when issuers' supplemental data
is dominated by additional diagnoses rather than modified or deleted
diagnoses.
Response: We appreciate these comments and recognize the desire for
further changes to the RADV program requirements to improve their
reliability and integrity, including implementation of policy options
explored in the 2019 HHS-RADV White Paper. However, we did not include
in the proposed rule any of the options explored in the 2019 HHS-RADV
White Paper and are not finalizing any of those options in this final
rule. As explained in the 2019 HHS-RADV White Paper, our goal was to
outline and seek feedback on certain RADV issues to inform future
policy development.
HHS is committed to ensuring the integrity and reliability of RADV.
Although the options explored in the 2019 HHS-RADV White Paper and the
additional modifications to RADV suggested by commenters are outside of
the scope of this rule, we continue to explore potential modifications
to this program and will propose any such changes for future benefit
years through rulemaking. In response to the comment, we note that we
do not intend to pursue the options explored in the 2019 HHS-RADV White
Paper for the 2018 benefit year of RADV.
Comment: One commenter urged HHS to adopt the HEDIS (Healthcare
Effectiveness Data and Information Set) audit methodology for RADV,
which would only require medical record review for supplemental codes
that the plan pulls from medical records.
Response: We continue to seek ways to improve RADV for both
accuracy and user experience, and will continue to examine approaches
taken by other organizations when making updates to the RADV process
for future benefit years. However, because the intent of RADV is to
ensure the integrity of the risk adjustment program by validating all
diagnoses to confirm the issuer's actuarial risk in a given benefit
year as measured by the risk adjustment program, we believe that RADV
should include a sample of 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 we believe that the
distributed data environment (that is, issuers' EDGE servers) precludes
the need for such customization. As such, we are maintaining our
current overall approach for RADV, with the modifications detailed
below that are finalized in this rule.
Comment: One commenter requested that HHS use our authority to
mandate the submission of medical records by providers to initial
validation auditors for the purposes of RADV.
Response: Under sections 1321 and 1343 of the PPACA, HHS has
authority to regulate issuers of risk adjustment covered plans, but not
providers. However, as explained in the 2019 Payment Notice, we
appreciate that issuers could experience some level of difficulty
retrieving medical records. As a result, we updated the RADV error
estimation methodology, by adopting confidence intervals to identify
outliers, to account for some level of variation and error in
validating HCCs.\79\ Only outlier issuers have their risk scores
adjusted as a result of RADV for this reason. In addition, recognizing
these challenges exist, we have taken steps to provide assistance to
issuers with this process. For example, we developed a memorandum \80\
that issuers can use to assist in their efforts to obtain medical
records from providers for the RADV program. The memo explains the
background and purpose of the RADV program and can be sent to providers
along with the issuer's request for medical records. We will continue
to explore other ways we may be able to help issuers encourage provider
response to medical records requests and whether there are mechanisms
that would enable us to differentiate between issuers who are outliers
due to unverified diagnoses or bad data, and those who are outliers due
to unresponsive providers during medical record retrieval.
---------------------------------------------------------------------------
\79\ See 83 FR at 16961-16965.
\80\ Available at https://www.regtap.info/uploads/library/2018_BY_HHS-RADV_Provider_Medical_Record_Request_Memo_073119_5CR_073119.pdf.
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a. Application of Risk Adjustment Data Validation Adjustments in Cases
Where HCC Count is Low
In the 2019 Payment Notice, to avoid adjusting all issuers' risk
adjustment transfers for expected variation and error, we finalized a
new methodology to evaluate material statistical deviation in data
validation failure rates beginning with 2017 benefit year RADV.\81\
When an issuer's failure rate within a group of HCCs materially
deviates from the mean of the failure rate for that HCC group, we apply
the difference between the mean group failure rate and the issuer's
calculated failure rate. If all failure rates in a state market risk
pool do not materially deviate from the national mean failure rates, we
do not apply any adjustments to issuers' risk scores for that benefit
year in the respective state market risk pool.\82\
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\81\ See 83 FR at 16961-16965.
\82\ When an issuer is determined to be an outlier in an HCC
group, the transfers for other issuers in the state market risk pool
(including those who are not outliers in any HCC group) will also be
adjusted due to the budget neutral nature of the HHS-operated risk
adjustment program.
---------------------------------------------------------------------------
Consistent with the methodology finalized in the 2019 Payment
Notice, for RADV for 2017 and 2018 benefit years, we calculate the data
validation failure rate for each HCC in issuers' initial validation
audit samples as:
[GRAPHIC] [TIFF OMITTED] TR14MY20.027
Where:
Freq_EDGEh is the frequency of HCC code h occurring on EDGE, which
is the number of sampled enrollees recording HCC code h on EDGE.
Freq_IVAh is the frequency of HCC code h occurring in initial
validation audit results, which is the number of sampled
[[Page 29197]]
enrollees with HCC code h on in initial validation audit results.
FRh is the failure rate of HCC code h.
HHS then creates three HCC groups based on the HCC failure rates
derived in the calculation above. These HCC groups are determined by
first ranking all HCC failure rates and then dividing the rankings into
three groups, weighted by total observations or frequencies, of that
HCC across all issuers' initial validation audit samples, to assign
each unique HCC in the initial validation audit samples to a high,
medium, or low failure rate group with an approximately even number of
observations in each group. That is, each HCC group may have an unequal
number of unique HCCs, but the total observations in each group are
approximately equal based on total observations of HCCs reflected in
EDGE data for all issuers' initial validation audit sample enrollees.
HHS then compares each issuer's failure rate for each HCC group
based on the number of HCCs validated in the initial validation audit,
compared to the number of HCCs recorded on EDGE within that HCC group
for the initial validation audit sample enrollees. The issuer's HCC
group failure rate is compared to the weighted mean failure rate for
that HCC group. We calculate an issuer's HCC group failure rate as:
[GRAPHIC] [TIFF OMITTED] TR14MY20.028
Where:
Freq_EDGEiG is the number of HCCs in group G in the EDGE sample of
issuer i.
Freq_IVAiG is the number of HCCs in group G in the initial
validation audit sample of issuer i.
GFRiG is i's group failure rate for the HCC group G.
We also calculate the weighted mean failure rate and the standard
deviation of each HCC group as:
[GRAPHIC] [TIFF OMITTED] TR14MY20.029
Where:
m(GFRG) is the weighted mean of GFRiG of all issuers for the HCC
group G weighted by all issuers' sample observations in each group.
Sd(GFRG is the standard deviation of GFRiG of all issuers for the
HCC group G.
If an issuer's failure rate for an HCC group falls outside the
confidence interval for the weighted mean failure rate for the HCC
group, the failure rate for the issuer's HCCs in that group is
considered an outlier. We use a 1.96 standard deviation cutoff, for a
95 percent confidence interval, to identify outliers. To calculate the
thresholds to classify an issuer's group failure rate as outliers or
not, the lower and upper limits are computed as:
LBG = m (GFRG) - sigma_cutoff * Sd(GFRG)
UBG = m (GFRG) + sigma_cutoff * Sd(GFRG)
Where:
sigma_cutoff is the parameter used to set the threshold for outlier
detection as the number of standard deviations away from the mean.
LBG, UBG are the lower and upper thresholds to classify issuers as
outliers or not outliers for group G.
When an issuer's HCC group failure rate is an outlier, we 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. Specifically, this results 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. The adjustment
amount for outliers is the distance between issuer i's Group Failure
Rate GFRiG and the weighted mean m(GFRG), calculated as:
If GFRiG > UBG or GFRiG < LBG:
Then FlagiG = ``outlier'' and AdjustmentiG = GFRiG - m(GFRG)
If GFRiG <= UBG and GFRiG >= LBG:
Then FlagiG = ``not outlier'' and AdjustmentiG = 0
Where:
FlagiG is the indicator if issuer i's group failure rate for group G
locates beyond a calculated threshold that we are using to classify
issuers into ``outliers'' or ``not outliers'' for group G.
AdjustmentiG is the calculated adjustment amount to adjust issuer
i's EDGE risk scores for all sampled HCCs in group G.
We then compute total adjustments and risk adjustment transfer error
rates for each issuer based on the sums of the AdjustmentiG.\83\
---------------------------------------------------------------------------
\83\ See, for example, the 2018 Benefit Year Protocols: PPACA
HHS Risk Adjustment Data Validation, Version 7.0 (June 24, 2019)
that are available at https://www.regtap.info/uploads/library/HRADV_2018Protocols_070319_5CR_070519.pdf.
Although the failure rate and error estimation methodology
described above is based on the number of HCCs within a sample, our
sampling methodology samples individual enrollees and varies in size
for issuers with fewer than 4,000 enrollees,\84\ rather than sampling
HCCs directly. This difference in unit of analysis between the error
estimation methodology--which applies to all non-exempt RADV issuers,
regardless of their size--and the sampling methodology may lead to
fewer HCCs in an HCC group than are necessary to reliably determine
whether an issuer is an outlier at the targeted precision and
confidence levels--that is, whether an issuer is statistically
different from the national (average) HCC failure rate, as defined by
an unadjusted 95 percent confidence interval.
---------------------------------------------------------------------------
\84\ For issuers with fewer than 4,000 enrollees, the sample
size varies according to a finite population correction (FPC) such
that nadjusted = noriginal * FPC, where nadjusted is the adjusted
sample size and noriginal is the original sample size of 200
enrollees. The FPC is determined by the equation FPC = (N -
n_original/N, where N is the population size. By these formulae, if
an issuer's adjusted sample size would be smaller than 50 enrollees,
that issuer should sample either a minimum of 50 enrollees or their
entire population of enrollees, whichever is smaller. See Ibid at
37.
---------------------------------------------------------------------------
Standard statistical theorems \85\ state that, as sample sizes
increase, the
[[Page 29198]]
sampling distribution of the means of those samples (in this case, the
distribution of mean HCC group failure rates) will more closely
approximate a normal distribution. Lower sample sizes are more likely
to lead to non-normal distributions of sample summary statistics--for
example, the means of multiple samples--if the distribution of the
underlying population is non-normal. The divergence from a normally
distributed distribution of sample means that can occur at lower sample
sizes may result in violations of the assumptions of statistical
testing, which may lead to the detection of more apparent outliers than
would be desirable.
---------------------------------------------------------------------------
\85\ In other words, the Central Limit Theorem (CLT). For
background regarding the CLT, see Ivo D. Dinov, Nicolas Christou,
and Juana Sanchez. ``Central limit theorem: New SOCR applet and
demonstration activity.'' Journal of Statistics Education 16, no. 2
(2008). DOI: 10.1080/10691898.2008.11889560.
---------------------------------------------------------------------------
Taking all of these points into consideration, we conducted an
analysis in which we simulated the selection of samples from an average
issuer using progressively smaller HCC counts. By this process we
identified that, if the number of HCCs per sample of enrollees was
below 30 HCCs, the implied alpha of our statistical tests for outliers
was higher than our 5 percent target, thereby failing to meet the
threshold for statistical significance. Moreover, statistical practice
often relies on a standard recommendation regarding the determination
of sample size, which states that sample sizes below 30 observations
are often insufficient to assume that the sampling distribution is
normally distributed.\86\
---------------------------------------------------------------------------
\86\ For example, David C. Howell, ``Hypothesis Tests Applied to
Means'' In Statistical Methods for Psychology (8th Ed.), 177-228.
Belmont, CA: Wadsworth, 2010.
---------------------------------------------------------------------------
Based on these findings, we proposed to amend the outlier
identification process and not consider as an outlier any issuer's
failure rate for an HCC group in which that issuer has fewer than 30
HCCs beginning with 2019 benefit year RADV. Furthermore, we proposed
that such issuers' data would continue to be included in the
calculation of national metrics for that HCC group, including the
national mean failure rate, standard deviation, and upper and lower
confidence interval bounds. However, the issuer would not have its risk
score adjusted for that group, even if the magnitude of its failure
rate appeared to otherwise be very large relative to other issuers. In
addition, we clarified that this issuer may be considered an outlier in
other HCC groups in which it has 30 or more HCCs. Under the proposal,
the adjustment amount for outliers would continue to be the distance
between issuer i's Group Failure Rate GFRiG and the weighted mean
m(GFRG calculated as:
If GFRiG > UBG or GFRiG < LBG,
And if Freq_EDGEiG [gteqt] 30:
Then FlagiG = ``outlier'' and AdjustmentiG = GFRiG - m(GFR G)
If GFRiG <= UBG and GFRiG [gteqt] LBG,
Or if Freq_EDGEiG < 30:
Then FlagiG = ``not outlier''and AdjustmentiG = 0
We solicited comments on this proposal.
After consideration of comments, we are finalizing the policy as
proposed such that beginning with 2019 benefit year RADV \87\, we will
not consider issuers with fewer than 30 HCCs in an HCC failure rate
group to be outliers in that HCC failure rate group, but will continue
to include such issuers in the calculation of national metrics. In
addition, these issuers may still be considered outliers in other HCC
groups in which they have 30 or more HCCs. The following is a summary
of the public comments we received on this proposed policy.
---------------------------------------------------------------------------
\87\ As part of the Administration's efforts to combat the
Coronavirus Disease 2019 (COVID-19), we recently announced the
postponement of the 2019 benefit year RADV process. We intend to
provide further guidance by August 2020 on our plans to begin 2019
benefit year RADV in calendar year 2021. See https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------
Comment: All commenters that submitted comments on this topic
supported the proposed modification to the outlier identification
process to not consider issuers with fewer than 30 HCCs in an HCC
failure rate group as outliers in RADV beginning with the 2019 benefit
year.
Response: After consideration of comments, we are finalizing the
policy as proposed such that beginning with 2019 benefit year RADV, we
will not consider issuers with fewer than 30 HCCs in an HCC failure
rate group to be outliers in that HCC failure rate group, but will
continue to include such issuers in the calculation of national
metrics. In addition, these issuers may still be considered outliers in
other HCC groups in which they have 30 or more HCCs. We also generally
remind issuers that when an issuer is determined to be outlier in an
HCC group, the transfers for other issuers in the state market risk
pool (including those who are not outliers) will also be adjusted due
to the budget neutral nature of the HHS-operated risk adjustment
program.
b. Prescription Drugs for the 2019 Benefit Year Risk Adjustment Data
Validation
In the 2020 Payment Notice,\88\ we finalized an approach to
incorporate RXCs into RADV 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 RADV. We
also finalized an approach to pilot the incorporation of these drugs
into the RADV process for 2018 benefit year RADV, and stated that RXC
errors that we identified during the 2018 benefit year RADV RXC pilot
will not be used to adjust risk scores or transfers. We stated that we
finalized this policy to treat the incorporation of RXCs into 2018
benefit year RADV as a pilot year to allow HHS and issuers to gain
experience in validating RXCs before RXCs are used to adjust issuers'
risk scores.
---------------------------------------------------------------------------
\88\ 84 FR 17454 at 17498 through 17503.
---------------------------------------------------------------------------
Following continued analysis of the issue after publication of the
2020 Payment Notice, in the proposed rule, we proposed that the 2019
benefit year RADV would serve as a second pilot year for the purposes
of prescription drug data validation, in addition to the 2018 benefit
year RADV pilot for prescription drugs. The proposed second pilot year
is consistent with the 2 pilot years provided for the 2015 and 2016
benefit years of the RADV program. We also noted in the proposed rule
that the proposal was also responsive to issuer concerns that were
previously expressed in comments to the 2020 Payment Notice.\89\ We
solicited comments on this proposal.
---------------------------------------------------------------------------
\89\ See, for example, America's Health Insurance Plans comment
on HHS Notice of Benefit and Payment Parameters for 2020 Proposed
Rule, February 19, 2019, https://www.regulations.gov/contentStreamer?documentId=CMS-2019-0006-23013&attachmentNumber=1&contentType=pdf, and BlueCross BlueShield
Association comment on HHS Notice of Benefit and Payment Parameters
for 2020 Proposed Rule, February 19, 2019, https://www.regulations.gov/contentStreamer?documentId=CMS-2019-0006-23345&attachmentNumber=1&contentType=pdf.
---------------------------------------------------------------------------
In light of the comments received, we are finalizing the proposal
to treat the 2019 benefit year \90\ as a second pilot year for RXC
validation.
---------------------------------------------------------------------------
\90\ As noted above, we recently announced the postponement of
the 2019 benefit year RADV process as part of the Administration's
efforts to combat COVID-19. See, supra note 87 and https://www.cms.gov/files/document/2019-HHS-RADV-Postponement-Memo.pdf.
---------------------------------------------------------------------------
We summarize and respond to the public comments received below.
Comment: All stakeholders who commented on this proposal supported
a second pilot year for RXC validation. Several commenters encouraged
HHS to
[[Page 29199]]
provide issuers with additional data and reports of the findings from
the 2018 benefit year RADV RXC validation pilot.
Response: As explained in the proposed rule, we recognize that
there may be more differences between validating HCCs and RXCs that
need to be considered when incorporating RXCs into RADV than initially
anticipated and that the metrics to validate a RXC are not the same as
coding a HCC. A second pilot year for validation of RXCs provides
additional time to examine these issues and any potential mitigating
strategies (as may be necessary). Therefore, we are finalizing a second
pilot year (2019 benefit year) for RXC validation to give HHS and
issuers more time and experience with the prescription drug data
validation process before those results will be used to adjust risk
scores and transfers. Additionally, we intend to provide issuers with
additional data and analysis from the 2018 benefit year RADV
prescription drug data validation pilot when we release our 2018
benefit year RADV error rate results memo in May 2020.
Comment: One commenter recommended that HHS include the drug name
in the National Drug Code (``NDC'') to RXC mapping because they
believed that not all the NDCs in the RXC model are listed in the
Federal Drug Administration's drug inventory.
Response: We refer the commenter to the most recent HHS-Development
Risk Adjustment Model Algorithm ``Do It Yourself (DIY)'' Software,\91\
which contains all NDCs that were active at any point during the
benefit year to which the DIY software refers and that crosswalk to
RXCs. Some of the Federal Drug Administration's drug reference sources
use 10-digit NDC codes, but the DIY Software uses 11-digit NDC codes.
Drug names can be identified from the 11-digit NDC code via the
National Institutes of Health's RxNorm system.\92\ Some of the NDCs in
the DIY Software may be marked with an obsolete status in the RxNorm
system; however, all NDCs are referenced against the EDGE NDC Global
Reference List for active status at the time of the claim.
---------------------------------------------------------------------------
\91\ See https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/index.
\92\ See https://www.nlm.nih.gov/research/umls/rxnorm/index.html.
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D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
1. Verification Process Related To Eligibility for Insurance
Affordability Programs
a. Employer-Sponsored Plan Verification
We proposed that HHS would not take enforcement action against
Exchanges that do not perform random sampling as required by Sec.
155.320(d)(4), when the Exchange does not reasonably expect to obtain
sufficient verification data as described in Sec. 155.320(d)(2)(i)
through (iii), for plan years 2020 and 2021. We also proposed that HHS
would exercise such discretion in anticipation of receiving the results
of the employer verification study described in the proposed rule. We
are finalizing this policy as proposed.
Strengthening program integrity with respect to subsidy payments in
the individual market continues to be a top priority. Currently,
Exchanges must verify whether an applicant is eligible for or enrolled
in an eligible employer-sponsored plan for the benefit year for which
coverage is requested using available data sources, if applicable, as
described in Sec. 155.320(d). For any coverage year that an Exchange
does not reasonably expect to obtain sufficient verification data as
described in Sec. 155.320(d)(2)(i) through (iii), an alternate
procedure is required. Specifically, Exchanges must select a
statistically significant random sample of applicants and meet the
requirements of Sec. 155.320(d)(4)(i). We discussed in the proposed
rule that we are exploring a new alternative approach to replace the
current procedures in Sec. 155.320(d)(4)(i), under which an Exchange
may design its verification process based on the Exchange's assessment
of risk for inappropriate eligibility or payment for APTC or CSRs.
HHS's experience conducting random sampling revealed that employer
response rates to HHS's request for information were low. The manual
verification process described in Sec. 155.320(d)(4)(i) requires
significant resources and government funds, and the value of the
results ultimately does not appear to outweigh the costs of conducting
the work because only a small percentage of sampled enrollees have been
determined by HHS to have received APTC/CSRs inappropriately. We
discussed in the proposed rule that we believe an approach to verifying
an applicant's attestation regarding access to an employer-sponsored
plan should be rigorous, while posing the least amount of burden on
states, employers, consumers, and taxpayers.
Based on our experiences with random sampling methodology under
Sec. 155.320(d)(4)(i), HHS questioned whether this methodology was the
best approach for all Exchanges to assess the associated risk for
inappropriate payment of APTC/CSRs. As such, HHS conducted a study to
(1) determine the unique characteristics of the population with offers
of employer-sponsored coverage that meets minimum value and
affordability standards; (2) compare premium and out-of-pocket costs
for consumers enrolled in employer-sponsored coverage to Exchange
coverage; and (3) identify the incentives, if any, that drive consumers
to enroll in Exchange coverage rather than coverage offered through
their current employer. The results of this study, which HHS expects to
be finalized sometime in 2020, will inform the approach we would
propose in future rulemaking to allow Exchanges to design an employer-
sponsored coverage verification based upon their assessment of the risk
of potential inappropriate payments of APTC/CSRs to those with offers
of affordable employer-sponsored coverage for Exchanges using the
Federal eligibility and enrollment platform. HHS also encouraged State
Exchanges to conduct similar research of their past and current
enrolled populations in anticipation of this future rulemaking.
As HHS continues to explore the best options for verification of
employer-sponsored coverage, we proposed that HHS would not take
enforcement action against Exchanges that do not perform random
sampling as required by Sec. 155.320(d)(4), as an alternative to
performing this verification against the data sources required under
Sec. 155.320(d)(2)(i) through (iii), for plan years 2020 and 2021. We
also proposed that HHS would exercise such discretion in anticipation
of receiving the results of the employer verification study described
in the proposed rule.
Comment: All commenters on this topic agreed with HHS's proposal to
refrain from taking enforcement action against Exchanges that do not
conduct random sampling to verify whether an applicant has access to or
received an offer of affordable coverage that meets the minimum value
standard through their employer. The commenters agreed with HHS's prior
study findings that the random sampling process requires significant
resources with little return on investment. Commenters also agreed with
HHS that an employer-sponsored coverage verification approach should
provide State Exchanges with flexibility and more opportunities to use
[[Page 29200]]
verification processes that are evidence-based, while imposing the
least amount of burden on consumers, states, employers, and taxpayers.
One commenter supported the proposal, but sought clarification on
whether the non-enforcement policy would apply to State Exchanges with
corrective active plans currently under Sec. 155.320(d)(4). Another
commenter suggested that HHS make available a reliable data source for
verification of employer-sponsored coverage.
A commenter suggested that, as HHS reviews the results of the study
discussed in the preamble to the proposed rule, we should consider that
soliciting additional information from employers and plan sponsors
regarding employer-sponsored coverage through the random sampling
process under Sec. 155.320(d)(4) is not necessary because this
information regarding employer-sponsored coverage for employees is
already provided annually on Internal Revenue Service (IRS) Form 1095-
C, Employer-Provided Health Insurance Offer and Coverage.
Response: We agree that the current random sampling process
required under Sec. 155.320(d)(4)(i) is not only burdensome for
states, employers, consumers, and taxpayers, but it also does not
provide enough flexibility to all Exchanges to develop a process for
employer-sponsored coverage verification that more accurately reflects
their respective enrolled Exchange populations. As discussed in the
preamble above and in the proposed rule, HHS shares the same concerns
regarding the feasibility and effectiveness of random sampling,
including the effectiveness of employer and employee notices, and the
impact that such a verification process has on Exchanges' appeals
processes. We also agree that a verification process should be
evidence-based and informed by certain risk-factors for inappropriate
payment of APTC/CSRs. HHS will also continue to explore the
availability of other data sources that may be used to verify offers of
employer-sponsored coverage, such as the National Directory of New
Hires (NDNH), however, access to that database would require statutory
changes. Finally, we agree that as HHS reviews the results of the study
discussed earlier in this preamble, we should also continue to explore
whether there may be information that applicable large employers can
provide regarding coverage available to employees as we generally agree
with the premise that HHS should avoid soliciting duplicative
information, if possible. We note however that Forms 1095-C would have
limited utility in helping an Exchange to verify a current offer of
employer-sponsored coverage because they are provided to employees
after a coverage year has ended.
In response to comments on the proposed non-enforcement policy, we
clarify that the non-enforcement of the requirement to conduct the
random sampling process under Sec. 155.320(d)(4)(i) will apply for
plan years 2020 and 2021 to all State Exchanges, including those that
currently have existing corrective action plans under which the State
Exchange proposed to implement the random sampling process required
under Sec. 155.320(d)(4)(i) as an alternative to conducting this
verification using the data sources under Sec. 155.320(d)(2).
HHS further reminds State Exchanges that they have existing
flexibility under Sec. 155.320(a)(2) and Sec. 155.315(h) to propose
an alternative approach to using the verification procedures under
Sec. 155.320(d)(2), or an alternative to using the random sampling
process described under Sec. 155.320(d)(4), in order to verify whether
applicants have received an offer of affordable coverage. We encourage
states to use this flexibility to explore evidence or risk-based
approaches to conducting this verification. Finally, these changes do
not impact State Exchanges that currently verify offers of employer-
sponsored coverage using approved data sources under Sec.
155.320(d)(2)(i) through (iii) or use the random sampling procedures
under Sec. 155.320(d)(4), and have determined these methods are the
appropriate approaches for their Exchanges to meet requirements under
Sec. 155.320(d).
Comment: One commenter also supported the proposal, but suggested
that HHS consider reinstating timely notices from the Exchanges using
the Federal platform to employers, required under Sec. 155.310(h) and
referenced at Sec. 155.320(d)(4)(i)(E), regarding employees who are
receiving APTC/CSRs.
Response: We did not propose policies or requirements related to
employer notices under Sec. 155.310(h) or elsewhere, and this comment
is outside the scope of this rulemaking. However, we wish to clarify
that there are limitations on the extent to which notification to
employers regarding employees who are receiving APTC/CSRs under Sec.
155.310(h) would alleviate the difficulties that employers may face
with regard to the assessment of employer shared responsibility
payments (ESRPs) in section 4980H of the Code. Based on HHS's
experience with the Exchanges issuing such notices to employers, the
Exchange does not have the capability to distinguish between employers
that are or are not subject to the ESRP. In addition, HHS found that
these notices caused substantial confusion among employers, as many
employers interpreted the notices as an assessment of the ESRP. HHS
also believes that while these notices could offer employers the
opportunity to dispute an employee's eligibility for APTC/CSRs, the
outcome of such a dispute may have no impact on the IRS's assessment of
the ESRP. IRS's assessment of the ESRP and whether an employer is
liable for the ESRP, is solely within the purview of the IRS.
Therefore, HHS believes that the notice and dispute processes
authorized for Exchanges would not contribute positively to verifying
whether employees have affordable offers of employer sponsored coverage
that meet minimum value. Furthermore, per Sec. 155.310(i), the IRS
currently sends letters to employers, known as ''226-J letters,'' to
certify to an employer that one or more employees has enrolled for one
or more months during a year in a QHP with APTC in order to satisfy the
requirement under section 4980H of the Code.
After reviewing the public comments, we are finalizing this
proposal as proposed.
2. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
a. Process for Voluntary Termination Upon a Finding of Dual Enrollment
via Periodic Data Matching (PDM)
We proposed to amend Sec. 155.330(e)(2)(i)(D) to provide that
Exchanges need not redetermine eligibility for APTC or CSRs for
enrollees who (1) are found to be dually enrolled in QHP coverage and
MEC consisting of Medicare, Medicaid/CHIP, or, if applicable, the Basic
Health Program (BHP); (2) have not responded to the Exchange notice to
provide updated information within 30-days; and (3) have previously
provided written consent for the Exchange to end their QHP coverage via
PDM in the event of dual enrollment or eligibility. We are finalizing
these amendments as proposed.
In accordance with Sec. 155.330(d)(3), Exchanges must periodically
examine available data sources (beginning with the 2021 calendar year,
generally at least twice per calendar year) to determine whether
enrollees in a QHP through an Exchange who are receiving APTC or CSRs
have been determined eligible for or are enrolled in other qualifying
coverage through Medicare, Medicaid, CHIP, or the BHP, if a BHP is
operating
[[Page 29201]]
in the service area of the Exchange. Individuals enrolled in one of
these forms of MEC and Exchange coverage are referred to as `dually-
enrolled' consumers and are identified through periodic data matching
against government and commercial sources, known as periodic data
matching or PDM.
Section 155.430(b)(1)(ii) requires an Exchange to provide an
opportunity at the time of plan selection for an enrollee to choose to
remain enrolled in QHP coverage or have their QHP coverage terminated
if the Exchange finds that he or she has become eligible for or
enrolled in other MEC, or to terminate QHP coverage if the enrollee
does not choose to remain enrolled in the QHP upon completion of the
redetermination process. As such, for plan year 2018 and thereafter,
HHS added language to the single streamlined application generally used
by the Exchanges using the Federal platform to allow consumers to
authorize the Exchange to obtain eligibility and enrollment data and,
if so desired by the consumer, to end their QHP coverage if the
Exchange finds during PDM that the consumer has become eligible for or
enrolled in other MEC. A consumer's authorization for the Exchange to
end QHP coverage is voluntary, as consumers may opt-in to or opt-out of
permitting the Exchange to process a voluntary termination of QHP
coverage if the consumers are found to be also enrolled in other MEC,
via PDM. We note that the PDM operational processes described above
pertain only to those Exchange enrollees receiving APTC/CSRs in
accordance with Sec. 155.330(d)(ii).
We further noted that for plan year 2019 and beyond, the Exchanges
using the Federal platform will continue to end QHP coverage or
subsidies for Medicare PDM only; terminations of Exchange coverage
based on consumer pre-authorization resulting from Medicaid/CHIP PDM
will be implemented at a time deemed appropriate by HHS to ensure the
accuracy of the Medicaid/CHIP data before it is utilized for Exchange
coverage terminations. Additionally, because the Medicaid/CHIP
population may become eligible or ineligible for Medicaid/CHIP
throughout a plan year as eligibility for the program is directly tied
to fluctuations in income, we discussed that HHS will continue to
evaluate the best manner by which to implement this process for
Medicaid/CHIP PDM to ensure that Exchange enrollees do not experience
unnecessary gaps in coverage. Similarly, we suggested that the two
State Exchanges that operate their own eligibility and enrollment
platform and that currently offer BHP coverage--New York and
Minnesota--consider adding the option for consumer pre-authorization of
terminations of Exchange coverage resulting from BHP PDM.
Given that enrollees may permit the Exchanges to terminate their
QHP enrollment upon finding that they are dually-eligible for or
enrolled in other MEC, in accordance with Sec. 155.330(d), discussed
above, we proposed to amend Sec. 155.330(e)(2)(i)(D) to provide that
Exchanges need not redetermine eligibility for APTC or CSRs for
enrollees who (1) are found to be dually enrolled in QHP coverage and
MEC consisting of Medicare, Medicaid/CHIP, or, if applicable, the BHP,
(2) have not responded to the Exchange notice to provide updated
information within 30-days, as required by Sec. 155.330(e)(2)(i), and
(3) have provided written consent to the Exchange to act to end their
QHP coverage via PDM in the event of dual enrollment or eligibility. We
discussed in the proposed rule that we believe that the revision would
ensure more efficient Exchange operations and would make clear that a
voluntary QHP termination conducted as part of PDM under Sec.
155.430(b)(1)(ii) follows the same process as other enrollee-initiated
voluntary terminations of QHP coverage. Furthermore, we noted that we
believe the changes would support HHS's program integrity efforts by
helping to ensure that APTC or CSRs are not paid inappropriately to
those enrollees who are ineligible to receive subsidies. Finally, we
stated that we believe the change would also ensure more efficient
termination of unnecessary or duplicative coverage for consumers who
have opted to have their coverage terminated in such circumstances.
We solicited comment on this proposal.
Comment: We received multiple comments in support of PDM as an
effort to improve Exchange program integrity. These commenters agreed
that the process has a positive impact on consumers as it helps inform
Exchange enrollees of their enrollment in potentially duplicative other
MEC, such as certain Medicare and Medicaid coverage, CHIP, or, if
applicable, the BHP. Commenters also noted that the proposed changes
help support efficient Exchange operations with respect to the PDM
process, while minimizing burden on stakeholders such as states,
issuers, consumers, and taxpayers. Commenters appreciated that the
proposed changes continue to support flexibility for State Exchanges by
providing all Exchanges with the option to allow applicants to provide
written consent for Exchanges to end their QHP coverage if later found
to be enrolled in Medicare, Medicaid/CHIP, or, if applicable, the BHP.
A few commenters supported the proposed changes but sought
clarification regarding whether eligibility determinations for APTC/
CSRs would still be completed for non-impacted members remaining on the
application. A few commenters suggested improvements that could be made
to current PDM processes or noted concerns for HHS to consider.
We also received some mixed comments that supported the overall PDM
process but cautioned us regarding the impact these proposed changes
could have for the Medicaid/CHIP population. Commenters urged HHS to
exercise caution as to not create coverage gaps for this population
while other comments argued that terminations of QHP coverage through
the Medicaid/CHIP process is inconsistent with current PDM requirements
under Sec. 155.330(d). One commenter suggested that we revise the
current application question where applicants can provide written
consent for Exchanges to end their QHP coverage through PDM to exclude
Medicaid/CHIP as this language could be confusing for consumers as
Exchanges currently do not terminate QHP coverage through Medicaid/CHIP
PDM.
Response: We agree with commenters that the PDM process is an
important tool for Exchange program integrity. We also agree with
commenters that the PDM process helps inform consumers of their
enrollment in potentially duplicative other MEC such as certain
Medicare and Medicaid coverage, CHIP, or BHP, and helps consumers avoid
a tax liability for having to repay APTC received during months of
overlapping coverage when reconciling at the time of annual federal
income tax filing.
Under current Medicare PDM operations in the Exchanges that use the
Federal platform, when enrollees on whose behalf APTC or CSRs are being
provided are identified as being enrolled in both an Exchange QHP and
in Medicare (dual enrollment), notices are sent to the household
contact, who may not always be the Medicare dual enrollee. The notice
includes a list of persons on the household contact's Exchange
application that the Exchange has identified as dually enrolled in
Exchange coverage and Medicare. Enrollees have 30 days to respond to
the Medicare PDM notice before the Exchange takes action to either end
APTC/CSRs or QHP coverage for the Medicare dual enrollee. For non-dual
[[Page 29202]]
enrollees remaining on the application, to the extent they are eligible
to continue their coverage, the Exchange will redetermine their
eligibility for APTC/CSRs, and their coverage will continue with the
APTC/CSR adjusted, as applicable. The same is true for Medicare dual
enrollees who do not provide written consent for the Exchange to end
their QHP coverage. In these cases, the Medicare dual enrollee is no
longer eligible for APTC/CSRs, and eligibility is redetermined for the
remaining persons on the application. Furthermore, in both scenarios,
non-dual enrollees will receive an eligibility determination notice
reflecting any changes to their eligibility for APTC/CSRs. In cases
where family members of dual enrollees lose their coverage or their
financial subsidies as a result of the PDM process described here, a
special enrollment period may be available.
We appreciate commenters' concerns regarding QHP terminations for
the Medicaid/CHIP population through PDM. We share these concerns and
are exploring ways to implement terminations of QHP coverage for the
Medicaid/CHIP population and to reduce consumer confusion. For example,
in 2019, we revised the current application question by which
applicants may provide written consent for the Exchange to terminate
their QHP coverage through PDM to ensure that consumers understand the
consequences of dual enrollment. HHS is also currently exploring ways
to operationalize terminations through Medicaid/CHIP PDM that are the
least disruptive for Medicaid/CHIP dual enrollees, as eligibility for
Medicaid/CHIP may change throughout a plan year due to fluctuations in
household income. We want to ensure that terminations through Medicaid/
CHIP PDM are developed in a manner that still provides a pathway back
into QHP coverage should a previously identified Medicaid/CHIP dual
enrollee no longer be eligible for Medicaid/CHIP and need to be re-
enrolled in an Exchange QHP. We are also exploring ways to improve the
accuracy of state Medicaid/CHIP data to ensure that Exchange enrollees
are not erroneously identified as also enrolled in Medicaid/CHIP and
subsequently lose Exchange QHP coverage due to data errors. We continue
to monitor data matching results each round of Medicaid/CHIP PDM and
are working to provide guidance directly to states in instances where
we believe data matching errors may have occurred.
Finally, we disagree with commenters that terminations of Exchange
QHP coverage through Medicaid/CHIP PDM is inconsistent with the current
regulation at Sec. 155.330(d). As discussed in the preamble, the
Exchange has authority under Sec. 155.430(b)(1)(ii) to provide the
opportunity for an enrollee to have their QHP coverage terminated if
the Exchange finds that they have become eligible for or enrolled in
other MEC, such as Medicare, Medicaid/CHIP, or, if applicable, the BHP.
We believe that such terminations through PDM benefit consumers because
they mitigate the risk that consumers are paying for duplicate coverage
and the risk that consumers will be required to pay back all or some of
the APTC received during months of overlapping coverage.
After reviewing the public comments, we are finalizing the proposal
as proposed.
b. Effective Date for Termination via Death PDM
In accordance with Sec. 155.330(e)(2), Exchanges must periodically
check available data sources to identify Exchange enrollees who are
deceased and must terminate a deceased person's QHP coverage after
following the process outlined at Sec. 155.330(e)(2)(i) and after a
redetermination of eligibility in accordance with Sec. 155.330(e)(1).
We proposed to amend Sec. 155.330 to allow Exchanges, under
appropriate circumstances, to terminate a deceased enrollee's coverage
retroactively to the date of death, with no requirement to redetermine
the eligibility of the deceased enrollee. We are finalizing this
amendment as proposed.
In 2019, Exchanges using the Federal platform conducted one check
for enrollees who are enrolled in QHP coverage and may have become
deceased during plan year 2019. For plan year 2019 and beyond, under
Sec. 155.430(d)(7), Exchanges currently must terminate QHP coverage
retroactively to the date of death when the Exchange terminates
coverage due to the death of an enrollee during a plan year. We
proposed to further amend Sec. 155.330(e)(2)(i)(D) to provide that
Exchanges are not required to redetermine eligibility of a deceased
enrollee when the Exchange identifies a deceased enrollee via PDM and
the enrollee does not respond or contest the updated information within
the 30-day period specified in paragraph (e)(2)(i)(B). Under such
circumstances, the Exchange would terminate coverage retroactively to
the date of death, as specified in Sec. 155.430(d)(7), with no
requirement to redetermine the eligibility of the deceased enrollee. We
explained in the proposed rule that we believe this policy will
strengthen the integrity of the individual market by mitigating the
risk of unnecessary funds leaving the Treasury in the form of APTC or
CSRs for enrollees identified as deceased during a plan year.
We solicited comment on this proposal.
Comment: All commenters that submitted comments on this topic
supported our proposal that Exchanges terminate coverage retroactively
to the date of death without redetermining the eligibility of the
deceased enrollee as part of PDM. These commenters noted that this
proposal will support the expeditious termination of deceased enrollees
and will be helpful to the families of the deceased enrollee, resulting
in a positive consumer experience.
Response: We agree that the PDM process is an important tool to
identify Exchange enrollees who may have become deceased during a plan
year to ensure that issuers do not receive financial assistance on
behalf of deceased enrollees and that deceased enrollees are more
timely removed from QHP coverage. As commenters noted, the death of a
family member or friend is a stressful time and those impacted may
delay or forget to end QHP coverage for the deceased enrollee. In these
instances, we agree that PDM can play an important role for the
families of deceased enrollees by taking action to terminate QHP
coverage for the deceased enrollee.
Comment: One commenter suggested that as part of PDM operations to
identify deceased enrollees during a plan year, HHS should provide
issuers with a specific reason code that identifies QHP plan
terminations due to death.
Response: No additional reason code is necessary to identify QHP
plan terminations due to death. In 2019, Exchanges using the federal
eligibility and enrollment platform began conducting periodic checks
for deceased enrollees on single member applications and subsequently
terminated the deceased enrollee's QHP coverage back to the date of
death. In order to notify issuers of these changes, we developed new
maintenance reason codes specific to deceased enrollees discovered
through PDM that issuers may use to identify Exchange enrollees who
were terminated due to death. Exchange issuers receive these PDM
specific maintenance reason codes through the 834 transaction process.
We are finalizing this policy as proposed, to amend Sec.
155.330(e)(2)(i)(D) to reflect that Exchanges must terminate coverage
retroactively back to the date of death in accordance with
[[Page 29203]]
Sec. 155.430(d)(7), with no requirement to redetermine eligibility for
the deceased enrollee.
3. Automatic Re-Enrollment Process
In the proposed rule, we solicited comment on whether we should
modify the automatic re-enrollment process such that any enrollee who
would be automatically re-enrolled with APTC that would cover the
enrollee's entire premium would instead be automatically re-enrolled
without APTC or with some lesser amount of APTC. We are not finalizing
changes to the automatic re-enrollment process in this rule.
In the proposed rule titled, ``Patient Protection and Affordable
Care Act; HHS Notice of Benefit and Payment Parameters for 2020'' (84
FR 227) (proposed 2020 Payment Notice) we explained that enrollees in
plans offered through Exchanges using the Federal platform can take
action to re-enroll in their current plan or to select a new plan, or
they can take no action and be automatically re-enrolled in their
current plan (or if their current plan is no longer available, a plan
selected under a hierarchy designed to identify a plan that is similar
to their current plan).
Since the Exchange program's inception, Exchanges using the Federal
platform have maintained an automatic re-enrollment process which
generally continues enrollment for enrollees who do not take action to
actively select the same or a different plan. Automatic re-enrollment
significantly reduces issuer administrative expenses, makes enrolling
in health insurance more convenient for the consumer, and is consistent
with general health insurance industry practice. In the open enrollment
period for 2019 coverage, 1.8 million people in FFE and SBE-FP states
were automatically re-enrolled in coverage, including about 270,000
persons who were enrolled in a plan with zero premium after application
of APTC.
The proposed 2020 Payment Notice sought comment on automatic re-
enrollment processes and capabilities, as well as additional policies
or program measures that might reduce eligibility errors and potential
government misspending. As we noted in the final rule, ``Patient
Protection and Affordable Care Act; HHS Notice of Benefit and Payment
Parameters for 2020'' (84 FR 17454) (final 2020 Payment Notice),
commenters unanimously supported retaining the 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 believed existing processes,
such as eligibility redeterminations, electronic and document-based
verification of eligibility information, PDM, and APTC reconciliations,
are sufficient safeguards against potential eligibility errors and
increased federal spending.
We also noted in the final 2020 Payment Notice that we would
continue to explore options to improve Exchange program integrity. As
such, in the proposed 2021 Payment Notice, we solicited comment on
modifying the automatic re-enrollment process such that any enrollee
who would be automatically re-enrolled with APTC that would cover the
enrollee's entire premium would instead be automatically re-enrolled
without APTC or with a lesser amount of APTC. This modification could
address concerns that automatic re-enrollment may lead to incorrect
expenditures of APTC, some of which cannot be recovered through the
reconciliation process due to statutory caps. We considered that there
may be particular risk associated with enrollees who are automatically
re-enrolled with APTC that cover the entire plan premium, since such
enrollees do not need to make payments to continue coverage. The
modifications discussed in the proposed rule could help ensure a
consumer's active involvement in their re-enrollment because the
consumer would need to return to the Exchange and obtain an updated
eligibility determination prior to having the full amount of APTC for
which the consumer was eligible paid to an issuer on their behalf for
the upcoming year.
We further discussed in the proposed rule that if APTC for this
population is reduced to a level that would result in an enrollee
premium that is greater than zero dollars, the process would ensure a
consumer's active involvement in re-enrollment because any enrollment
in a plan with a premium greater than zero would require the enrollee
to take action by making the premium payment to effectuate or maintain
coverage and avoid termination of coverage for non-payment. We stated
in the proposed rule that if we were to implement such a change, we
would conduct consumer outreach and education alerting consumers to the
new process and emphasizing the importance of returning to the Exchange
during open enrollment to update their applications to ensure that
their income and other information is correct and that they are still
in the best plan for their needs. This outreach could include fact
sheets, email or mail outreach depending on preference, and education
among issuers, agents, brokers, Navigators, and other assisters.
We noted that under current regulations at Sec. 155.335, each
Exchange has some flexibility to define its own annual redetermination
procedures. We solicited comment on whether the approaches discussed
above should be adopted, and whether they should be adopted only for
Exchanges using the Federal platform, maintaining automatic re-
enrollment flexibility for State Exchanges that operate their own
eligibility and enrollment platforms.
On December 20, 2019, section 1311(c) of PPACA was amended to
require the Secretary to establish a process to re-enroll persons
enrolled in 2020 QHP coverage through an FFE who do not actively re-
enroll for plan year 2021 and who do not elect to disenroll for 2021
coverage during the open enrollment period for 2021.\93\ We believe the
current automatic re-enrollment process under Sec. 155.335(j) (that
was in place during the 2020 open enrollment period and prior years)
will satisfy this requirement for automatic re-enrollment for the 2021
plan year.
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\93\ Further Consolidated Appropriations Act, 2020, Division N,
title I, subtitle F, section 608 (Pub. L. 116-94: December 20, 2019,
enacting H.R. 1865).
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Comment: All but one commenters on this request for comments
opposed modifying the current automatic re-enrollment processes for a
variety of reasons. Many believed that adopting the proposed changes
could disadvantage the lowest income group of Exchange enrollees by
taking away financial assistance for which they are eligible without
evidence that they are at greater risk of incurring overpayments of
APTC. Others questioned HHS's legal authority to apply an amount of
APTC other than that determined in accordance with section 36B of the
Code and sections 1411 and 1412 of the PPACA. Some commenters were
specifically opposed to any requirement that State Exchanges modify
their automatic re-enrollment processes because it would require costly
IT system reconfigurations, consumer noticing changes, and additional
investments to support increased Exchange customer service capacity
that would be necessary to address consumer confusion caused by the
change.
Most commenters supported the current automatic re-enrollment
[[Page 29204]]
process, citing 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, lower premiums, and promotion of continuity of coverage.
Many commenters believed that existing processes, including annual
eligibility redetermination, periodic data matching, and APTC
reconciliation, sufficiently safeguard against potential eligibility
errors and increased federal spending. Other commenters noted that HHS
provided no data indicating that the groups targeted by the proposed
modifications are at a higher risk of receiving APTC overpayments.
Response: In light of commenters' overwhelming opposition to
changing our automatic re-enrollment process, we will not change the
current process at this time. We believe that existing Exchange
safeguards have mitigated the risk of inappropriate APTC payments.
These safeguards include requiring checks of the most recent IRS data
and APTC reconciliation on the annual federal income tax return. HHS
put into place new `Failure to Reconcile' checks in 2018 that
discontinued access to APTC for enrollees who did not file an annual
federal income tax return or who filed an annual federal income tax
return, but did not reconcile APTC. In addition, recent changes made in
the 2019 Program Integrity rule require all Exchanges to conduct period
data matching at least twice per year. We appreciate the comments on
current processes and we will continue to explore options to improve
Exchange program integrity going forward.
Comment: One commenter supported the changes for which HHS
solicited comment and suggested HHS should end automatic re-enrollment
for all consumers who are eligible for APTC. The commenter stated that
requiring consumers who are eligible for APTC to return to the Exchange
each year will better ensure integrity of government spending on APTC,
citing concerns around insufficient verifications processes.
Response: We appreciate this comment. Notwithstanding, given the
concerns many commenters expressed and the safeguards we have
implemented to ensure eligibility is verified, we believe it would be
inappropriate to end automatic re-enrollment for all consumers who are
eligible for APTC at this time. We will continue to monitor the
effectiveness of current program integrity safeguards and explore
options to strengthen them in future rulemaking.
4. Enrollment of Qualified Individuals Into QHPs (Sec. 155.400)
We proposed revisions to binder payment deadlines under Sec.
155.400(e)(1)(i) through (iv) to ensure consistency with revisions we
proposed to Sec. 155.420. Specifically, we proposed that in the
Exchanges using the Federal platform, special enrollment periods
currently following regular effective date rules would instead be
effective on the first of the month following plan selection. We also
proposed to align the retroactive effective date and binder payment
rules so that any consumer who is eligible to receive retroactive
coverage, whether due to a special enrollment period, a favorable
eligibility appeal decision, or a special enrollment period
verification processing delay, has the option to pay the premium due
for all months of retroactive coverage through the first prospective
month of coverage, or only the premium for 1 month of coverage and
receive prospective coverage only. We are finalizing these revisions as
proposed. For a full discussion of the proposals related to prospective
binder payment rules at Sec. 155.400(e)(1)(i) and (ii), and
retroactive binder payment rules at Sec. 155.400(e)(1)(iii) and (iv),
please see the preamble to Sec. 155.420 of the proposed rule.
5. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for Cost-Sharing Reductions
We proposed to revise Sec. 155.420 to allow silver level QHP
enrollees and their dependents who become newly ineligible for CSRs to
change to a QHP that is one metal level higher or lower than their
current plan. We are finalizing these revisions as proposed, except
that we are delaying the effective date of the revision related to new
plans that may be chosen by an enrollee who loses CSR eligibility.
In 2017, the HHS Market Stabilization Rule preamble explained that
HHS would move forward with a pre-enrollment verification of
eligibility for certain special enrollment periods in all states served
by the Federal platform. This practice was part of an effort to
stabilize the individual market, and to address concerns that allowing
individuals to enroll in coverage through a special enrollment period
without electronic or document-based verification of eligibility could
negatively affect the individual market risk pool by allowing
individuals to newly enroll in coverage based on health needs during
the coverage year, as opposed to enrolling during open enrollment and
maintaining coverage for a full year.
To address related concerns that Exchange enrollees were utilizing
special enrollment periods to change plan metal levels due to health
needs during the coverage year, which negatively affects the individual
market risk pool, the Market Stabilization Rule also set forth
requirements at Sec. 155.420(a)(4) to limit Exchange enrollees'
ability to change to a QHP of a different metal level when they qualify
for, or when a dependent(s) newly enrolls in, Exchange coverage through
most types of special enrollment periods.\94\
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\94\ These limitations do not apply to enrollees who qualify for
certain types of special enrollment periods, including those under
Sec. Sec. 155.420(d)(4), (8), (9), (10), (12), and (14). While
special enrollment periods under Sec. Sec. 155.420(d)(2)(i) and
(d)(6)(i) and (ii) are excepted from Sec. 155.420(a)(4)(iii), Sec.
155.420(a)(4)(i) and (ii) apply other plan category limitations to
them. See also the proposals about applicability of plan category
limitations to certain special enrollment periods in this section of
this final rule.
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We proposed to amend these rules in order to allow enrollees and
their dependents who become newly ineligible for CSRs while enrolled in
a silver-level QHP, to change to a QHP one metal level higher or lower
if they elect to change their QHP enrollment in an Exchange. Generally,
Sec. 155.420(a)(4) provides that enrollees who newly add a dependent
through most types of special enrollment periods may add the dependent
to their current QHP or enroll the dependent in a separate QHP,\95\ and
that if an enrollee qualifies for certain special enrollment periods,
the Exchange must allow the enrollee and his or her dependents to
change to another QHP within the same level of coverage (or one metal
level higher or lower, if no such QHP is available), as outlined in
Sec. 156.140(b). To ensure that individuals who are newly eligible for
CSRs can access this benefit, Sec. 155.420(a)(4)(ii) provides that if
an enrollee and his or her dependents become newly eligible for CSRs in
accordance with paragraph Sec. 155.420(d)(6)(i) or (ii) and are not
enrolled in a silver-level QHP, the Exchange must allow them to change
to
[[Page 29205]]
a silver-level QHP so that they may access CSRs for which they are
eligible.
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\95\ Section 155.420(a)(4)(i) and (a)(4)(iii)(B) also provide
that alternatively, if the QHP's business rules do not allow the
dependent to enroll, the Exchange must allow the enrollee and his or
her dependents to change to another QHP within the same level of
coverage (or one metal level higher or lower, if no such QHP is
available), as outlined in 45 CFR 156.140(b).
---------------------------------------------------------------------------
However, as discussed in the proposed rule, there was no
corresponding provision to permit enrollees and their dependents who
become newly ineligible for CSRs in accordance with Sec.
155.420(d)(6)(i) or (ii), and who are enrolled in a silver-level QHP,
to change to a QHP of a different metal level in order to account for
their change in financial assistance. Instead, if they wish to change
plans, Sec. 155.420(a)(4)(iii)(A) currently limits them to changing to
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available). As explained in the
proposed rule, since the implementation of Sec. 155.420(a)(4) in
states served by the Federal platform, HHS has received questions and
concerns about this issue from Navigators, agents and brokers, and
other enrollment assisters. Based on their experiences, consumers who
lose eligibility for CSRs are often unable to afford cost sharing for
their current silver-level QHP, and therefore, may need to change to a
lower-cost QHP in order to maintain their coverage.
We proposed to redesignate Sec. 155.420(a)(4)(ii) as (a)(4)(ii)(A)
and add a new Sec. 155.420(a)(4)(ii)(B) in order to allow enrollees
and their dependents who become newly ineligible for CSRs in accordance
with paragraph (d)(6)(i) or (ii) of this section, and are enrolled in a
silver-level QHP, to change to a QHP one metal level higher or lower if
they elect to change their QHP enrollment in an Exchange. We further
proposed to modify Sec. 155.420(a)(4)(iii) to include Sec.
155.420(d)(6)(i) and (ii) for becoming newly ineligible for CSRs in the
list of trigger events excepted from the limitations at Sec.
155.420(a)(3)(iii). As discussed, the proposal may help affected
enrollees' ability to maintain continuous coverage for themselves and
for their dependents in spite of a potentially significant change to
their out of pocket costs. For example, an enrollee affected by an
increase to his or her monthly premium payment could change to a
bronze-level plan, while an enrollee who has concerns about higher
copayment or co-insurance cost-sharing requirements could change to a
gold-level plan. Finally, current regulations at 45 CFR
147.104(b)(2)(iii) establish that plan category limitations do not
apply off-Exchange. Therefore, in the case of an individual who loses
eligibility for CSRs and wishes to use his or her special enrollment
period to purchase coverage off-Exchange, he or she is not limited to
any specific metal level(s) of coverage.
We solicited comments on these proposals.
Comment: No commenters opposed this proposed change, and many
commenters supported it for the reasons described above, explaining
that allowing enrollees the flexibility to change to a plan of a
different metal level based on a change in their financial assistance
would allow more individuals to maintain coverage. Several commenters
suggested that we provide more flexibility for Exchange enrollees to
change to a different metal level plan. One commenter suggested
allowing enrollees and their dependents who become newly ineligible for
CSRs and are enrolled in a silver-level QHP to change to a QHP of any
metal level. Another commenter suggested that enrollees who lose
eligibility for APTC during the plan year should also be able to change
to a plan of a different metal level. Several commenters disagreed with
the need for plan category limitations in general. Of these commenters,
one asked that State Exchanges have the option not to implement plan
category limitations requirements at all. Another commenter noted that
any loosening of special enrollment period regulations can affect the
level of adverse selection in the market.
Response: We are finalizing these changes as proposed, but delaying
to January 2022 the effective date for the modification of plan
category limitations to allow Exchanges more time to implement the
change. We agree with commenters who stated that it will help enrollees
and their dependents who lose eligibility for CSRs during the plan year
to stay enrolled in coverage by switching to a new QHP that better
suits their changed financial situation. We disagree with commenters
who suggested that the plan category limitation policy is not necessary
to prevent adverse selection and protect the individual market risk
pool. However, we acknowledge that enrollees who experience changes in
their financial situation, such as an increase in income that makes
them ineligible for APTC, may wish to change to a different metal level
QHP for reasons that are not health related. Nonetheless, we share
concerns that incorporating additional flexibility into plan category
limitations rules could increase the risk of adverse selection;
therefore, we are not doing so at this time.
Comment: While supporting this proposal in general, several
commenters raised concerns that enrollees changing plans mid-coverage
year might not realize that their out of pocket costs could increase if
their deductible and other accumulators are re-set.
Response: HHS acknowledges these concerns, and works to promote
health insurance literacy including an understanding of the
implications of changing plans mid-coverage year.
Comment: One commenter asked that HHS permit and encourage or
require issuers to preserve progress towards a deductible and other
accumulators for enrollees who switch to a different metal level plan
with the same issuer.
Response: These comments are outside the scope of the proposal;
however, we clarify that HHS does allow issuers the option to preserve
or to re-set progress towards accumulators for enrollees who switch
plans mid-year.
Comment: Some commenters expressed support for this proposal based
on a misunderstanding that it would allow Exchange enrollees who become
newly eligible for CSRs to change to a silver-level QHP if they elect
to change their QHP.
Response: We clarify that this flexibility already exists through
Sec. 155.420(a)(4)(ii), newly designated by this final rule as Sec.
155.420(a)(4)(ii)(A).
Comment: Several commenters expressed strong support for providing
State Exchanges with flexibility related to special enrollment period
policy implementation, explaining that any special enrollment period
changes require significant State Exchange effort and potentially
unpredictable costs. Additionally, several commenters expressed the
belief that this provision does provide Exchanges with flexibility in
terms of whether and when to implement it.
Response: While we generally support flexibility for State
Exchanges' policy and operations, we will continue to require all
Exchanges to implement plan category limitations as established at
Sec. 155.420(a)(4), including changes finalized in this rule. These
limitations are necessary to prevent adverse selection and to protect
the individual market risk pool. To provide Exchanges with additional
time to comply with new plan category limitations finalized in this
rule, we are delaying the effective date of these changes to January
2022.
b. Special Enrollment Period Limitations for Enrollees Who Are
Dependents
We proposed to apply the same plan category limitations to
dependents who are currently enrolled in Exchange coverage that applies
to current, non-dependent Exchange enrollees. We are finalizing this
policy as proposed.
[[Page 29206]]
As discussed in the preceding section of this preamble, under Sec.
155.420(a)(4)(i) and (a)(4)(iii)(B), enrollees who newly add a
dependent through most types of special enrollment periods may add the
dependent to their current QHP or enroll the dependent in a separate
QHP.\96\ Specifically, Sec. 155.420(a)(4)(i) establishes that if an
enrollee has gained a dependent in accordance with Sec.
155.420(d)(2)(i), the Exchange must allow the enrollee to add the
dependent to his or her current QHP. But if the current QHP's business
rules do not allow the dependent to enroll, the Exchange must allow the
enrollee and his or her dependents to change to another QHP within the
same level of coverage (or one metal level higher or lower, if no such
QHP is available), as outlined in Sec. 156.140(b), or, at the option
of the enrollee or dependent, enroll the dependent in any separate
QHP.\97\ Per Sec. 155.420(a)(4)(iii)(B), if a dependent qualifies for
a special enrollment period not related to becoming a new dependent,
and an enrollee is adding the dependent to his or her QHP, the Exchange
must allow the enrollee to add the dependent to his or her current QHP;
or, if the QHP's business rules do not allow the dependent to enroll in
that plan, the Exchange must allow the enrollee and his or her
dependents to change to another QHP within the same level of coverage
(or one metal level higher or lower, if no such QHP is available), as
outlined in Sec. 156.140(b), or enroll the new qualified individual in
a separate QHP. Finally, Sec. 155.420(a)(4)(iii)(A) requires that if
an enrollee qualifies for certain special enrollment periods, the
Exchange must allow the enrollee and his or her dependents to change to
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available), as outlined in Sec.
156.140(b).
---------------------------------------------------------------------------
\96\ Section 155.420(a)(4)(i) and (a)(4)(iii)(B) also provide
that alternatively, if the QHP's business rules do not allow the
dependent to enroll, the Exchange must allow the enrollee and his or
her dependents to change to another QHP within the same level of
coverage (or one metal level higher or lower, if no such QHP is
available), as outlined in 45 CFR 156.140(b).
\97\ Per Sec. 155.420(a)(2), ``dependent'' has the same meaning
as it does in 26 CFR 54.9801-2, referring to any individual who is
or who may become eligible for coverage under the terms of a QHP
because of a relationship to a qualified individual or enrollee.
---------------------------------------------------------------------------
Per Sec. 155.420(a)(2), a dependent refers to any individual who
is or who may become eligible for coverage under the terms of a QHP
because of a relationship to a qualified individual or enrollee. As
described in the proposed rule, the rules at Sec. 155.420(a)(4) did
not previously address all situations in which a current enrollee is a
dependent of a qualified individual who is newly enrolling in Exchange
coverage through a special enrollment period. For example, the current
rules do not explicitly address what limitations apply when a mother
loses her self-only employer-sponsored coverage, thereby gaining
eligibility for a special enrollment period for loss of MEC, and seeks
to be added as an enrollee to the Exchange coverage in which her two
young children are currently enrolled. Applying the limitations at
Sec. 155.420(a)(4) to such circumstances is consistent with HHS's
goals of establishing equivalent treatment for all special enrollment
period eligible qualified individuals, and preventing enrollees from
changing plans in the middle of the coverage year based on ongoing or
newly emerging health issues. Preamble language from the 2017 Market
Stabilization Proposed Rule explained that the requirement at Sec.
155.420(a)(4)(iii) would extend to enrollees who are on an application
where a new applicant is enrolling in coverage through a special
enrollment period, using general terms to convey that restrictions
should apply to enrollees and newly-enrolling individuals regardless of
whether the new enrollee is a dependent.\98\
---------------------------------------------------------------------------
\98\ 82 FR at 10986.
---------------------------------------------------------------------------
To ensure that Exchange enrollees and qualified individuals are
treated consistently under our special enrollment period rules, we
proposed to apply the same limitations to dependents who are currently
enrolled in Exchange coverage that applies to current, non-dependent
Exchange enrollees. Specifically, we proposed to add a new Sec.
155.420(a)(4)(iii)(C) to establish that the Exchange must allow a
qualified individual who is not an enrollee, who qualifies for a
special enrollment period and has one or more dependents who are
enrollees, to add him or herself to a dependent's current QHP; or, per
similar existing rules at Sec. 155.420(a)(4)(iii)(B), if the QHP's
business rules do not allow the qualified individual to enroll in such
coverage, to enroll with his or her dependent(s) in another QHP within
the same level of coverage (or one metal level higher or lower, if no
such QHP is available), as outlined in Sec. 156.140(b), or enroll him
or herself in a separate QHP.
As proposed, Sec. 155.420(a)(4)(iii)(C) would be parallel to Sec.
155.420(a)(4)(iii)(B), which applies plan category limitations to
current enrollees whose dependent(s) qualify for a special enrollment
period to newly enroll in coverage, and specifies that the Exchange
must permit the enrollee to change plans in order to add the dependent
when the enrollee's current plan's business rules do not permit adding
the dependent, notwithstanding whether the enrollee also qualifies for
a special enrollment period. In other words, as proposed, Sec.
155.420(a)(4)(iii)(C) would apply plan category limitations in allowing
currently enrolled dependents who are enrolled in a plan that has
business rules that do not permit the non-dependent to be added to the
enrollment, to change plans in order to enroll together with the non-
dependent.
Current regulations at Sec. 147.104(b)(2)(iii) provide that Sec.
155.420(a)(4) does not apply off-Exchange. Therefore, the existing and
proposed requirements and restrictions under Sec. 155.420(a)(4) do not
apply off-Exchange. However, our regulations do not prohibit issuers
off-Exchange from newly enrolling with currently enrolled dependents a
non-dependent household member(s) who qualifies for a special
enrollment period, or from newly enrolling dependent household members
who qualify for a special enrollment period with currently enrolled
individuals of whom they are a dependent, to the extent consistent with
applicable state law.
Comment: Several commenters supported this proposal based on their
position that it is appropriate to apply the same limitations to any
individual seeking to newly enroll in Exchange coverage with a
currently-enrolled household member(s), and a few supported this
proposal because it would simplify special enrollment period rules. One
of these commenters asked that HHS continue not to apply the plan
category limitations policy to off-Exchange enrollments.
Response: We agree with these comments, and note that at this time
we do not plan to apply plan category limitations off-Exchange.
Comment: Multiple commenters supported this proposal, but
misunderstood it to be either the creation of a new special enrollment
period or of a new process for those who qualify for an existing
special enrollment period to allow parents or guardians to add
themselves to a dependent's Exchange coverage.
Response: Here, we clarify that the proposal would not create a new
special enrollment period or incorporate additional flexibility into
existing plan category limitations rules; in fact, it clarifies that
these limitations apply to Exchange enrollees who are dependents in the
same way that they apply to
[[Page 29207]]
Exchange enrollees who are not dependents.
Comment: Additionally, one commenter misunderstood the proposal to
be a change in how the Federally-facilitated Exchanges operationalize
special enrollment periods for individuals newly enrolling in coverage
with dependents.
Response: We clarify that we are not proposing any changes to how
Exchanges using the Federal platform operationalize special enrollment
periods for these individuals, including how these Exchanges send this
type of enrollment to issuers.
Comment: Several commenters opposed this proposal, citing
opposition to plan category limitations more generally. As discussed
above, one commenter asked that HHS provide State Exchanges with
flexibility in terms of when, and whether, to implement plan category
limitations.
Response: While we generally support flexibility for State
Exchanges' policy and operations, we will continue to require all
Exchanges to implement plan category limitations as established at
Sec. 155.420(a)(4), including changes finalized in this rule. These
limitations are necessary to prevent adverse selection and to protect
the individual market risk pool.
Comment: Some commenters stated that a household should be able to
re-assess plan choice, including choice of metal level, in situations
where a parent or guardian newly enrolls in Exchange coverage with his
or her dependents. These commenters expressed doubt that permitting
this flexibility would cause adverse selection.
Response: As discussed in the proposed rule, we agree with comments
that expressed support for applying plan category limitations to all
Exchange enrollees in the same way. Relatedly, we do not think that
Exchange enrollees who are dependents are any less likely than
enrollees who are not dependents to change to a different metal level
plan through a special enrollment period due to ongoing health needs
during the coverage year. Therefore we believe it is appropriate to
apply the same plan category limitations to all enrollees, whether or
not they are dependents.
Comment: One commenter requested clarification of the proposed
regulation text; specifically, how it would impact Exchange enrollees
who are dependents and whose parent or guardian is newly enrolling in
coverage with them, and who themselves are also eligible for a special
enrollment period.
Response: Exchange enrollees who are dependents and whose parent or
guardian is newly enrolling in coverage with them through a special
enrollment period, and who themselves are also eligible for a special
enrollment period, will be limited based on the rules at Sec.
155.420(a)(4) that apply to them. For example, if a parent enrolls in
coverage with her dependent child through a special enrollment period
due to a move for which they both qualify, then per Sec.
155.420(a)(4)(iii)(A), the currently-enrolled dependent may change to a
QHP of the same metal level as his current plan (or one metal level
higher or lower, if no such QHP is available). Per Sec.
155.420(a)(iii)(C), the parent may enroll in her child's QHP, or, if
the QHP's business rules do not allow her to enroll, the Exchange must
allow her and her child to change to another QHP within the same level
of coverage (or one metal level higher or lower, if no such QHP is
available), or enroll herself in a separate QHP of any metal level.
c. Special Enrollment Period Prospective Coverage Effective Dates
We proposed that in the Exchanges using the Federal platform,
special enrollment periods currently following regular effective date
rules would instead be effective on the first of the month following
plan selection. Specifically, we proposed to amend Sec. 155.420(b)(3)
for improved clarity and to specify how Exchanges using the Federal
platform would implement the proposal. We are finalizing these policies
as proposed, but delaying the effective date until January 2022 to
allow the sufficient time to implement these changes.
Under regular special enrollment period effective date rules at
current Sec. 155.420(b)(1), the Exchange is required to ensure a
coverage effective date of the first day of the following month for
individuals who select a QHP between the 1st and the 15th day of any
month. The Exchange was required to ensure a coverage effective date of
the first day of the second following month for individuals who select
a QHP between the 16th and the last day of any month. Under those
rules, it could take as many as 47 days from plan selection to
effectuate coverage under a special enrollment period (that is, from
the 16th of a month to the first of the next following month; or for
example, from July 16 to September 1). In the Exchanges using the
Federal platform and pursuant to Sec. 155.420(b)(1), those rules apply
to special enrollment periods provided under Sec. 155.420(d)(3),
(d)(6)(i), (ii), (iv), and (v), and (d)(7), (8), (10), and (12). Under
other special enrollment periods, such as those under Sec.
155.420(d)(4), (5), and (9), in the Exchanges using the Federal
platform, the consumer is generally offered a choice of regular
effective dates that would apply under Sec. 155.420(b)(1), or an
effective date that is retroactive to the date that would have applied
if not for the triggering event. In addition, under Sec.
147.104(b)(5), the coverage effective date rules in Sec. 155.420(b)
apply to each of those special enrollment periods to the extent they
apply off-Exchange, as specified in Sec. 147.104(b)(2)(i).
These regular special enrollment period effective date rules under
Sec. 155.420(b)(1), along with the initial open enrollment period
effective date rules under Sec. 155.410(c), were originally designed
to provide issuers several weeks to collect binder payments, mail
identification cards, and complete other administrative actions prior
to the policy's start date. However, QHP issuers that offer coverage
through the Federal Exchange, already effectuate coverage and process
changes in circumstance using first-of-the-month rules. In 2017,
issuers processed 88 percent of special enrollment periods for
individuals newly enrolling in coverage through Exchanges using the
Federal platform under accelerated or retroactive effective date
rules.\99\ HHS internal data on enrollments through Exchanges using the
Federal platform in 2018 indicates that issuers processed a majority of
changes in circumstances (including those resulting in special
enrollment periods) under accelerated or faster effective date rules.
Because issuers in Exchanges using the Federal platform routinely
effectuate coverage on a shorter timeframe, we do not anticipate that
this change would be difficult for issuers to implement.
---------------------------------------------------------------------------
\99\ Centers for Medicare & Medicaid Services, The Exchanges
Trends Report (July 2, 2018), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-3.pdf.
---------------------------------------------------------------------------
Additionally, we explained that as a program integrity measure, we
believe any enrollment changes related to changes in eligibility for
Exchange coverage or for insurance affordability programs should be
implemented as soon as practicable. This is particularly important for
consumers with special enrollment periods based on changes in
eligibility for APTC under Sec. 155.420(d)(6)(i) and (ii), which
currently follow regular effective date rules in the Exchanges using
the Federal platform.
As discussed in the proposed rule, the provision will permit
Exchanges, including Exchanges using the Federal platform, and issuers
to more rapidly implement changes in QHP enrollment, particularly those
related to changes in financial assistance eligibility, and
[[Page 29208]]
would standardize prospective special enrollment period effective dates
across the Exchanges using the Federal platform, such that consumers
eligible for prospective coverage would have a single effective date.
It will also help reduce consumer confusion regarding different
effective date rules and minimize gaps in coverage.
Finalizing this proposal will also allow State Exchanges the
flexibility to retain current special enrollment period regular
effective date rules or to adopt the approach that will be taken in the
Exchanges using the Federal platform. State Exchanges already had
flexibility under Sec. 155.420(b)(3) to effectuate coverage in a
shorter timeframe if their issuers agree. Several State Exchanges had
already transitioned to faster than regular effective date rules for
special enrollment periods. Under these changes, State Exchanges may
retain their current effective date rules or implement faster ones
without needing to demonstrate issuer concurrence.
By reference, the effective-date-of-coverage rules at Sec.
155.420(b) apply off-Exchange, under Sec. 147.104(b)(5). The proposal
would continue to provide the applicable state authority with
flexibility regarding the options for effective dates under current
rules for off-Exchange coverage.
This change will also help reduce confusion around binder payment
deadlines, since these deadlines depend on a policy's coverage
effective date. Accordingly, we proposed to make updates to binder
payment deadlines in Sec. 155.400(e)(1)(ii) to ensure that special
enrollment periods using effective dates under revised Sec.
155.420(b)(3) would also be subject to the same binder payment rules as
other special enrollment periods that are effective the first of the
month following plan selection. Because the Exchanges using the Federal
platform would no longer be following regular coverage effective dates
for special enrollment periods under Sec. 155.420(b)(1), we also
proposed to remove reference to that provision in Sec.
155.400(e)(1)(i) and to replace ``regular effective dates'' in Sec.
155.400(e)(1)(iii) with a reference to Sec. 155.420(b)(3). This latter
change provides that in the Exchanges using the Federal platform,
coverage would be effective on the first of the month following plan
selection for consumers who are eligible for retroactive coverage but
just pay 1 month's premium and receive only prospective coverage. This
change will help ensure that prospective effective dates across the
Exchanges using the Federal platform are streamlined under one rule.
We solicited comments on these proposals.
Comment: Most commenters supported this proposal, noting that it
will reduce consumer confusion and minimize gaps in coverage. Several
commenters stressed the importance of continued flexibility for State
Exchanges. One commenter cautioned that this provision could create
operational challenges that are difficult to overcome if it is
implemented without accounting for a reasonable timeframe for binder
payment to effectuate coverage. A commenter urged HHS to ensure that
controls are in place to reduce gaming. Specifically, the commenter
asked that HHS review current special enrollment period verification
processes and make any updates needed to verify eligibility for first
of the month coverage following special enrollment periods.
Response: We agree with commenters that this provision will help
reduce coverage gaps for consumers who enroll with a special enrollment
period and, by harmonizing with coverage effective dates that apply to
many of the most common special enrollment periods, will also reduce
consumer confusion regarding enrollment through special enrollment
periods. As we noted in the preamble to the proposed rule, because
issuers in Exchanges using the Federal platform routinely effectuate
coverage on a shorter timeframe, we do not anticipate that this change
will be difficult for issuers to implement. We continue to monitor the
special enrollment period verification process. If any changes are
needed to verify eligibility for special enrollment periods that are
effective on the first of the month following plan selection, we will
explore solutions. Further, current special enrollment period
verification processes require many enrollments submitted through the
Federal platform to be pended until after verification, after which the
enrollment will be released to the issuer with the appropriate
effective date. Therefore, we do not anticipate this change will result
in additional consumer gaming.
Comment: One commenter requested that this provision be implemented
off-Exchange as well, while one commenter asked HHS to confirm that
proposed changes for on-Exchange enrollments alone do not seek to
regulate existing off-Exchange practices.
Response: Because we believe states are generally in the best
position to determine the effective dates that apply in State Exchanges
and off-Exchange, we are limiting this provision to QHPs on the
Exchanges using the Federal platform. States will continue to have the
same flexibility off-Exchange and in State Exchanges to adopt earlier
effective dates as they currently have.
We are finalizing the rule as proposed, but delaying the effective
date until January 2022 to allow sufficient time to implement these
changes.
d. Special Enrollment Period Retroactive Coverage Effective Dates
We proposed to eliminate the option for a consumer whose enrollment
is delayed until after the verification of the consumer's eligibility
for a special enrollment period, under certain circumstances, to elect
a coverage effective date that is no more than 1 month later than the
effective date the consumer would otherwise have had but for the delay.
This provision will align the retroactive effective date and binder
payment rules so that any consumer who is eligible to receive
retroactive coverage, whether due to a special enrollment period, a
favorable eligibility appeal decision, or a special enrollment period
verification processing delay, has the option to pay the premium due
for all months of retroactive coverage through the first prospective
month of coverage, or only the premium for 1 month of coverage and
receive prospective coverage only. Specifically, we proposed to
eliminate Sec. 155.420(b)(5).
We are finalizing this policy as proposed.
Section 155.400(e)(1)(iii) states that for coverage to be
effectuated under retroactive special enrollment period effective
dates, as provided for in Sec. 155.420(b)(2), a consumer's binder
payment must include the premium due for all months of retroactive
coverage through the first prospective month of coverage. If only the
premium for 1 month of coverage is paid, only prospective coverage
should be effectuated, in accordance with regular effective dates. As
an example, a consumer has a special enrollment period that is not
subject to verification with a March 1 effective date, but the
enrollment is delayed due to an Exchange error. The issuer does not
receive the transaction until April 15. Under this rule, to effectuate
retroactive coverage beginning March 1, the issuer must receive
premiums for March, April, and May. If the issuer only receives a
premium payment for 1 or 2 months of coverage, it must effectuate only
prospective coverage beginning May 1. This rule was designed to allow
consumers who might have difficulty paying for retroactive coverage
through a special enrollment period or a favorable eligibility appeal
decision to
[[Page 29209]]
enroll with prospective coverage only.\100\
---------------------------------------------------------------------------
\100\ If the enrollee pays some, but not all, months of
retroactive premium due (two months in the example above), then the
issuer would effectuate coverage prospectively. See 2017 Payment
Notice, 81 FR at 12272. The issuer could then apply any amount paid
in excess of 1 month's premium but less than the full amount needed
to effectuate retroactive coverage to the next month's premium, or
refund the excess amount to the enrollee, at the enrollee's request.
---------------------------------------------------------------------------
The Market Stabilization Rule added a different set of binder
payment rules at Sec. 155.400(e)(1)(iv) for retroactive effective
dates after an enrollment has been delayed due to a prolonged special
enrollment period verification under Sec. 155.420(b)(5).\101\ Under
current rules, if a consumer's enrollment is delayed until after the
verification of the consumer's eligibility for a special enrollment
period, and the assigned effective date would require the consumer to
pay 2 or more months of retroactive premium to effectuate coverage or
avoid cancellation, the consumer has the option to choose a coverage
effective date that is no more than 1 month later than had previously
been assigned. If the consumer does not move her effective date, her
binder payment would be the premium due for all months of retroactive
coverage through the first prospective month of coverage, consistent
with other binder payment rules. For instance, if the consumer's
special enrollment period in the above example were subject to
verification, and, as above, the March 1 effective date were pended
until April 15 due to pre-enrollment verification, the consumer's only
effective date options require payment for retroactive months, unlike
the previous example. To effectuate coverage under the special
enrollment period verification rules in current Sec. Sec.
155.400(e)(1)(iv) and 155.420(b)(5), she could either pay the premiums
for March, April, and May; or move her effective date forward only 1
month to April 1, and must still pay for April and May coverage.
---------------------------------------------------------------------------
\101\ Market Stabilization Rule, 82 FR at 18346.
---------------------------------------------------------------------------
HHS established the special enrollment period verification
effective date rules in response to issuer concerns that delays in
special enrollment period verification and an un-checked ability of
consumers to move their effective date later (as contemplated in the
original version of that paragraph in the 2018 Payment Notice) would
result in adverse selection, with healthier enrollees requesting a
later effective date and sicker enrollees keeping the original
retroactive date. However, we have been able to manage our operational
processes so that delays in special enrollment period verification
processing have not materialized. As described in the proposed rule, in
2017, we averaged a response time of 1 to 3 days to review consumer-
submitted special enrollment period verification documents and provide
consumers a response.\102\ The response time in 2018 was substantially
similar. Additionally, in 2018 and 2019, we resolved over 800,000
special enrollment period verifications, and fewer than 300 enrollees
subject to special enrollment period verification have requested to
move forward their effective date under Sec. Sec. 155.400(e)(1)(iv)
and 155.420(b)(5). This indicates that these rules are largely
unnecessary.
---------------------------------------------------------------------------
\102\ Centers for Medicare & Medicaid Services, The Exchanges
Trends Report (July 2, 2018), available at https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/Downloads/2018-07-02-Trends-Report-3.pdf.
---------------------------------------------------------------------------
We also proposed to remove the corresponding cross-reference at
Sec. 155.420(b)(1) and the special enrollment period verification
binder payment rule at Sec. 155.400(e)(1)(iv). Finally, we proposed to
amend Sec. 155.400(e)(1)(iii) to state more explicitly that any
consumer who can effectuate coverage with a retroactive effective date,
including those whose enrollment is delayed until after special
enrollment period verification, also has the option to effectuate
coverage with the applicable prospective coverage date by choosing to
only pay for 1 month of coverage by the applicable deadline,
notwithstanding the retroactive effective date that the Exchange
otherwise would be required to ensure.
Standardizing a single binder payment rule for retroactive
effective dates will improve operational efficiency for issuers and
Exchanges using the Federal platform. Issuers have indicated that it is
difficult to determine the appropriate binder payment rule to apply to
an enrollment with a retroactive effective date when they receive fewer
than all retroactive months of premium, because issuers need to discern
whether the consumer's eligibility stems from an appeal, a non-verified
special enrollment period, or a special enrollment period with a delay
in verification processing. For example, if on March 5, an issuer
receives a plan selection for a mother and child enrolling through an
adoption special enrollment period with a January 10 effective date,
and neither the mother nor child are current enrollees with the issuer,
the issuer has no way of knowing whether this transaction was subject
to verification. If the issuer in this case only receives 1 month's
premium, it would not know whether to cancel the enrollment or
effectuate prospective-only coverage. This change will simplify issuer
operations by eliminating that complexity.
Implementing a single set of binder payment rules will help ensure
all enrollees (including those subject to special enrollment period
verification) can access affordable coverage without being required to
pay for months of retroactive coverage that may be prohibitively
expensive, and during which most providers would have insisted on
direct payment in order to provide health care services.
Finally, by reference, the effective-date-of-coverage rules at
Sec. 155.420(b) apply off-Exchange, in accordance with Sec.
147.104(b)(5). Therefore, removing Sec. 155.420(b)(5) will also remove
this requirement off-Exchange.
We solicited comments on these proposals, including alternative
approaches to streamlining retroactive effective date rules.
Comment: Many commenters supported our proposal. One commenter
suggested that to the extent HHS proceeds with the proposal, HHS should
afford flexibility to State Exchanges in how they address retroactive
coverage.
Response: For the reasons explained elsewhere in this subsection of
the preamble, this provision, simply reverts retroactive coverage
effective date policy to the policy that was in place prior to the 2018
Payment Notice. State Exchanges were previously required to follow
retroactive special enrollment period effective date rules, and this
change does not alter that.
Comment: Several commenters asked that we continue to monitor
special enrollment period verification speed and return to the earlier
process should any delays in verification resume. One commenter urged
us to establish a system whereby the consumer is intentionally
selecting their effective date on the Exchange and then that date is
communicated from Exchanges using the Federal platform. A number of
commenters asked for consumers to be able to select partial or full
coverage post-appeal, and a group of commenters urged that consumers
may have valid reasons for requesting partial retroactive coverage.
Response: HHS will continue to monitor the speed of special
enrollment period verification and will reconsider this change if there
is evidence of regular and significant delays. We will consider
establishing a system whereby a consumer can select their effective
date in the application for Exchanges using the Federal platform, but
note that such a program would be operationally complex to implement,
as would allowing consumers to select partial
[[Page 29210]]
retroactive coverage post-appeal. Such a system might also present
adverse selection concerns.
Comment: Several commenters expressed concern that this proposal
would result in challenges for issuers in determining how to proceed
with a binder payment in order to effectuate retroactive or prospective
coverage. One commenter suggested that HHS should specify that this
option should not be allowed for periods during which an individual
used covered services.
Response: Under Sec. 155.400(e)(1)(iv), issuers determine a
consumer's effective date if the consumer was eligible for retroactive
coverage, based on the premium paid. That provision states that for
coverage to be effectuated under retroactive special enrollment period
effective dates, as provided for in Sec. 155.420(b)(2), a consumer's
binder payment must include the premium due for all months of
retroactive coverage through the first prospective month of coverage.
If only the premium for 1 month of coverage is paid, only prospective
coverage should be effectuated, in accordance with regular effective
dates. This proposal would simply streamline all retroactive effective
date rules, including for consumers who enrollment is pended due to
special enrollment verification. These rules apply whether or not an
individual was using covered services.
After reviewing the public comments, we are finalizing this
provision as proposed.
e. Enrollees Covered by a Non-Calendar Year Plan Year QSEHRA
We proposed to codify the policy that qualifying individuals and
dependents who are provided a qualified small employer HRA (QSEHRA)
with a non-calendar year plan year would be eligible for the special
enrollment period at Sec. 155.420(d)(1)(ii) for qualified individuals
and dependents who are enrolled in any non-calendar year group health
plan or individual health insurance coverage, to allow the same
flexibility for employees and dependents who are provided QSEHRAs as is
available to those who are offered individual coverage HRAs.\103\
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\103\ This preamble refers to a QSEHRA being ``provided'' as
opposed to being ``offered'' because, per Sec. 146.123(c)(4), an
individual coverage HRA eligible employee has an annual opportunity
to opt out of and forfeit future payments from the HRA. However,
this is not the case for employees and dependents with a QSEHRA.
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The HRA rule allows employers to offer HRAs and other account-based
group health plans integrated with individual health insurance coverage
or Medicare Part A and B or Part C, if certain conditions are
satisfied.\104\ These are called individual coverage HRAs. Among other
conditions, an individual coverage HRA must require that the
participant and any covered dependent(s) be enrolled in individual
health insurance coverage (either on or off-Exchange) or Medicare Part
A and B or Part C, for each month that they are covered by the
individual coverage HRA.\105\
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\104\ 84 FR 28888 (June 20, 2019).
\105\ For purposes of individual coverage HRAs, references to
individual health insurance coverage do not include individual
health insurance coverage that consists solely of excepted benefits.
See 45 CFR 146.123(c)(1)(i).
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The HRA rule provides a special enrollment period to employees and
dependents who newly gain access to an individual coverage HRA to
enroll in individual health insurance coverage, or to change to other
individual health insurance coverage in order to maximize the use of
their individual coverage HRA.\106\ In addition, because employees and
dependents with a QSEHRA \107\ generally must be enrolled in MEC,\108\
and one category of MEC is individual health insurance coverage, the
HRA rule provides that individuals who are newly provided a QSEHRA also
qualify for the new special enrollment period.
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\106\ See Sec. 155.420(d)(14).
\107\ Section 18001 of the Cures Act amends the Code, ERISA, and
the PHS Act to permit an eligible employer to provide a QSEHRA to
its eligible employees. See IRS Notice 2017-67, 2017-11 IRB 1010,
for related guidance: https://www.irs.gov/pub/irs-drop/n-17-67.pdf.
\108\ Generally, payments from a QSEHRA to reimburse an eligible
employee's medical care expenses are not includible in the
employee's gross income if the employee has coverage that provides
MEC as defined in Code section 5000A(f), which includes individual
health insurance coverage.
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The HRA rule also solicited and addressed public comments on
whether the new special enrollment period should be available on an
annual basis at the beginning of each new plan year of the employee's
individual coverage HRA or QSEHRA, particularly if the new plan year is
not aligned with the calendar year.\109\ In the preamble to the HRA
rule, HHS stated that it had determined that individual coverage HRA or
QSEHRA enrollees should have the option to re-evaluate their individual
health insurance coverage for each new HRA plan year, regardless of
whether the HRA is provided on a calendar year basis. Therefore, while
the HRA rule did not make the new individual coverage HRA and QSEHRA
special enrollment period available on an annual basis, it clarified
that those who are enrolled in an individual coverage HRA with a non-
calendar year plan year--that is, the HRA's plan year begins on a day
other than January 1--will be eligible annually for the special
enrollment period under existing regulations at Sec.
155.420(d)(1)(ii), because individual coverage HRAs are group health
plans. While the HRA rule did not make any changes to Sec.
155.420(d)(1)(ii), the preamble of the rule expressed HHS's intention
to treat a QSEHRA with a non-calendar year plan year as a group health
plan for the limited purpose of qualifying for this special enrollment
period, and to codify this interpretation in future rulemaking.\110\
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\109\ 84 FR at 28955 through 28956.
\110\ Id. at 28956.
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As HHS explained in the HRA rule, we believe making the non-
calendar year plan year special enrollment period available annually to
individual market enrollees with a non-calendar year plan year
individual coverage HRA or QSEHRA appropriately provides employers with
flexibility to offer individual coverage HRAs or provide QSEHRAs on a
12-month cycle that meets their needs. The expansion also allows
employees and their dependents the flexibility to re-assess their
individual health insurance coverage options at the same time that the
terms of their individual coverage HRA or QSEHRA may change. We believe
accessing this non-calendar year plan year special enrollment period
may be important to some individuals, including those who wish to
change their individual health insurance plan due to a change in the
terms of their individual coverage HRA or QSEHRA. However, we
anticipate that most individuals with an individual coverage HRA or a
QSEHRA would not seek to change their individual coverage outside of
the individual market open enrollment period when their new HRA plan
year starts since doing so would generally cause their accumulators to
reset. Therefore, we do not anticipate significant additional
administrative burden for issuers or a significant increase in the
potential for adverse selection in the individual market associated
with this special enrollment period. In addition, HHS believes that the
applicability of plan category limitations to the non-calendar year
plan year special enrollment period for Exchange enrollees will further
mitigate the potential risk of adverse selection.
As discussed in the HRA rule preamble,\111\ under section 2791 of
the PHS Act, section 733 of ERISA, and section 9831 of the Code,
QSEHRAs are not group health plans,\112\ and
[[Page 29211]]
employees and their dependents with a QSEHRA do not qualify for the
non-calendar year special enrollment period as our special enrollment
period rules are currently written. Therefore, we proposed to amend
Sec. 155.420(d)(1)(ii) to codify that individuals and dependents who
are provided a QSEHRA with a non-calendar year plan year may qualify
for this special enrollment period. We noted that this special
enrollment period also is incorporated by reference in the guaranteed
availability regulations at Sec. 147.104(b)(2). Therefore, individuals
provided a non-calendar year plan year QSEHRA would be entitled to a
special enrollment period to enroll in or change their individual
health insurance coverage through or outside of an Exchange.
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\111\ 84 FR at 28956.
\112\ One exception to this general rule is that a QSEHRA
continues to be treated as a group health plan under the PHS Act for
purpose of Part C Title XI of the Act. See section 2791(a)(1) of the
PHS Act.
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We solicited comment on this proposal.
After consideration of the comments received, we are finalizing
this policy and the accompanying update to Sec. 155.420(d)(1)(ii) as
proposed.
Comments: Many commenters supported this proposal. Several
expressed support because it aligns special enrollment period
eligibility for consumers whose employer provides them with a QSEHRA
with that of consumers whose employer offers them an individual
coverage HRA, and several supported it due to their general support of
all provisions to promote the use of HRAs. Some commenters supported
the proposal, but misunderstood it to be the creation of a new special
enrollment period for consumers who are newly provided with a QSEHRA.
Response: We clarify that employees and dependents newly provided
with a QSEHRA are already included in the special enrollment period at
Sec. 155.420(d)(14), which we established in the HRA Rule for
individuals, enrollees, and dependents who newly gain access to an
individual coverage HRA or to a QSEHRA. We appreciate the general
support for allowing employees and dependents with a non-calendar year
plan year QSEHRA to change plans annually based on their QSEHRA plan
year start date, and we are finalizing the policy and the accompanying
update to Sec. 155.420(d)(1)(ii) as proposed.
6. Termination of Exchange Enrollment or Coverage (Sec. 155.430)
a. Enrollee-Initiated Terminations Upon a Finding of Dual Enrollment in
Medicare via PDM
Consistent with our discussion of voluntary terminations upon a
finding of dual enrollment in the preamble to Sec. 155.330, we
proposed to revise paragraph (b)(1)(ii) by removing the requirement
that the Exchange must initiate termination of a Medicare dual
enrollee's QHP coverage upon completion of the redetermination process
specified in Sec. 155.330. We also proposed to add to Sec.
155.330(b)(1)(ii) a reference to the process and authority outlined in
Sec. 155.330(e)(2) to align with the proposed changes to Sec.
155.330(e)(2)(i)(D), discussed in the preamble on the proposed rule at
Sec. 155.330. For more detailed discussions of these proposals, please
see the preamble discussion in the proposed rule at Sec. 155.330. We
are finalizing these revisions as proposed.
Comment: We received multiple comments in support of Medicare PDM
as an effort to improve Exchange program integrity. These commenters
agreed that the process has a positive impact on consumers as it helps
inform Exchange enrollees of their enrollment in potentially
duplicative other MEC such as certain Medicare. Commenters also noted
that the proposed changes help support efficient Exchange operations
with respect to the Medicare PDM process while minimizing burden on
stakeholders such as states, issuers, consumers, and taxpayers.
Commenters appreciated that the proposed changes continue to support
flexibility for State Exchanges by providing all Exchanges with the
option to allow applicants to provide written consent for Exchanges to
end their QHP coverage if later found to be enrolled in Medicare.
Response: We agree with commenters that the Medicare PDM process is
an important tool for Exchange program integrity. We also agree that
the process helps inform consumers of their enrollment in potentially
duplicative other MEC such as certain Medicare and helps consumers
avoid a tax liability for having to repay APTC received during months
of overlapping coverage when reconciling at the time of annual federal
income tax filing.
After reviewing the public comments, we are finalizing as proposed.
b. Effective Dates for Retroactive Termination of Coverage or
Enrollment Due to Exchange Error
In the proposed rule, we proposed to update the rule that defines
the effective date for enrollees seeking retroactive terminations due
to a technical error to allow their coverage to end retroactive to the
date they attempted the termination, without the 14-day advance notice
requirement that was otherwise eliminated in the 2019 Payment Notice.
We are finalizing this policy as proposed.
The 2019 Payment Notice amended Sec. 155.430(d)(2) to allow
additional flexibility regarding the effective date for enrollee-
initiated terminations. This flexibility included permitting
Exchanges--at the option of the Exchange--to provide for enrollee-
initiated terminations to be effective on the date on which the
termination was requested by the enrollee, or on another prospective
date selected by the enrollee. Previously, enrollees generally had to
provide 14-days advance notice before termination became effective.
Corresponding updates to reflect the new flexibilities were not made to
Sec. 155.430(d)(9), which defines the effective date for retroactive
terminations due to a technical error as described in paragraph
(b)(1)(iv)(A). The current provision specifies that termination in
these circumstances will be no sooner than 14 days after the date that
the enrollee can demonstrate he or she contacted the Exchange to
terminate his or her coverage or enrollment through the Exchange,
unless the issuer agrees to an earlier effective date as set forth in
Sec. 155.430(d)(2)(iii).
To ensure that enrollees who suffered technical errors are put in
the position they would have been absent the technical error, we
proposed to align Sec. 155.430(d)(9) with the provisions for enrollee-
initiated terminations at Sec. 155.430(d)(2).
We solicited comment on this proposal.
Comment: While fewer than 10 commenters commented on this proposal,
all were in support. A few commenters requested retroactive
terminations not be granted if the enrollee continued to incur claims.
Response: This proposal simply addresses the oversight of not
uniformly removing the 14-day waiting period for terminations in
previous regulation. It does not revisit eligibility for retroactivity
under the rule. We expect the number of claims that will be reversed
for enrollees whose termination was delayed due to technical error will
be very low, given that most consumers taking independent steps to end
their coverage would have little reason to keep using it.
After reviewing the public comments, we are finalizing as proposed.
[[Page 29212]]
7. Eligibility Pending Appeal (Sec. 155.525)
As discussed in the proposed rule, we are considering whether
changes to Sec. 155.525 governing eligibility pending appeals are
necessary or prudent to provide greater clarity to Exchanges, issuers,
and consumers who appeal Exchange determinations, and asked for public
comment in the event that we decide to propose regulatory changes in
the future. As such, we are not finalizing any changes to eligibility
pending appeal in this rule.
Under Sec. 155.525, when an appellant accepts eligibility pending
appeal, an Exchange must continue the appellant's eligibility for
enrollment in a QHP, APTC, and CSR, as applicable, in accordance with
the level of eligibility that was in effect immediately before the
eligibility redetermination that the consumer is appealing. We
solicited comment on various aspects of the administration of this
provision, including: (1) The retroactive application of benefits
relative to an appellant's enrollment and applicability of plan
category limitations; (2) the advisability of establishing a timeliness
standard, whether Exchanges should have the flexibility to determine
their own timeliness standards, and what a reasonable timeliness
standard should be; (3) how life events and other reported eligibility
changes interact with eligibility pending appeal; (4) how the
retroactive implementation of an appeal decision interacts with
eligibility pending appeal; and (5) how eligibility pending appeal
interacts with the consequences of non-payment of premiums. While we
decided against proposing any changes to the regulations at this time,
we invited comments on this topic. We received the following comments,
and our response follows.
Comment: Several commenters were supportive of preserving state
flexibility in how State Exchanges administer this provision. A few
commenters noted the current absence of data about appeals generally
and recommended the provision of data to inform future rulemaking in
this area. For example, it was observed that issuers do not have
adequate access to data on enrollees who are appealing an eligibility
determination, which makes it difficult to offer comment on these
proposals and recommend guardrails. We also received a comment
questioning the need for any regulatory changes, stating that the
current system of administering this provision has been functioning
largely as intended. Another commenter advised against any changes to
the regulations that reduce or eliminate consumer flexibility while
consumers exercise their constitutionally provided due process rights.
Finally, one commenter expressed a belief that the most accurate
understanding of eligibility pending appeal is not that the appellant
is theoretically eligible for certain benefits, but instead that the
appellant is in fact able to access the benefits for which they were
eligible immediately before the eligibility determination on appeal.
This commenter noted that in its state, the provision of eligibility
pending appeal involves additional state-based premium and cost-sharing
assistance for qualifying residents below 300 percent of the federal
poverty level, which are in addition to the APTC and CSRs provided at
the federal level.
With respect to the permissibility of changes to plan enrollment,
we received many comments supporting a policy that would allow
appellants who are granted eligibility pending appeal to enroll in any
Exchange plan without regard to issuer or metal level. One of these
commenters also recommended that an appellant who is receiving
eligibility pending appeal be permitted to switch plans at the end of
the appeal, stating that if the appeal is upheld, the appellant will
experience a termination of the APTC and may want to switch to a lower
metal level plan. Conversely, another commenter supported the ability
of appellants who win their appeals to select a different plan from the
same issuer, stating that there is a need to balance flexibility with
appropriate controls to ensure that frivolous appeals are not filed for
individuals who are looking for any opening to change plans, which in
turn could create financial and premium instability for health plans.
One commenter was in favor of offering retroactive as well as
prospective implementation of eligibility pending appeal, while another
commenter expressed opposition to prospective implementation on the
grounds that doing so would eliminate the very protection eligibility
pending appeal is intended to address. One commenter stated that
unrestricted plan and issuer changes would be extremely confusing to
consumers, while another commenter recommended robust consumer
education materials to help individuals understand the implications of
their plan choices while they are receiving eligibility pending appeal.
In the context of implementing an appellant's request for eligibility
pending appeal retroactively, two commenters advised HHS to consider
the impact of retroactive changes to plans, products, metal levels or
issuer on adverse selection. These commenters noted that retroactive
enrollment changes are problematic due to claims reprocessing, changing
benefits, and state prompt pay laws, and may expose appellants to
increased out-of-pocket costs for services they already received.
Finally, we received a comment urging HHS to provide autonomy to states
in this area, as rules allowing unrestricted plan and issuer changes
would require substantial technological rule and code changes that
would likely come with a significant financial burden.
We received numerous comments in opposition to any timeliness
standard that would apply to an appellant requesting eligibility
pending appeal. One of these commenters noted that consumers who had
initially filed an appeal on their own may later appoint an authorized
representative or legal counsel who might inform them of this right;
similarly, consumers who did not elect eligibility pending appeal at
the outset of the appeal may later encounter a situation necessitating
the coverage and financial help eligibility pending appeal may provide.
We also received several comments supporting either a 15-day or 30-day
timeframe in which to request eligibility pending appeal from the
receipt date of the appeal request or from the date of the
acknowledgment notice, with most of these commenters also supporting an
extension if there were exceptional circumstances precluding a timely
request. One commenter recommended that Exchanges be permitted to
establish their own timeliness standard and determine whether to
establish a good cause exception, while another recommended that HHS
leave the process as it currently exists in place.
We received a number of comments recommending that consumers who
experience a life event during the pendency of the appeal have their
appeals considered resolved in their favor, with one commenter noting
that the life event, once reported, may negate the need for an appeal.
Several commenters noted the importance of appellants being able to
report life events even while receiving eligibility pending appeal in
order for appellants and members of the household to access coverage on
a timely basis. One commenter advised that Exchanges be given the
flexibility to determine how to proceed with processing these
eligibility changes. Relatedly, one commenter, drawing on its
experience administering an Exchange, observed that the hearing
decision of an independent hearing officer must be implemented as
issued, in order to preserve the fairness and
[[Page 29213]]
independence of the hearing process. This commenter stated that if a
hearing officer ordered the Exchange to provide an appellant with the
option for retroactive coverage at a given level of eligibility, the
Exchange would do so, in situations where the appellant had been
receiving eligibility pending appeal at a level less generous than what
the hearing officer's decision awarded; however, the hearing decision
would not be implemented retroactively in situations where a less
generous eligibility level was awarded than the eligibility level
provided by eligibility pending appeal.
In response to our request for comments on the applicability of the
grace period to individuals enrolled in Exchange coverage and receiving
eligibility pending appeal, we received a number of comments
recommending a 3-month grace period as well as a general prohibition on
termination of coverage during the pendency of the appeal. One
commenter was in favor of the ability of appellants receiving
eligibility pending appeal to select the effective date of retroactive
coverage, effectuate the first month of retroactive coverage, and be
given a reasonable amount of time to bring their payment current.
Another commenter expressed a belief that the grace period does apply
and supported a rule clarifying its applicability to the extent that it
was not sufficiently clear under the existing regulations. Finally, we
received a comment recommending that the enrollee be required to pay
the current billed amount and another comment stating that appellants
should not be treated any differently than non-appellants with respect
to coverage termination.
Response: We thank the commenters for the feedback on these issues.
We did not propose and are not finalizing any changes to rules
governing eligibility pending appeal. This feedback, however, will help
inform future policy in this area.
8. Eligibility Standards for Exemptions (Sec. 155.605)
a. Required Contribution Percentage (Sec. 155.605(d)(2))
In the proposed rule, we used the proposed 2021 premium adjustment
percentage to calculate the excess of the rate of premium growth over
the rate of income growth for 2013 to 2020 as 1.3542376277 /
1.3094029651, or 1.0342405385. This resulted in a proposed required
contribution percentage for 2021 of 8.00 x 1.0342405385 or 8.27
percent, when rounded to the nearest one-hundredth of one percent. We
are finalizing the required contribution percentage as proposed.
HHS calculates the required contribution percentage for each
benefit year using the most recent projections and estimates of premium
growth and income growth over the period from 2013 to the preceding
calendar year. We proposed to calculate the required contribution
percentage for the 2021 benefit year, using income and premium growth
data for the 2013 and 2020 calendar years.
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
would 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 reduced 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 would 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 the 2021 premium adjustment percentage of
1.3542376277 (or an increase of about 35.4 percent over the period from
2013 to 2020). This reflects an increase of about 5.0 percent over the
2020 premium adjustment percentage (1.3542376277/1.2895211380).
As the measure of income growth for a calendar year, we established
in the 2017 Payment Notice that we would use per capita personal income
(PI). Under the approach finalized in the 2017 Payment Notice using the
National Health Expenditure Accounts (NHEA) data, the rate of income
growth for 2021 is the percentage (if any) by which the most recent
projection of per capita PI for the preceding calendar year ($58,821
for 2020) exceeds per capita PI for 2013 ($44,922), carried out to ten
significant digits. The ratio of per capita PI for 2020 over the per
capita PI for 2013 is estimated to be 1.3094029651 (that is, per capita
income growth of about 30.9 percent).\113\ This rate of income growth
between 2013 and 2020 reflects an increase of approximately 4.6 percent
over the rate of income growth for 2013 to 2019 (1.3094029651/
1.2524152976) that was used in the 2020 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 insurance, workers' compensation,
etc.).\114\
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\113\ The 2013 and 2020 per capita personal income figures used
for this calculation reflect the latest NHEA data as of the
publication of the proposed rule. These data were published 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 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 also available on the CMS website.
\114\ 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 2021 premium adjustment percentage finalized in this
rule, the excess of the rate of premium growth over the rate of income
growth for 2013 to 2020 is 1.3542376277 / 1.3094029651, or
1.0342405385. This results in the required contribution percentage for
2021 of 8.00 x 1.0342405385 or 8.27 percent, when rounded to the
nearest one-hundredth of one percent, an increase of 0.04 percentage
points from 2020 (8.27392-8.23702).
We solicited comment on the required contribution percentage. After
reviewing public comments, we are finalizing the required contribution
percentage for 2021 at 8.00 x 1.0342405385 or 8.27 percent, when
rounded to the nearest one-hundredth of one percent. The following is a
summary of the public comments we received on the required contribution
percentage. We address comments regarding the measures used
[[Page 29214]]
to calculate the excess of the rate of premium growth over the rate of
income growth in the section of the preamble related to the premium
adjustment percentage, later in this rule.
Comment: One commenter asked that we not increase the required
contribution percentage from the value finalized for 2020, as increases
to this value reflect increases in the percentage of income enrollees
may have to contribute toward health care, thereby reducing
affordability for these consumers. A few other commenters expressed
concern with the increase in this value as part of their comments on
the proposed premium adjustment percentage.
Response: HHS is required to update the required contribution
percentage annually by section 5000A(e)(1)(D) of the Code. The updated
contribution percentage is used, among other things, for purposes of
determining whether individuals above the age of 30 qualify for an
affordability exemption, so that they can be eligible to enroll in
catastrophic coverage under Sec. [thinsp]155.305(h). As such, after
reviewing the public comments, we are finalizing the required
contribution percentage for 2021 at 8.00 x 1.0342405385 or 8.27
percent, when rounded to the nearest one-hundredth of one percent.
9. Quality Rating Information Display Standards for Exchanges
(Sec. Sec. 155.1400 and 155.1405)
We proposed to amend Sec. Sec. 155.1400 and 155.1405 to codify the
flexibility for State Exchanges that operate their own eligibility and
enrollment platforms, to customize the display of quality rating
information on their websites to display the quality rating information
as calculated by HHS or to display quality rating information based
upon certain state-specific customizations of the quality rating
information provided by HHS. We are finalizing as proposed.
To implement sections 1311(c)(3) and 1311(c)(4) of the PPACA, we
developed the QRS and the QHP Enrollee Experience Survey (collectively
referred to as the quality rating information). In the Exchange and
Insurance Market Standards for 2015 and Beyond Final Rule \115\, HHS
issued regulations at Sec. Sec. 155.1400 and 155.1405 to establish
quality rating information display standards for Exchanges.\116\
Consistent with these regulations, Exchanges must prominently display
on their websites, in accordance with Sec. 155.205(b)(1)(iv) and (v),
quality rating information assigned for each QHP \117\, as provided by
HHS and in a form and manner specified by HHS.
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\115\ See the Patient Protection and Affordable Care Act;
Exchange and Insurance Market Standards for 2015 and Beyond; Final
Rule; (May 27, 2014), 79 FR 30240 at 30310, available at https://www.gpo.gov/fdsys/pkg/FR-2014-05-27/pdf/2014-11657.pdf.
\116\ Patient Protection and Affordable Care Act; Exchange and
Insurance Market Standards for 2015 and Beyond, Final Rule, 79 FR
30240 at 30352 (May 27, 2014).
\117\ Exchanges can satisfy the requirement to display the QHP
Enrollee Survey results by displaying the Quality Rating System
(QRS) quality ratings (which incorporate member experience data from
the QHP Enrollee Survey). See 79 FR at 30310.
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To balance HHS's strategic goals of empowering consumers through
data, minimizing cost and burden on QHP issuers, and supporting state
flexibility, HHS developed a phased-in approach to display of quality
rating information across the Exchanges. In particular, during plan
years 2017, 2018, and 2019, HHS displayed quality rating information on
HealthCare.gov in a handful of select FFE states as part of a limited
pilot program. During this time, State Exchanges that operated their
own eligibility and enrollment platforms were given the option to
display the quality rating information for their respective QHPs and
several of these State Exchanges voluntarily elected to display this
information on their State Exchange websites. The QRS pilot involved
focused consumer testing of the display of quality rating information
to maximize the clarity of the information provided and to assess how
the information was displayed and used on Exchange websites.
In August 2019, HHS issued a Quality Rating Information Bulletin to
announce the transition away from the QRS pilot to the public display
of quality rating information for plan year 2020 by all Exchanges,
including FFEs, SBE-FPs, and State Exchanges that operate their own
eligibility and enrollment platform.\118\ This included flexibility for
State Exchanges that operate their own eligibility and enrollment
platforms to display QHP quality rating information on their websites
in the form and manner specified by HHS or with some limited state
customizations. Based upon experience during the QRS pilot, we
recognize there are benefits to permitting some flexibility for State
Exchanges that operate their own eligibility and enrollment platforms
to customize the quality rating information for their QHPs. As stated
in the proposed rule, we understand that during the QRS pilot, some
State Exchanges that operate their own eligibility and enrollment
platforms displayed the quality rating information as provided by HHS,
while others displayed the quality rating information with certain
state-specific customizations in order to best reflect local priorities
or information. Therefore, we proposed to amend Sec. Sec. 155.1400 and
155.1405 to codify this flexibility and provide State Exchanges that
operate their own eligibility and enrollment platforms some flexibility
to customize the display of quality rating information for their
respective QHPs.
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\118\ Quality Rating Information Bulletin for Plan Year 2020.
Available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/QualityRatingInformationBulletinforPlanYear2020.pdf.
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For example, we would allow State Exchanges that operate their own
eligibility and enrollment platform to make state-specific
customizations, such as to incorporate additional state or local
quality information or to modify the display names of the QRS quality
ratings. However, we clarified under this approach State Exchanges that
operate their own eligibility and enrollment platform could not develop
their own programs to replace the quality ratings calculated by HHS.
Consistent with the statute, the Secretary remains responsible for the
development of the QRS and QHP Enrollee Survey and the calculation of
quality ratings under these programs across all Exchanges.\119\ We
further noted that we believe the proposed flexibility supports the
feedback we received from a Request for Information, entitled
``Reducing Regulatory Burdens Imposed by the Patient Protection and
Affordable Care Act and Improving Healthcare Choices to Empower
Patients'', published in the June 12, 2017 Federal Register (82 FR
26885), in identifying ways to reduce burden and promote State Exchange
flexibility. We solicited comment on this proposal.
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\119\ See sections 1311(c)(3) and (c)(4) of the PPACA.
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After consideration of the comments received, we are finalizing
these changes as proposed.
Comment: All commenters who provided feedback regarding this
proposal expressed support for codifying the flexibility for State
Exchanges that operate their own eligibility and enrollment platforms
to customize the display of quality rating information for their
respective QHPs. One commenter urged HHS to clarify that states are not
permitted to develop their own programs and replace the quality ratings
developed by HHS in their entirety.
Response: We are finalizing as proposed and maintain in the final
rule that State Exchanges that operate their own eligibility and
enrollment platforms have the flexibility to engage
[[Page 29215]]
in some customization of the display of quality rating information for
their respective QHPs, such as by incorporating additional state or
local quality information or by modifying the display names of the QRS
quality ratings. However, consistent with sections 1311(c)(3) and
1311(c)(4) of the PPACA, the Secretary of HHS is responsible for the
development of the QRS and QHP Enrollee Survey and the calculation of
quality ratings for QHPs across all Exchanges. Although State Exchanges
may continue to provide additional state or local healthcare quality
information or display additional state-level quality ratings as part
of their plan shopping experience, State Exchanges cannot develop their
own programs to replace the quality ratings calculated by HHS because
the Secretary remains responsible for the development of the QRS and
QHP Enrollee Survey and the calculation of quality ratings under these
programs across all Exchanges.
Comment: A few commenters requested greater flexibility for State
Exchanges that operate their own eligibility and enrollment platforms,
including the option for these State Exchanges to perform their own
calculations in determining QRS information. One commenter supported
the need for common national and performance benchmarks, but noted that
State Exchanges should retain the flexibility to modify the QRS rating
methodology since periodic and future refinements are expected of the
federal quality rating methodology. Further, one commenter suggested
that State Exchanges on the Federal platform should be allowed the same
flexibility to customize the display of quality rating information.
Response: We support flexibility for State Exchanges that are
consistent with the statute and available technical systems. Sections
1311(c)(3) and 1311(c)(4) of the PPACA require each Exchange to provide
information to individuals and employers from the rating and enrollee
satisfaction systems on the Exchange's website. Therefore, the
information from the QRS and the QHP Enrollee Survey must be displayed
on each Exchange website. In addition, sections 1311(c)(3) and
1311(c)(4) direct the Secretary of HHS to develop a rating system and a
system to assess enrollee satisfaction. Therefore, to be consistent
with the statute, the greater flexibility for State Exchanges that
operate their own eligibility and enrollment platforms is related to
the display of quality rating information and not the development of
separate quality ratings. This rule finalizes flexibility for State
Exchanges that operate their own eligibility and enrollment platforms
to be able to customize the display of quality rating information.
State Exchanges that use the Federal platform, however, would follow
the display requirements of the HealthCare.gov system, which is
currently unable to accommodate state-specific customizations of this
nature.
We clarify that, as outlined in the statute and in the 2015 Market
Standards Rule, HHS will continue to calculate federal quality ratings
based on data submitted by eligible QHP issuers across Exchanges and
using a standardized methodology. HHS will also continue providing
federal quality rating information to State Exchanges that operate
their own eligibility and enrollment platforms for display on each
Exchange website. In this final rule, HHS is allowing certain state-
specific modifications to the display of federal quality rating
information including incorporating additional state or local quality
information or modifying the display names of the quality ratings, for
State Exchanges that operate their own eligibility and enrollment
platforms. This flexibility does not include the ability to recalculate
or modify the quality ratings provided by HHS. As detailed above,
sections 1311(c)(3) and 1311(c)(4) of the PPACA assign responsibility
for the development of the QRS and QHP Enrollee Survey and the
calculation of quality ratings for QHPs across all Exchanges to the
Secretary. Therefore, we did not propose and are not finalizing changes
to permit states greater flexibility to calculate quality ratings for
QHPs offered through Exchanges.
We agree that, as with all HHS quality reporting programs and
initiatives, periodic evaluation of and refinements to the QRS rating
methodology are appropriate and we expect to continue to improve the
program with such refinements for future benefit years. HHS will
continue to transparently communicate program and methodology
refinements and request stakeholder feedback.
Comment: Two commenters requested additional clarification from HHS
regarding how and what QRS information would be displayed, including
certain state-specific customizations, and on how local and state
quality ratings could be incorporated into the greater QRS.
Response: We intend to continue to require display of the QHP
quality rating information for all Exchanges and will provide guidance
in a subsequent QRS Bulletin, as in previous years, on the form and
manner of display of quality rating information by Exchanges and direct
enrollment entities.\120\ The upcoming QRS Bulletin will clarify the
quality rating information to be displayed beginning in the individual
market open enrollment period for the 2021 plan year, which starts on
November 1, 2020.\121\
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\120\ As part of the Administration's efforts to combat COVID-
19, we recently announced the suspension of activities related to
the collection of clinical quality measures for the QRS and survey
measures for the QHP Enrollee Survey for the 2021 plan year (2020
ratings year). See the COVID-19 Marketplace Quality Initiatives
memo, available at: https://www.cms.gov/files/document/covid-qrs-and-marketplace-quality-initiatives-memo-final.pdf.
\121\ See 45 CFR 155.410(e)(3).
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The changes made in this final rule provide flexibility to State
Exchanges that operate their own eligibility and enrollment platforms
to make certain state-specific customizations to the quality rating
information provided by HHS, including the incorporation of additional
local and state QHP quality information or the modification of the
display names of the quality ratings. State Exchanges that operate
their own eligibility and enrollment platforms can determine whether
and how to take advantage of this flexibility, including if and how to
incorporate local and state quality rating information.
Comment: Two commenters provided general recommendations regarding
the display of quality rating information. One commenter encouraged HHS
to continue working with issuers and consumers relating to display of
QRS information in a meaningful manner and to be transparent in
disclosing information on the use of QRS information during plan
selection and enrollment. Another commenter requested that if there are
changes for a specific display format, sufficient time and funding be
provided to State Exchanges that operate their own eligibility and
enrollment platforms to implement system changes and that State
Exchanges be included early in the development process for any
potential changes.
Response: We agree that transparency of information will help
issuers, states and consumers make informed decisions related to QHP
quality. We will continue working with issuers, consumers, states,
quality measurement technical experts, and others to help ensure that
the display of quality rating information for QHPs offered on Exchanges
is useful, meaningful and understandable to individuals and families
shopping for a QHP. We intend to conduct focus groups and cognitive
testing directly with consumers
[[Page 29216]]
regarding the enrollee experience survey measures, some of which are
part of the QRS. We also anticipate providing consumers with technical
assistance if needed and additional materials to clarify the details
and uses of QHP quality rating information. We also agree that State
Exchanges and other stakeholders should be provided opportunities to
give input on potential future changes to the display of quality rating
information. We believe it is important to obtain diverse feedback from
stakeholders to continue to improve the utility and comprehension of
displayed QHP quality rating information and to help inform plan
selection. Since this final rule is providing an additional option to
State Exchanges that operate their own eligibility and enrollment
platforms to customize the display of quality rating information for
their QHPs, we believe that states that elect to take advantage of this
flexibility will have adequate time to make any changes. Should we
pursue changes to the formatting or other display requirements in the
future, we will keep in mind the comments about providing time for
State Exchanges to make the necessary updates to their respective
systems to implement any such changes.
E. Part 156--Health Insurance Issuer Standards Under the Affordable
Care Act, Including Standards Related to Exchanges
1. Definitions (Sec. 156.20)
We proposed to remove the definition of the term ``generic'' at
Sec. 156.20 because we proposed a revision at Sec. 156.130(h) which
would no longer use the term ``generic.'' For a discussion of that
policy, please see the preamble related to Sec. 156.130(h).
We received no comments on the proposed removal of the term
``generic''. Therefore, we are finalizing this change as proposed.
2. FFE and SBE-FP User Fee Rates for the 2021 Benefit Year (Sec.
156.50)
We proposed maintaining the FFE user fee for all participating FFE
issuers at 3.0 percent of total monthly premiums. Likewise, we proposed
maintaining a user fee rate of 2.5 percent of the monthly premium
charged by the issuer for each policy under plans offered through an
SBE-FP. These proposed rates were based on internal projections of
Federal costs for providing special benefits to FFE and SBE-FP issuers
during the 2021 benefit year, as well as estimates of premium increases
and enrollment decreases. We stated that we were considering, and we
solicited comment on, lowering the user fee rates below the proposed
rates. We are finalizing maintaining the FFE and SBE-FP user fee rates
at 3.0 percent and 2.5 percent, respectively, as proposed for the 2021
benefit year.
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 specify 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. In addition, OMB Circular No.
A-25 establishes Federal policy regarding the assessment of user fee
charges under other statutes, and applies to the extent permitted by
law. Furthermore, OMB Circular No. A-25 specifically provides 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, or that are performed by the Federal government for all QHPs,
including those offered through State Exchanges, are not covered by
this user fee. As in benefit years 2014 through 2020, issuers seeking
to participate in an FFE in the 2021 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.
a. FFE User Fee Rate
For the 2021 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).
Activities through which FFE issuers receive a special benefit also
include the Health Insurance and Oversight System (HIOS) and
Multidimensional Insurance Data Analytics System (MIDAS) platforms,
which are partially funded by Exchange user fees. Based on estimated
costs, enrollment (including changes in FFE enrollment resulting from
anticipated establishment of State Exchanges or SBE-FPs in certain
states in which FFEs currently are operating), and premiums for the
2021 plan year, we solicited comment on two alternative proposals.
First, we proposed maintaining the FFE user fee for all participating
FFE issuers at 3.0 percent of total monthly premiums in order to
preserve and ensure that the FFE has sufficient funding to cover the
cost of all special benefits provided to FFE issuers during the 2021
benefit year.
We also solicited comment on an alternate proposal that would
reduce the FFE user fee rate below the 2020 benefit year level. As
discussed in the proposed rule, the alternative proposal reflected our
estimates of premium increases and enrollment decreases for the 2021
benefit year, as well as potential savings resulting from cost-saving
measures implemented over the last several years that we expect would
enable HHS to collect user fees at a lower rate, thereby reducing the
user fee burden on consumers and creating downward pressure on
premiums, while still fully funding FFE operations. As discussed in the
proposed rule, if these savings did not materialize, we would have
increased user fee rates for the subsequent benefit year, to ensure
that sufficient funds would be available to cover the costs of special
benefits provided to FFE issuers. We solicited comment on this
proposal. We also solicited comment on trends in usage of Exchange
functions and services, potential efficiencies in Exchange operations,
and premium and enrollment projections, all of which might inform a
change in the user fee rate in the final rule. We did not receive any
comments on the trends in usage of Exchange functions and services,
potential efficiencies in Exchange operations, and premium and
enrollment projections.
b. SBE-FP User Fee Rate
As previously discussed, OMB Circular No. A-25 establishes Federal
policy regarding user fees, and specifies that a user charge will be
assessed
[[Page 29217]]
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 specify 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, unless the SBE-FP
and HHS agree on an alternative mechanism to collect the funds from the
SBE-FP or state. 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 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.
We proposed a user fee rate of 2.5 percent of the monthly premium
charged by the issuer for each policy under plans offered through an
SBE-FP. Similar to our proposal to maintain the FFE user rate
applicable to benefit year 2020, maintaining the SBE-FP user rate at
2.5 percent of premium would result in stability in the amount of user
fees collected.
We also considered and solicited comment on an alternate proposal
that would lower the SBE-FP user fee rate below the 2020 benefit year
level to a level that would reduce the user fee burden on consumers,
while still covering the costs of the special benefits HHS provides to
SBE-FP issuers. We discussed that we will continue to examine contract
cost estimates for the special benefits provided to issuers offering
QHPs on the Exchanges using the Federal platform for the 2021 benefit
year as we finalize the FFE and SBE-FP user fee rates. We solicited
comment on the alternative proposal.
In addition, we solicited comment on trends in usage of Federal
platform functions and services, potential efficiencies in Federal
platform operations, and premium and enrollment projections, all of
which might inform a change in the user fee level in the final rule.
After reviewing the public comments, we are finalizing the proposed
rates of 3.0 percent for the FFE user fee rate and 2.5 percent for the
SBE-FP user fee rate for the 2021 benefit year.
The following is a summary of the public comments we received.
Comment: A group of commenters supported lowering user fee rates
only if the reduction would not adversely affect FFE operations.
Another group of commenters supported maintaining current user fee
rates in favor of HHS re-investing excess user fees into consumer
outreach and education activities, the improvement of HealthCare.gov,
or otherwise increasing funding of these activities to 2017 levels. One
commenter recommended HHS spend additional funding on providing
additional in-language resources for those with limited English
proficiency.
Response: We are finalizing user fee rates at 3.0 percent for FFE
issuers and 2.5 percent for SBE-FP issuers, which is the same as the
user fee rates for the 2020 benefit year. These user fees will provide
ample funding for the full functioning of the Federal platform. Based
on projected changes in costs, enrollment and premiums, we project that
we can readily fund Federal platform costs associated with providing
special benefits to these issuers. HHS remains committed to providing a
seamless enrollment experience for consumers who enroll in coverage
through an Exchange that uses the Federal platform. We will continue to
apply resources to cost-effective, high-impact outreach and marketing
activities that offer the highest return on investment. Thus, we are
not committing to increasing funding for outreach and education
activities in excess of current levels or to levels similar to those
that existed in prior years, but we will continue to evaluate consumer
outreach and education needs within the normal annual budget process.
Consistent with OMB Circular No. A-25, any collections in excess of
user fee-eligible costs for a given year will be rolled over for
spending on the subsequent year's user fee-eligible expenses.
Comment: Some commenters expressed support for lower user fee rates
for issuers participating in Enhanced Direct Enrollment (EDE), or who
take on additional administrative functions.
Response: While we expect long-term economies of scale and cost
reductions associated with EDE, HHS incurs costs associated with
building, maintaining and improving the infrastructure associated with
EDE. However, we will continue to review the costs associated with EDE
and potential interactions between EDE implementation and user-fee
eligible costs.
Comment: One commenter suggested that HHS lower the SBE-FP user fee
rate to 1.5 percent for SBE-FPs for several reasons. The commenter
stated that SBE-FP states can take on federal tasks, such as
eligibility and enrollment processes, Navigator and agents programs,
and consumer selection tools. The commenter also stated that call
centers can be reduced since most enrollments are automatic re-
enrollments, and the Federal Platform and call center tasks can be
taken on by issuers. Further, the commenter stated that the Exchanges
are not to the benefit of the issuers, since there is no competitive
advantage to being on the Exchanges, the existence of the Exchanges are
mandated by law, and the benefits associated with user fees are all to
the consumers, and not the issuers who pay them.
Response: We calculated the SBE-FP user fee rate based on the
proportion of all FFE functions that are also conducted for SBE-FPs.
The final SBE-FP user fee rate for the 2021 benefit year of 2.5 percent
of premiums is based on HHS's calculation of the percent of 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, which we estimate to be approximately 85 percent. As
described in this rule, user fee eligible cost estimates are reviewed
on an annual basis and developed in advance of the benefit year.
Setting the SBE-FP user fee rate below the proportion of costs
associated with benefits provided to SBE-FP issuers would result in FFE
QHPs subsidizing the functions used by QHPs in SBE-FPs.
Comment: Several commenters asked HHS to provide more data and
transparency into how user fee rates are calculated.
Response: The FFE and SBE-FP user fee rates for the 2021 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 2021 benefit year. Annually, HHS and
CMS also publish detailed information on Federal Exchange Activities
and budget request estimates,
[[Page 29218]]
including expected Exchange user fee eligible costs.\122\
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\122\ FY2021 CMS Budget Request is available at https://www.cms.gov/About-CMS/Agency-Information/PerformanceBudget/FY2021-CJ-Final.pdf. and FY2021 HHS Budget Request is available at https://www.hhs.gov/sites/default/files/fy-2021-budget-in-brief.pdf.
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User fee eligible costs are estimated in advance of the benefit
year and are based upon cost targets for specific contracting
activities that are not yet finalized, and therefore proprietary. We
will continue to outline user fee eligible functional areas in the
annual Payment Notices, and will evaluate contract activities related
to operation of the federal Exchange user fee eligible functions. 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 QHP issuers. For example, functions related to risk adjustment
program operations and operations associated with APTC calculation and
payment, 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 2021 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 considered 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 based on the portion of FFE costs that are also
applicable to issuers offering QHPs through SBE-FPs.
3. State Selection of EHB-Benchmark Plan for Plan Years Beginning on or
after January 1, 2020 (Sec. 156.111)
a. Annual Reporting of State-Required Benefits
We proposed to amend Sec. 156.111 to require states each year,
beginning in plan year 2021, to identify required benefits mandated by
state law and which of those benefits are in addition to EHB in a
format and by a date specified by HHS. If the state does not comply
with this annual reporting submission deadline, we proposed that HHS
will determine which benefits are in addition to EHB for the state. We
are finalizing the annual reporting of state-required benefits policy
as proposed, with minor revisions. We are also finalizing as proposed
that the first annual submission deadline for states to notify HHS of
their state-required benefits will be July 1, 2021.
Section 1311(d)(3)(B) of the PPACA permits a state to require QHPs
offered in the state to cover benefits in addition to the EHB, but
requires the 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. In the EHB final rule,\123\ we
finalized a standard at Sec. 155.170(a)(2) that specifies benefits
mandated by state action taking place on or before December 31, 2011,
even if not effective until a later date, may be considered EHB, such
that the state is not required to defray costs for these state-required
benefits. Under this policy, benefits mandated by state action taking
place after December 31, 2011 are considered in addition to EHB, even
if the mandated benefits also are embedded in the state's selected EHB-
benchmark plan. In such cases, states must defray the associated costs
of QHP coverage of such benefits, and those costs should not be
included in the percentage of premium attributable to coverage of EHB
for purpose of calculating APTC.
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\123\ Standards Related to Essential Health Benefits, Actuarial
Value, and Accreditation, 78 FR 12834, 12837 through 12838 (February
20, 2013), available at https://www.gpo.gov/fdsys/pkg/FR-2013-02-25/pdf/2013-04084.pdf.
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We also finalized in the EHB final rule that, because the Exchange
is responsible for certifying QHPs, the Exchange would be the entity
responsible for identifying which additional state-required benefits,
if any, are in addition to the EHB. We also finalized that it is the
QHP issuer's responsibility to quantify the cost attributable to each
additional required benefit based on an analysis performed in
accordance with generally accepted actuarial principles and
methodologies conducted by a member of the American Academy of
Actuaries and to then report this to the state. Although Sec. 155.170
contemplates issuers conducting the cost analysis independently from
the state, we now clarify that it would also be permissible for issuers
to choose to rely on another entity, such as the state, to produce the
cost analysis, provided the issuer remains responsible for ensuring
that the quantification has been completed in a manner that complies
with Sec. 155.170(c)(2)(i) through (iii).
We also finalized that this calculation should be done
prospectively to allow for the offset of an enrollee's share of premium
and for purposes of calculating the PTC and reduced cost sharing. We
reminded states and issuers that section 36B(b)(3)(D) of the Code
specifies that the portion of the premium allocable to state-required
benefits in addition to EHB shall not be taken into account in
determining a PTC. We also finalized that because states may wish to
take different approaches with regard to basing defrayal payments on
either a statewide average or each issuer's actual cost that we were
not establishing a standard and would permit both options for
calculating state payments, at the election of the state. As discussed
in the proposed rule, we clarified that we interpret actual cost to
refer to the actuarial estimate of what part of the premium is
attributable to the state-required benefit that is in addition to EHB,
which is an analysis that should be performed prospectively to the
extent possible.
In the 2017 Payment Notice,\124\ we clarified that section
1311(d)(3)(B) of the PPACA governing defrayal of state-required
benefits is not specific to state statutes and we thus interpreted that
section to apply not only in cases of legislative action but also in
cases of state regulation, guidance, or other state action. We also
finalized a change to Sec. 155.170(a)(3), designating the state,
rather than the Exchange, as the entity required to identify which
benefits mandated by state action are in addition to EHB and require
defrayal. We also clarified in the 2017 Payment Notice \125\ that there
is no requirement to defray the cost of benefits added through
supplementation of the state's base-benchmark plan, as long as the
state is supplementing the base-benchmark to comply with the PPACA or
another Federal requirement. We also explained in the 2017 Payment
Notice that this means benefits mandated by state action after December
31, 2011 for purposes of compliance with new Federal requirements would
not require defrayal. Examples of such Federal requirements include:
requirements to provide benefits and services in each of the ten
categories of EHB; requirements to cover preventive services;
requirements to comply with the Paul Wellstone and Pete Domenici Mental
Health Parity and Addiction Equity Act of 2008 (MHPAEA); and the
removal of discriminatory age limits from existing benefits.
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\124\ 81 FR at 12242.
\125\ This was originally clarified in the 2016 Payment Notice,
and reiterated in the 2017 Payment Notice.
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In the 2017 Payment Notice, we also affirmed a transitional policy
originating from the 2016 Payment Notice,
[[Page 29219]]
specifying that Sec. 156.110(f) allows states to determine services
included in the habilitative services and devices category without
triggering defrayal if the state's base-benchmark plan does not include
coverage for that category. We interpreted this to mean that, when a
state has an opportunity to reselect its EHB-benchmark plan, a state
may use this as an opportunity to also update its habilitative services
category within the applicable Federal parameters for doing so as part
of EHB-benchmark plan reselection. As such, once a state has defined
its habilitative services category under Sec. 156.110(f), state-
required benefits related to habilitative services may trigger defrayal
in accordance with Sec. 155.170 if they are in addition to EHB and/or
outside of an EHB-benchmark plan selection process.
In the 2019 Payment Notice,\126\ we finalized that, as part of the
new EHB-benchmark plan selection options for states at Sec. 156.111,
we would not make any changes to the policies governing defrayal of
state-required benefits at Sec. 155.170. That is, whether a benefit
mandated by state action could be considered EHB would continue to
depend on when the state enacted the mandate (unless the benefit
mandated was for the purposes of compliance with Federal requirements).
We reminded states of their obligations in light of the new EHB-
benchmark plan selection options for states at Sec. 156.111 in an
October 2018 FAQ.\127\ In this FAQ, we also reminded states that,
although it is the state's responsibility to identify which state-
required benefits require defrayal, states must make such
determinations using the framework finalized at Sec. 155.170. For
example, a law requiring coverage of a benefit passed by a state after
December 31, 2011, is still a state-required benefit requiring defrayal
even if the text of the law says otherwise. We affirmed that in the
proposed rule. We also noted that we are monitoring state compliance
with the defrayal requirements regarding state-required benefits in
addition to EHB at Sec. 155.170, and that we encouraged states to
reach out to us concerning any state defrayal questions in advance of
passing and implementing benefit mandates.
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\126\ 83 FR 16930, at 16977.
\127\ Frequently Asked Questions on Defrayal of State Additional
Required Benefits (October 2018), available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQ-Defrayal-State-Benefits.pdf.
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As explained in the proposed rule, HHS is concerned that there may
be states that are not defraying the costs of the state-required
benefits in accordance with federal requirements. State noncompliance
with section 1311(d)(3)(B) of the PPACA, as implemented at Sec.
155.170, may result in an increase in the percent of premium that QHP
issuers report as attributable to EHB, more commonly referred to as the
``EHB percent of premium,'' which is used to calculate PTCs. Due to
state noncompliance with defrayal of state-required benefits, issuers
may be covering benefits as EHB that were required by state action
after December 31, 2011 that actually require defrayal under federal
requirements, but for which the state is not actively defraying costs.
As such, to strengthen program integrity and potentially reduce
improper federal expenditures, we proposed to amend Sec. 156.111(d)
and to add a new Sec. 156.111(f) to explicitly require states to
annually notify HHS in a form and manner specified by HHS, and by a
date determined by HHS, of any state-required benefits applicable to
QHPs in the individual and/or small group market that are considered to
be ``in addition to EHB'' in accordance with Sec. 155.170(a)(3). Given
the proposed changes, we further proposed to rename Sec. 156.111
``State selection of EHB-benchmark plan for plan years beginning on or
after January 1, 2020, and annual reporting of state-required
benefits'' to better reflect its contents.
After reviewing and carefully considering the comments, we are
finalizing these policies at Sec. 156.111(d) and (f), but with changes
explained below. We are also finalizing the revision of the heading of
Sec. 156.111 so that it accurately describes the new requirements in
this final rule.
Comment: Most commenters objected to the proposed annual reporting
policy as unnecessary and without adequate justification, asking that
we withdraw the proposed changes entirely. A minority of commenters
supported the proposed changes, supporting the observation that states
have not been defraying state benefit requirements consistently.
Supporting commenters agreed that requiring states to report their
state benefit requirements to HHS would improve transparency and
accountability of states that may not be appropriately defraying the
costs of state benefit requirements in addition to EHB and that this
reporting policy will help to ensure that Exchange subsidies are
calculated and used appropriately.
Commenters objecting to the proposed policy stated that HHS did not
provide sufficient evidence that states are not complying with federal
defrayal requirements, and that HHS should first develop a strong
evidentiary basis that states are not properly compensating issuers or
enrollees for state-required benefits in addition to EHB before
imposing onerous new requirements on states. Several commenters
explained that, contrary to HHS's concerns expressed in the proposed
rule, states are already regularly making careful assessments about
whether their state benefit requirements are in addition to EHB and are
doing so in accordance with federal requirements. One commenter noted
that its state has coordinated a robust inter-agency process since 2013
to comply with section 1311 of the PPACA and defrayed the cost of state
benefit requirements in addition to EHB since 2014. This commenter
urged HHS to withdraw the proposal, expressing that finalization would
be disruptive and unnecessary to states such as its own which have
already set up a fully functional process. Other commenters noted that
this reporting requirement is unnecessary given that we already publish
information about state benefit requirements on the CMS website.
Commenters opposing the reporting policy as unnecessary also stated
that existing regulations already establish robust requirements for
states and issuers to follow when a state benefit requirement is in
addition to EHB and requires defrayal, including performing actuarially
sound analyses of costs associated with state benefit requirements in
addition to EHB when calculating APTCs. Commenters also noted that HHS
already has existing authority to investigate states that are not
complying with defrayal requirements and that, as such, imposing a
reporting requirement on states is not necessary for federal oversight
purposes.
Many commenters also opposed the annual reporting policy because it
would be an additional administrative burden on states, the type this
administration instructed agencies to reduce to the maximum extent
permitted by law. They also noted the burden states already bear as the
entities responsible for identifying which mandates require defrayal.
One commenter recommended that HHS leverage existing reporting related
to EHB rather than creating a new, duplicative report, though the
commenter did not provide clarity on what reporting this is. One
commenter stated that HHS making determinations in the state's place
about which state-required benefits are in addition to EHB conflicts
with Executive Order 13865, ``Reducing Regulatory Burdens Imposed by
the Patient Protection and Affordable Care Act & Improving Healthcare
Choice To Empower Patients,'' which directs HHS ``to the maximum extent
permitted
[[Page 29220]]
by law, provide relief from any provision or requirement of the PPACA
that would impose a fiscal burden on any State. . . .'' \128\
Commenters also expressed concern that the annual reporting requirement
will be so burdensome that it will discourage states from adopting
changes to provide additional health benefits to consumers or even
deter states from updating their EHB-benchmark plan.
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\128\ Executive Order 13865, ``Reducing Regulatory Burdens
Imposed by the Patient Protection and Affordable Care Act &
Improving Healthcare Choice To Empower Patients,'' 82 FR 26885,
26886 (June 12, 2017) available at https://www.govinfo.gov/content/pkg/FR-2017-06-12/pdf/2017-12130.pdf.
---------------------------------------------------------------------------
Response: We continue to have concerns that states are not
defraying the costs of their state-required benefits in addition to EHB
in accordance with federal requirements. As a result of this
noncompliance, QHP issuers may be covering benefits as EHB that
actually require state defrayal under federal requirements, but for
which the state is not actively defraying costs, resulting in improper
expenditures of APTC paid by the federal government. This contravenes
section 36B(b)(3)(D) of the Code, which specifies that the portion of
the premium allocable to state-required benefits in addition to EHB
shall not be taken into account in determining a PTC.
HHS must ensure that APTC is paid in accordance with federal law.
We continue to believe that requiring states to annually report their
state benefit requirements to HHS will strengthen program integrity in
this regard.
We note that, contrary to some commenters' assertions, we do not
currently collect detailed information from states with regard to their
state benefit requirements. We therefore do not have an existing means
of assessing whether states are complying with federal defrayal
requirements or whether federal APTC payments are properly allocated
solely to EHB. The ``State-Required Benefits'' links listed under each
state on the ``Information on Essential Health Benefits (EHB) Benchmark
Plans'' page on the CMS website \129\ are not actively updated by the
states or by HHS. Those records of state benefit requirements were
collected in conjunction with state updates to EHB-benchmark plans in
2015 for plan years beginning in 2017. Furthermore, we do not collect
detailed information about state-required benefits when states update
their EHB-benchmark plans pursuant to the new flexibility we finalized
at Sec. 156.111(a).\130\ Therefore, our records are outdated by
several years and do not reflect the most current information about
state benefit requirements in addition to EHB, nor do they contain the
level of detail we will collect as part of the annual reporting
requirement we are finalizing here.
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\129\ Information on Essential Health Benefits (EHB) Benchmark
Plans available at https://www.cms.gov/cciio/resources/data-resources/ehb.
\130\ If a state chooses to utilize the flexibility finalized at
Sec. 156.111(a) to select a new EHB-benchmark plan starting with
the 2020 plan year, we currently only ask the selecting state if the
EHB-benchmark plan includes benefits mandated by state action taking
place after 2011, other than for purposes of compliance with Federal
requirements, for which payment is required under Sec. 155.170. For
more information, please refer to the State Confirmation Template in
the information collection currently approved under OMB control
number: 0938-1174 (Essential Health Benefits Benchmark Plans (CMS-
10448)).
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State submissions of annual reports on state-required benefits will
enable HHS to determine whether HHS is paying APTC correctly. The
information states submit will provide the necessary information to HHS
for increased oversight over whether states are appropriately
identifying which state benefit requirements are in addition to EHB and
whether QHP issuers are properly allocating the portion of premiums
attributable to EHB for purposes of calculating PTCs.
We acknowledge that some states may already be appropriately
identifying which state-required benefits are in addition to EHB and
require defrayal, and that these states may have developed processes
for defraying these state-required benefits. However, other states may
not be doing so. This annual reporting policy will assist in achieving
greater compliance with Sec. 155.170 in all states, which will help to
resolve HHS's current program integrity concerns.
Furthermore, we disagree that requiring already compliant states to
annually report would be disruptive and unnecessary. Every state should
already be defraying the costs of state-required benefits in addition
to EHB. Thus states should already have ready access to the information
required to be reported to HHS. This reporting requirement should be
complementary to the process the state already has in place for
tracking and analyzing state-required benefits. We also note that this
regulation provides that if the state does not notify HHS of its
required benefits considered to be in addition to EHB by the annual
reporting submission deadline, or does not do so in the form and manner
specified by HHS, HHS will identify the state-mandated benefits it
believes are in addition to EHB for the applicable plan year. HHS
prefers for states to provide the required information on their state-
required benefits to support HHS's efforts to determine whether it is
paying APTC correctly. However, if states choose not to provide this
information in accordance with Sec. 156.111(d) and (f), HHS must rely
on its own ability to assess the scope of EHB in that state to ensure
that only proper federal expenditures of APTC are made by the federal
government.
Finalizing an annual reporting requirement for states to provide
information regarding their state benefit requirements to HHS properly
aligns with federal requirements for defraying the cost of state-
required benefits; will generally improve transparency with regard to
the types of benefit requirements states are enacting; and will provide
the necessary information to HHS for increased oversight over whether
states are appropriately identifying which state-required benefits
require defrayal and whether QHP issuers are properly allocating the
portion of premiums attributable to EHB for purposes of calculating
PTCs.
Therefore, we are finalizing Sec. 156.111(d) and (f) as proposed,
to require states to annually notify HHS of any state-required benefits
applicable to QHPs in the individual and/or small group market that are
considered to be ``in addition to EHB'' in accordance with Sec.
155.170(a)(3). We are also finalizing as proposed that the first annual
submissions deadline for states to notify HHS of their state-required
benefits in accordance with Sec. 156.111(d) and (f) will be July 1,
2021.
Comment: One commenter stated that HHS should make the
determination about which benefits require defrayal in every instance,
because relying on the state's determination does not provide adequate
program integrity. All other commenters on this topic stated we should
retain Sec. 155.170(a)(3) as is, designating the state as the entity
responsible for identifying which mandates are in addition to EHB
because they believe states are best positioned to make these
determinations. Some commenters opposed any change making the Exchange
or HHS the entity responsible for making such determinations, even in
instances where the state does not submit an annual report to HHS by
the annual reporting deadline or does not do so in the form and manner
specified by HHS. Commenters stated that states should be able to
continue their own processes for reviewing and defraying state-mandated
benefits, and that to require otherwise would be disruptive and
unnecessary, especially in states that have set up an already complete
process for making these determinations and defraying costs when
necessary.
[[Page 29221]]
Commenters stated that shifting authority away from the state as
the entity responsible for making these determinations would be
inconsistent with the administration's goals of promoting state
flexibility. For example, one commenter stated that HHS's
identification of state-required benefits that are in addition to EHB
conflicts with Executive Order 13865, ``Reducing Regulatory Burdens
Imposed by the Patient Protection and Affordable Care Act & Improving
Healthcare Choice To Empower Patients.'' That Executive Order directs
HHS, ``to the maximum extent permitted by law, to afford the States
more flexibility and control to create a more free and open health care
market. . . .'' \131\ One commenter noted that state insurance
regulation and oversight dates back to the 1800s, has been recognized
by Congress in the McCarran Ferguson Act,\132\ and that the Supreme
Court has also recognized states being the primary regulators of
insurance.
---------------------------------------------------------------------------
\131\ Executive Order 13865, ``Reducing Regulatory Burdens
Imposed by the Patient Protection and Affordable Care Act &
Improving Healthcare Choice To Empower Patients,'' 82 FR 26885,
26886 (June 12, 2017) available at https://www.govinfo.gov/content/pkg/FR-2017-06-12/pdf/2017-12130.pdf.
\132\ 15 U.S.C. 1011-1015.
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Commenters also stated that shifting authority away from the state
would be inconsistent with HHS deference to states in other areas of
EHB policy. Commenters explained that the EHB-benchmark plan selection
process appropriately relies on state choices to set the EHBs under
federal guidelines and that, as the primary regulators of individual
and small group markets, states should continue to maintain the
authority to mandate certain benefits in those markets and are the best
positioned entities to determine which, if any, mandated benefits are
in addition to EHB. One commenter also noted that defrayal
determinations necessarily rely to some extent on state interpretation
and judgment. Commenters stated it would be counterproductive for HHS
to offer the tremendous increase in state flexibility offered through
the new EHB-benchmark plan selection options finalized at Sec.
156.111, only to take unprecedented federal control over another aspect
of EHB in the near future. Commenters emphasized that allowing states
to continue their own processes supports the administration's general
approach of deference to states and their expertise in local market
issues. Commenters also stated that HHS does not have expertise in
evaluating state-mandated benefit laws and enforcing state
requirements.
One commenter also stated that HHS's identification of state-
required benefits that are in addition to EHB when a State chooses not
to do so is internally inconsistent because Sec. 155.170(a)(3)
establishes the state's right to identify which state-mandated benefits
are in addition to the EHB. This commenter therefore questioned how HHS
acting in the state's place would be consistent with Sec.
155.170(a)(3).
Response: We agree that states are uniquely positioned to track and
analyze state-required benefits and identify which state benefit
requirements are in addition to EHB and require defrayal. State
expertise about the unique legislative and regulatory framework
involving proposing, enacting, and implementing state benefit
requirements is the reason we also believe states are best situated to
populate and submit the proposed annual report, which will serve as
documentation for states, issuers, the federal government, and the
general public of the state benefit requirements that are in addition
to EHB.
We note that the annual reporting policy we are finalizing at Sec.
156.111(d) and (f) does not restrict the state's ability to mandate any
particular benefit--it merely requires states to report these state
actions to HHS in order to assist in ensuring that HHS is not paying
APTC for portions of premiums attributable to non-EHB.
We disagree that Sec. 156.111(d)(2) conflicts with the flexibility
offered to states as part of the new EHB-benchmark plan selection
process finalized at Sec. 156.111. We believe the annual reporting
policy we are finalizing is consistent with this goal of state
flexibility and acknowledges state expertise. In the 2019 Payment
Notice, we finalized that, as part of the new EHB-benchmark plan
selection options for states finalized at Sec. 156.111, we would not
make any changes to the policies governing defrayal of state-required
benefits at Sec. 155.170. Therefore, whether a benefit mandated by
state action can be considered EHB continues to depend on when the
state enacted the mandate (unless the benefit mandated was for the
purposes of compliance with federal requirements).\133\ Under any of
the three methods for a state to select a new EHB-benchmark plan at
Sec. 156.111, the act of selecting a new EHB-benchmark plan does not
alone create new state mandates, but it also does not relieve the state
of its obligation to continue defraying the cost of QHPs covering any
state-mandated benefits that are in addition to EHB. The annual
reporting policy we are finalizing at Sec. 156.111(d) and (f) does not
change that standard. In other words, although states will be required
to provide HHS with additional information with regard to state-
required benefits, the annual reporting policy itself does not affect
whether a state benefit requirement is or is not in addition to EHB.
States are already required under Sec. 155.170 to identify which
state-required benefits are in addition to EHB and to defray the cost
of those benefits, and states should already be complying with this
requirement regardless of the annual reporting policy and regardless of
the EHB-benchmark plan selection options at Sec. 156.111.
Although there may be states that do not currently have in place an
effective process for tracking, analyzing, and identifying state-
required benefits for purposes of identifying whether they are in
addition to EHB and require defrayal, all states should be able to
readily track, analyze, and identify the requirements they themselves
have established. For such states, the annual reporting policy may
restrict perceived flexibility in the state to the extent that this
annual reporting policy improves the state's compliance with defrayal
requirements. However, we believe any such restriction in state
flexibility in these otherwise noncompliant states is illusory because
states should have already been identifying which benefits require
defrayal. Further, we believe that this regulatory change is necessary
to ensure that such noncompliant states are diligent about their
framework for identifying which mandates are in addition to EHB in
accordance with Sec. 155.170 and to ultimately strengthen program
integrity and reduce improper federal expenditures.
Finally, the policy does not shift responsibility for identifying
whether a mandate is in addition to EHB from the state to HHS, unless
the state chooses not to submit an annual report to HHS in accordance
with Sec. 156.111(d) and (f). Thus, this policy adds flexibility for
states since HHS will identify required benefits that are in addition
to EHB only where the state opts not to do so.
Therefore, we are finalizing the proposal with only a minor
revision. We originally proposed at Sec. 156.111(d)(2) that for states
that do not report to HHS by the annual submission deadline in
accordance with Sec. 156.111(d) and (f), HHS would determine which
benefits are in addition to EHB consistent with Sec. 155.170(a)(3). We
agree with the commenter, however, that referring back to Sec.
155.170(a)(3) is inappropriate because that subsection requires the
state, not HHS, to identify which state-required benefits are in
addition to the
[[Page 29222]]
EHB. We are thus finalizing a revision such that Sec. 156.111(d)(2)
refers instead to Sec. 155.170(a)(2). Section 155.170(a)(2) specifies
that benefits required by state action taking place on or before
December 31, 2011, are considered EHB and benefits required by state
action taking place on or after January 1, 2012, other than for
purposes of compliance with Federal requirements, are considered in
addition to EHB.
Comment: Many commenters expressed concern that HHS is proposing to
increase its oversight of state compliance with defrayal requirements
when HHS's policy governing which state benefit requirements are in
addition to EHB is still unclear. Commenters also stated that HHS has
not codified or formally clarified comprehensive standards that states
must use, or that HHS would use under Sec. 156.111(d)(2) to determine
whether a state mandate is in addition to EHB and subject to defrayal.
Commenters stated that, in the past, HHS has provided subregulatory
guidance and verbal technical assistance about defrayal upon which
states have relied, and upon which HHS should confirm states can still
rely. Commenters also expressed concern that, because much of this
guidance provided by HHS was unpublished or vague, HHS interpretation
of defrayal policy could have since changed without warning to states,
and therefore, states could be subject to unexpected defrayal costs as
part of the finalized annual reporting policy. Commenters added that,
although HHS provides technical assistance to states regarding what
would be considered a state-required benefit in addition to EHB, states
have understood these discussions to be examples rather than exhaustive
or binding guidance. Commenters urged HHS that further clarifying its
defrayal policies is integral for states and legislatures to make fully
informed decisions about the consequences of state-required benefits on
the state budget. Due to this perceived lack of clarity, commenters
urged HHS to not finalize the proposal, but to clarify its defrayal
policies and engage in a structured discussion with states to address
defrayal questions. These commenters stated that only then should HHS
consider issuing more detailed guidance that can be provided uniformly
to states moving forward. One commenter recommended that, if this
provision is finalized, HHS delay the implementation of an annual
reporting requirement and instead take additional time to determine how
many states are not complying with defrayal requirements so that HHS
can better understand the scope of the problem the reporting policy is
intended to address.
Several commenters offered specific policy recommendations about
how HHS should modify its current policy on whether a state benefit
requirement is in addition to EHB.
Response: We acknowledge commenters' concerns that they do not
fully understand when a state-required benefit is in addition to EHB
and requires defrayal. However, finalizing an annual reporting policy
is important to help resolve HHS's program integrity concerns regarding
improper federal expenditures of APTC for benefits that are in addition
to EHB. The information states provide to HHS in the annual reports
will assist HHS in identifying whether states are appropriately
identifying which state-required benefits require defrayal, and
therefore, whether QHP issuers are properly allocating the portion of
premiums attributable to EHB for purposes of calculating PTCs.
In addition to the existing guidance we have provided on defrayal
through our past regulations and guidance documents, we intend to
continue to engage with states and provide additional technical
assistance that helps ensure state understanding of when a state-
benefit requirement is in addition to EHB and requires defrayal. We
anticipate that this assistance will provide examples and explains how
a state could operationalize the defrayal process pursuant to federal
requirements at Sec. 155.170. We believe such technical assistance
will bolster state compliance with defrayal requirements, as well as
result in a smoother annual reporting process for states and review
process for HHS.
While we appreciate commenters' recommendations on how HHS should
modify its current policy on whether a state benefit requirement is in
addition to EHB, such recommendations are outside the scope of this
rulemaking, which is limited to reporting of state benefit
requirements.
Comment: Several commenters raised concerns that this rule does not
specify how HHS will use the information states provide in the annual
reports and does not outline what oversight activities HHS will
conduct. Commenters urged HHS to provide additional transparency into
how it will use state reported information on benefit requirements to
enhance its oversight and enforcement of Sec. 155.170. For example,
one commenter suggested HHS clarify how it will review state
information from state actions taken prior to the first annual
reporting submission deadline and clarify whether HHS will take
retroactive action to determine if previous state benefit requirements
are in addition to EHB and require defrayal. Several commenters stated
that the annual reports should only be used to hold states accountable
prospectively for defrayal of state benefit requirements in addition to
EHB, and that it would be of great concern to states if HHS's intention
is to review annual reports for retrospective compliance with defrayal,
which would have significant practical consequences.
Other commenters stated that HHS should enhance the already
existing oversight that would occur if the policy is finalized as
proposed, by developing and providing details on how it intends to
ensure that states' annual reports are accurate and complete, for
example through annual audits of state reports, and requested specific
information regarding whether HHS will review the reports for prior
state activity. One commenter suggested that HHS require ``one source
of truth'' as to which benefit requirements in a given state are in
addition to EHB and require defrayal so that QHP issuers can be sure
they have the correct benefits listed as EHBs.
Many commenters requested that, before the reporting requirement is
finalized, states understand the potential liabilities the reported
information could generate (for example, types of remedial action).
Commenters argued that, although section 1311(d)(3)(B) of the PPACA
requires states defray the cost of benefits in addition to EHB to
either the enrollee or the issuer on behalf of the enrollee, it does
not provide a process for how an HHS determination about a state's
benefit requirement can substitute the state's own policy conclusion
with regard to whether that benefit requirement is in addition to EHB.
Commenters argued that section 1311(d)(3)(B) of the PPACA does not give
HHS authority to interpret state insurance law. Commenters also
requested that HHS clarify the process for when HHS reviews a state's
annual report, or makes the determination for a non-reporting state,
and the state disagrees with HHS or otherwise refuses to comply with
HHS's determination and does not defray the cost of the state benefit
requirement that HHS believes is in addition to EHB. One commenter
stated that it is not clear what options exist in the event of conflict
except for HHS to overrule the will of state legislative and executive
branches, state insurance commissioners' authority, and Exchanges'
state-based authority.
Commenters argued that HHS must establish a neutral and fair
process for
[[Page 29223]]
evaluating state-mandated benefits and resolving disputes between HHS
and the state. For example, one commenter stated that there needs to be
a formal appeals process because HHS has a conflict of interest in
determining whether a mandate requires defrayal since such a
determination could potentially lower the amount of APTC the government
needs to pay out, and therefore, this proposal is arbitrary and
capricious without a formal hearing or appeals process. Other
commenters expressed concern that there was no proposed dispute
resolution or appeals process, especially since the remedial action HHS
would take is unclear.
Commenters recommended that federal oversight and compliance
actions over state benefit requirements reported in the annual reports
remain limited and that retaining the primary authority with the states
will help avoid circumstances of conflict between the state and HHS
about whether a benefit requirement is in addition to EHB. One
commenter stated that there would be far reaching operational problems
if HHS incorrectly issues a decision about a state benefit requirement
because that interpretation would interfere with state form review,
rate review, plan certification, market conduct exams, enforcement, and
even consumer assistance. Another commenter understood the proposal to
mean that HHS could also determine the amount to be defrayed by the
state for a benefit that is in addition to EHB. This commenter stated
they are unaware of any authority that would allow the federal
government to access and spend money from a state's treasury.
Many commenters questioned whether HHS has any available
enforcement authority to actually require states to defray the cost of
a state benefit requirements in such situations of disagreement between
the state and HHS. Commenters stated that there is no legal mechanism
in place for resolving any disputes HHS may have with a state's
determination which calls into question the very need for the
amendments to Sec. 156.111, if HHS has no viable enforcement
authority.
One commenter was critical that the proposed rule did not specify
what the procedure would be for direct enforcement states that do not
report to HHS. The same commenter argued that HHS making the
determinations about which state benefit requirements are in addition
to EHB and require defrayal would be unconstitutional commandeering of
states, and would violate the Tenth Amendment because it coerces states
to act. Commenters noted that, different from the authority HHS has to
implement federal law in states that refuse or are unable to, in this
case HHS is giving itself authority to interpret state insurance law,
which is authority that neither the PPACA nor other laws related to
health insurance provide to HHS. This commenter stated that the PPACA
requirement to defray is unconstitutional in the first place and that
HHS should not seek through this rulemaking to further attempt to
implement this unconstitutional requirement. This commenter further
stated they are uncertain whether the federal government can compel a
direct enforcement state to pay a part of anyone's insurance premium or
even any portion of federal subsidies.
Response: We acknowledge the discomfort expressed by some
commenters with regard to how HHS intends to use the information
included in the annual reports for oversight purposes, especially given
commenters' stated concerns regarding lack of clarity about the
defrayal policy itself, and how to identify whether a state benefit
requirement is in addition to EHB. However, we believe that conducting
additional technical assistance to states in the interim will assist in
easing state concerns and uncertainty about identifying which state
benefit requirements are in addition to EHB and require defrayal.
We further acknowledge that some states already comply with Sec.
155.170, making reasoned assessments about state benefit requirements,
and defraying benefits in addition to EHB. Nonetheless, we still
believe collecting annual reports for such states is necessary. We also
believe collecting annual reports from otherwise compliant states will
improve transparency generally with regard to the types of benefit
requirements states are enacting.
HHS will review the information states submit in their reports to
help determine whether HHS is paying APTC correctly. Without such
reports, HHS lacks the information necessary to make these assessments.
Although all information submitted in the reports will be helpful to
HHS, we anticipate most closely reviewing the information the state
provides pursuant to Sec. 156.111(f)(2) and (3), regarding whether a
state-required benefit is or is not in addition to EHB and the basis
the state provides for why a state-required benefit is not in addition
to EHB. To the extent that HHS has concerns about the content of a
state's annual report, or has concerns about a non-reporting state's
compliance with HHS's identification of which state benefit
requirements are in addition to EHB and require defrayal, HHS intends
to first reach out to the state directly to resolve any such concerns.
To the extent possible, it is our intent to continue the
collaborative process we have cultivated with states up to this point
regarding questions states have about defrayal. We continue to believe
states are best suited to analyze their own state mandates, which is
why we are finalizing the annual reporting policy in a manner that
relies first on states to submit information to HHS identifying which
state-required benefits are in addition to EHB. We also are finalizing
that HHS will identify, rather than determine, which benefits are in
addition to EHB in states that opt not to report. We note that, as
finalized, the annual reporting requirement is the same for all states
regardless of whether they are an enforcing or direct enforcement
state. We intend to provide non-reporting states with an opportunity to
review our identifications prior to releasing the annual reports on the
CMS website for public viewing in an effort to mitigate the potential
for disagreement between the state and HHS. We also believe our interim
outreach with states to clarify defrayal policy more generally will
assist in states' understanding on what basis HHS will assess whether
state-required benefits are in addition to EHB in non-reporting states.
Further, we disagree with commenters' assertions that HHS does not
have enforcement authority to penalize states that refuse to defray the
cost of state benefit requirements in addition to EHB in accordance
with Sec. 155.170. Pursuant to section 1313(a)(4) of the PPACA, if the
Secretary determines that a state or Exchange has engaged in serious
misconduct with respect to compliance with requirements under Title I
of the PPACA, which includes the requirement that states defray the
cost state benefit requirements in addition to EHB, HHS is authorized
to rescind up to 1 percent of payments otherwise due to a state per
year until corrective actions are taken by the state that are
determined to be adequate by the Secretary. HHS would like to avoid the
use of such authority, especially as it would not result in a transfer
of any portion of such amounts to the issuer or consumer who is
entitled to state defrayal payments under the PPACA. We disagree,
however, that using this authority would be overstepping HHS authority.
HHS also disagrees that identifying benefits that are in addition
to EHB in a state and requiring defrayal violates the Tenth Amendment.
We
[[Page 29224]]
acknowledge that HHS's identification of state-required benefits that
are in addition to EHB might conflict with the opinion of a non-
reporting state. However, as previously noted, HHS must ensure that
APTC is paid in accordance with federal law. If a state is not
defraying the cost of a state-required benefit that is in addition to
EHB, resulting in improper federal expenditures, we believe section
1313(a)(4) of the PPACA provides HHS with the authority to enforce the
defrayal requirements outlined in statute.
Program integrity remains a top priority for HHS, and we believe
exercising our existing authority to address noncompliance with
defrayal requirements under section 1311(d)(3)(B) of the PPACA and
Sec. 155.170, if necessary, is warranted to mitigate the risk of
federal dollars incorrectly leaving the federal Treasury in the form of
APTC during the year. However, we appreciate commenters' desire for
further insight into how the notices will play into our policy for
enforcing the defrayal requirements. We are not adopting any policy
with regard to whether enforcement of the defrayal requirement will be
retrospective or prospective in relation to the submission of Sec.
156.111 reports. The requirement to submit reports under this final
rule is independent of a state's pre-existing duty under section
1313(a)(4) of the PPACA to defray costs for state-mandated benefits
that are in addition to EHB. Whether we discover noncompliance with
defrayal requirements through submission of the reports required under
this final rule or through a complaint lodged by a consumer or an
issuer, HHS will take appropriate action in line with its statutory
authority. However, as noted earlier, we intend to continue the
collaborative process we have cultivated with states up to this point.
We intend to provide non-reporting states with an opportunity to review
our identifications of state-mandated benefits that are in addition to
EHB prior to releasing the annual reports on the CMS website for public
viewing in an effort to mitigate the potential for disagreement between
the state and HHS.
Comment: Commenters noted mixed opinions with regard to a public
comment period. Some commenters stated that they do not think it is
necessary to allow for a public comment period before publicizing state
reporting, but suggested HHS develop a procedure to use in the event
there ever is a mistake in a state's mandated benefit reporting. Other
commenters stated there should be a public comment period on the annual
reports. Commenters stated that it is important to allow issuers and
other stakeholders to provide formal input, and create a public record,
on which benefit requirements require defrayal given that states have a
conflict of interest in identifying these mandates themselves, and that
HHS should review the record of comments when reviewing state-reported
benefit mandates as part of its oversight review.
Response: We agree with commenters that it is unnecessary to
require a public comment period on the annual reports submitted to HHS
or for the annual reports that HHS completes for non-reporting states.
State benefit requirements most often originate from the state
legislature and, upon passage, the question of whether or not the
benefit requirement is in addition to EHB has a fixed answer. As such,
the feedback provided to states or HHS from the public or from
stakeholders during a public comment period could not impact the
ultimate decision on the part of states, or on the part of HHS for non-
reporting states, about whether a benefit requirement is in addition to
EHB. Therefore, we do not believe a public comment period would be a
beneficial use of time or resources.
Comment: Several commenters had specific recommendations or
concerns regarding the type of information states would be required to
submit to HHS by the annual submission deadline in a form and manner
specified by HHS. One commenter requested that, to support the
administration's goals of state flexibility, HHS instead allow states
to submit state mandate information in a form and manner determined by
the state.
Other commenters expressed concern that HHS did not provide
sufficient specificity about the types of data elements states would be
required to include in the annual report. For example, one commenter
stated that there is not enough detail in the proposed rule about how
this reporting process would work and HHS should make the proposed
templates available for commenters to review. One commenter urged HHS
to include information on the final annual reporting templates to be
used by states that would identify whether the state benefit
requirement doesn't require defrayal because it falls into an exception
to the defrayal policy. Another commenter requested that, after the
initial report in the first year of annual reporting, states should
only identify changes to benefit requirements to make it easier for HHS
and issuers to identify which benefits are new or modified.
One commenter argued that states should also be required to report
these additional benefits to the insurance department or other
agencies. Another commenter suggested that HHS require states to submit
their methodologies for conducting their defrayal analysis to require
additional transparency. A different commenter argued that states
should not be required to provide a justification or basis for the
state's defrayal determination as there is no statutory or regulatory
authority for HHS to impose this burden, but that if it finalizes this
requirement the commenter agrees such justification should be concise
(for example citing to the state constitution amendment that gives the
state department of insurance the authority to oversee insurance). One
commenter stated that the report should detail the benefits that are
included as EHBs in the benchmark plan, state mandated benefits that
are part of the benchmark plan, state mandated benefits that are
subject to state defrayal, and a list of common benefits that must be
considered non-EHB by QHPs.
Response: We appreciate the feedback provided in comments regarding
ways to improve the annual reporting process and the data elements that
would be most helpful for HHS to collect. We are finalizing as proposed
Sec. 156.111(f), which specifies the type of information states are
required to submit to HHS by the annual submission deadline in a form
and manner specified by HHS. For a reporting package to be complete, it
will need to comply with each requirement listed at Sec. 156.111(f)(1)
through (6). We believe the descriptions of the required data elements
at Sec. 156.111(f)(1) through (6) provide sufficient detail to states
regarding the types of information states will be required to include
in the annual reports such that states and other stakeholders reviewing
those requirements can understand the scope of the information states
are required to include in their annual reports without reviewing the
actual reporting templates. With respect to Sec. 156.111(f)(4), which
provides for states to submit other information about state-required
benefits that is necessary for HHS oversight, we reiterate the
illustrative examples we previously published. Additional information
that is necessary for HHS oversight may include data such as the date
of state action imposing the requirement to cover the state-required
benefit; the effective date of the applicable state action; the market
it applies to (that is, individual, small group, or both); the
[[Page 29225]]
precise benefit or set of benefits that QHPs in the individual and/or
small group market are required to cover; any exclusions; and the
citation to the relevant state action.
In the first reporting year, this annual report must include a
comprehensive list of all state benefit requirements applicable to QHPs
in the individual and/or small group market under state mandates that
were imposed on or before December 31, 2011 and that were not withdrawn
or otherwise no longer effective before December 31, 2011, and any
state benefit requirements under state mandates that were imposed any
time after December 31, 2011, regardless of whether the state believes
they require defrayal in accordance with Sec. 155.170.
The first reporting cycle is intended to set the baseline list of
state-required benefits applicable to QHPs in the individual and/or
small group market. Each annual reporting cycle thereafter, the state
will only be required to update the content in its report to add any
new benefit requirements, and to indicate whether benefit requirements
previously reported to HHS have been amended or repealed. State reports
for subsequent years must be accurate as of 60 days prior to the annual
reporting submission deadline set by HHS for that year. If a state has
not imposed, amended, or repealed any state benefit requirements in the
time period between annual reporting deadlines, the state is still
required to report to HHS that there have been no changes to state-
required benefits since the previous reporting cycle. In such a
scenario, we are finalizing that the state should submit the same
reporting package as the previous reporting cycle and affirmatively
indicate to HHS that there have been no changes.
As stated in the proposed rule, HHS will provide template(s)
reflecting the form and manner of the report that states will be
required to use for reporting the required information proposed in
Sec. 156.111(f)(1) through (6). We believe standardizing the form and
manner of the report and the data elements required is important for
consistency year after year and for ensuring HHS has the information
necessary to adequately oversee that states are defraying the cost of
state-required benefits in addition to EHB consistent with Sec.
155.170 and to ensure that HHS is not improperly paying APTC for
portions of premium attributable to non-EHB.
We still intend to post state submissions of these documents on the
CMS website prior to the end of the plan year during which the annual
reporting takes place such that this information is accessible to
states, QHP issuers, enrollees, stakeholders, and the general public.
HHS will complete a similar document for non-reporting states and post
it to the CMS website. As noted above, we intend to provide the non-
reporting state with an opportunity to review the HHS's identifications
prior to posting the HHS-created report on the CMS website. We do not
believe it is necessary to explicitly require the state to provide a
copy of the report to the insurance department, as the report will be
publicly available on the CMS website.
We emphasize that this reporting requirement would be independent
of the state's requirement to defray the cost of QHP coverage of state-
required benefits in addition to EHB in accordance with Sec. 155.170.
The obligation for a state to defray the cost of QHP coverage of state-
required benefits in addition to EHB is an independent statutory
requirement under section 1311(d)(3)(B) of the PPACA, as implemented at
Sec. 155.170, and would remain fully applicable to states regardless
of whether they annually report state-required benefits to HHS or defer
to HHS to identify which state-required benefits are in addition to EHB
and require defrayal. We also note that issuers would still be
responsible for quantifying the cost of these benefits and reporting
the cost to the state. States remain responsible for making payments to
defray the cost of additional required benefits, either to the enrollee
or to the QHP issuer on behalf of the enrollee.
Comment: Many commenters expressed concern with the proposed timing
of the annual reporting requirement. Commenters stated that legislative
sessions end at different times in different states and that, as such,
the annual submission deadline being at the same time during the plan
year for every state is not feasible. For example, for states whose
legislative sessions end in September, the commenter explained that the
proposed reporting deadline in July is too early and would mean the
annual reports would include mandates imposed retrospectively rather
than prospectively. Another commenter expressed that HHS determinations
need to give ample opportunity to states to amend their statutes, be
made in advance of rate filings, and only be made on a prospective
basis, but that this is impossible given the proposed submission
deadline in July. The commenter further explained that their state's
legislature adjourns between May 2021 and January 2023, leaving no
ability for the state legislature to legislatively respond to
determinations made by HHS under this reporting policy. Many other
commenters echoed the request that the annual reporting and defrayal
requirements be made only on a prospective basis.
Commenters who supported the entire proposal agreed the reporting
should occur annually. One commenter noted their appreciation for the
proposal but argued the reporting requirement should be every two years
at most to reduce administrative burden and unnecessary costs, given
that the process for enacting state mandates is often a long one.
We received no comments on the proposed 60-day cut-off date that
proposed to require the annual report be accurate as of the day that is
at least 60 days prior to the annual reporting submission deadline set
by HHS.
Response: As stated in the proposed rule, we acknowledge that the
start and end dates of state legislative sessions vary greatly by
state, and that many state legislative sessions may not have concluded
by the annual reporting submission deadline. However, we believe that
setting the same annual submission deadline for all states is necessary
to standardize the annual reporting process and publish the annual
reports on the CMS website at or around the same time each year. We
agree with commenters that we should require reporting annually and
that this frequency will best serve HHS's goals of increased oversight
over state compliance with defrayal requirements than would a less
frequent collection of annual reports.
We also still believe it is important to set a cut-off date after
which states are not expected to report on their state-required
benefits until the following annual reporting deadline, which is why we
are finalizing at Sec. 156.111(f)(1) that state annual reports must be
accurate as of the day that is at least 60 days prior to the annual
reporting submission deadline set by HHS. We believe that setting this
cut-off date at least 60 days prior to the submission deadline allows a
state sufficient time to analyze its state benefit requirements
imposed, amended, or repealed through state action taken by that date
and prepare the required documents we are proposing that states submit
to HHS.
A state where a legislative session ends after the 60-day cut-off
date (such as a legislative session that ends in September of that plan
year) that happens to enact, amend, or repeal a state-required benefit
after the cut-off date but before the annual reporting submission
deadline will not be expected to report that state-required
[[Page 29226]]
benefit in that plan year's annual reporting submission. Instead, the
state is expected to include that state-required benefit in the annual
reporting package for the following year. States will be permitted to
submit their reports any time between the 60-day cut-off date and the
applicable deadline.
We acknowledge commenters' concerns that, depending when the annual
reporting submission deadline falls in relation to the state's
legislative calendar, the state's annual report may be more reflective
of state mandates passed in previous plan years than reflective of the
plan year in which the annual reporting submission deadline falls.
Although we acknowledge this is not ideal, we do not foresee this being
a problem, as the state will be able to include any state-required
benefits enacted after the annual submission deadline in the annual
reporting package for the following year. Further, we again emphasize
that the annual reporting requirement and the reporting cut-off date do
not alter a state's obligation to defray the cost of benefits in
addition to EHB that result from state action taken after the cut-off
date. In other words, states must defray benefits in addition to EHB in
accordance with Sec. 155.170 regardless of whether the state benefit
requirement was imposed, amended, or repealed through state action
taken before or after the proposed 60-day cut-off date for inclusion in
that plan year's annual reporting submission. If a state passes a
benefit requirement after the annual submission deadline that is in
addition to EHB and requires defrayal, the state should defray the cost
of that benefit in spite of it not being captured as part of the annual
report submitted to HHS for that submission year. The annual reporting
requirement should function as an additional, but complementary step to
those already in place at Sec. 155.170.
b. States' EHB-Benchmark Plan Options
We proposed May 7, 2021 as the deadline for states to submit the
required documents for the state's EHB-benchmark plan selection for the
2023 plan year pursuant to Sec. 156.111(a), and the deadline for
states to notify us that they wish to permit between-category
substitution for the 2023 plan year. We also made some clarifications
to Sec. 156.111(b)(2) regarding scope of benefits. We are finalizing
these deadlines as proposed and confirming the scope of benefit
clarifications.
In the 2019 Payment Notice, we stated that we believe states should
have additional choices with respect to benefits and affordable
coverage. Therefore, we finalized options for states to select new EHB-
benchmark plans starting with the 2020 plan year. Under Sec.
156.111(a), a state may modify its EHB-benchmark plan by: (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 also has
to meet additional standards, including EHB scope of benefit
requirements under Sec. 156.111(b). These requirements include
providing a scope of benefits that is equal to, or greater than, to the
extent any supplementation is required to provide coverage within each
EHB category, the scope of benefits provided under a typical employer
plan. Section 156.111(b)(2) defines a typical employer plan as either
(1) one of the selecting state's 10 base-benchmark plan options
established at Sec. 156.100 from which the state was able to select
for the 2017 plan year; or (2) the largest health insurance plan by
enrollment in any of the five largest large group health insurance
products by enrollment in the selecting state, as product and plan are
defined at Sec. 144.103, provided that: (a) The product has at least
10 percent of the total enrollment of the five largest large group
health insurance products by enrollment in the selecting state; (b) the
plan provides minimum value; (c) the benefits are not excepted
benefits; and (d) the benefits in the plan are from a plan year
beginning after December 31, 2013. The state's EHB-benchmark plan must
also satisfy the generosity standard at Sec. 156.111(b)(2)(ii), which
specifies that a state's EHB-benchmark plan must not exceed the
generosity of the most generous among a set of comparison plans,
including the EHB-benchmark plan used by the state in 2017, and any of
the state's base-benchmark plan options for the 2017 plan year,
supplemented as necessary.
Additionally, states must document meeting these requirements
through an actuarial certification and associated actuarial report from
an actuary who is a member of the American Academy of Actuaries, in
accordance with generally accepted actuarial principles and
methodologies. We published the ``Example of an Acceptable Methodology
for Comparing Benefits of a State's EHB-benchmark Plan Selection in
Accordance with Sec. 156.111(b)(2)(i) and (ii)'' (example methodology
guidance), alongside the 2019 Payment Notice.\134\ We finalized that
the current EHB-benchmark plan selection would continue to apply for
any year for which a state does not select a new EHB-benchmark plan
from among these options.
---------------------------------------------------------------------------
\134\ Example of an Acceptable Methodology for Comparing
Benefits of a State's EHB-benchmark Plan Selection in Accordance
with 45 CFR 156.111(b)(2)(i) and (ii), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-Example-Acceptable-Methodology-for-Comparing-Benefits.pdf.
---------------------------------------------------------------------------
The 2019 Payment Notice stated that we would propose EHB-benchmark
plan submission deadlines in the HHS annual Notice of Benefit and
Payment Parameters. Accordingly, we proposed May 7, 2021 as the
deadline for states to submit the required documents for the state's
EHB-benchmark plan selection for the 2023 plan year. We emphasized that
this deadline would be firm, and that states should optimally have one
of their points of contact who has been predesignated to use the EHB
Plan Management Community reach out to us using the EHB Plan Management
Community well in advance of the deadline with any questions. Although
not a requirement, we recommended states submit applications at least
30 days prior to the submission deadline to ensure completion of their
documents by the proposed deadline. We also reminded states that they
must complete the required public comment period and submit a complete
application by the deadline. We solicited comment on the proposed
deadline.
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
deadline applicable to state selection of a new benchmark plan would
also apply to this state opt-in process. Therefore, we proposed May 7,
2021, as the deadline for states to notify us that they wish to permit
between-category substitution for the 2023 plan year. States wishing to
make such an election must do so via the EHB Plan Management Community.
We solicited comment on the proposed deadline.
We also reiterated the scope of benefits requirements at Sec.
156.111(b)(2). We finalized the definition of a typical employer plan
to establish the minimum level of benefits for the state's EHB-
benchmark plan selection and to ensure plans that meet EHB standards
are equal in scope to a typical employer plan as required under section
1302(2)(A) of the PPACA, and a generosity standard to establish the
[[Page 29227]]
maximum level of benefits for a state's EHB-benchmark plan selection.
The generosity standard at Sec. 156.111(b)(2)(ii) balances our
goal of promoting state flexibility with the need to preserve coverage
affordability by minimizing the opportunity for a state to select EHB
in a manner that would make coverage unaffordable for patients and
increase federal costs. As such, we clarified for states that when
selecting an updated EHB-benchmark plan from the available options
listed at Sec. 156.111(a), the new EHB-benchmark plan may not exceed
the generosity of the most generous among the set of comparison plans
listed at Sec. 156.111(b)(2)(ii) even by a de minimis amount, and that
states must clearly demonstrate in their actuarial report to HHS how
the state's updated EHB-benchmark plan satisfies the generosity test.
In other words, the generosity of the state's updated EHB-benchmark
plan may not exceed a 0.0 percentage point actuarial increase above the
most generous among the set of comparison plans listed at Sec.
156.111(b)(2)(ii).
Finally, we clarified that the typical employer plan and generosity
standard requirements are two separate tests that an EHB-benchmark plan
must satisfy. However, we recognized that there may be some instances
in which it may be difficult to design an EHB-benchmark plan that
satisfies both standards. Therefore, we reminded states that, as we
stated in the example methodology guidance,\135\ states should consider
using the same plan as the comparison plan for both tests, to the
extent possible, to help minimize burden and to mitigate against any
potential conflict caused by applying each test with a different
comparison plan.
---------------------------------------------------------------------------
\135\ Example of an Acceptable Methodology for Comparing
Benefits of a State's EHB-benchmark Plan Selection in Accordance
with 45 CFR 156.111(b)(2)(i) and (ii), available at https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-Example-Acceptable-Methodology-for-Comparing-Benefits.pdf.
---------------------------------------------------------------------------
Comment: Multiple commenters agreed with the proposed submission
deadlines.
Response: We are finalizing the deadlines as proposed. The deadline
for state submission of EHB-benchmark plan changes and to notify HHS
that the state will allow between-category benefit substitution for the
2023 plan year is May 7, 2021.
Comment: Some commenters asked for further clarification on the
generosity standard when states chose to select a new EHB-benchmark
plan. Others did not agree with the generosity standard. One commenter
noted that states could interpret the requirement for a proposed EHB-
benchmark plan not to exceed the generosity of the comparison plan to
allow a de minimis difference in actuarial value. Another commenter
stated that the 2019 Payment Notice did not sufficiently emphasize that
a state could not exceed the generosity standard.
Response: As provided at Sec. 156.111(e)(2)(ii), the actuary's
certification and report must affirm that the state's proposed EHB-
benchmark plan does not exceed the generosity of the most generous of
the plans listed at Sec. 156.111(b)(2)(ii)(A) and (B). Furthermore,
``does not exceed the generosity'' means that changes to the EHB-
benchmark plan cannot result in an increase in generosity beyond that
reference plan, no matter how de minimis. Finally, when a state selects
a new EHB-benchmark plan, the state must, among other requirements,
provide an actuarial certification and an associated actuarial report
from an actuary, who is a member of the American Academy of Actuaries,
in accordance with generally accepted actuarial principles and
methodologies, that affirms compliance with the generosity standard,
consistent with Sec. 156.111(e)(2).
Comment: Several comments were out of the scope of the proposals
and pertained to EHB benchmark policy in general. Some commenters noted
opposition to the policy previously finalized at Sec. 156.111 in the
2019 Payment Notice. Commenters stated that HHS should ensure that
states strictly comply with the requirement to provide public notice
and comment on the proposed benchmark plan, including by providing
detailed information about proposed changes and the actuarial report
that the state must submit to HHS. They also suggested that we
implement a federal notice and comment process for state benchmark plan
changes. Another commenter noted that the comment period should allow
commenters a significant amount of time to respond to the proposal,
while another commenter stated that states should notify interested
stakeholders when proposing changes to the benchmark. One commenter
suggested allowing states to add additional coverage of habilitative
services, outside of the process at Sec. 156.111. One commenter urged
us to implement a notice and comment process when a state wishes to
permit between-category benefit substitution.
Response: As these comments do not pertain to the proposals, we
will take them into consideration for future rulemaking. As stated in
the 2019 Payment Notice, we expect states to use a reasonable public
comment period.\136\ As a best practice, we encourage states to use the
public comment process delineated in any applicable state
administrative procedure law or regulations. States must submit a
complete application to HHS by the deadline, which means that the state
public comment period must have concluded prior to submitting the
application to HHS, so that the state can consider public comments
prior to submitting the final application.
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\136\ 83 FR at 17017.
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4. Essential Health Benefits Package (Sec. 156.130)
a. Premium Adjustment Percentage (Sec. 156.130)
We proposed to update the annual premium adjustment percentage
using the most recent estimates and projections of per enrollee
premiums for private health insurance (excluding Medigap and property
and casualty insurance) from the NHEA, which are calculated by the CMS
Office of the Actuary. For the 2021 benefit year, the premium
adjustment percentage will represent the percentage by which this
measure for 2020 exceeds that for 2013.
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.
The 2015 Payment Notice \137\ and 2015 Market Standards Rule \138\
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.
[[Page 29228]]
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. 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 the 2016 through 2019 benefit years, 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.
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\137\ 79 FR 13743.
\138\ 79 FR 30240.
---------------------------------------------------------------------------
In the 2020 Payment Notice, we adopted a modification of the
premium measure that we use to calculate the premium adjustment
percentage. This premium measure captures increases in individual
market premiums in addition to increases in employer-sponsored
insurance premiums for purposes of calculating the premium adjustment
percentage. Specifically, we calculate the premium measures for 2013
and 2020 as private health insurance premiums minus premiums paid for
Medicare supplement (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 used in the 2020 Payment Notice
is published by NHEA and includes NHEA estimates and projections of
employer-sponsored insurance and direct purchase insurance premiums,
but we excluded 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 used
per enrollee premiums for private health insurance (excluding Medigap
and property and casualty insurance) so that the premium measure would
more closely reflect premium trends for all individuals primarily
covered in the private health insurance market since 2013, and we
anticipated that the change to use per enrollee premiums for private
health insurance (excluding Medigap and property and casualty
insurance) would additionally reduce Federal PTC expenditures if the
Department of the Treasury and the IRS adopted the same premium
measure. The Department of the Treasury and the IRS have since adopted
the premium growth measure provided in the 2020 Payment Notice for
purposes of the indexing adjustments under section 36B of the
Code.\139\
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\139\ See Revenue Procedure 2019-29, 2019-32 IRB 620. https://www.irs.gov/pub/irs-drop/rp-19-29.pdf.
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We proposed to continue to use the NHEA private health insurance
premium measure (excluding Medigap and property and casualty insurance)
for the 2021 benefit year. As such, we proposed that the premium
adjustment percentage for 2021 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
2020 ($6,759) 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).\140\ Using this formula, the
proposed premium adjustment percentage for the 2021 benefit year was
1.3542376277 ($6,759/$4,991), which represents an increase in private
health insurance (excluding Medigap and property and casualty
insurance) premiums of approximately 35.4 percent over the period from
2013 to 2020. We sought comments on the proposed premium adjustment
percentage.
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\140\ The 2013 and 2020 per enrollee premiums for private health
insurance (excluding Medigap and property and casualty insurance)
figures used for this calculation were published 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 also
available on the CMS website.
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After reviewing public comments, we are finalizing the premium
adjustment percentage at the proposed value of 1.3542376277, based on
the NHEA data available at the time of proposal, for the 2021 benefit
year. The following is a summary of the public comments we received on
the premium adjustment percentage.
Comment: We received a few comments regarding the timing of NHEA
data updates that we use to calculate the premium adjustment percentage
index (PAPI) and associated payment parameters. For the 2020 Payment
Notice, these data were updated between the proposed and final rules,
and in order to reflect the most recent data available, we updated the
value of the premium adjustment percentage in the final 2020 Payment
Notice accordingly. Some commenters expressed concern that updates to
the NHEA data between the proposed and final rules could lead to
unpredictability in benefit design and pricing. They recommended that
even if NHEA data are updated between the proposed and final rules, we
should finalize the premium adjustment percentage using the NHEA data
that was available when the proposed rule was published.
Response: We understand some commenters' concern that issuers
require the payment parameters associated with the NHEA data as early
as possible prior to rate submissions to develop benefit designs and
pricing. In light of these comments, we clarify that for the 2021
benefit year and beyond, we are finalizing payment parameters that
depend on NHEA data, including the premium adjustment percentage and
required contribution percentage, based on the data that are available
as of the publication of the proposed rule for that benefit year, to
increase the predictability of benefit design. These payment parameters
include the premium adjustment percentage, the maximum annual
limitation on cost sharing, the reduced maximum annual limitations on
cost sharing for silver plan variations, and the required contribution
percentage. We are finalizing a premium adjustment percentage for the
2021 benefit year at 1.3542376277, as proposed.
Comment: All commenters on this proposal expressed concern with the
rate of increase in the PAPI and related payment parameters. Many
commenters specifically opposed the use of a premium measure that
includes individual market premium changes, on
[[Page 29229]]
the grounds that the use of that measure would lead to more rapid
increases in consumer costs than the ESI-only premium measure utilized
to calculate the PAPI prior to the 2020 benefit year. Commenters
expressed concerns that more rapid increases in the premium adjustment
percentage would lead to lower enrollment. We also received two
comments suggesting caps to the PAPI such that, if we maintain the
current measure, we should cap the PAPI to a maximum 3 percent annual
increase or that we should revise the calculation to allow for a few
years of transition between the ESI-only premium measure and premium
measures that include individual market premiums.
Response: As stated earlier in this preamble, we are finalizing the
proposed value of the premium adjustment percentage, using the measure
of premium growth that accounts for individual market health insurance
premiums, as well as employer-sponsored insurance that we finalized in
the 2020 Payment Notice, based on the data available at the time of the
proposal. We believe that a measure that incorporates employer-
sponsored insurance as well as individual market premiums is an
appropriate, comprehensive measure of premium growth as discussed in
the 2020 Payment Notice.\141\ As such, we will continue to calculate
the premium adjustment percentage using NHEA projections of per
enrollee premiums for private health insurance (excluding Medigap and
property and casualty insurance).
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\141\ See 84 FR 17454 at 17540.
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(1) Maximum Annual Limitation on Cost Sharing for Plan Year 2021
We proposed to increase the maximum annual limitation on cost
sharing for the 2021 benefit year based on the proposed value
calculated for the premium adjustment percentage for the 2021 benefit
year. Under Sec. 156.130(a)(2), for the 2021 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 2021. 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.
Using the premium adjustment percentage of 1.3542376277 for 2021 as
proposed, 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,\142\ we proposed that the 2021 maximum annual limitation on cost
sharing would be $8,550 for self-only coverage and $17,100 for other
than self-only coverage. This represents an approximately 4.9 percent
increase above the 2020 parameters of $8,150 for self-only coverage and
$16,300 for other than self-only coverage. We solicited comment on this
proposal.
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\142\ See Revenue Procedure 2013-25, 2013-21 IRB 1110. http://www.irs.gov/pub/irs-drop/rp-13-25.pdf.
---------------------------------------------------------------------------
After reviewing public comments, we are finalizing the maximum
annual limitation on cost sharing values at $8,550 for self-only
coverage and $17,100 for other than self-only coverage, as proposed.
The following is a summary of the public comments we received on the
maximum annual limitation on cost sharing.
Comment: Some commenters requested that HHS work with the IRS to
align the maximum annual limitation on cost sharing we publish based on
the PAPI and the maximum out-of-pocket value the IRS publishes
regarding high-deductible health plans (HDHPs). These commenters are
concerned that differences between the two maximum out-of-pocket values
would prevent issuers from offering HDHPs that will allow individuals
to contribute to health savings accounts (HSAs) as bronze plans.
Response: We recognize that the different requirements published by
the IRS and by HHS may result in some issuers being unable to offer
HSA-eligible HDHPs, in accordance with sections 223(c) and (g) of the
Code, within the actuarial value range for bronze metal level plans.
IRS and HHS are required to follow separate statutes for the maximum
annual limitation on cost sharing. The calculation for the maximum
annual limitation on cost sharing published by HHS is mandated by
section 1302(c)(1) of the PPACA and depends on the premium adjustment
percentage defined by section 1302(c)(4) of the PPACA as a measure of
growth in average per capita premiums. The annual updates to the HDHP
maximum out-of-pocket published by the IRS, however, are mandated by
section 223(g) of the Code and depend on a cost-of-living adjustment
defined as a measure of growth in the Chained Consumer Price Index for
all Urban Consumers by section 1(f)(3) of the Code. HHS will continue
to adhere to the calculation of the maximum annual limitation on cost
sharing mandated by the PPACA.
b. Reduced Maximum Annual Limitation on Cost Sharing (Sec. 156.130)
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 to serve enrollees at three ranges of household income below
250 percent of the federal poverty level (FPL). We are finalizing the
reductions in the maximum annual limitation on cost sharing as
proposed.
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 CSRs. Specifically, in part 156, subpart E,
we specified that QHP issuers must provide CSRs 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) of the PPACA 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) of the PPACA (that is, 73 percent, 87
percent, or 94 percent, depending on the income of the enrollee).
As we proposed, the 2021 maximum annual limitation on cost sharing
would be $8,550 for self-only coverage and $17,100 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 the
proposed rule, we described our analysis for the 2021 plan year and our
proposed results.
[[Page 29230]]
(1) Analysis for Determining the Reduced Maximum Annual Limitation on
Cost Sharing
Consistent with our analysis in the 2014 through 2020 Payment
Notices, we developed three test silver level QHPs, and analyzed the
impact on AV of the reductions described in the PPACA to the proposed
estimated 2021 maximum annual limitation on cost sharing for self-only
coverage ($8,550). The test plan designs are based on data collected
for 2020 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 2021, the test silver
level QHPs included a PPO with typical cost-sharing structure ($8,550
annual limitation on cost sharing, $2,650 deductible, and 20 percent
in-network coinsurance rate); a PPO with a lower annual limitation on
cost sharing ($6,800 annual limitation on cost sharing, $3,000
deductible, and 20 percent in-network coinsurance rate); and an HMO
($8,550 annual limitation on cost sharing, $4,375 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, $30 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 draft version of the 2021
AV Calculator \143\ 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), would not cause the AV of any of the model
QHPs to exceed the statutorily specified AV levels (94 and 87 percent,
respectively).
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\143\ Available at https://www.cms.gov/cciio/resources/
regulations-and-guidance/index.
---------------------------------------------------------------------------
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), would 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 4.
The proposed reductions in the maximum annual limitation on cost
sharing must adequately account for unique plan designs that may not be
captured by our three model QHPs. We also noted that selecting a
reduction for the maximum annual limitation on cost sharing that is
less than the reduction specified in the statute would 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.
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, the statutory
reductions 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 solicited comment on this
analysis and the proposed reductions in the maximum annual limitation
on cost sharing for 2021.
We note that for 2021, as described in Sec. 156.135(d), states are
permitted to submit for HHS approval state-specific datasets for use as
the standard population to calculate AV. No state submitted a dataset
by the September 1, 2019 deadline.
Table 4--Reductions in Maximum Annual Limitation on Cost Sharing for 2021
----------------------------------------------------------------------------------------------------------------
Reduced maximum annual
Reduced maximum annual limitation on cost
Eligibility category limitation on cost sharing for other than
sharing for self-only self-only coverage for
coverage for 2021 2021
----------------------------------------------------------------------------------------------------------------
Individuals eligible for CSRs under Sec. 155.305(g)(2)(i) $2,850 $5,700
(100-150 percent of FPL).....................................
Individuals eligible for CSRs under Sec. 155.305(g)(2)(ii) 2,850 5,700
(151-200 percent of FPL).....................................
Individuals eligible for CSRs under Sec. 155.305(g)(2)(iii) 6,800 13,600
(201-250 percent of FPL).....................................
----------------------------------------------------------------------------------------------------------------
We received no comments on the reductions in the maximum
limitations on cost sharing apart from those already discussed in this
preamble. As such, we are finalizing the 2021 values as proposed
(reproduced in Table 4).
c. Cost-Sharing Requirements (Sec. 156.130)
We proposed to revise Sec. 156.130(h) to provide that,
notwithstanding any other provision on the annual limitation on cost
sharing, and to the extent consistent with applicable state law,
amounts paid toward reducing the cost sharing incurred by an enrollee
using any form of direct support offered by drug manufacturers to
enrollees for specific prescription drugs are permitted, but not
required, to be counted toward the annual limitation on cost sharing.
We also proposed to interpret the definition of cost sharing to exclude
expenditures covered by direct drug manufacturer support. We are
generally finalizing the policy as proposed with a minor revision to
the title of the regulatory provision to reflect its application to all
forms of direct support provided by drug manufacturers, which include
coupons for specific prescription drugs. However, we are not finalizing
the proposed interpretation of the definition of cost sharing to
exclude these amounts from that term.
[[Page 29231]]
In the 2020 Payment Notice at Sec. 156.130(h)(1), we finalized
that, for plan years beginning on or after January 1, 2020,
notwithstanding any other provision of Sec. 156.130, and to the extent
consistent with applicable 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. In that rule, we expressed
concern that market distortion can exist when a consumer selects a
higher-cost brand name drug when an equally effective generic drug is
available.
Since finalizing Sec. 156.130(h)(1) in that rule, we received
feedback indicating confusion about whether it requires plans and
issuers to count the value of all forms of direct support provided by
drug manufacturers, including drug manufacturers' coupons, toward the
annual limitation on cost sharing, other than in circumstances in which
there is a medically appropriate generic equivalent available,
particularly with regard to large group market and self-insured group
health plans. On August 26, 2019, HHS and the Departments of Labor and
the Treasury released FAQ Part 40,\144\ acknowledging the confusion
among stakeholders and the possibility that the requirement could
create a conflict with certain rules for HDHPs that are intended to
allow eligible individuals to establish an HSA.
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\144\ Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-40.pdf.
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Specifically, Q&A-9 of IRS Notice 2004-50 \145\ states that the
provision of drug discounts will not disqualify an individual from
being an eligible individual if the individual is responsible for
paying the costs of any drugs (taking into account the discount) until
the deductible under the HDHP is satisfied. Thus, Q&A-9 of IRS Notice
2004-50 requires an HDHP to disregard drug discounts and other
manufacturer and provider discounts when determining if the deductible
for an HDHP has been satisfied, and only allows amounts actually paid
by the individual to be taken into account for that purpose. Therefore,
an issuer or sponsor of an HDHP could be put in the position of
complying with either the requirement under the 2020 Payment Notice for
limits on cost sharing in the case of direct support provided by drug
manufacturers for a brand name drug with no available or medically
appropriate generic equivalent or the IRS rules for minimum deductibles
for HDHPs, but potentially being unable to comply with both rules
simultaneously.\146\
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\145\ 2004-2 C.B. 196, available at https://www.irs.gov/pub/irs-drop/n-04-50.pdf.
\146\ FAQs About Affordable Care Act Implementation Part 40.
August 26, 2019. Available at https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/FAQs-Part-40.pdf and https://www.dol.gov/agencies/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-40.
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Accordingly, in FAQ Part 40, we explained that we intended to
undertake rulemaking in the HHS Notice of Benefit and Payment
Parameters for 2021, in consultation with the Departments of Labor and
the Treasury to address the conflict, and that until the 2021 Payment
Notice is issued and effective, the Departments will not initiate an
enforcement action if an issuer of group or individual health insurance
coverage or a group health plan excludes the value of direct support
provided by drug manufacturers from the annual limitation on cost
sharing, including in circumstances in which there is no medically
appropriate generic equivalent available.
In the proposed rule, we proposed to revise Sec. 156.130(h) in its
entirety to provide that, notwithstanding any other provision of the
annual limitation on cost sharing regulation, and to the extent
consistent with applicable state law, amounts paid toward reducing the
cost sharing incurred by an enrollee using any form of direct support
offered by drug manufacturers to enrollees for specific prescription
drugs are permitted, but not required, to be counted toward the annual
limitation on cost sharing. Under the proposal, plans and issuers would
have the flexibility to determine whether to include or exclude dollar
amounts of direct support provided by drug manufacturers from the
annual limitation on cost sharing, regardless of whether a generic
equivalent is available, when otherwise consistent with applicable
requirements.
We also proposed to interpret the definition of cost sharing to
exclude expenditures covered by drug manufacturer coupons, without
proposing any changes to the regulatory definition of cost sharing
under Sec. 155.20. Under the proposed interpretation, the value of the
direct support provided by drug manufacturers would not be required to
count towards the annual limitation on cost sharing.
Section 1302(c)(3)(A) of the PPACA defines the term cost sharing to
include: (1) Deductibles, coinsurance, copayments, or similar charges;
and (2) any other expenditure required of an insured individual which
is a qualified medical expense \147\ with respect to EHB covered under
the plan. Section 1302(c)(1) of the PPACA states that the cost sharing
incurred under a health plan shall not exceed the annual limitation on
cost sharing. We explained that, under the proposed interpretation,
direct support provided by drug manufacturers, including coupon
amounts, would be viewed as reducing the costs incurred by an enrollee
under the health plan because they would reduce the amount that the
enrollee is required to pay in order to obtain coverage for the drug.
The value of the coupon would not be considered a cost incurred by or
charged to the enrollee; thus, we explained its value would not be
required to count toward the annual limitation on cost sharing.
---------------------------------------------------------------------------
\147\ As defined in section 223(d)(2) of the Code.
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Under this proposed interpretation, and to the extent consistent
with applicable state law, we sought to provide issuers of non-
grandfathered individual and group market coverage, and all non-
grandfathered group health plans subject to section 2707(b) of the PHS
Act, flexibility to determine whether to include or exclude amounts of
direct support provided by drug manufacturers from the annual
limitation on cost sharing, regardless of whether a medically
appropriate generic equivalent is available.\148\ The proposal would
enable issuers and group health plans to continue longstanding
practices with regard to how and whether direct drug manufacturer
support accrues towards an enrollee's annual limitation on cost
sharing.\149\
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\148\ We note that an issuer or group health plan that elects to
credit direct drug manufacturer support amounts toward the minimum
deductible of an HDHP could disqualify an individual from making HSA
contributions, pursuant to Q&A-9 of Notice 2004-50.
\149\ The annual limitation on cost sharing under section
1302(c)(1) of the PPACA is applied to non-grandfathered group health
plans by section 2707(b) of the PHS Act, which is incorporated by
reference into ERISA and the Code. Therefore, we generally refer to
both issuers and group health plans when describing the policy
regarding the annual limitation on cost sharing in this section of
the preamble.
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As noted, the proposal would also afford issuers of non-
grandfathered individual and group market coverage, and all non-
grandfathered group health plans subject to section 2707(b) of the PHS
Act, the same opportunity as under the current Sec. 156.130(h)(1) to
incentivize generic drug usage by excluding the amounts of direct drug
manufacturer support for brand name drugs from the annual limitation on
cost sharing when a medically appropriate generic equivalent is
available. We
[[Page 29232]]
stated that we expect issuers and group health plans to be transparent
with enrollees and prospective enrollees regarding whether the value of
direct drug manufacturer support accrues to the annual limitation on
cost sharing as such policies would affect enrollees' out-of-pocket
liability under their plans. We also stated we would expect issuers to
prominently include this information on websites and in brochures, plan
summary documents, and other collateral material that consumers may use
to select, plan, and understand their benefits.
We received many comments on this proposal.
Comment: Some commenters supported the proposed policy, noting that
the policy would give health insurance issuers and group health plans
increased flexibility to address the cost of brand name drugs and lower
the cost of health insurance overall. Others supported the proposal's
deference to state law, regulations, and guidance on whether drug
manufacturer support accrues towards the annual limitation on cost
sharing. One commenter recommended that the regulation text be revised
to require that all drug manufacturer financial assistance be treated
the same way, whether provided directly or through a surrogate
organization.
Numerous commenters and individuals opposed permitting insurers to
exclude direct support from drug manufacturers from amounts enrollees
have paid toward the annual limitation on cost sharing. These
commenters urged HHS not to finalize the proposal, and to leave the
policy established in the 2020 Payment Notice. These commenters
asserted that the proposal is in direct opposition to the
administration's stated goals of reducing drug prices for patients.
Additionally, they expressed concern that patient costs would increase
dramatically, which could lead to greater non-adherence to medications
and ultimately impact the life and health of patients.
Response: For the reasons stated in the proposed rule, and as
further described in responses to comments in this subsection of the
preamble, we are generally finalizing this policy as proposed, except
we are making a non-substantive change to the title of the regulatory
provision to ``Use of direct support offered by drug manufacturers''
and are not finalizing the proposed interpretation of the definition of
cost sharing to exclude expenditures covered by direct drug
manufacturer support.
We agree with commenters who supported the provision of the policy
that states it is only effective to the extent consistent with state
law. As finalized, Sec. 156.130(h) provides states with the
flexibility to promulgate rules that would require direct drug
manufacturer support amounts to be counted by health insurance issuers
towards the annual limitation on cost sharing. To the extent states
want to require health insurance issuers to count direct drug
manufacturer support amounts towards the annual limitation on cost
sharing, they can do so when such action would be consistent with other
applicable laws and rules (for example, federal non-discrimination
requirements). At the same time, however, states also have flexibility
to promulgate rules that would mandate exclusion of such amounts from
the annual limitation on cost sharing.
We appreciate commenters' concerns that the proposal could raise
out-of-pocket costs for consumers who use brand name drugs. However, we
believe the impact of such costs may be limited if issuers that
currently allow these amounts to be counted toward enrollees'
deductibles or their annual limitation on cost sharing continue their
current behavior, which we believe will be the case. \150\ As stated in
the proposed rule, the flexibility provided under this policy will
enable issuers and group health plans to continue longstanding
practices with regard to how and whether direct drug manufacturer
support accrues towards an enrollee's annual limitation on cost
sharing. Prior to the 2020 Payment Notice, federal rules did not
explicitly state whether issuers and group health plans had the
flexibility to determine how to factor in direct drug manufacturer
support amounts towards the annual limitation on cost sharing. While
the policy finalized in the 2020 Payment Notice may have caused
confusion, FAQ Part 40, released in August 2019, provided issuers and
group health plans with sufficient notice that issuers and group health
plans may choose to maintain their existing plan designs for plan year
2020. This final rule, combined with FAQ Part 40, ensures that issuers
and group health plans need not make changes to how they have
historically handled direct drug manufacturer support amounts. Issuers
and group health plans will continue to have flexibility, subject to
state law and other applicable requirements (if any), to determine if
and how to factor in direct drug manufacturer support amounts towards
the annual limitation on cost sharing. Longstanding practices of
including these amounts towards the annual limitation on cost sharing
can continue. Although, consistent with the Administration's efforts to
combat high and rising out-of-pocket costs for prescription drugs, we
continue to encourage issuers to find innovative methods to address the
market distortion that occurs when consumers select a higher-cost brand
name drug over an equally effective, medically appropriate generic
drug. This includes, to the extent consistent with state law and other
applicable requirements, leveraging the flexibility to exclude direct
drug manufacturer support amounts from the annual limitation on cost
sharing, given the market distortive effects such support can cause. We
do not expect any significant increases in patient costs or non-
adherence to medications if issuers choose to continue their current
behavior. Therefore, we believe the impact to consumers will be minimal
if issuers choose to continue their current behavior.
---------------------------------------------------------------------------
\150\ In fact, no comments submitted by the health insurance
industry on this policy in the 2021 Payment Notice proposed rule
expressed a desire to change their current practices.
---------------------------------------------------------------------------
While we believe it is unlikely that issuers will choose to change
their longstanding practices, we acknowledge the possibility that some
issuers or group health plans may make changes to their plan designs to
exclude direct drug manufacturer support amounts from the annual
limitation on cost sharing. In these limited circumstances, consumers
enrolled in such plans may see changes to their plan design, such as
changes to formulary designs or cost-sharing structures, which may
increase or decrease their out-of-pocket costs for a specific
prescription drug. Given the multitude of variables and considerations
that are out of HHS's control, we cannot project this burden with
sufficient certainty. For issuers and group health plans that do make
changes to their longstanding practices, we continue to encourage
transparency with regard to changes in how direct drug manufacturer
support amounts count towards the annual limitation on cost sharing.
For example, we encourage issuers to prominently include this
information on websites and in brochures, plan summary documents, and
other collateral material that consumers may use to select, plan, and
understand their benefits. If we find that such transparency is not
provided, HHS may consider future rulemaking to require that issuers
provide this information in plan documents and collateral material. We
also remind issuers that when determining if and how to factor in
direct drug
[[Page 29233]]
manufacturer support amounts towards the annual limitation on cost
sharing, such policies must apply in a uniform, non-discriminatory
manner.\151\ Lastly, while we did not propose and are not finalizing
policies regarding indirect drug manufacturer support of specific
drugs, we do intend to continue to monitor the impact of such support.
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\151\ See, for example, 45 CFR 146.121, 147.104(e), 147.110,
156.125, and 156.225, as applicable.
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Comment: Some commenters supported the policy, stating that it
ensures the viability of HSAs that may be paired with HDHPs. Opposing
commenters expressed concern that HHS's rationale for choosing not to
maintain and enforce the rule as finalized in the 2020 Payment Notice
is based on a misinterpretation of Q&A 9 of IRS Notice 2004-50 and that
no conflict exists. Several commenters questioned whether the scenario
described in Q&A 9 of IRS Notice 2004-50 referenced in the proposed
rule applies to direct drug manufacturer support. One commenter noted
that a ``discount card'' is separate and distinct from a drug maker
coupon, traditionally used in lieu of health insurance, and therefore,
was excluded from the calculation of annual deductibles when the IRS
issued Notice 2004-50. This commenter also noted that copay assistance
from a drug maker has traditionally counted toward annual deductibles
and out-of-pocket limits, and therefore, it is highly unlikely that the
IRS was referring to drug manufacturers' coupons in its notice.
Many commenters requested that HHS clarify that the rule does not
conflict with rules relating to HDHPs with HSAs. Many commenters also
noted that the 2020 Payment Notice could not conflict with IRS Notice
2004-50 because it is explicitly described as ``guidance on Health
Savings Accounts,'' and therefore, does not carry the force of law. One
commenter noted that in section 223(c)(2) of the Code, which defines
the term ``high deductible health plan,'' that there was no mention in
the statute of precisely who must bear the cost of the established
deductible, nor any requirement that assistance with cost sharing, from
any party, be excluded from the deductible.
Another commenter was concerned that health plans could
misinterpret these statements to mean that HHS is directing them to
exclude manufacturer assistance from patient cost-sharing limits, which
could accelerate a trend toward ``accumulator adjustment programs,''
which are utilization management tools pharmacy benefit managers and
health plans may use that exclude copay assistance from counting toward
a patient's deductible or annual limitation on cost sharing.
Response: As explained in FAQ Part 40, since publication of the
2020 Payment Notice, the Departments received feedback indicating there
was confusion about whether the HHS policy finalized in the 2020
Payment Notice required plans and issuers to count the value of drug
manufacturers' coupons toward the annual limitation on cost sharing,
other than in circumstances in which there is a medically appropriate
generic equivalent available, particularly with regard to large group
market and self-insured group health plans. The Departments considered
the information provided by stakeholders and agreed that the federal
standards regarding the application of drug manufacturers' coupons to
the annual limitation on cost sharing was ambiguous. FAQ Part 40 also
explained that the Departments would not initiate an enforcement action
if an issuer of group or individual health insurance coverage or a
group health plan excludes the value of direct support provided by drug
manufacturers from the annual limitation on cost sharing. In the
proposed rule and this final rule, we seek to clarify the HHS policy
and address the confusion, including the potential conflict, identified
by stakeholders.
Since its enactment, section 223 of the Code has provided that
individuals covered by an HDHP may not have medical expenses paid by
other coverage prior to satisfying the deductible and remain eligible
to contribute to an HSA (with certain limited exceptions, such as
preventive care or disregarded coverage). There is no requirement that
individuals covered by an HDHP exclusively pay for medical expenses
they incur before meeting the deductible (and so, for example, family
members may provide assistance as a gift to the individual, which may
include paying for medical expenses on behalf of the individual).
However, the HDHP is not permitted to credit the deductible in a manner
that does not reflect the actual cost of medical care to the
individual.
Whether or not this principle is directly applicable to a
particular arrangement, it is consistent with the guidance provided in
IRS Notice 2004-50. If a third party involved in the provision of a
service or product that resulted in the medical expense, such as a drug
manufacturer, has arranged for a rebate or discount for the individual
tied to the individual incurring the medical expense, whether via a
drug discount card or a drug coupon, the true economic cost to the
individual is the net amount incurred. Accordingly, to meet the
requirements of section 223 of the Code, an HDHP may only take into
account that net amount when determining whether the individual has
satisfied the deductible. Therefore, a conflict between the HHS policy
finalized in the 2020 Payment Notice and the provisions of section 223
of the Code and IRS guidance may exist for issuers who elect to include
drug manufacturer support amounts towards the consumer's deductible and
annual limitation on cost sharing if the consumer is enrolled in an
HDHP coupled with an HSA. In addition, stakeholders expressed confusion
about these issues and the possibility that the HHS policy on the
annual limitation on cost sharing could create a conflict with certain
IRS rules. For example, stakeholders raised questions related to
certain administrative issues related to how to determine and apply the
net amount to the deductible when an individual receives this type of
payment. The Department of the Treasury and the IRS continue to review
the comments from stakeholders on the IRS rules on HDHPs to determine
if additional guidance would assist in lowering plan burdens while
still ensuring the deductible is applied in compliance with the
requirements of section 223 of the Code. In this rule, we clarify that
the HHS policy on the annual limitation on cost sharing is intended to
provide maximum flexibility and allow issuers to avoid this type of
conflict for those situations where it may arise.
Under the policy finalized in this rule, issuers have flexibility,
when consistent with state law, to determine if and how to factor in
direct drug manufacturer support amounts towards the annual limitation
on cost sharing, subject to applicable requirements such as federal
non-discrimination laws.
Finally, HHS further clarifies that, under the policy finalized in
this rule, issuers and group health plans remain free to continue
longstanding policies with regard to how direct drug manufacturer
support accrues towards accumulators. We do not require and are not
directing issuers and group health plans to any specific practice with
regards to how these amounts are treated with respect towards
accumulators. However, recognizing the market distortion effects
related to direct drug manufacturer support amounts when consumers
select a higher-cost brand name drug over an equally effective,
medically appropriate generic drug and as part of our efforts
[[Page 29234]]
to combat the high and rising out-of-pocket costs for prescription
drugs, we encourage issuers and group health plans to consider the
flexibility to exclude these amounts from the annual limitation on cost
sharing as one tool that could be used to address these concerns.
Comment: Multiple commenters expressed concern about our
interpretation of the term ``cost sharing.'' Most commenters found the
interpretation of cost sharing in the proposed rule to be inconsistent
with the definition of ``cost sharing'' in 45 CFR 155.20, which
provides that ``cost sharing means any expenditure required by or on
behalf of an enrollee with respect to essential health benefits.''
Commenters argued that drug manufacturer coupons offered on behalf of
plan enrollees fall within the definition of cost sharing. One
commenter noted the proposed rule failed to acknowledge that many other
forms of patient assistance exist beyond direct drug manufacturer
support, such as crowdfunding amounts, durable medical equipment (DME)
manufacturer support, and waived medical debt, and thus failed to
explain why the proposal singles out direct drug manufacturer
assistance, or to explain how the policy, more broadly applied, would
impact these other types of assistance.
Response: After consideration of comments, we are not finalizing
the proposed interpretation to exclude expenditures covered by drug
manufacturer coupons and other drug manufacturer direct support from
the definition of cost sharing at 45 CFR 155.20. Excluding such amounts
from the federal definition of cost sharing would be inconsistent with
the flexibility we are seeking to provide to issuers in this rulemaking
and could be seen as a barrier for issuers who want to include these
amounts towards a consumer's annual limitation on cost sharing when
otherwise consistent with applicable federal and state requirements.
As some commenters noted, drug manufacturer coupons offered to plan
enrollees can be interpreted as falling within the existing definition
of cost sharing. More specifically, ``cost sharing,'' as defined at
section 1302(c)(3)(A) of PPACA and implemented at Sec. 155.20, are
expenditures required by or on behalf of an enrollee with respect to
EHB, and include deductibles, coinsurance, copayments or similar
charges. The value of the direct drug manufacturer support can be
considered part of the overall charges incurred by the enrollee as the
consumer cannot obtain the drug without providing the full amount owed.
For example, if a consumer is responsible for a $50 co-pay for a brand
name drug, the consumer cannot obtain the drug at the point of sale
without providing the full $50 (whether with $50 cash, or $30 cash with
the $20 coupon). At the same time, however, as stated in the proposed
rule, the value of the direct drug manufacturer support could be viewed
as not representing costs incurred by or charged to enrollees. Instead,
such amounts could be viewed as representing a reduction, by drug
manufacturers, in the amount that the enrollee is required to pay at
the point of sale in order to obtain the drug. We have therefore
determined that the term ``cost sharing'' is subject to interpretation
regarding whether these amounts fall under this definition. To provide
maximum flexibility for states and issuers to decide if and how to
factor in direct drug manufacturer support amounts towards the annual
limitation on cost sharing, we are not finalizing the proposed
interpretation to exclude such amounts from the definition of cost
sharing.
For issuers who elect to include these amounts towards a consumer's
annual limitation on cost sharing, the value of direct drug
manufacturer support would be considered part of the overall charges
incurred by the enrollee. For issuers who elect to not count these
amounts towards the consumer's annual limitation on cost sharing, the
value of the direct drug manufacturer support would be considered a
reduction in the amount that the enrollee incurs or is required to pay.
As we explained above, when determining if and how to factor in direct
drug manufacturer support amounts towards the annual limitation on cost
sharing, issuers must apply such policies in a uniform, non-
discriminatory manner. In addition, issuers should be clear and
transparent in communications with enrollees and prospective enrollees
regarding whether the value of drug manufacturer support accrues to the
annual limitation on cost sharing. We encourage issuers to prominently
include this information on websites and in brochures, plan summary
documents, and other collateral material that consumers may use to
select, plan, and understand their benefits.
We also disagree with comments that the proposed rule did not
adequately explain the policy or the rationale for tailoring this
policy to direct support provided by drug manufacturers. We explained
in the proposed rule that the flexibility afforded under this policy
was proposed specifically to address market distortion caused by direct
support, including coupons, from drug manufacturers. As we explained in
the 2020 Payment Notice proposed rule, we recognize that copayment
support may help enrollees by encouraging adherence to existing
medication regimens, particularly when copayments may be unaffordable
to many patients.\152\ However, the availability of a coupon or other
direct support may cause physicians and enrollees 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
cost of drugs. Such direct support from drug manufacturers can add
significant long-term costs to the health care system. In some cases,
this direct support 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. Further, the
Administration has identified high and rising out-of-pocket costs for
prescription drugs, among other issues, as a challenge to consumers.
For these reasons, we pursued a policy that was focused on direct drug
manufacturer support. We currently have no evidence that the other
types of support identified by the commenter (for example, crowdfunding
amounts, waived medical debt, or support toward the purchase of DME)
has similar distortive effects on the market as manufacturer support
for brand name prescription drugs.\153\ Further, we are unaware of any
DME providers that provide financial incentives to compete with
`generic' versions of their product. Thus, we did not propose and are
not finalizing cost sharing policies regarding such amounts, but will
monitor them and their potential impact on the market for potential
future rulemaking.
---------------------------------------------------------------------------
\152\ See 84 FR 227 at 290-291.
\153\ HHS previously identified concerns with respect to cost-
sharing support from hospitals, other healthcare providers and other
commercial entities. See, for example, https://www.cms.gov/cciio/resources/fact-sheets-and-faqs/downloads/third-party-qa-11-04-2013.pdf. We also continue to monitor these practices and their
impact on the market for potential further action, if necessary.
---------------------------------------------------------------------------
Comment: Several commenters appreciated the recommendation that
issuers and group health plans consider adopting the practice of
excluding any value an enrollee may obtain from a prescription drug
manufacturer's cost-sharing assistance program and should
[[Page 29235]]
disclose this practice on all websites, brochures, plan documents and
other collateral materials. However, numerous commenters expressed
concern that putting the onus on issuers and group health plans to
inform the consumer about any policy to not count direct drug
manufacturer support towards the annual limitation on cost sharing
limit is inadequate. These commenters recommended that HHS require that
issuers and group health plans clearly communicate to enrollees in
their summaries of benefits and coverage and in their summary plan
descriptions that direct drug manufacturer support does not count
toward their deductibles or out-of-pocket maximums. One commenter
opposed placing a new notice requirement on issuers and group health
plans. An additional commenter noted that any efforts aimed at
supporting transparency must also include a requirement that drug
manufacturers fully disclose all direct payments they make on behalf of
plan enrollees.
Response: We agree with commenters that it is important for issuers
and group health plans to be clear and transparent with consumers
regarding whether direct drug manufacturer support amounts will count
towards the annual limitation on cost sharing, especially when such
amounts will not be counted towards the annual limitation on cost
sharing. This information may be essential for a consumer in deciding
between plans. However, we did not propose such a requirement in the
proposed rule and are not finalizing such a requirement in this rule.
We intend to continue to monitor this issue, including how issuers
disclose such information and may propose further rulemaking to impose
robust disclosure requirements if we find that enrollees are not
provided sufficient information on these practices. Further, while we
encourage drug pricing transparency among drug manufacturers, we did
not propose a requirement that drug manufacturers fully disclose all
direct payments that are made on behalf of plan enrollees, and
therefore this issue is outside of the scope of this rule.
5. Requirements for Timely Submission of Enrollment Reconciliation Data
(Sec. 156.265)
In the Establishment of Exchanges and Qualified Health Plans;
Exchange Standards interim final rule,\154\ we established standards
for the collection and transmission of enrollment information. At Sec.
156.265(f), we set forth standards on the enrollment reconciliation
process, specifying that issuers must reconcile enrollment with the
Exchange no less than once a month. Issuers in Exchanges using the
Federal platform, that is, FFEs and SBE-FP, currently update data
through ongoing processes collectively referred to as Enrollment Data
Alignment, which includes 834 transactions, the monthly enrollment
reconciliation cycle, and two dispute processes (enrollment disputes
and payment disputes) that are used to make enrollment updates that
cannot be handled through monthly reconciliation. Issuers offering
plans through State Exchanges update Exchange data through processes
designed by the State Exchange.
---------------------------------------------------------------------------
\154\ See 77 FR 18309 at 18425.
---------------------------------------------------------------------------
Although the regulations in Sec. 156.265 require issuers to
reconcile enrollment with the Exchange monthly, they do not specify
standards for the format or quality of these data exchanges, such as
the manner in which enrollment updates must be reflected in updates of
previously submitted enrollment data, or the timeframe in which issuers
should report data updates and data errors to the Exchange. If QHP
issuers fail to make or report enrollment updates accurately and
timely, the accuracy of payment, the accuracy of enrollment data that
the Exchange has available to address consumer questions, and the
accuracy of the data reported to consumers on their IRS Forms 1095-A,
Health Insurance Marketplace Statement, after the end of the coverage
year could be affected. For example, if an issuer does not regularly
update its enrollment data to reflect retroactive enrollment changes
throughout the year, and instead submits large volumes of changes to
the Exchange well after the plan year has ended, these late changes may
trigger the mailing of corrected Forms 1095-A to consumers after tax
season, creating consumer burden and confusion.
To more explicitly state requirements for issuers in the Exchanges,
we proposed amending Sec. 156.265(f) to require an issuer to include
in its enrollment reconciliation submission to the Exchange the most
recent enrollment information that is available and that has been
verified to the best of its knowledge or belief. We also proposed to
amend Sec. 156.265(g) to direct QHP issuers to update their enrollment
records as directed by the Exchange, and to inform the Exchange if any
such records contain errors, within 30 days. We believe these
amendments will encourage more timely reconciliation and error
reporting, resulting in an improved consumer experience. We stated in
the proposed rule that, for SBE-FPs, references in this section to the
``Exchange'' should be understood to mean HHS, as administrator of the
Federal platform. We sought comments on these proposed amendments.
After reviewing public comments, we are finalizing amendments to
the enrollment reconciliation data submission requirements in Sec.
156.265 as proposed to require an issuer to include in its enrollment
reconciliation submission to the Exchange the most recent enrollment
information that is available. HHS looks forward to working with
issuers on improving the reconciliation process to promote the exchange
of timely and accurate data between QHP issuers and Exchanges.
Below, we summarize public comments received on these proposals.
Comment: Several commenters supported the proposal stating it will
help improve the enrollment reconciliation process allowing both QHPs
and Exchanges to have timely and accurate data.
Response: HHS agrees with these comments and is finalizing the
policy as proposed.
Comment: One commenter proposed changes to Sec. 156.265(g)(1) and
(2). This commenter asked that HHS change the word ``confirm'' to
``verify'' in Sec. 156.265(g)(1). The commenter was concerned that use
of the word ``confirm'' could be misunderstood as referring to the
Confirmation/Effectuation ASC X12 Benefit Enrollment and Maintenance
(834) file. This commenter also suggested that HHS change the word
``describe'' in Sec. 156.265(g)(2) to ``resolve for'' as ``describe''
does not convey that an issuer has the responsibility to make any
necessary enrollment updates in issuer systems and electronically send
corresponding enrollment information to update Exchange records.
Response: HHS agrees with the recommendation regarding Sec.
156.265(g)(1) and will amend it to avoid any potential
misunderstanding. HHS does not agree with the suggested change to
(g)(2). The suggested ``resolve for'' edit implies that it is entirely
within the issuer's control. While the issuer needs to report the
problem, resolving it is a joint process that involves both the issuer
and the Exchange. However, to address the issuer's concern, we are
adding the language ``and resolved assigned updates'' to Sec.
156.265(f) to make it clear that the issuer is responsible for
resolving assigned updates in its own system during reconciliation.
Comment: One commenter asked HHS to provide additional
clarification on issuer responsibilities to send updates
[[Page 29236]]
to the Exchange within 30 days of an enrollment dispute. Another
commenter recommended that issuers continue submitting monthly files as
part of the enrollment reconciliation process, but should not be
penalized for failure to report all errors or changes within 30 days.
Response: QHP issuers should make their best effort to actively
monitor their enrollment data for accuracy in real time and to report
all known data errors and changes to the Exchange within 30 days. If
QHP issuers fail to make or report enrollment updates accurately and
timely, the accuracy of payment, the accuracy of enrollment data that
the Exchange has available to address consumer questions, and the
accuracy of the data reported to consumers on their IRS Form 1095-As
after the end of the coverage year could be affected. HHS notes that
some issuers currently review enrollment and payment data for errors
after the plan year has ended, leading to late payment and Form 1095-A
corrections, and therefore, we are making this change to clarify that
issuers have a responsibility to actively review their data on an
ongoing basis and report corrections timely to HHS. HHS intends to
monitor compliance with this requirement as a risk factor for targeting
issuers for payment audits.
6. Promoting Value-Based Insurance Design
In this section of the proposed rule, we sought to promote a
consumer-driven health care system in which consumers are empowered to
select and maintain health care coverage of their choosing. We proposed
to offer QHP issuers options to assist them design value-based
insurance plans that would empower consumers to receive high value
services at lower cost.
In the 2017, 2018, and 2019 Payment Notices, we sought comment on
ways in which HHS can foster market-driven programs that can improve
the management and costs of care and that provide consumers with
quality, person-centered coverage. We also sought comment on how we may
encourage value-based insurance design within the individual and small
group markets and ways to support issuers in using cost sharing to
incentivize more cost-effective consumer behavior. We solicited
comments on how HHS can better encourage these types of plan designs,
and whether any existing regulatory provisions or practices discourage
such designs.
We also previously noted our interest in value-based insurance
designs that: Focus on cost effective drug tiering structures; address
overused, higher cost health services; provide innovative network
design that incentivizes enrollees to use higher quality care; and
promote use of preventive care and wellness services. In response to
these comment solicitations, we received many comments supporting HHS's
efforts to explore ways to encourage innovations and value-based
insurance design.
In the proposed rule, we stated that we are pursuing strategies
that will assist in the uptake and offering of value-based insurance
design by QHP issuers. Specifically, we outlined a ``value-based''
model QHP that contains consumer cost-sharing levels aimed at driving
utilization of high value services and lowering utilization of low
value services when medically appropriate.
Currently, under our rules, issuers have considerable discretion in
the design of cost-sharing structures, subject to certain statutory AV
requirements, non-discrimination provisions,\155\ and other applicable
laws such as the MHPAEA (section 2726 of the PHS Act). We did not
propose any changes to this flexibility. We are providing additional
specificity around value-based design and how issuers could opt to
incorporate such design into their QHPs. Offering a value-based
insurance design QHP would be voluntary and issuers are encouraged to
select services and cost sharing that work best for their consumers.
---------------------------------------------------------------------------
\155\ We note that issuers are also subject to federal civil
rights laws, including Title VI of the Civil Rights Act. Section 504
of the Rehabilitation Act, the Age Discrimination Act, section 1557
of the PPACA, and conscience and religious freedom laws.
---------------------------------------------------------------------------
Borrowing from work provided by the Center for Value-based
Insurance Design at the University of Michigan \156\ (the Center),
Table 5 lists high value services and drugs that an issuer may want to
consider offering with lower or zero cost sharing. Table 5 also
includes a list of low value services that issuers should consider
setting at higher consumer cost sharing. High value services are those
that most people will benefit from and have a strong clinical evidence
base demonstrating appropriate care. The high value services and drugs
identified in Table 5 are supported by strong clinical effectiveness
evidence. Low value services are those services in which the majority
of consumers would not derive a clinical benefit. The Center considered
services that have been identified by other aligned efforts, such as
the Choosing Wisely initiative, the Value-based Insurance Design Health
Task Force on Low Value Care, the Oregon Public Employee's Benefits
Board, SmarterCare CA, and the Washington State Health Authority.\157\
The Center's research has shown that a silver level of coverage base
plan could alter the cost sharing as we proposed in Table 5 of the
proposed rule and could achieve a zero impact on plan premiums, while
incentivizing the consumer to seek more appropriate care.
---------------------------------------------------------------------------
\156\ For more information, please see information about the
VBID-X project available at http://vbidcenter.org/initiatives/vbid-x/ and resulting white paper, available at http://vbidcenter.org/wp-content/uploads/2019/07/VBID-X-Final-Report_White-Paper-7.13.19.pdf.
\157\ Additional information on data sources considered by the
Center, please see: https://www.choosingwisely.org/; http://vbidhealth.com/low-value-care-task-force.php; https://www.oregon.gov/oha/pebb/pages/index.aspx; https://www.iha.org/our-work/insights/smart-care-california; https://www.hca.wa.gov.
Table 5--High and Low Value Services and Drug Classes
------------------------------------------------------------------------
-------------------------------------------------------------------------
High Value Services with Zero Cost Sharing
------------------------------------------------------------------------
Blood pressure monitors (hypertension)
Cardiac rehabilitation
Glucometers and testing strips (diabetes)
Hemoglobin a1c testing (diabetes)
INR testing (hypercoagulability)
LDL testing (hyperlipidemia)
Peak flow meters (asthma)
Pulmonary rehabilitation
------------------------------------------------------------------------
High Value Generic Drug Classes with Zero Cost Sharing
------------------------------------------------------------------------
ACE inhibitors and ARBs
Anti-depressants
Antipsychotics
Anti-resorptive therapy
Antiretrovirals
Antithrombotics/anticoagulants
Beta blockers
Buprenorphine-naloxone
Glucose lowering agents
Inhaled corticosteroids
Naloxone
Rheumatoid arthritis medications
Statins
Thyroid-related
Tobacco cessation treatments
------------------------------------------------------------------------
High Value Branded Drug Classes with Reduced Cost Sharing
------------------------------------------------------------------------
Anti-TNF (tumor necrosis factor)
Hepatitis C direct-acting combination
Pre-exposure prophylaxis for HIV (PrEP) \1\
------------------------------------------------------------------------
Specific Low Value Services Considered
------------------------------------------------------------------------
Proton beam therapy for prostate cancer
Spinal fusions
Vertebroplasty and kyphoplasty
Vitamin D testing
------------------------------------------------------------------------
Commonly Overused Service Categories with Increased Cost sharing
------------------------------------------------------------------------
Outpatient specialist services
Outpatient labs
[[Page 29237]]
High-cost imaging
X-rays and other diagnostic imaging
Outpatient surgical services
Non-preferred branded drugs
------------------------------------------------------------------------
\1\ Per 26 CFR 54.9815-2713, 29 CFR 2590.715-2713, and 45 CFR 147.130,
non-grandfathered group health plans and non-grandfathered health
insurance coverage in the group or individual markets, including QHP
issuers in the individual market, will be required to cover PrEP
without imposing any cost-sharing requirements for plan or policy
years beginning on or after June 11, 2020, in a manner consistent with
the U.S Preventive Services Task Force (USPSTF) final recommendation
at https://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis.
For issuers in Exchanges using the Federal platform, HHS is not
currently offering preferential display on HealthCare.gov for QHPs that
include value-based insurance design. However, we are considering ways
in which consumers could easily identify a ``value-based'' QHP. We
solicited comments on ways in which these ``value-based'' QHPs could be
identified to consumers on HealthCare.gov, how best to communicate
their availability to consumers, how best to demonstrate how the cost-
sharing structures affect different consumers, and how to assist
consumers in selecting a value-based QHP if it is an appropriate
option.
We also solicited comment on how HHS could collect information from
issuers in Exchanges using the Federal platform to indicate that their
QHP includes value-based insurance design. This could include
collecting the information from the issuer, instructing issuers to
include ``value-based'' in the plan name, or establishing HHS-adopted
criteria that an issuer would have to meet in order to be labeled
value-based.
We also solicited comment on principles that HHS could adopt to
establish what constitutes a value-based plan, perhaps establishing
minimum standards, as well as obstacles to implementation. We are
interested in additional ways in which HHS could provide operational
assistance to issuers offering value-based QHPs. We discussed that we
understand that some states require the use of standardized plan
designs and may not be able to certify QHPs with alternative cost-
sharing structures. We solicited comment from states that believe their
cost-sharing laws would not allow for this type of plan design.
Lastly, we solicited comment on other value-based insurance design
activities HHS should pursue in the future, including applicable models
for stand-alone dental plans.
Comment: The majority of comments received were in support of HHS
using value-based insurance design as a tool to make coverage more
affordable and to encourage consumers to seek cost-effective care.
Commenters supported the approach outlined in the proposed rule as it
would allow QHP issuers to maintain flexibility while incrementally
introducing value-based insurance design options for Exchange
enrollees. Others noted that some issuers are already offering some of
the proposed cost-sharing options. A few commenters questioned the
proposed approach noting that using cost sharing as a tool to influence
consumer behavior could potentially introduce discriminatory benefit
design or unfairly disadvantage consumers with certain chronic
conditions.
Commenters offered numerous suggestions to modify the options
included in the proposed rule. Specifically, commenters suggested
alternative value-based approaches that would not require varying
consumer cost sharing, such as providing incentives to issuers or
providers to support cost effective care delivery. Several commenters
supported making ``value-based'' plans required for QHP issuers to
achieve greater standardization across QHPs. Others requested that HHS
defer to states to develop specific value-based plan designs as states
are in the best position to determine the needs of their population.
Many commenters offered specific suggestions to the services identified
in Table 5, either requesting additional services be added or
identifying specific services be removed, most commonly outpatient
services or non-preferred branded drugs.
Response: We appreciate the support for the options outlined in the
proposed rule and are finalizing the options as proposed. We note that
the option to provide varying cost sharing for any of the services
identified in Table 5 is at the discretion of the issuer. As we noted
in the proposed rule, issuers have considerable discretion in the
design of cost-sharing structures, subject to certain statutory AV
requirements, non-discrimination provisions,\158\ and other applicable
laws such as the MHPAEA (section 2726 of the PHS Act). We did not
propose any changes to this flexibility. We believe that maintaining
issuer flexibility will allow for issuers to experiment with different
cost-sharing structures that best meet their enrollee's needs. We are
not requiring issuers to offer value-based plans required. We expect
that value-based plans utilizing the cost sharing suggested in Table 5
would be among many different plan designs offered by QHP issuers to
meet the needs of consumers and acknowledge that QHP issuers may not
offer these designs exclusively. We share concerns with commenters that
varying cost sharing may not meet the needs of all consumers and
encourage issuers to offer QHPs that meet the needs of a heterogenetic
population. For this reason, we will not be pursuing or requiring the
development of a value-based standardized option.
---------------------------------------------------------------------------
\158\ We note that issuers are also subject to federal civil
rights laws, including Title VI of the Civil Rights Act. Section 504
of the Rehabilitation Act, the Age Discrimination Act, section 1557
of the PPACA, and conscience and religious freedom laws.
---------------------------------------------------------------------------
While we believe that states have the primary role in assessing the
needs of their population, we also acknowledge that some states may not
have the resources or desire to develop value-based plan options. The
designs offered in this preamble are offered in such a fashion as to
encourage issuers to engage in value-based plan design without stifling
innovation or intruding upon state activities to do the same.
Comment: Commenters offered numerous comments on consumer
understanding of the concept of value-based plans and how best to
potentially identify ``value-based'' QHPs. Most commenters were
concerned that consumers may not understand the differences between
value-based plans and non-value-based plans without significant
investment in education, communication, and direct assistance. Because
of this, some recommended that no changes be made to HealthCare.gov to
identify value-based plans until more research and education on best
practices on how to communicate the concept of value to consumers is
complete. Other commenters suggested search functionalities on
HealthCare.gov should be enhanced to facilitate the identification of
value-based plans and to allow for consumers to search for value-based
services at a granular level and for pre-deductible services. Other
commenters suggested that HealthCare.gov include static educational
information for consumers and include a visual designation for
consumers to easily identify QHPs with value-based cost sharing. Others
stated value-based plans should be offered preferential display and be
easily identified by consumers. We did not receive many specific
comments on how to best demonstrate how the cost-sharing structures
affect different
[[Page 29238]]
consumers or how to assist consumers in selecting a value-based plan,
if appropriate, with many commenters suggesting HHS engage with outside
stakeholders or adopt recommendations produced by other entities to the
extent they are available. Other consumers requested that price and
quality data be displayed alongside a value-based indicator.
Response: At this time, we are evaluating options on how best to
identify value-based plans on HealthCare.gov and currently have no
specific plans to introduce an indicator for the 2021 plan year as we
have yet to develop criteria or minimum standards as to what would
constitute a value-based plan, as discussed further below. As we
previously noted, we also will not implement preferential display at
this time. We agree that consumers will need to be educated on how to
evaluate differing cost-sharing structures, how those cost-sharing
structures will impact different consumers, and how best to direct
certain consumers to value-based plans, if appropriate. We will
consider the work of external groups in this area and as well as our
own consumer testing. We will consider our operational priorities in
evaluating other suggested changes to HealthCare.gov in the future.
Comment: Commenters suggested modifying the QHP issuer application
materials to collect from the issuer whether or not the QHP was
``value-based,'' however many were not supportive of publicly labelling
plans on HealthCare.gov as ``value-based'' as ``value'' can be
interpreted differently by different consumers. Other commenters
appeared supportive of HHS exploring standards for QHP issuers to meet
in order to be designated as value-based. Commenters also noted that
issuer tools to design plans, such as the actuarial value calculator
may need to be modified in order to accommodate value-based plans. Some
states indicated that they were modifying their existing standardized
plans to accommodate the cost-sharing options in Table 5. Commenters
also supported exploring adoption of value-based approaches by stand-
alone dental plans.
Response: At this time, we will consider options to establish
criteria for identifying value-based plans in future rulemaking. We
will also consider the impact of value-based insurance design on the
actuarial value calculator, if necessary. We will continue to work with
states that are implementing similar approaches to ensure that we share
best practices and lessons learned with value-based option adoption.
Lastly, we will continue to explore opportunities for stand-alone
dental plans to adopt value-based design.
After reviewing the public comments, we are finalizing the options
as proposed.
7. Termination of Coverage or Enrollment for Qualified Individuals
(Sec. 156.270)
Under existing Sec. 156.270(b)(1), issuers have been required to
send termination notices, including the termination effective date and
reason for termination, to enrollees only for terminations due to (1)
loss of eligibility for QHP coverage, (2) non-payment of premiums, and
(3) rescission of coverage. For this purpose, we considered a
termination of coverage of a consumer whose enrollment would violate
the anti-duplication provision of section 1882 of the Social Security
Act (the Act) to be a termination because the enrollee is no longer
eligible for QHP coverage under Sec. 155.430(b)(2)(i), and therefore,
issuers are required to send a termination notice under Sec.
156.270(b)(1) when the consumer's coverage is non-renewed.\159\
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\159\ See 3.4.8 Medicare Enrollment and Non-renewals of the 2019
Federally-facilitated Exchanges (FFEs) and Federally-facilitated
Small Business Health Options Program (FF-SHOP) Enrollment Manual at
https://www.regtap.info/uploads/library/ENR_EnrollmentManualForFFEandFF-SHOP_v1_5CR_092519.pdf.
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However, there are a number of scenarios where issuers were not
clearly required to send termination notices, including enrollee-
initiated terminations, the death of the enrollee, the enrollee
changing from one QHP to another during an annual open enrollment
period or special enrollment period, and terminations for dual
enrollment when an enrollee has asked the Exchange to end QHP coverage
when found in other coverage, such as through Medicare PDM. We proposed
to amend Sec. 156.270(b)(1) to require QHP issuers to send to
enrollees a termination notice for all termination events described in
Sec. 155.430(b), regardless of who initiated the termination. We are
finalizing this provision as proposed.
The original version of Sec. 156.270 required a termination notice
when an enrollee's coverage was terminated ``for any reason,'' \160\
with a 30-day advance notice requirement. This requirement was
eventually replaced with the previous requirement this rule revises. As
bases for termination in Sec. 155.430(b)(2) were expanded, Sec.
156.270 was not updated in parallel. Although we recommended that
issuers send termination notices whenever an enrollee's coverage is
terminated, questions arose from issuers regarding when termination
notices were required. Updating our regulations to require issuers to
send termination notices to enrollees for all termination events,
regardless of who initiated the termination, will help streamline
issuer operations and reduce confusion. This change will also help
promote continuity of coverage by ensuring that enrollees are aware
that their coverage is ending, as well as the reason for its
termination and the termination effective date, so that they can take
appropriate action to enroll in new coverage, if eligible. We solicited
comments on this proposal.
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\160\ Patient Protection and Affordable Care Act; Establishment
of Exchanges and Qualified Health Plans; Exchange Standards for
Employers; Final Rule and Interim Final Rule, March 27, 2012 (77 FR
18310).
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Comment: All commenters who weighed in on this proposal supported
it. Commenters stated that this proposal would avoid member confusion
and/or unnecessary QHP inquiries and promote continuity of coverage.
For example, enrollees don't currently receive written confirmation of
a termination they initiated; commenters stated that it is important
for the enrollee to have in writing the actual termination date for
their records, in case of miscommunication with the issuers about the
preferred date or to later dispute an inaccurate Form 1095-A, and to
ensure they take appropriate steps to re-enroll in coverage without a
gap, if eligible.
Response: We agree with commenters and believe this change will
help streamline issuer operations and reduce confusion. It will also
help promote continuity of coverage by ensuring that enrollees are
aware that their coverage is ending, as well as the reason for their
termination, and their termination effective date, so that they can
take appropriate action to enroll in new coverage, if eligible.
After reviewing the public comments, we are finalizing this
provision as proposed.
8. Dispute of HHS Payment and Collections Reports (Sec. 156.1210)
In the 2014 Payment Notice,\161\ we established provisions related
to confirmation and dispute of payment and collection reports. These
provisions were written under the assumption that issuers would
generally be able to provide these confirmations or disputes
automatically to HHS. However, we found that many issuers prefer to
[[Page 29239]]
research payment errors and use enrollment reconciliation and disputes
to update their enrollment and payment data, and are unable to complete
this research and provide confirmation or dispute of their payment and
collection reports within 15 days, as currently required under Sec.
156.1210. In addition, because the FFE typically reflects enrollment
reconciliation updates 1 to 2 months after they have occurred, issuers
attempting to comply with the 15-day deadline submit disputes that are
no longer necessary after the reconciliation updates have been
processed.
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\161\ See 78 FR 65045 at 65080.
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Therefore, we proposed to amend Sec. 156.1210(a) to lengthen the
time to report payment inaccuracies from 15 days to 90 days to allow
issuers more time to research, report, and correct inaccuracies through
other channels. The longer timeframe also allows for the processing of
reconciliation updates, which may resolve potential disputes.
We also proposed to remove the requirement at Sec. 156.1210(a)
that issuers actively confirm payment accuracy to HHS each month, as
well as the language in Sec. 156.1210(b) regarding late filed
discrepancies. Instead, we proposed to amend Sec. 156.1210(b) to
require an annual confirmation from issuers that the amounts identified
in the most recent payment and collections report for the coverage year
accurately reflect applicable payments owed by the issuer to the
Federal Government and the payments owed to the issuer by the Federal
Government, or that the issuer has disputed any identified
inaccuracies, after the end of each payment year, in a form and manner
specified by HHS. Under the proposed approach, issuers would also have
an opportunity as part of the annual confirmation process to notify HHS
of disputes related to identified inaccuracies. In the proposed rule,
we explained that the changes are based on our experience with current
enrollment and payment operations, which include frequent updates to
enrollment and payment data throughout the year that we believe make
monthly confirmation unnecessarily burdensome. We also explained that
we believed that the late filed discrepancy process in Sec.
156.1210(c) was unnecessary and duplicative of the payment process
modifications proposed in Sec. 156.1210 and the adjustments to the
enrollment process proposed in Sec. 156.265(f).
We also explained that HHS intends to work cooperatively with
issuers that make a good faith effort to comply with these procedures.
We noted that issuers could demonstrate that they are working in good
faith cooperatively with HHS by sending regular and accurate enrollment
reconciliation files and timely enrollment disputes throughout the
applicable enrollment calendar, submitting payment disputes within the
90-day dispute window, making timely and regular changes to enrollment
reconciliation and dispute files to correct past errors, and by
reaching out to HHS and responding timely to HHS outreach to address
any issues identified.
We sought comments on these proposed amendments to Sec. 156.1210.
After reviewing public comments, we are finalizing the amendments as
proposed to lengthen the time to report payment inaccuracies from 15
days to 90 days to allow issuers more time to research, report, and
correct inaccuracies through other channels. We are also finalizing the
amendments to Sec. 156.1210(b) and (c) as proposed, to require issuers
to provide an annual confirmation after the end of the payment year, in
a form and manner specified by HHS and to remove the language that has
become duplicative regarding discrepancies to be addressed in future
reports. HHS intends to continue working with issuers on potential
further improvements to the payment and collections reports process.
Comment: Several commenters supported these amendments saying they
appreciate HHS's interest in removing unnecessary reporting
requirements to reduce administrative burden for issuers, as well as
HHS's intention to work cooperatively with issuers that make a good
faith effort to comply with these requirements. These commenters also
supported the proposed change from a 15 day to 90 day reporting
timeframe and appreciate the additional time to report payment
inaccuracies as this better accounts for monthly billing cycles. One
commenter recommended that the annual certification process occur after
March following the applicable benefit year to account for the 90-day
window for reporting payment inaccuracies.
Response: We appreciate the comments and are finalizing the
amendments to Sec. 156.1210 as proposed. We also note that we intend
to conduct the annual certification process under Sec. 156.1210(b)
after the final April enrollment reconciliation file is issued.
Additional details on the form and manner for submission of this annual
confirmation will be provided in future guidance.
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
1. Reporting Requirements Related to Premiums and Expenditures (Sec.
158.110)
We proposed to amend Sec. 158.110(a) to clarify the requirement
that expenses for functions outsourced to or services provided by other
entities retained by an issuer must be reported consistently with how
expenses must be reported when such functions are performed directly by
the issuer. Such entities include third-party vendors, other health
insurance issuers, and other entities, whether affiliated or
unaffiliated with the issuer.
In the preamble to the proposed rule, we identified several
technical guidance documents \162\ that HHS released to address
specific issues and circumstances related to the reporting of third-
party expenses for MLR purposes. The guidance generally specifies that
the administrative cost and profit component of payments to third-party
vendors may not be included in an issuer's incurred claims or QIA,
except in the case of capitation payments to clinical providers or to
third-party vendors for the provision of clinical services directly to
enrollees through the vendors' own employees. The guidance also
generally specifies that payments to third-party vendors to perform
administrative functions on behalf of the issuer must be reported as a
non-claims administrative expense. In order to consolidate and clarify
the MLR treatment of payments to third-party vendors and other
entities, we proposed to revise Sec. 158.110(a) to capture the
requirement that expenses for functions outsourced to or services
provided by other entities retained by an issuer must be reported
consistently with how expenses must be reported when incurred directly
by the issuer. We solicited comments on this proposal.
---------------------------------------------------------------------------
\162\ See May 13, 2011 CCIIO Technical Guidance (CCIIO 2011-002)
Q&As #8, #11, #12 and #14, available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/mlr-guidance-20110513.pdf. Also see July
18, 2011 CCIIO Technical Guidance (CCIIO 2011-004) Q&A #19,
available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/20110718_mlr_guidance.pdf.
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After considering the public comments, we are finalizing the
amendment to Sec. 158.110(a) as proposed.
Comment: Several commenters supported the proposal and agreed that
it would be beneficial to clarify the regulation to ensure that issuers
report expenses for functions outsourced to or services provided by
other entities retained by the issuers in the same manner as expenses
that issuers incur
[[Page 29240]]
directly. One commenter opposed the proposal because of concern that
issuers may be required to report confidential and proprietary
information that is specific to a third-party vendor. One commenter
asked HHS to clarify whether this provision will encompass risk-based
payments made by health plans to contracted providers. Another
commenter requested that we delay the applicability date of the
proposed amendment to give large group issuers additional time to renew
outsourced contracts.
Response: With respect to the comment regarding disclosure of
confidential and proprietary information, we note that nothing in the
existing MLR regulations and guidance or the amendments to Sec.
158.110(a) finalized in this rule requires an issuer to report
confidential and proprietary information specific to a third-party
vendor or other entity it retains, as the expenses for functions
outsourced to or services provided by such entities are reported only
in the aggregate, generally combined with the issuer's non-outsourced
expenses, and allocated to the applicable state and market. With
respect to the question regarding payments to risk-bearing providers,
we clarify that the amendments to Sec. 158.110(a) do not modify the
February 10, 2012 CCIIO Technical Guidance (CCIIO 2012-001) \163\ Q&As
##20-22. That guidance clarified that issuers may include in incurred
claims payments to certain clinical (but not pricing) risk-bearing
entities such as Accountable Care Organizations (ACOs), provided
certain conditions are met, except that payments to such entities for
administrative functions performed on behalf of the issuer may not be
included in incurred claims. Finally, regarding the request to delay
the applicability date for this amendment, we acknowledge the
commenter's concern but note that the proposal codifies, clarifies, and
aligns with the approach outlined in existing guidance. Therefore, we
are not modifying the applicability date and the amendment will be
applicable as of the effective date for this final rule.
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\163\ Available at https://www.cms.gov/CCIIO/Resources/Files/Downloads/2012-02-10-guidance-mlr-ipas.pdf.
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2. Reimbursement for Clinical Services Provided to Enrollees (Sec.
158.140)
We proposed to amend Sec. 158.140(b)(1)(i) to require issuers to
deduct from incurred claims not only prescription drug rebates received
by the issuer, but also any price concessions received and retained by
the issuer and any prescription drug rebates and other price
concessions received and retained by an entity providing pharmacy
benefit management services (including drug price negotiation services)
to the issuer, typically a pharmacy benefit manager (PBM). In the
proposed rule, we explained that the phrase ``price concession,'' when
used in this context, is intended to capture any time an issuer or an
entity that provides pharmacy benefit management services to the issuer
receives something of value related to the provision of a covered
prescription drug (for example, manufacturer rebate, incentive payment,
direct or indirect remuneration, etc.) regardless from whom the item of
value is received (for example, pharmaceutical manufacturer,
wholesaler, retail pharmacy, vendor, etc.).
The existing regulatory framework in Sec. 158.140(b)(1)(i) and
(b)(3)(i) through (iii) did not clearly address the situation where the
administrative costs and profits related to the provision of pharmacy
benefits are comprised, in whole or in part, of a portion or all of the
prescription drug rebates and other price concessions that the issuer
allows the entity providing pharmacy benefit management services to
retain. Consequently, enrollees failed to receive the benefit of
prescription drug rebates and price concessions to the extent these are
retained by an entity other than the issuer and issuers faced an
unlevel playing field based on the manner in which they chose to
compensate entities providing pharmacy benefit management services. The
existing regulations also did not clearly address situations where the
issuer received a price concession related to the provision of pharmacy
benefits other than a rebate.
Therefore, we proposed to revise Sec. 158.140(b)(1)(i) to require
adjustments that must be deducted from incurred claims to include not
only prescription drug rebates received by the issuer, but also any
price concessions received and retained by the issuer, and any
prescription drug rebates and other price concessions received and
retained by an entity providing pharmacy benefit management services
(including drug price negotiation services) to the issuer that are
associated with administering the issuer's prescription drug benefits.
We explained that the proposed amendments would additionally align more
closely with the MLR provisions that apply to the Medicare Advantage
organizations and Part D sponsors and Medicaid managed care
organizations,\164\ both of which require that the full amount of
prescription drug rebates and price concessions be deducted from
incurred claims. We further proposed that these amendments would be
applicable beginning with the 2021 MLR reporting year (reports due by
July 31, 2022). We solicited comments on all aspects of these
proposals.
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\164\ See the Medicare Advantage program and Prescription Drug
Benefit program May 23, 2013 final rule (78 FR 31284), as amended by
the April 16, 2018 final rule (83 FR 16440); and the Medicaid
managed care May 6, 2016 final rule (81 FR 27497) and the CMCS May
15, 2019 information bulletin available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib051519.pdf.
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After considering the public comments, we are finalizing the
amendment to Sec. 158.140(b)(1)(i) as proposed to require adjustments
that must be deducted from incurred claims to include not only
prescription drug rebates received by the issuer, but also any price
concessions received and retained by the issuer, and any prescription
drug rebates and other price concessions received and retained by an
entity providing pharmacy benefit management services (including drug
price negotiation services) to the issuer that are associated with
administering the issuer's prescription drug benefits. However, in
response to comments, we are delaying the applicability date for these
amendments to the 2022 MLR reporting year (MLR reports filed in 2023).
We are also updating the regulatory text to clarify that,
consistent with the policy outlined in the proposed rule,\165\ the
amendment to Sec. 158.140(b)(1)(i) requires issuers to subtract from
incurred claims prescription drug rebates and other price concessions
when received and retained by an issuer ``and'' an entity providing
pharmacy benefit management services.
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\165\ Namely, that the policy reflected in the amendment to
Sec. 158.140(b)(1)(i) requires issuers to deduct from incurred
claims prescription drug rebates and other price concessions not
only when received and retained by the issuer but also when received
and retained by an entity providing pharmacy benefit management
services to the issuer. See 85 FR 7088 at 7139 (February 6, 2020).
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Comment: Most commenters supported the proposal and agreed that
implementing these amendments would more accurately reflect an issuer's
incurred claims that are included in the MLR rebate and calculation and
align with the requirements that have been implemented in the Medicare
and Medicaid MLR programs. Some commenters expressed confidence that
the amendment would benefit enrollees either by lowering premiums or
increasing MLR rebates, and some commenters further urged HHS to pursue
robust enforcement of the
[[Page 29241]]
proposed requirements. A few commenters opposed the proposal,
expressing concerns that it would reduce the allowable administrative
costs and disadvantage PBM contracts that do not pass all prescription
drug rebates and price concessions to issuers, that the amounts for
prescription drug rebates and other price concessions retained by PBMs
and similar entities are not readily available to issuers, and that
amounts that an issuer allows the PBM to retain do not represent an
issuer's expense.
Response: As explained in the proposed rule, we believe the
existing regulatory framework provided an unfair advantage to issuers
with PBM contracts that did not pass all prescription drug rebates and
price concessions to issuers, since the regulation currently only
requires issuers to deduct from incurred claims prescription drug
rebates received by the issuer. This allowed such issuers to inflate
incurred claims in the MLR calculation, and thus improperly increase
the allowable administrative costs, relative to financially identically
situated issuers who choose to compensate entities providing pharmacy
management benefit services by paying a fee or inflated pharmacy
reimbursement amount. Further, as discussed in the proposed rule, it is
our view that allowing an entity providing pharmacy benefit management
services to retain some or all of the prescription drug rebates and
other price concessions that an issuer could have otherwise received is
a form of compensation provided by the issuer to the entity for
services that the entity performs for the issuer, and therefore is an
administrative cost of the issuer. An issuer that does not outsource
pharmacy benefit management services to another entity would perform
such services itself, exclude such expenses from incurred claims, and
report the expenses as an administrative cost. Issuers that do not
outsource these services and directly negotiate prescription drug
rebates for enrollees' drug utilization would also deduct from incurred
claims the full amount of these rebates (as there would be no other
entity retaining such amounts). Therefore, we view these amendments as
a way to level the playing field among issuers, promote uniform MLR
reporting, and ensure that enrollees receive the benefit of these
rebates and price concessions. We also appreciate the comments urging
HHS to pursue robust enforcement of the amendments and will continue to
conduct enforcement activities in the MLR oversight process, which
would include review of compliance with these requirements (once
effective). Lastly, we proposed that the amendment would be applicable
beginning with the 2021 MLR reporting year (reports due by July 31,
2022) precisely in order to enable issuers to make any adjustments to
their contracts with entities providing pharmacy benefit management
services that may be necessary to ensure that issuers are able to
obtain the information required for accurate reporting and compliance
with federal MLR requirements. As detailed below, we are finalizing a
later applicability date in response to comments to provide more time
for issuers to update their respective contracts, as may be necessary.
Comment: A number of commenters, including both some that supported
and some that opposed the proposal, requested that HHS define ``price
concessions'' more narrowly to align with the definitions in section
1150A of the Act, as added by the PPACA, which requires PBMs to report
certain prescription benefit information to HHS and that excludes
certain types of fees paid to PBMs by drug manufacturers or issuers.
These commenters additionally requested that HHS codify the definition
of prescription drug rebates and other price concessions in the
regulation and recommended that HHS do so through separate rulemaking.
Response: We appreciate these comments and will consider codifying
the definition of prescription drug rebates and other price concessions
through separate rulemaking in advance of the applicability date for
these new reporting requirements. In addition, in light of these
comments, and the delayed applicability date discussed below, we are
not finalizing a definition of ``price concession'' in this rulemaking.
Comment: Several commenters requested that HHS delay the
applicability date for these amendments until the 2022 reporting year
(MLR reports filed in 2023) in order to allow additional time for
issuers to negotiate contracts with entities providing pharmacy benefit
management services, as well as to allow additional time for HHS to
consider alternative definitions for the term ``price concessions''.
Some commenters noted that some issuers have already executed contracts
with PBMs and other entities to perform pharmacy benefit management
services for 2021, such that the proposed applicability of the 2021
reporting year (MLR reports filed in 2022) may not provide sufficient
time to update those contracts and allow an issuer to come into
compliance with the proposed new requirements.
Response: We acknowledge the practical considerations raised by the
commenters, including with respect to the timing of contracts, and
agree with commenters' recommendation to delay the applicability date
of these amendments to the 2022 reporting year (MLR reports filed in
2023). This additional time will also allow us to further consider the
suggested alternative definition for ``price concession''.
3. Activities That Improve Health Care Quality (Sec. 158.150)
We proposed to amend Sec. 158.150(b)(2)(iv)(A)(5) to clarify that
issuers in the individual market may include the cost of certain
wellness incentives \166\ as QIA expenses in the MLR calculation, in
the same manner as is currently permitted in the group market.\167\ The
proposal reflected the fact that issuers in the individual market are
currently permitted to offer participatory wellness programs, provided
such programs are consistent with applicable state law and available to
all similarly situated individuals,\168\ and that some issuers in
participating states may additionally offer health-contingent wellness
programs under the wellness program demonstration project that HHS
announced on September 30, 2019.\169\ We proposed that this amendment
would be applicable beginning with the 2021 MLR reporting year (reports
due by July 31, 2022). We solicited comments on this proposal.
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\166\ For this purpose, the term ``wellness incentive'' has the
same meaning as the term ``reward'' in Sec. 146.121(f)(1)(i).
\167\ Under section 2705(j) of the PHS Act and 45 CFR
146.121(f), health-contingent and participatory wellness programs
are permitted in the group market. HHS previously recognized that
participatory wellness programs in the individual market do not
violate section 2705 and are therefore permitted, provided that such
programs are consistent with applicable state law and available to
all similarly situated individuals enrolled in the individual health
insurance coverage. See 78 FR at 33167. In addition, section 2705(l)
of the PHS Act authorizes the Secretary to establish a 10-state
wellness program demonstration project under which issuers may offer
non-discriminatory wellness programs in the individual market.
\168\ See the Incentives for Nondiscriminatory Wellness Programs
in Group Health Plans; Final Rule; 78 FR 33158 at 33167 (June 3,
2013).
\169\ https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Wellness-Program-Demonstration-Project-Bulletin.pdf.
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After reviewing the public comments, we are finalizing this
amendment as proposed.
Comment: We received numerous comments regarding the proposed
amendment to explicitly allow all issuers in the individual market to
[[Page 29242]]
include certain wellness incentives as QIA in the MLR calculation. Some
commenters supported the proposal because it would align the treatment
of wellness programs in the group and individual markets and encourage
issuers to offer wellness programs in the individual market. While the
majority of commenters on this proposal expressed opposition, most of
these commenters cited concerns about wellness programs themselves,
such as concerns about their effectiveness and potential to
discriminate, rather than concerns regarding the proposed amendment to
the MLR rules.
Response: We appreciate commenters' general concerns about wellness
programs, but note that we did not propose and are not making any
changes to the rules regarding wellness programs.\170\ Instead, the
amendment to Sec. 158.150(b)(2)(iv)(A)(5) is specific to the treatment
of expenses of certain wellness activities for MLR reporting purposes.
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\170\ See 45 CFR 147.121 and 147.110.
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We believe this amendment is appropriate and necessary as it
ensures that the MLR rules are interpreted consistently across the
individual and group markets, and therefore, would increase consumer
choice and access to participatory wellness programs that are currently
allowed in the individual market and any health-contingent wellness
programs that may be available in a state that is approved to
participate in the wellness program demonstration project.
4. Other Non-Claims Costs (Sec. 158.160)
In the proposed rule, we proposed to amend Sec. 158.160(b)(2), to
conform with the proposed amendments to Sec. 158.140(b)(1)(i), by
requiring issuers to report the prescription drug rebates received by
the issuer, as well as any price concessions received and retained by
the issuer, and any prescription drug rebates and other price
concessions received and retained by an entity providing pharmacy
benefit management services (including drug price negotiation services)
to the issuer that are associated with administering the issuer's
prescription drug benefits, as non-claims costs.
After reviewing the public comments, we are finalizing this
requirement as proposed, except that the requirement will not apply to
the prescription drug rebates and other price concessions received by
the issuer. We are also delaying the applicability date of this
amendment to the 2022 reporting year (MLR reports filed in 2023) to
align with the applicability date of the amendments to Sec.
158.140(b)(1)(i).
Comment: Several commenters pointed out that the proposal
inadvertently required issuers to report prescription drug rebates and
other price concessions as an administrative cost regardless of whether
they are received and retained by the issuer or by the entity providing
pharmacy benefit management services. The commenters noted that to the
extent such amounts are received and retained by the issuer, they do
not represent an administrative fee paid by the issuer to the entity
providing pharmacy benefit management services, and that adding these
amounts to non-claims cost may cause them to be double-counted in the
administrative costs reported by the issuer.
Response: We agree with the commenters that reporting the
prescription drug rebates and other price concessions received and
retained by the issuer as non-claims costs may result in double-
counting in MLR reports, since issuers would already report these
amounts in non-claims costs to the extent the funds are used for
administrative expenses. Therefore, we are finalizing this requirement
as proposed, except that the requirement will not apply to the
prescription drug rebates and other price concessions received by the
issuer and will have a delayed applicability date, as detailed above.
IV. Collection of Information Requirements
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 8. To fairly evaluate whether an
information collection should be approved by OMB, section 3506(c)(2)(A)
of the Paperwork Reduction Act of 1995 (PRA) requires that we solicit
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.\171\ Table 65 in this final rule presents the
mean hourly wage, the cost of fringe benefits and overhead, and the
adjusted hourly wage.
---------------------------------------------------------------------------
\171\ See May 2018 Bureau of Labor Statistics, Occupational
Employment Statistics, National Occupational Employment and Wage
Estimates. Available at https://www.bls.gov/oes/current/oes_stru.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 6--Adjusted Hourly Wages Used in Burden Estimates
----------------------------------------------------------------------------------------------------------------
Fringe
Occupational Mean hourly benefits and Adjusted
Occupation Title code wage ($/hr.) overhead ($/ hourly wage
hr.) ($/hr.)
----------------------------------------------------------------------------------------------------------------
Chief Executive*................................ 11-1011 $96.22 $96.22 $192.44
General and Operations Manager.................. 11-1021 59.56 59.56 119.12
Compensation and Benefits Manager............... 11-3111 63.87 63.87 127.74
Lawyer.......................................... 23-1011 69.34 69.34 138.68
[[Page 29243]]
Legal Support Worker............................ 23-2099 34.34 34.34 68.68
----------------------------------------------------------------------------------------------------------------
* Chief executive wage is used to estimate the state official wages.
B. ICRs Regarding Notice Requirement for Excepted Benefit HRAs Offered
by Non-Federal Governmental Plan Sponsors (Sec.
146.145(b)(3)(viii)(E))
In Sec. 146.145(b)(3)(viii)(E), we require that an excepted
benefit HRA offered by a non-Federal governmental plan sponsor must
provide a notice that describes conditions pertaining to eligibility to
receive benefits, annual or lifetime caps or other limits on benefits
under the plan, and a description or summary of the benefits. This
notice must be provided on an annual basis no later than 90 days after
the first day of the excepted benefit HRA plan year (or, if a
participant is not eligible to participate at the beginning of the plan
year, no later than 90 days after the employee becomes a participant in
the excepted benefit HRA).
We estimate that for each excepted benefit HRA sponsored by a non-
Federal governmental plan, a compensation and benefits manager will
need 1 hour (at $127.74 per hour) and a lawyer will need 0.5 hours (at
$138.68 per hour) to prepare the notice. The total burden for an HRA
plan sponsor will be 1.5 hours with an equivalent cost of approximately
$197. This burden will be incurred the first time the non-Federal
governmental plan sponsor provides an excepted benefit HRA.
In subsequent years, if there are changes in benefits, we estimate
that a compensation and benefits manager will need 0.5 hours (at
$127.74 per hour) and a lawyer will need 0.25 hours (at $138.68 per
hour) to update the notice. The total burden for an HRA plan sponsor
will be 0.75 hours with an equivalent cost of approximately $99. If
there are no changes in benefits, the burden to update the notice in
subsequent years is expected to be minimal and therefore is not
estimated.
We estimate that approximately 901 state and local government
entities will offer excepted benefit HRAs each year.\172\ The total
burden to prepare the notices will be approximately 1,352 hours with an
equivalent cost of approximately $177,569. We estimate that
approximately 10 percent of state and local government entities will
make substantive changes to benefits each year and the total annual
burden to update the notices will be approximately 68 hours with an
equivalent cost of approximately $8,879.
---------------------------------------------------------------------------
\172\ HHS assumes that only 1 percent of state and local
government entities will offer excepted benefit HRAs.
---------------------------------------------------------------------------
Non-Federal governmental sponsors of excepted benefit HRAs must
provide the notice to eligible participants every year. We estimate
that sponsors will provide printed copies of these notices to
approximately 193,715 eligible participants annually.\173\ We
anticipate that the notices will be approximately 1-page long, and the
cost of materials and printing will be $0.05 per notice. It is assumed
that these notices will be provided along with other benefits
information with no additional mailing cost. We assume that
approximately 54 percent of notices will be provided electronically and
approximately 46 percent will be provided in print along with other
benefits information. Therefore, state and local government entities
providing excepted benefit HRAs to their employees will print
approximately 89,109 notices at a cost of approximately $4,455
annually.
---------------------------------------------------------------------------
\173\ HHS assumes that excepted benefit HRAs will be offered to
all employees of state and local government entities that offer
excepted benefit HRAs. This is an upper bound and actual number of
eligible participants is likely to be lower if excepted benefit HRAs
are offered to only some employee classes.
---------------------------------------------------------------------------
The total burden to prepare and send the notices in the first year
will be approximately $182,000. In subsequent years, these employers
will incur a cost of $8,879 to update the notices and printing and
materials costs of approximately $4,455 annually. The average annual
burden over 3 years will be 496 hours with an equivalent annual cost of
$65,109, and an average annual total cost of $69,565.
Table 7--Annual Burden and Costs
----------------------------------------------------------------------------------------------------------------
Estimated
number of non- Estimated Total
federal number of Total annual Total estimated
Year governmental notices to all burden estimated printing and
employers eligible (hours) labor cost materials cost
offering HRAs participants
----------------------------------------------------------------------------------------------------------------
2020............................ 901 193,715 1,352 $177,569 $4,455
2021............................ 901 193,715 68 8,879 4,455
2022............................ 901 193,715 68 8,879 4,455
3 year Average.................. 901 193,715 496 65,109 4,455
----------------------------------------------------------------------------------------------------------------
We did not receive any comments on the burden estimates. A summary
of comments and response on whether the notice should be provided
annually is included previously in the preamble.
C. ICRs Regarding Special Enrollment Periods (Sec. 155.420)
We are amending Sec. 155.420(d)(1)(ii) to codify that qualified
individuals and dependents who are provided a QSEHRA with a non-
calendar year plan year will be eligible for the special enrollment
period available to qualified individuals and dependents who are
enrolled in any non-calendar year group health plan or individual
health insurance coverage. This special enrollment period is subject to
pre-enrollment eligibility verification for individuals who are newly
enrolling in
[[Page 29244]]
coverage through the Exchange, and to plan category limitations for
Exchange enrollees who use the special enrollment period to change to a
different QHP. While the FFEs make every effort to verify an
individual's special enrollment period eligibility through automated
electronic means, including when it is verifying eligibility on behalf
of SBE-FPs, the FFEs currently cannot electronically verify whether an
individual has a non-calendar year plan year QSEHRA. Therefore,
qualifying individuals will be required to provide supporting
documentation within 30 days of plan selection to confirm their special
enrollment period triggering event, which is the end date of their
QSEHRA. Acceptable documents may include a dated letter from their
employer stating when their QSEHRA plan year ends or a copy of the
notice that their employer provided them with to comply with section
9831(d)(4) of the Code.\174\
---------------------------------------------------------------------------
\174\ Per IRS Notice 2017-67, this notice must include the date
on which the QSEHRA is first provided to the eligible employee.
Therefore, it is likely that in some cases it will also include or
imply the QSEHRA end date.
---------------------------------------------------------------------------
We estimate that this policy will result in relatively few
additional consumers being required to submit documents to verify their
eligibility to enroll through the proposed special enrollment period on
Exchange, because this group consists of a subset of consumers with a
QSEHRA whose QSEHRA renews on a non-calendar year plan year basis.
Within that group, only those who are not already enrolled in
individual market health insurance coverage in order to meet their
QSEHRA's requirement to have MEC and who wish to change plans mid-
calendar year will be required to submit documents to confirm special
enrollment period eligibility. Additionally, because changing plans
mid-calendar year will generally result in these consumers' deductibles
and other cost-sharing accumulators re-setting we anticipate that few
consumers will opt to do so, and that there will only be a minimal
increase in burden.
We solicited comment on whether or not this is the case; we
received broad support for the proposal, and did not receive any
comments that disagreed with or suggested that we should revise our
estimate in the proposed rule that relatively few additional consumers
would be required to submit documents to verify their eligibility to
enroll through the proposed special enrollment period on Exchange.
D. ICRs Regarding Quality Rating Information Display Standards for
Exchanges (Sec. Sec. 155.1400 and 155.1405)
At Sec. Sec. 155.1400 and 155.1405, we codify the flexibility for
State Exchanges that operate their own eligibility and enrollment
platforms to customize the display of quality rating information for
their QHPs. The burden related to the proposed requirements was
previously approved under OMB control number 0938-1312 (Establishment
of an Exchange by a State and Qualified Health Plans PRA (CMS-10593));
the approval expired in August 2019; however, we are in the process of
reinstating this information collection. The associated 60-day Federal
Register notice published on February 25, 2020 (85 FR 10701). We do not
anticipate that the flexibility we are codifying for State Exchanges
that operate their own eligibility and enrollment platforms regarding
the display of quality rating information for their QHPs would increase
burden, as State Exchanges have the choice to pursue (or not pursue)
this flexibility.
E. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan Years
Beginning on or After January 1, 2020 (Sec. 156.111)
We are finalizing as proposed Sec. 156.111(f) that specifies the
type of information states are required to submit to HHS by the annual
submission deadline in a form and manner specified by HHS. For a
reporting package to be complete, states will need to submit an annual
report that complies with each requirement listed at Sec.
156.111(f)(1) through (6). If a state does not submit an annual
reporting package by the annual submission deadline, HHS will identify
which benefits are in addition to EHB for the applicable plan year in
the state. We are also finalizing the proposed reporting schedule, such
that states will be required to notify HHS for the first year of
reporting by July 1, 2021, of any benefits in addition to EHB that QHPs
are required to cover in plan year 2021 or after plan year 2021 by
state action taken by May 2, 2021 (60 days prior to the annual
submission deadline).
HHS will provide the template(s) to states that states are required
to use for reporting the required information proposed in Sec.
156.111(f)(1) through (6). Those templates, including the certification
form, are available for review as part of the information collection we
are amending under OMB control number: 0938-1174 (Essential Health
Benefits Benchmark Plans (CMS-10448)), publishing alongside this final
rule. We intend to post state submission of these documents on the EHB
website prior to the end of the plan year during which the reporting
takes place. If the state does not notify HHS of its state-required
benefits that are in addition to EHB in accordance with the
requirements at Sec. 156.111(f), HHS will complete a similar document
for the state and post it to the CMS website.
As we did not receive any comments that specifically contested the
estimated state burden associated with the annual reporting requirement
and no comments regarding the estimated number of states that we
anticipate will annually report to HHS versus the number we anticipate
will opt to have HHS identify which benefits are in addition to EHB for
the applicable plan year in the state, we are finalizing these
estimates below.
We continue to anticipate that the majority of states will choose
to annually report to HHS under this policy, as states are already
required under Sec. 155.170 to identify which state-required benefits
are in addition to EHB and to defray the cost of QHP coverage of those
benefits. Because we believe the information we are requiring that
states report to HHS as part of this annual reporting should already be
readily accessible to states, we estimate that approximately ten states
will not report and the remaining states will annually report to HHS by
the annual reporting submission deadline. Therefore, we estimate that
approximately forty-one (41) states will respond to the information
collection requirements associated with the finalized annual reporting
policy.
For the first year in which the annual reporting will take place,
states will be required to include a comprehensive list of all state-
required benefits applicable to QHPs in the individual and/or small
group markets under state mandates that were imposed on or before
December 31, 2011 and that were not withdrawn or otherwise no longer
effective before December 31, 2011, as well as those state mandates
that were imposed after December 31, 2011, regardless of whether the
state believes such state-required benefits require defrayal in
accordance with Sec. 155.170. Each annual reporting cycle thereafter,
the state will only need to update the content in its report to add any
new state benefit requirements, and to indicate whether state benefit
requirements previously reported to HHS have been amended or repealed.
Information in states' initial reports must be accurate as of a day
that is at least 60 days prior to the first reporting submission
deadline set by HHS. As such, we estimate that the burden estimates for
states in the first
[[Page 29245]]
year of annual reporting will be higher than in each subsequent year.
Although we estimate a higher burden in the first year of annual
reporting of state-required benefits, states are already expected to
identify which state-required benefits are in addition to EHB and to
defray the cost of QHP coverage of those benefits in accordance with
Sec. 155.170. Because we believe the information we are requiring
states report to HHS should be readily accessible to states, we
estimate that it will require a legal support worker 25 hours (at a
rate of $68.68) to pull and review all mandates, transfer this
information into the HHS provided template, and validate the
information in the first year of annual reporting. We estimate that it
will require a general and operations manager 3 hours (at a rate of
$119.12) to then review the completed template and submit it to HHS in
the first year of annual reporting. We estimate that it will require a
state official 2 hours (at a rate of $192.44) in the first year of
annual reporting to review and sign the required document(s) for
submission on behalf of the state, to confirm the accuracy of the
submission. The information will be submitted to HHS electronically at
minimal cost. Therefore, we estimate that the burden for each state to
meet this reporting requirement in the first year will be 30 hours,
with an equivalent cost of approximately $2,459, with a total first
year burden for all 41 states of 1,230 hours and an associated total
first year cost of approximately $100,829.
Because the first year of annual reporting is intended to set the
baseline list of state-required benefits which states will update as
necessary in future annual reporting cycles, we believe the burden
associated with each annual reporting thereafter will be lower than the
first year. We estimate that for each annual reporting cycle after the
first year it will require a legal support worker 10 hours (at a rate
of $68.68) to transfer the information about state-required benefits
into the HHS provided template and validate the information. We
estimate that it will require a general and operations manager 2 hours
(at a rate of $119.12) to review the completed template and submit it
to HHS each year after the first annual reporting. We estimate that it
will require a state official 1 hour (at a rate of $192.44) to review
and sign the required document(s) for submission on behalf of the
state, to confirm the accuracy of the submission. Therefore, we
estimate that the burden for each state to meet the annual reporting
requirement each year after the first year of annual reporting will be
13 hours with an equivalent cost of approximately $1,117, with a total
annual burden for all 41 states of 533 hours and an associated total
annual cost of approximately $45,817. The average annual burden over 3
years will be approximately 765 hours with an equivalent average annual
cost of approximately $64,154.
We are amending the information collection currently approved under
OMB control number: 0938-1174 (Essential Health Benefits Benchmark
Plans (CMS-10448)) to include this burden.
F. ICRs Regarding Termination of Coverage or Enrollment for Qualified
Individuals (Sec. 156.270)
The collection of information titled, ``Establishment of Exchanges
and Qualified Health Plans; Exchange Standards for Employers'' (OMB
control number 0938-1341 (CMS-10592)) already accounts for burden
estimates for QHP issuers to provide notice to an enrollee if the
enrollee's coverage in a QHP is terminated. Consequently, we are not
making any changes under the aforementioned control number. Since we
are not making any changes to the submission process or burden, we are
not making any changes under the aforementioned control number.
G. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.110, 158.140,
158,150, and 158.160)
We are finalizing our proposal to amend Sec. 158.110(a) to clarify
that issuers must report for MLR purposes expenses for functions they
outsource to or services provided by other entities, consistent with
how issuers must report directly incurred expenses. We are also
finalizing our proposal to amend Sec. 158.140(b)(1)(i) to require
issuers to deduct from incurred claims not only the prescription drug
rebates received by the issuer, but also any price concessions received
and retained by the issuer and any prescription drug rebates and other
price concessions received and retained by an entity that provides
pharmacy benefit management services to the issuer (including drug
price negotiation services) that are associated with administering the
issuer's prescription drug benefits. We are further amending Sec.
158.160(b)(2) to require that the prescription drug rebates and other
price concessions received and retained by an entity that provides
pharmacy benefit management services to the issuer must be reported as
a non-claims cost. Finally, we are finalizing our proposal to amend
Sec. 158.150(b)(2)(iv)(A)(5) to explicitly allow issuers in the
individual market to include the cost of certain wellness incentives as
QIA in the MLR calculation. We do not anticipate that implementing any
of these provisions will require significant changes to the MLR annual
reporting form or significantly change the associated burden. The
burden related to this information collection is currently approved
under OMB control number 0938-1164 (Medical Loss Ratio Annual Reports,
MLR Notices, and Recordkeeping Requirements (CMS-10418)).
H. Summary of Annual Burden Estimates for Requirements
[[Page 29246]]
TABLE 8--Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
Burden per Total annual
Regulation section(s) OMB control Number of Number of response burden Labor cost of Total cost
number respondents responses (hours) (hours) reporting ($) ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec. 146.145(b)(3)(viii)(E)........... 0938-1361 901 193,715 0.003 496 65,109 69,565
Sec. 156.111.......................... 0938-1174 41 41 18.7 765 64,154 64,154
-----------------------------------------------------------------------------------------------
Total............................... .............. 942 193,756 .............. 1,261 129,263 133,719
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note: There are no capital/maintenance costs associated with the information collection requirements contained in this rule; therefore, we have removed
the associated column from Table 8.
V. Regulatory Impact Analysis
A. Statement of Need
This rule finalizes standards related to the risk adjustment
program for the 2021 benefit year, clarifications and improvements to
the RADV program, as well as certain modifications that will promote
transparency, innovation in the private sector, reduce burden on
stakeholders, and improve program integrity. This rule finalizes
additional standards related to eligibility redetermination, special
enrollment periods, state selection of EHB-benchmark plan and annual
reporting of state-required benefits, premium adjustment percentage,
termination of coverage, excepted benefit HRAs, the MLR program, and
FFE and SBE-FP user fees.
B. Overall Impact
We have examined the impacts of this 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 rule is
likely to have economic impacts of $100 million or more in at least 1
year, and therefore, is expected to be economically significant under
Executive Order 12866. Therefore, HHS has provided an assessment of the
potential costs, benefits, and transfers associated with this 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 flexibility and control
over their insurance markets. They will reduce regulatory burden,
reduce administrative costs for issuers and states, and may lower net
premiums for consumers. Through the reduction in financial uncertainty
for issuers and increased affordability for consumers, these provisions
are expected to increase access to affordable health coverage. Although
there is still some uncertainty regarding the net effect on premiums,
we anticipate that the provisions of this final rule will help further
HHS's goal of ensuring that all consumers have access to quality and
affordable health care and are able to make informed 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 states, will incur costs related to the
EHB reporting requirement, defrayal of the cost of state-required
benefits; implementation of new special enrollment period requirements;
and non-Federal governmental plan sponsors offering excepted benefit
HRAs will incur expenses associated with providing a notice. Issuers
will experience a net increase in rebates paid to consumers due to the
amendments to the MLR requirements. 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 No. A-4, Table 9 depicts an
accounting statement summarizing HHS's 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 9
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 annual monetized transfers
described in Table 9 include an increase in risk adjustment user fee
transfers and the potential net increase in rebates from
[[Page 29247]]
issuers to consumers due to the amendments to MLR requirements.
We are finalizing the risk adjustment user fee of $0.25 PMPM for
the 2021 benefit year to operate the risk adjustment program on behalf
of states,\175\ which we estimate to cost approximately $60 million in
benefit year 2021, an increase of $10 million from that estimated for
the 2020 benefit year. We are also finalizing the FFE user fee rate at
3.0 percent of premiums and the SBE-FP user fee rate at 2.5 percent of
premiums, which are the same as the user fee rates for the 2020 benefit
year.
---------------------------------------------------------------------------
\175\ As noted earlier in this final rule, no state has elected
to operate the risk adjustment program for the 2021 benefit year;
therefore, HHS will operate the program for all 50 states and the
District of Columbia.
Table 9--Accounting Table
------------------------------------------------------------------------
-------------------------------------------------------------------------
Benefits:
------------------------------------------------------------------------
Qualitative:
Greater market stability resulting from updates to the risk
adjustment methodology.
Increase in consumers' understanding of their excepted
benefit HRA offer.
Strengthened program integrity related to provisions to
terminate QHP coverage for Exchange enrollees who have become
deceased during a plan year and via processing voluntary
terminations on behalf of Medicare, Medicaid/CHIP, if applicable,
BHP, dual enrollees via PDM.
More plan options for Exchange enrollees newly ineligible
for CSRs, resulting in increased continuous coverage and associated
benefit to risk pools.
Streamlined Exchange operations by eliminating certain
prospective coverage effective date rules and retroactive payment
rules for special enrollment periods.
------------------------------------------------------------------------
Estimate Discount rate Period
Costs (million) Year dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Annualized Monetized ($/year)................... -$54.57 2019 7 2020-2024
-51.51 2019 3 2020-2024
Quantitative:
Costs incurred by sponsors of non-
Federal governmental plans and states to
comply with provisions related to notice
requirement for excepted benefit HRAs and
reporting related to state mandated
benefits, as detailed in the Collection of
Information Requirements section, estimated
to be approximately $182,000 in 2020,
approximately $105,200 in 2021 and
approximately $59,000 from 2022 onwards....
Reduction in potential costs to
Exchanges since they will not be required
to conduct random sampling as a
verification process for enrollment in or
eligibility for employer-based insurance
when the Exchange reasonably expects that
it will not obtain sufficient verification
data, estimated to be one-time savings of
$48.5 million in 2020 and annual savings of
$99 million in 2020 and 2021...............
Regulatory familiarization costs of
approximately $169,500 in 2020.............
----------------------------------------------------------------------------------------------------------------
Qualitative:
Increased costs due to increases in
providing medical services (if health
insurance enrollment increases)............
Potentially minor costs to
Exchanges and DE partners to update the
application and logic to account for new
plan options for Exchange enrollees newly
ineligible for CSRs and enrollees covered
by a non-calendar plan year QSEHRA.........
Potential reduction in costs to
issuers due to elimination of duplicative
coverage as part of PDM....................
Potential reduction in costs to
consumers due to PDM noticing efforts to
notify enrollees of duplicative coverage
and risk for tax liability.................
Potential costs to the Exchanges
and consumers to comply with the new
special enrollment period requirements.....
Potential reduction in burden for
Exchanges and issuers to comply with the
special enrollment period prospective
coverage effective dates...................
----------------------------------------------------------------------------------------------------------------
Estimate Discount rate Period
Transfers (million) Year dollar (percent) covered
----------------------------------------------------------------------------------------------------------------
Federal Annualized Monetized ($/year)........... $7.7 2019 7 2020-2024
7.9 2019 3 2020-2024
Other Annualized Monetized ($/year)............. 10.2 2019 7 2020-2024
10.6 2019 3 2020-2024
----------------------------------------------------------------------------------------------------------------
Quantitative:
Federal Transfers: Increase in risk
adjustment user fee transfers from issuers
to the federal government by $10 million
starting in 2021, compared to that
estimated for the prior benefit year.......
[[Page 29248]]
Other Transfers: Net increase in
transfers from health insurance issuers to
consumers in the form of rebates of $18.2
million per year starting in 2022 MLR
reporting year, due to amendments to the
MLR requirements...........................
----------------------------------------------------------------------------------------------------------------
Qualitative:
Potential decreases in premiums and
PTCs associated with adjustments to MLR....
Potential decrease in APTC and CSR
payments due to reduction in duplicative
coverage and retroactive termination of
coverage to the date of death as part of
PDM and more accurate defrayal of costs for
state mandated benefits....................
Transfer of costs from issuers to
states to the extent that a state will
newly defray the cost of state-required
benefits it should have already been
defraying..................................
----------------------------------------------------------------------------------------------------------------
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 ends the transitional reinsurance program and
temporary risk corridors program after the benefit year 2016.
Therefore, the costs associated with those programs are not included in
Table 9 or 10. Table 10 summarizes the effects of the risk adjustment
program on the Federal budget from FYs 2020 through 2024, 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 premium stabilization
programs that are described in Table 10.
In addition to utilizing CBO projections, HHS conducted an internal
analysis of the effects of its regulations on enrollment and premiums.
Based on these internal analyses, we anticipate that the quantitative
effects of the provisions in this rule are consistent with our previous
estimates in the 2020 Payment Notice for the impacts associated with
the APTCs, the premium stabilization programs, and FFE and SBE-FP user
fee requirements.
Table 10--Estimated Federal Government Outlays and Receipts for the Risk Adjustment and Reinsurance Programs From Fiscal Year 2020-2024, in Billions of
Dollars \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Year 2020 2021 2022 2023 2024 2020-2024
--------------------------------------------------------------------------------------------------------------------------------------------------------
Risk Adjustment and Reinsurance Program Payments.. 5 6 6 6 7 30
Risk Adjustment and Reinsurance Program 5 6 6 6 7 30
Collections......................................
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ Reinsurance collections ended in FY 2018 and outlays in subsequent years reflect remaining payments, refunds, and allowable activities.
Note: Risk adjustment program payments and receipts lag by one quarter. Receipt will fully offset payments over time.
Source: Congressional Budget Office. Net Federal Subsidies Associated With Health Insurance Coverage, 2020 to 2030: Table From CBO's March 2020
Baseline. March 6, 2020. Available at https://www.cbo.gov/about/products/baseline-projections-selected-programs#6.
1. Notice Requirement for Excepted Benefit HRAs Offered by Non-Federal
Governmental Plan Sponsors (Sec. 146.145(b)(3)(viii)(E))
In Sec. 146.145(b)(3)(viii)(E), we require that an excepted
benefit HRA offered by a non-Federal governmental plan sponsor must
provide, on an annual basis, a notice that describes conditions
pertaining to eligibility to receive benefits, annual or lifetime caps
or other limits on benefits under the plan, and a description or
summary of the benefits. This notice will provide employees with clear
information regarding excepted benefit HRAs offered by their employers.
Excepted benefit HRAs sponsored by non-Federal governmental entities
will incur costs to provide the notice as detailed previously in the
Collection of Information Requirements section.
2. Early Retiree Reinsurance Program (Part 149)
The provision to remove the regulations at part 149 of title 45
governing the ERRP will not have any direct regulatory impact since the
ERRP sunset as of January 1, 2014. However, removing the regulations
will reduce the volume of Federal regulations.
3. 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 part
153.
If a state is not approved to operate, or chooses to forgo
operating its own risk adjustment program, HHS will operate risk
adjustment on its behalf. For the 2021 benefit year, HHS will operate a
risk adjustment program in every state and the District of Columbia. As
described in the 2014 Payment Notice, HHS's operation of risk
adjustment on behalf of states is funded through a risk adjustment user
fee. For the 2021 benefit year, we have used the same methodology that
we finalized in the 2020 Payment Notice to estimate our administrative
expenses to operate the program. Risk adjustment user fee costs for the
2021 benefit year are expected to increase from the prior 2020 benefit
year estimates of approximately $50 million to approximately $60
million. We estimate that the total cost for HHS to
[[Page 29249]]
operate the risk adjustment program on behalf of states and the
District of Columbia for 2021 will be approximately $60 million, and
the risk adjustment user fee will be $0.25 PMPM. Because of the
increase in costs estimated for the 2021 benefit year, we expect the
final risk adjustment user fee for the 2021 benefit year to increase
transfers from issuers of risk adjustment covered plans to the Federal
Government by $10 million.
Additionally, to use risk adjustment factors that reflect more
recent treatment patterns and costs, we will recalibrate the HHS risk
adjustment models for the 2021 benefit year by using more recent claims
data to develop updated risk factors, as part of our continued
assessment of modifications to the HHS-operated risk adjustment program
for the individual and small group (and merged) markets. We will
discontinue our reliance on MarketScan[supreg] data to recalibrate the
risk adjustment models, and adopt an approach of using the 3 most
recent years of available enrollee-level EDGE data for recalibration of
the risk adjustment models for the 2021 benefit year and beyond. We
believe that the approach of blending (or averaging) 3 years of
separately solved coefficients will provide stability within the risk
adjustment program and minimize volatility in changes to risk scores
from the 2020 benefit year to the 2021 benefit year due to differences
in the datasets' underlying populations. We will also incorporate the
proposed HCC changes beginning with the 2021 benefit year risk
adjustment models to transition from the ICD-9 to ICD-10 codes. We do
not expect these changes to affect the absolute value of risk
adjustment transfers, or impact issuer burden beyond what we previously
estimated in the 2020 Payment Notice.
4. Risk Adjustment Data Validation (Sec. Sec. 153.350 and 153.630)
We are making changes to the RADV methodology for identifying
outliers, which results in adjustments to transfers under Sec.
153.350. Beginning with the 2019 benefit year of RADV, we will consider
issuers to be outliers only if they have 30 or more HCCs recorded on
EDGE for any HCC group in which their failure rate appears anomalous.
As only a very small number of issuers will be affected by this change,
and those affected already have small total plan liability risk scores
for the affected HCC groups due to their low HCC counts, we expect the
total reduction of burden to issuers to be small. Projections based on
2017 benefit year RADV adjustments estimate an overall 0.7 percent
reduction in absolute RADV transfer adjustments across all issuers for
benefit years to which this change may apply.
We are also finalizing that the 2019 benefit year RADV will serve
as a second pilot year for the purposes of prescription drug data
validation in addition to the 2018 benefit year RADV. This second pilot
year will provide HHS and issuers with 2 full years of experience with
the data validation process for prescription drugs before adjusting
transfers. We do not expect this to affect the magnitude of RADV
adjustments to risk adjustment transfers, or to impact issuer burden or
administrative costs beyond what we previously estimated in the 2020
Payment Notice.
5. Verification Process Related to Eligibility for Insurance
Affordability Programs (Sec. 155.320)
We are finalizing the policy that HHS will not take enforcement
action against Exchanges that do not perform random sampling as
required by Sec. 155.320(d)(4), when the Exchange does not reasonably
expect to obtain sufficient verification data as described in Sec.
155.320(d)(2)(i) through (iii), for plan years 2020 and 2021. In the
2019 Payment Notice final rule, we discussed the burden associated with
sampling based in part on the alternative process used for the
Exchanges. HHS incurred approximately $750,000 in costs to design and
operationalize a study in 2016 and the study indicated that $353,581 of
APTC was potentially incorrectly granted to individuals who
inaccurately attested to their enrollment in or eligibility for a
qualifying eligible employer-sponsored plan. We placed calls to
employers to verify 15,125 cases but were only able to verify 1,948
cases. A large number of employers either could not be reached or were
unable to verify a consumer's information, resulting in a verification
rate of approximately 13 percent. The sample-size involved in the 2016
study did not represent a statistically significant sample of the
target population and did not fulfill all regulatory requirements for
sampling under paragraph (d)(4)(i) of Sec. 155.320.
We estimate that the overall one-time cost of implementing sampling
would have been approximately $8 million for the Exchanges using the
Federal platform, and between $2 million and $7 million for other
Exchanges, depending on their enrollment volume and existing
infrastructure. Therefore, we estimate that the average per-Exchange
cost of implementing sampling that resembles the approach taken by the
Exchanges using the Federal platform would have been approximately $4.5
million for State Exchanges that operate their own eligibility and
enrollment platform, for a total cost of $58.5 million for the 13 State
Exchanges that operate their own eligibility and enrollment platform
(operating in 12 States and the District of Columbia). However, we are
aware that 4 State Exchanges that operate their own eligibility and
enrollment platform have already incurred costs to implement sampling
and estimate that they have incurred one-time costs of approximately
$4.5 million per Exchange with a total of $18 million and will only
experience savings related to recurring costs. Therefore, the one-time
savings for Exchanges using the Federal platform and the remaining
State Exchanges that operate their own eligibility and enrollment
platform will be approximately $48.5 million.
We estimate the annual costs to conduct sampling on a statistically
significant sample size of approximately 1 million cases to be
approximately $8 million for the Exchanges using the Federal platform
and $7 million on average for each State Exchange that operates its own
eligibility and enrollment platform. This estimate includes operational
activities such as noticing, inbound and outbound calls to the
Marketplace call center, and adjudicating consumer appeals. The total
annual cost to conduct sampling would have been $91 million for 13
State Exchanges. Therefore, the total annual cost for the Exchanges
using the Federal platform and the 13 State Exchanges that operate
their own eligibility and enrollment platform would have been $99
million. We estimated that relieving Exchanges of the requirement to
conduct sampling for plan years 2020 and 2021 will result in annual
savings of approximately $99 million. We solicited comment on this
estimate.
We received no public comments on these proposed cost savings, and
therefore, we are finalizing as proposed.
6. Eligibility Redetermination During a Benefit Year (Sec. 155.330)
We are amending Sec. 155.330(e)(2)(i)(D) to clarify that the
Exchanges will not redetermine eligibility for APTC/CSRs for Medicare,
Medicaid/CHIP, and, if applicable, BHP for dual enrollees who provide
written consent for Exchanges to end their QHP coverage prior to
terminating the coverage. We anticipate that this will benefit dual
enrollees, as processing a voluntary termination mitigates the risk for
future tax liability for APTC/CSRs paid inappropriately during months
of overlapping coverage. It will also streamline the termination
[[Page 29250]]
process. Additionally, we believe this provision will safeguard
consumers against being enrolled in unnecessary or duplicative
coverage. This provision may reduce burden on Exchanges by allowing
them to streamline their PDM operations since eligibility
redeterminations for APTC/CSRs are not necessary when processing a
voluntary termination of coverage for a dual enrollee who has permitted
the Exchange to do so, and will provide Exchanges with more flexibility
in their operations.
We solicited comment on the impacts of the proposal. We received no
public comments on costs or anticipated burden on states with regard to
the proposed changes. Therefore, we are finalizing as proposed.
We further amend Sec. 155.330(e)(2)(i)(D) by adding new language
that clarifies when the Exchange identifies deceased enrollees via PDM,
the Exchange will follow the process outlined in Sec. 155.430(d)(7)
and terminate coverage retroactively to the date of death, without the
need to redetermine the eligibility of the deceased enrollee. We
believe this change will reduce the amount of time a deceased enrollee
remains in QHP coverage while receiving APTC/CSRs. Additionally, we
believe this provision will not increase burden on State Exchanges that
operate their own eligibility and enrollment platform because we
believe these changes merely clarify the operational process when
conducting checks for deceased enrollees and would not impose new
requirements on State Exchanges that operate their own eligibility and
enrollment platform. Additionally, this provision may help streamline
Exchanges' PDM operations, as eligibility redeterminations are not
necessary when termination of coverage is for a deceased enrollee, and
will provide Exchanges with more flexibility in their operations.
We solicited comment on the impacts of the proposal. We received no
public comments on costs or anticipated burden on states with regard to
the proposed changes. Therefore, we are finalizing as proposed.
7. Special Enrollment Periods (Sec. 155.420)
a. Exchange Enrollees Newly Ineligible for CSRs
We are amending Sec. 155.420(a)(4) to allow enrollees who qualify
for a special enrollment period due to becoming newly ineligible for
CSRs to change to a QHP one metal level higher or lower, but delaying
to January 2022 the effective date for this modification to allow
Exchanges more time to implement the change. We anticipate that this
will benefit applicable enrollees and dependents by providing them with
additional flexibility to change to a plan better suited to their needs
based on changes to their premiums and/or cost-sharing requirements. In
some cases, this change may help enrollees to maintain continuous
coverage for themselves and for their dependents when they otherwise
would have no longer been able to afford higher premiums or increased
cost-sharing requirements of their current silver-level plan. This
provision may also provide some benefit to the individual market risk
pool by making it easier for those affected to maintain continuous
coverage in spite of potentially significant changes in their out-of-
pocket health care costs. Regardless, we believe that this change will
not have a negative impact on the individual market risk pool, because
most applicable enrollees will seek to change coverage based on
financial rather than health needs. However, this provision will impose
a small cost to Exchanges that have implemented plan category
limitations, because it will require a change to application and plan
selection system logic to permit applicable enrollees and dependents to
change to gold or bronze level plans after having previously restricted
them to silver level plans. We solicited comments on the extent to
which Exchanges would experience burden due to the change, and
regarding potential burden on FFE Direct Enrollment and Enhanced Direct
Enrollment partners, as well as more generally on the impact of the
proposal.
Several commenters supported providing State Exchanges with
flexibility related to implementing special enrollment period policy
changes because they often necessitate resource-intensive work.
However, a wide range of commenters supported this proposal because
they believed it would reduce burden on affected Exchange enrollees by
allowing them to change their QHP selection based on a change to their
financial circumstances. Some of these commenters noted that this
change could allow some enrollees to maintain coverage who otherwise
would not have been able to do so, which supports our belief that this
provision may have a small but positive impact on the individual market
risk pool. Therefore, while we are aware that this change will likely
impose burden on State Exchanges required to implement it, we believe
that the benefit of finalizing it will outweigh the cost and that
delaying the effective date for this modification will give Exchanges
sufficient time to incorporate it into their development priorities and
allocate resources accordingly.
b. Special Enrollment Period Limitations for Enrollees Who Are
Dependents
We believe that the new provision in Sec. 155.420(a)(4)(iii)(C)
will not impose burden on Exchanges, because it will streamline the
rules at Sec. 155.420(a)(4) by ensuring that all existing enrollees
are treated in the same way, and therefore, may simplify
implementation. We also anticipate that it will help mitigate confusion
on the part of issuers, Exchanges, and consumers by clarifying that the
2017 Market Stabilization Rule's intent was to apply the same
limitations to dependents who are currently enrolled in Exchange
coverage that it applies to current, non-dependent Exchange enrollees.
However, we solicited comment from Exchanges on whether this is the
case, and if not, on the costs that the proposal would impose in terms
of updates to application system logic, as well as potential consumer
burden based on the number of enrollees who might be affected by this
type of plan category limitation.
Several commenters expressed support for this proposal based on its
simplification of current regulations. However, several commenters
opposed this proposal based on their belief that a parent or guardian
should be able to re-evaluate their household's QHP selection based on
metal level when newly enrolling in Exchange coverage with currently-
enrolled dependents. Additionally, similar to the other plan category
limitation-related proposal, we did not receive comments that
specifically contradicted our understanding that this change would
impose some limited burden on Exchanges, but several commenters cited
strong support for providing State Exchanges with flexibility related
to implementing special enrollment period policy changes because they
often necessitate resource-intensive work. Some of these commenters
also voiced strong opposition to plan category limitations more
generally. While we are sensitive to State Exchange concerns about the
cost of implementing changes to system logic, we believe that the
benefit of this provision in terms of simplifying plan category
limitation rules and ensuring that these rules work as intended will
outweigh the cost.
[[Page 29251]]
c. Special Enrollment Period Prospective Coverage Effective Dates
Our revision to transition special enrollment periods previously
following regular effective date rules to instead be effective on the
first of the month following plan selection in Exchanges using the
Federal platform will improve long-term operational efficiency through
standardization for issuers and the Exchanges using the Federal
platform, while reducing consumer confusion and minimizing gaps in
coverage. We do not expect issuers to incur substantial new costs by
aligning these effective dates, as issuers routinely effectuate
coverage on the first of the month following plan selection or faster.
Additionally, because billing is tied to effective dates,
transitioning to these more expedited effective dates in the Exchanges
using the Federal platform will simplify issuer billing practices.
Operationalizing the aligned prospective effective dates may reduce
system errors and related casework, as well as confusion for consumers,
issuers, and caseworker and call center staff based on different rules
applying for different scenarios. Also, we believe eliminating the
requirement that Exchanges demonstrate that all of their participating
QHP issuers agree to effectuate coverage in a shorter timeframe will
reduce burden for both issuers and Exchanges. We did not receive
comments on this analysis.
d. Special Enrollment Period Retroactive Coverage Effective Dates
We are eliminating the special rule for retroactive effective dates
after an enrollment has been pended due to special enrollment period
verification and to simplify applicability of retroactive effective
date and binder payment rules to clarify the ability of consumers
effectuating enrollments with retroactive effective dates to select
prospective coverage by paying only one month's premium. This will
improve long-term operational efficiency for issuers and Exchanges,
while reducing confusion for consumers, issuers, and caseworker and
call center staff based on different rules for different scenarios. We
do not expect issuers to incur new costs in streamlining applicability
of the retroactive effective date rule. Under previous Sec.
155.400(e)(1)(iii), issuers already received transactions for
retroactive coverage and assigned coverage effective dates either
retroactively or prospectively based on consumer payments. This change
will simply eliminate the complexity for an issuer to have to determine
the appropriate binder payment rule to apply to an enrollment with a
retroactive effective date when issuers receive only 1 month's premium.
Finally, because issuers, not Exchanges using the Federal platform, are
responsible for assigning effective dates based on premium payments
received under this policy, Exchanges using the Federal platform will
not incur costs based on this change. We did not receive comments on
this analysis.
e. Enrollees Covered by a Non-Calendar Year Plan Year QSEHRA
We are amending Sec. 155.420(d)(1)(ii) to codify the special
enrollment period available to qualified individuals and dependents who
are provided a QSEHRA with a non-calendar year plan year. We expect
that this will impose some burden on Exchanges and off-Exchange
individual health insurance issuers that implement pre-enrollment
eligibility verification for special enrollment periods due to related
updates to the application and the need to train staff that reviews
documents from applicants to verify special enrollment period
eligibility. However, we believe that this burden will be limited
because the ``non-calendar year plan year special enrollment period''
is already subject to pre-enrollment eligibility verification, and
because individuals who qualify may already be enrolled in Exchange
coverage, and therefore, not subject to pre-enrollment eligibility
verification. We also anticipate that this provision will impose
limited burden on FFE Enhanced Direct Enrollment partners, because
required changes for these partners will be limited to updating
application question wording.
Additionally, while this provision will provide QSEHRA participants
an opportunity to change their individual health insurance plan, we
believe that uptake will be limited as most eligible employees will
likely not want to change to a new QHP during the QHP's plan year
because such a change would result in their deductibles and other
accumulators re-setting. Similarly, we believe that burden on issuers
related to adverse selection will be limited due to low uptake because
of the disadvantages to enrollees of changing their coverage during its
plan year, and because the special enrollment period at Sec.
155.420(d)(1)(ii) is subject to plan category limitations per Sec.
155.420(a)(4)(iii). We solicited comments on this proposal, including
from Exchanges, on implementation burden and costs.
Commenters generally expressed support for this proposal, and we
did not receive comments that this change would create burden for State
Exchanges or other key stakeholders.
8. Effective Dates for Terminations (Sec. 155.430)
As discussed earlier in the preamble to Sec. 155.430, this
provision will align the provision for termination after an enrollee
experiences a technical error that does not allow her to terminate her
coverage or enrollment through the Exchange with all other enrollee-
initiated termination effective date rules under Sec. 155.430.
Specifically, at the option of the Exchange, the enrollee will no
longer have to provide 14-days advance notice before the termination
becomes effective. Exchanges and issuers are not expected to incur new
costs by aligning these termination dates, as Exchanges and issuers are
both well acquainted with same-day termination transactions. Further,
similar to the 2019 updates to Sec. 155.430(d)(2), this provision will
retain State Exchange flexibility to choose whether to implement this
change. Operationalizing the aligned termination dates might reduce
system errors and related casework, as well as confusion for consumers,
issuers, and caseworker and call center staff based on contradictory
rules for different scenarios.
9. Quality Rating Information Display Standards for Exchanges
(Sec. Sec. 155.1400 and 155.1405)
We are amending Sec. Sec. 155.1400 and 155.1405 to codify the
flexibility for State Exchanges that operate their own eligibility and
enrollment platforms, to customize the display of quality rating
information on their websites. We expect that this will impose minimal
burden on State Exchanges. In particular, these State Exchanges have
the choice to pursue this flexibility or to display the quality rating
information assigned for each QHP as provided by HHS. Further, a few
State Exchanges during the display pilot have already chosen to display
quality rating information with some state-specific customizations to
incorporate additional state or local information or to modify the
names of the QRS quality ratings.
10. FFE and SBE-FP User Fees (Sec. 156.50)
For 2021, we considered two alternative proposals. First, we
proposed to maintain the FFE and the SBE-FP user fee rates at current
levels, 3.0 and 2.5 percent of premiums, respectively. Alternatively,
we considered and solicited comment on reducing the user fee rates
below the 2020 benefit year levels. If the user fees
[[Page 29252]]
are lowered below the 2020 benefit year levels, FFE and SBE-FP user fee
transfers from issuers to the Federal Government would be lower
compared to those estimated for the prior benefit year.
We are finalizing the FFE user fee rate at 3.0 percent of premiums
and the SBE-FP user fee rate at 2.5 percent of premiums, which are the
same as the user fee rates for the 2020 benefit year. Therefore, there
will be no change in user fee transfers.
11. State Selection of EHB-Benchmark Plan for Plan Years Beginning on
or After January 1, 2020 (Sec. 156.111)
We are amending Sec. 156.111(d) and adding a new paragraph (f) to
require states to annually report to HHS any state-required benefits in
addition to EHB in accordance with Sec. 155.170 that are applicable to
QHPs in the individual and/or small group markets. As finalized, if the
state does not report to HHS its state-required benefits considered to
be in addition to EHB by the annual reporting submission deadline, HHS
will identify which benefits are in addition to EHB for the state for
the applicable plan year. We also specify at Sec. 156.111(f)(1)
through (6) the type of documentation states will be required to submit
as part of the annual reporting, which among other requirements will
need to be signed by a state official with authority to make the
submission on behalf of the state, to confirm the accuracy of the
submission.
Comment: Many commenters stated that an annual reporting
requirement would be an additional administrative burden on states, the
type the Administration instructed agencies to reduce to the maximum
extent permitted by law and duplicate the burden states already bear as
the entities responsible for identifying which mandates require
defrayal. To ease burden, one commenter recommended that HHS leverage
the existing reporting related to EHB rather than creating a new,
duplicative report. For example, one commenter stated that HHS making
determinations in the states' place about which state-required benefits
are in addition to EHB conflicts with Executive Order 13865, ``Reducing
Regulatory Burdens Imposed by the Patient Protection and Affordable
Care Act & Improving Healthcare Choice To Empower Patients,'' which
directs HHS ``to the maximum extent permitted by law, provide relief
from any provision or requirement of the PPACA that would impose a
fiscal burden on any State. . . .'' \176\ Commenters also expressed
concerned that the annual reporting requirement will be so burdensome
that it will discourage states from adopting changes to provide
additional health benefits to consumers or even deter states from
updating their EHB-benchmark plan.
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\176\ Executive Order 13865, ``Reducing Regulatory Burdens
Imposed by the Patient Protection and Affordable Care Act &
Improving Healthcare Choice To Empower Patients,'' 82 FR 26885,
26886 (June 12, 2017) available at https://www.govinfo.gov/content/pkg/FR-2017-06-12/pdf/2017-12130.pdf.
---------------------------------------------------------------------------
Response: We recognize that requiring states to annually report to
HHS will require that states submit additional paperwork to HHS on an
annual basis. However, because states are already required under Sec.
155.170 to identify which state-required benefits are in addition to
EHB and to defray the cost of those benefits, we believe any burden
experienced by states will be minimal and that this reporting
requirement will be complementary to the process the state should
already have in place for tracking and analyzing state-required
benefits. Additionally, states may opt not to report this information
and instead let HHS make this determination for them.
We also believe any such burden is justified to ensure that HHS is
not paying APTC for portions of premium attributable to non-EHB. We
continue to be concerned that there are states not defraying the costs
of their state-required benefits in addition to EHB in accordance with
Federal requirements. For such states, the burden may be higher to meet
the annual reporting requirement to the extent it requires the state to
begin tracking, analyzing, and identifying state-required benefits for
purposes of determining whether defrayal is required. However, we
believe the annual reporting requirement is necessary to help states be
diligent about their framework for determining which mandates are in
addition to EHB in accordance with Sec. 155.170 and to partner with
HHS on improving program integrity. This requirement properly aligns
with Federal requirements for defraying the cost of state-mandated
benefits, will generally improve transparency with regard to the types
of benefit requirements states are enacting, and will provide the
necessary information to HHS for increased oversight over whether
states are appropriately determining which state-required benefits
require defrayal and whether QHP issuers are properly allocating the
portion of premiums attributable to EHB for purposes of calculating
PTCs.
We acknowledge that some states may already be appropriately
identifying which state-required benefits are in addition to EHB, and
that these states may have already developed an effective process for
defraying the cost of these state-required benefits. However, we
believe many other states are not doing so, and that this annual
reporting policy will assist in achieving greater compliance with Sec.
155.170 in all states, and therefore, broadly strengthen program
integrity. Furthermore, we disagree that requiring already compliant
states to annually report would be disruptive or unnecessarily
burdensome given that the information included in the annual reports
should already be readily accessible to states, especially already
compliant states. We believe any burden will be limited to the
completion of the HHS templates, validation of that information, and
submission of the templates to HHS. These costs have been discussed
previously in the Collection of Information Requirements section. We
also believe standardizing the form and manner of the report and the
data elements required (rather than allowing states to determine the
form and manner of reporting) is important for consistency year after
year and for ensuring HHS has the information necessary to adequately
oversee state compliance with Sec. 155.170.
We do not anticipate these requirements will add any new burden on
non-reporting states as they will be relying on HHS to make these
determinations and fill out these templates for them. Because we are
also finalizing that HHS's identification of which benefits are in
addition to EHB in non-reporting states will become part of the
definition of EHB for the applicable state for the applicable year,
this may require states to defray more benefits than the state
currently defrays or anticipated having to defray. In this scenario, we
acknowledge the annual reporting requirement may generate additional
costs for a state that defers the task of identifying state-mandated
benefits that require defrayal to HHS in order to properly align the
state with Federal requirements regarding defrayal.
To the extent that this provision will cause a state to newly
defray the cost of state-required benefits, this will represent a
transfer of costs from the issuer to the state, as the issuer might
have been previously covering the costs of benefits for which the state
should have been defraying. In the event that the annual reporting
requirement causes states to newly identify state-required benefits as
being in addition to EHB that were previously being incorrectly
[[Page 29253]]
covered as part of EHB, this may decrease the amount of PTC for
enrollees in the state as the percent of premium allocable to EHB will
be reduced.
We again emphasize that section 36B(b)(3)(D) of the Code specifies
that the portion of the premium allocable to state-required benefits in
addition to EHB shall not be taken into account in determining a PTC.
As such, we believe any burden resulting from the finalized annual
reporting requirement is necessary to ensure that the federal
government is not paying APTC for portions of premiums attributable to
non-EHB in violation of this provision.
12. Provisions Related to Cost Sharing (Sec. 156.130)
The Affordable Care Act provides for the reduction or elimination
of cost sharing for certain eligible individuals enrolled in QHPs
offered through the Exchanges. This assistance is intended to help many
low- and moderate-income individuals and families obtain health
insurance.
We are finalizing the reductions in the maximum annual limitation
on cost sharing for silver plan variations as proposed. Consistent with
our analysis in previous Payment Notices, we developed three model
silver level QHPs and analyzed the impact on their AVs of the
reductions described in the PPACA to the estimated 2021 maximum annual
limitation on cost sharing for self only coverage of $8,550. We do not
believe the changes to the maximum annual limitation on cost sharing or
the reductions in this parameter for silver plan variations will result
in a significant economic impact.
We are also finalizing the premium adjustment percentage for the
2021 benefit year at the proposed value of 1.3542376277, based on the
NHEA data available at the time of proposal. Section 156.130(e)
provides 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 annual premium
adjustment percentage sets the rate of increase for three parameters
detailed in the Affordable Care Act: 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, and the assessable payments under sections
4980H(a) and 4980H(b). In response to comments, we have finalized the
premium adjustment percentage, required contribution percentage, and
related parameters based on the NHEA data that were available as of the
publication of the proposed rule. This approach differs from the
approach taken by HHS in the 2020 Payment Notice, wherein we updated
the premium adjustment percentage based on updates to the NHEA data
that took place between the publication of the proposed rule and the
publication of the final rule.
We are finalizing the 2021 premium adjustment percentage as
proposed without updates to reflect the most recent NHEA data available
as of the publication of the proposed rule in order to increase the
transparency and predictability of premium adjustment percentage and
related parameters for stakeholders.
We believe that the premium adjustment percentage of 1.3542376277
based on average per enrollee private health insurance premiums
(excluding Medigap and property and casualty insurance), and as
calculated based on NHEA data available as of the publication of the
proposed rule, is well within the parameters used in the modeling of
the Affordable Care Act, and we do not expect that these finalized
values will alter CBO's May 2018 baseline estimates of the budget
impact beyond the changes described in the 2020 Payment Notice.
13. Cost-Sharing Requirements and Drug Manufacturers Support (Sec.
156.130)
We are revising Sec. 156.130(h) in its entirety to state,
notwithstanding any other provision of the annual limitation on cost
sharing regulation, and to the extent consistent with state law,
amounts of direct support offered by drug manufacturers to enrollees
for specific prescription drugs towards reducing the cost sharing
incurred by an enrollee using any form are not required to be counted
toward the annual limitation on cost sharing. We believe that this will
impose minimal burden, as it reflects the longstanding practice of
health insurance issuers and group health plans determining whether
drug manufacturer direct support to enrollees for specific prescription
drugs counts toward the annual limitation on cost sharing.
Comment: Some commenters expressed concerns that consumers would
experience higher health care utilization and greater overall health
care costs.
Response: While we appreciate concerns that the proposal may raise
out-of-pocket costs for consumers, we believe the impact of such costs
will be limited as issuers and group health plans were provided with
sufficient notice that longstanding plan designs need not change for
plan year 2020 with regard to how direct drug manufacturer support
amounts count towards the annual limitation on cost sharing. By
finalizing this policy, issuers and group health plans may continue
their longstanding practices with regard to how and whether direct drug
manufacturer support accrues towards an enrollee's annual limitation on
cost sharing. This, combined with FAQ Part 40 released in August 2019,
should prevent or mitigate changes to how issuers and group health
plans have historically handled direct drug manufacturer support
amounts. Therefore, we anticipate that there will be minimal overall
disruption to consumers.
14. Requirements for Timely Submission of Enrollment Reconciliation
Data (Sec. 156.265)
In the Establishment of Exchanges and Qualified Health Plans;
Exchange Standards interim final rule,\177\ we established standards
for the collection and transmission of enrollment information. At Sec.
156.265(f), we set forth standards on the enrollment reconciliation
process, specifying that issuers must reconcile enrollment with the
Exchange no less than once a month. Although the regulations in Sec.
156.265 require issuers to reconcile enrollment with the Exchange
monthly, they do not specify standards for the format or quality of
these data exchanges, such as the manner in which enrollment updates
must be reflected in updates of previously submitted enrollment data,
or the timeframe in which issuers should report data updates and data
errors to the Exchange. To clarify these procedures, we are amending
Sec. 156.265(f) to require a QHP issuer to include in its enrollment
reconciliation submission to the Exchange the most recent enrollment
information that is available and that has been verified to the best of
its knowledge or belief. We are also amending Sec. 156.265(g) to
direct a QHP issuer to update its enrollment records as directed by the
Exchange (or for QHP issuers in SBE-FPs, the Federal platform), and to
inform the Exchange (or for QHP issuers in SBE-FPs, the Federal
platform) if any such directions are in error within 30 days. In SBE-
FPs, references in this section to the Exchange should be understood to
mean HHS, as administrator of the Federal platform. We believe these
amendments will encourage more timely reconciliation and error
reporting, resulting in an improved consumer
[[Page 29254]]
experience. However, because we believe that issuers are already
routinely conducting verifications of internal enrollment data at
various points in the year, we do not believe that these clarifying
standards on the process for submitting enrollment and reconciliation
data will materially impact issuer burden, beyond what we estimated in
the Exchange Establishment rules.
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\177\ See 77 FR 18309 at 18425.
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15. Dispute of HHS Payment and Collections Reports (Sec. 156.1210)
In the 2014 Payment Notice,\178\ we established provisions related
to confirmation and dispute of payment and collection reports. These
provisions were written under the assumption that issuers would
generally be able to provide these confirmations or disputes
automatically to HHS. We are amending Sec. 156.1210 by lengthening the
time to report payment errors from 15 days to 90 days to allow issuers
the option of researching, reporting, and correcting errors through
other channels. We believe this change will slightly reduce issuer
burden compared to what was previously estimated in the 2014 Payment
Notice.
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\178\ See 78 FR 65045 at 65080.
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16. Medical Loss Ratio (Sec. Sec. 158.110, 158.140, 158.150, and
158.160)
We are amending Sec. 158.110(a) to clarify that for MLR purposes,
issuers must report expenses for functions outsourced to or services
provided by other entities consistently with how issuers must report
directly incurred expenses. We do not expect this amendment to impact
issuer burden as it does not fundamentally change the existing
requirements. We are also amending Sec. 158.140(b)(1)(i) to require
issuers to deduct from incurred claims not only the prescription drug
rebates received by the issuer, but also any price concessions received
and retained by the issuer, as well as any prescription drug rebates
and other price concessions received and retained by an entity
providing pharmacy benefit management services (including drug price
negotiation services) to the issuer. We are making conforming
amendments to Sec. 158.160(b)(2) to require such amounts to be
reported as non-claims costs when received and retained by an entity
providing pharmacy benefit management services. While there does not
exist comprehensive public data on the amount, prevalence, or retention
rate for prescription drug rebates and other price concessions retained
by PBMs or other entities providing pharmacy benefit management
services, based on data from the 2017 MLR reporting year, including the
data from issuers who receive and report prescription drug rebates, we
estimate that this requirement may increase rebate payments from
issuers to consumers by $18.4 million per year. Since issuers generally
prefer to set premium rates at a level that avoids rebates, and
consequently potential rebate increases create a downward pressure on
premiums, this requirement is also likely to lead to reductions in PTC
transfers (which are a function of the premium rate for the second
lowest-cost silver plan applicable to a consumer, the premium rate for
the plan purchased by the consumer, and the consumer's income level)
from the Federal Government to certain consumers in the individual
market. Additionally, we are amending Sec. 158.150(b)(2)(iv)(A)(5) to
explicitly allow issuers in the individual market to include the cost
of certain wellness incentives as QIA in the MLR calculation. Based on
data from the 2017 MLR reporting year, we estimate that this provision
may decrease rebate payments from issuers to consumers by $0.2 million
per year.
We are finalizing these proposals as proposed, except that we are
delaying the applicability date of the amendments to Sec. Sec.
158.140(b)(1)(i) and 158.160(b)(2) until the 2022 MLR reporting year
(MLR reports filed in 2023), and modifying the amendment to Sec.
158.160(b)(2) to only apply to the prescription drug rebates and price
concessions received and retained by an entity providing pharmacy
benefit management services to the issuer.
Comment: One commenter stated that the amendment to Sec.
158.140(b)(1)(i) requiring issuers to deduct from incurred claims the
prescription drug rebates and other price concessions received and
retained by an entity providing pharmacy benefit management services to
the issuer would increase, rather than decrease, premiums because
``retained rebates as currently reported under MLR reduce actual plan
administrative expenses [and t]he administrative fees paid to PBMs that
replace the retained rebates would also be subtracted, resulting in the
same net effect.''
Response: We respectfully disagree with the commenter's assessment.
We note that the regulation, both before and after the amendment to
Sec. 158.140(b)(1)(i), does not allow administrative fees paid by an
issuer directly to a PBM or a similar entity to be included in incurred
claims. However, prior to the amendment to Sec. 158.140(b)(1)(i), an
issuer was able to include in incurred claims compensation provided by
an issuer to a PBM for administrative or other services by allowing the
PBM to retain part or all of the prescription drug rebates and other
prices concessions. Because the amendment to Sec. 158.140(b)(1)(i)
requires issuers to subtract such prescription drug rebates and other
prices concessions from incurred claims, the amendment will result in
lower MLRs for some issuers and will lead such issuers to lower
premiums or pay higher MLR rebates to enrollees.
17. 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 rule, we assume that this rule will be reviewed by
all affected issuers, states, non-Federal governmental entities
offering excepted benefit HRAs, and some individuals and other entities
that commented on the proposed rule. We acknowledge that this
assumption may understate or overstate the costs of reviewing this
rule. It is possible that not all commenters reviewed the proposed rule
in detail, and it is also possible that some reviewers chose not to
comment on the proposed rule. For these reasons, we consider the number
of affected entities and past commenters to be a fair estimate of the
number of reviewers of this final rule.
We are required to issue a substantial portion of this rule each
year under our regulations and we estimate that approximately half of
the remaining provisions would 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 rule is $109.36 per hour, including overhead and fringe
benefits.\179\ Assuming an average reading speed, we estimate that it
would take approximately 1 hours for the staff to review the relevant
portions
[[Page 29255]]
of this final rule that causes unanticipated burden. We assume that
approximately 1,550 entities will review this final rule. For each
entity that reviews the rule, the estimated cost is approximately
$109.36. Therefore, we estimate that the total cost of reviewing this
regulation is approximately $169,508 ($109.36 x 1,550 reviewers).
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\179\ https://www.bls.gov/oes/current/oes_nat.htm.
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D. Regulatory Alternatives Considered
In developing the policies contained in this rule, we considered
numerous alternatives to the presented proposals. Below we discuss the
key regulatory alternatives that we considered.
For the amendment to part 146, we considered not proposing a
requirement that a notice be provided to individuals with an offer of
an excepted benefit HRA from a non-Federal governmental plan. However,
we believe that a notice will provide these consumers with important
information about their excepted benefit HRA.
Instead of deleting the regulations in part 149, governing the
ERRP, we considered taking no action and leaving the regulations in
place. We believe that it serves the public interest to reduce the
volume of federal regulations when doing so will not compromise the
effectiveness of federal programs, nor detract from the government's
ability to implement laws or oversee funds appropriated for that
purpose. Since the ERRP has been fully implemented, and has no ongoing
functions, costs, or obligations, repealing the regulations will not
impair the government's ability to implement the program or oversee the
funds appropriated for that purpose.
In finalizing the risk adjustment model recalibration in part 153,
we considered whether to add an additional sex and age category for
enrollees age 65 and over as part of our recalibration of the HHS
models, due to our proposal to stop using MarketScan[supreg] data.
However, upon finding different trends in the age 65 and over
population, as discussed in the preamble, we did not propose to add
these additional categories.
In regards to the proposed changes to Sec. 155.320, we considered
taking no action to modify the requirement that when an Exchange does
not reasonably expect to obtain sufficient verification data related to
enrollment in or eligibility for employer sponsored coverage that the
Exchange must select a statistically significant random sample of
applicants and attempt to verify their attestation with the employer
listed on their Exchange application. However, based on HHS's
experience conducting sampling, this manual verification process
requires significant resources for a low return on investment, as using
this method HHS identified only a small population of applicants who
received APTC/CSR payments inappropriately. We ultimately determined
that a verification process for employer-sponsored coverage should be
one that is evidence or risk-based and that not taking enforcement
action against Exchanges that do not conduct random sampling was
appropriate as we anticipate future rulemaking is necessary to ensure
that Exchanges have more flexibility for such verifications.
Regarding the changes to Sec. Sec. 155.330 and 155.430, we
considered taking no action to clarify Exchange operations regarding
processing voluntary terminations for Exchange enrollees who provide
written consent to permit the Exchange to end QHP coverage if they are
later found to also be enrolled in Medicare via PDM. We ultimately
determined however that these revisions were necessary to clarify that
eligibility need not be redetermined as part of terminations at the
request of enrollees resulting from Medicare PDM.
Additionally, we considered taking no action and proceeding with
terminating coverage following an eligibility determination when the
Exchange conducts periodic checks for deceased enrollees rather than
retroactively terminating back to the date of death. However, we
determined that the revisions will clarify that eligibility need not be
redetermined prior to terminating deceased enrollee coverage
retroactively to the date of death.
We considered taking no action regarding the proposal to add a new
Sec. 155.420(a)(4)(ii)(B) in order to allow enrollees and their
dependents who become newly ineligible for CSRs and are enrolled in a
silver-level QHP to change to a QHP one metal level higher or lower if
they elect to change their QHP enrollment. However, based on questions
and concerns from Navigators and other enrollment assisters, as well as
from agents and brokers, the current policy likely prevents some
enrollees from maintaining continuous coverage for themselves and for
their dependents due to a potentially significant change to their out-
of-pocket costs. Under the provision, an enrollee impacted by an
increase to his or her monthly premium payment may change to a bronze-
level plan, while an enrollee who has concerns about higher copayment
or coinsurance cost-sharing requirements may change to a gold-level
plan. HHS believes that this policy will likely have minimal impact on
the individual market risk pool because most applicable enrollees will
be seeking to change coverage based on changes to their financial
circumstances rather than ongoing or emerging health needs.
We also considered making no changes regarding our proposal to
clarify the 2017 Market Stabilization Rule's intent to apply the same
limitations to dependents who are currently enrolled in Exchange
coverage that it applies to current, non-dependent Exchange enrollees.
As discussed in the proposed rule, preamble language from the 2017
Market Stabilization Proposed Rule explains that the requirement at
Sec. 155.420(a)(4)(iii) would extend to enrollees who are on an
application where a new applicant is enrolling in coverage through a
special enrollment period, using general terms to convey that
restrictions should apply to enrollees and newly-enrolling individuals
regardless of the dependent or parent or guardian status of a new
enrollee. However, because this intended aspect of the limitation is
not articulated in regulation, we were concerned that the rule's
current wording would cause confusion among issuers, consumers, and
Exchanges. Additionally, this change is consistent with HHS's goal to
establish equivalent treatment for all special enrollment period
eligible enrollees, and with the policy goal of preventing enrollees
from changing plans in the middle of the coverage year based on ongoing
or newly emerging health issues.
In proposing and finalizing that special enrollment periods
currently following regular effective date rules would instead be
effective on the first of the month following plan selection in
Exchanges using the Federal platform, we considered whether we could
implement this change through subregulatory guidance, since for many of
these special enrollment periods, Exchanges have discretion under Sec.
155.420(b)(2)(i), (iv), and (v) to provide an effective date on the
first of the month following plan selection, or under Sec.
155.420(b)(3) to ensure that coverage is effective on an appropriate
date based on the circumstances of the special enrollment period.
However, Exchange discretion is not available under current regulations
for several special enrollment periods that use regular effective
dates; that is, HHS could not apply faster effective dates in the
Exchanges using the Federal platform without regulatory changes for
certain special enrollment periods. These are the special enrollment
periods available under Sec. 155.420(d)(6)(i), (ii), and (v); (d)(8);
and (d)(10). Only applying faster effective dates for some, but not
all, special enrollment periods that currently use regular effective
date rules would not accomplish our goals of
[[Page 29256]]
standardization and improving long-term operational efficiency. We
believe this regulatory change is necessary to align all prospective
special enrollment periods under one effective date rule.
In proposing and finalizing aligning retroactive effective date and
binder payment rules under Sec. 155.400(e)(1)(iii), we considered
eliminating both Sec. 155.400(e)(1)(v) (as we proposed), but revising,
rather than eliminating, Sec. 155.420(b)(5). Previously, section
155.420(b)(5) provided that if a consumer's enrollment is delayed until
after the verification of the consumer's eligibility for a special
enrollment period, and the assigned effective date would require the
consumer to pay 2 or more months of retroactive premium to effectuate
coverage or avoid cancellation, the consumer has the option to choose a
coverage effective date that is no more than 1 month later than had
previously been assigned. However, we determined that revising this
provision would cause more confusion than standardizing retroactive
effective date and binder payment rules under Sec. 155.400(e)(1)(iii).
Instead, we are finalizing the proposed amendment to Sec.
155.400(e)(1)(iii) to state more explicitly that any consumer who can
effectuate coverage with a retroactive effective date, including those
whose enrollment is delayed until after special enrollment period
verification, would also have the option to effectuate coverage with
the applicable prospective coverage.
Through this change, a consumer can choose to only pay for 1 month
of coverage by the applicable deadline, notwithstanding the retroactive
effective date that the Exchange otherwise would be required to ensure.
Even though very few consumers wait more than a few days for HHS to
review their special enrollment period verification documents and
provide a response (as discussed in the preamble of the proposed rule),
we want to ensure that those few consumers whose coverage is delayed by
at least 1 month due to special enrollment period verification would
have the same options as any other consumers who are eligible to
receive coverage with a retroactive effective date.
As described in the HRA rule,\180\ HHS included consumers who are
newly provided a QSEHRA in the class of persons eligible for a new
special enrollment period established for qualified individuals,
enrollees, and dependents who newly gain access to an individual
coverage HRA. We also expressed our intent to treat a QSEHRA with a
non-calendar year plan year as a group health plan for the limited
purpose of the non-calendar year plan year special enrollment period,
and to codify this interpretation in future rulemaking. Our goal is to
ensure employees and their dependents with a non-calendar year plan
year QSEHRA have the same opportunity to change individual health
insurance coverage outside of the individual market open enrollment
period as those who are enrolled in a non-calendar year plan year
individual coverage HRA.
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\180\ 84 FR 28888.
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In finalizing the annual reporting of state-required benefits in
addition to EHB, we considered a variety of alternatives, including
withdrawing the proposal altogether. We also considered instead issuing
a toolkit or guidance for states to assist with identifying state-
required benefits in addition to EHB and properly defraying the cost of
those benefits in accordance with Sec. 155.170. However, we do not
believe that either of these options would alone offer HHS direct
insight into the frequency with which states require benefits in
addition to EHB to be covered and whether states are properly defraying
the costs of state-required benefits in addition to EHB. Therefore, we
are finalizing the annual reporting policy as proposed, except for a
minor revision at Sec. 156.111(d)(2). However, to address comments
regarding the lack of clarity around the current defrayal policy, we
will also take steps to engage with states to clarify this policy
before the first annual submission deadline. Through this state
engagement, we hope to provide additional technical assistance that
helps ensure state understanding when a state-benefit requirement is in
addition to EHB and requires defrayal, provides examples, and explains
how a state could operationalize the defrayal process pursuant to
federal requirements at Sec. 155.170. We believe additional outreach
to states prior to the first annual reporting submission deadline of
July 1, 2021, will strengthen state understanding of defrayal policy
ahead of the first year of implementation of the annual reporting
requirement in plan year 2021.
We also considered revising the policy such that Exchanges would
again be the entity responsible for identifying which additional state-
required benefits, if any, are in addition to EHB instead of the state.
However, as noted previously in the 2017 Payment Notice, we changed the
policy to make the state the entity responsible for identifying state-
required benefits in addition to EHB instead of the Exchange because we
believe states are generally more familiar with state-required
benefits. We also considered revising Sec. 155.170 to make HHS the
entity responsible for identifying which state-required benefits are in
addition to EHB in every state such that HHS would always identify
which mandates require defrayal, but the QHP issuers would still be
responsible for quantifying the costs for these additional mandates and
reporting them to the state, at which point the state would be expected
to make payments directly to the enrollee or the QHP issuer. However,
because we still believe states are generally most familiar with state-
required benefits and, because we support state flexibility, we believe
that states should remain the entity responsible for identifying state-
required benefits in addition to EHB. We believe the annual reporting
policy we are finalizing is consistent with this goal of state
flexibility and acknowledges state expertise, as it would not shift the
authority from the state to HHS as the entity responsible for
identifying whether a mandate is in addition to EHB unless the state
does not submit an annual report to HHS or does not do so in the form
and manner specified by HHS, in which case only then would HHS identify
which state-required benefits are in addition to EHB for the state.
In proposing and finalizing amendments to Sec. 156.270(b)(1) to
require QHP issuers to send to enrollees a termination notice for all
termination events, we considered whether to revert to the original
language in the first iteration of Sec. 156.270, which required a
termination notice when an enrollee's coverage was terminated ``for any
reason.'' However, because the termination notice requirement is
triggered under this paragraph ``[i]f a QHP issuer terminates an
enrollee's coverage or enrollment in a QHP through the Exchange . . . ,
'' we were concerned that this could be read to require termination
notices for issuer-initiated terminations only. To be clear that we are
proposing to require termination notices for the full range of
termination events described under Sec. 155.430(b), including those
initiated by an enrollee, our amendments instead refer broadly to the
reasons listed in Sec. 155.430(b) rather than identifying each
termination reason under that section.
For the amendments to Sec. 158.150, we considered making no change
to the current regulation that does not explicitly allow issuers in the
individual market to include the cost of certain wellness incentives as
QIA in the MLR calculation. However, we believe that finalizing the
changes to this section will ensure that it is
[[Page 29257]]
interpreted consistently across the individual and group markets. We
also believe that finalizing the changes to this section will generally
increase consumer choice and access to wellness programs, including any
health-contingent wellness programs that may be available in a state
that is approved to participate in the wellness program demonstration
project.
E. Regulatory Flexibility Act
The Regulatory Flexibility Act (RFA), (5 U.S.C. 601, et seq.),
requires agencies to prepare an initial regulatory flexibility analysis
to describe the impact of the proposed 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 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 rule, we finalize standards for the risk adjustment and
RADV programs, which are intended to stabilize premiums and reduce
incentives for issuers to avoid higher-risk enrollees. 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 $41.5 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 $35 million or less.\181\ 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 \182\ submissions
for the 2017 MLR reporting year, approximately 90 out of 500 issuers of
health insurance coverage nationwide had total premium revenue of $41.5
million or less. This estimate may overstate the actual number of small
health insurance companies that may be affected, since over 72 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 $41.5 million.
Only 10 of these 90 potentially small entities, three of them part of
larger holding groups, are estimated to experience a change in rebates
under the amendments to the MLR provisions of this final rule in part
158. Therefore, we believe that the MLR provisions of this final rule
will not affect a substantial number of small entities.
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\181\ https://www.sba.gov/document/support--table-size-standards.
\182\ Available at https://www.cms.gov/CCIIO/Resources/Data-Resources/mlr.html.
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We believe that a small number of non-Federal government
jurisdictions with a population of less than 50,000 will offer
employees an excepted benefit HRA, and therefore, will be subject to
the proposed notice requirement in part 146. Therefore, we do not
believe that an initial regulatory flexibility analysis is required for
such firms.
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 rule will not affect
small rural hospitals. Therefore, the Secretary has determined that
this rule 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 proposed 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 2020, that threshold is approximately $156 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 final 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 NAIC, and consulting with state insurance
officials on an individual basis.
While developing this rule, we attempted to balance the states'
interests in regulating health insurance issuers with the need to
ensure market stability. By doing so, we 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, those states had
the opportunity to use funds under Exchange Planning and Establishment
Grants to fund the development of data. Accordingly, some of the
initial cost of creating 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 requirements or costs on state and local governments, this
regulation has federalism implications due to potential direct effects
on the distribution of power and responsibilities among the state and
Federal governments relating to determining standards relating to
health insurance that is offered in the individual and small group
markets. We are also requiring non-Federal governmental plan sponsors
to provide a notice when offering an excepted benefit HRA, but expect
state and local governments to incur minimal costs to meet the
requirements in this rule.
[[Page 29258]]
We also believe this regulation has federalism implications for the
PDM process provisions, specifically for QHP terminations resulting
from Medicare, Medicaid/CHIP, BHP (if applicable) or deceased enrollee
PDM. In these instances, HHS also believes that the federalism
implications are substantially mitigated because the requirements
merely clarify that the Exchange is following termination guidelines
that differ from the processes when Exchanges are terminating only
APTC/CSRs as part of the standard PDM processes. Furthermore, these
clarifications will not impose new requirements on State Exchanges that
operate their own eligibility and enrollment platform, but rather
provide guidance that State Exchanges that operate their own
eligibility and enrollment platform can choose to incorporate into
their current operations for PDM.
We believe there may be federalism implications in connection with
our provisions related to plan category limitations: (1) We added a new
Sec. 155.420(a)(4)(ii)(B) in order to allow enrollees and their
dependents who become newly ineligible for CSRs and are enrolled in a
silver-level QHP, to select a QHP one metal level higher or lower if
they elect to change their QHP enrollment; and (2) we added a new Sec.
155.420(a)(4)(iii)(C) to apply the same limitations to dependents who
are currently enrolled in Exchange coverage that it applies to current,
non-dependent Exchange enrollees. There may be operational costs to
State Exchanges that have already implemented plan category limitations
due to the need to update their application logic to reflect these
changes. However, given the 2017 Market Stabilization Rule preamble
language discussed above, it is possible that State Exchanges are
already in compliance with our proposal to clarify the application of
the same limitations to dependents who are currently enrolled in
Exchange coverage that apply to current, non-dependent Exchange
enrollees. We solicited comment on how many State Exchanges currently
implement plan category limitations, as well as estimates related to
how much time and expense would be required to update these systems to
comply with the two proposals.
Comment: We did not receive comments describing State Exchanges'
implementation of plan category limitations, or comments that included
estimates of time and expense that this proposal would require.
However, several commenters expressed support for providing State
Exchanges with flexibility related to special enrollment period policy
implementation in general, explaining that any special enrollment
period changes require significant State Exchange effort and
potentially unpredictable costs.
Response: Given most commenters' support for allowing enrollees and
their dependents who become newly ineligible for CSRs and are enrolled
in a silver-level QHP, to select a QHP one metal level higher or lower
if they elect to change their QHP enrollment, we believe that the
benefits of finalizing it as proposed outweigh general concerns about
implementation. Additionally, we have delayed the effective date for
this modification to January 2022, which we believe will allow
Exchanges sufficient time to incorporate the change into their
development priorities. We also believe that the benefit of simplifying
plan category limitation rules and ensuring that these rules work as
intended by applying the same limitations to enrolled dependents that
apply to non-dependents will outweigh costs associated with
implementation.
Additionally, we expect that amendment to Sec. 155.420(d)(1)(ii)
to codify the special enrollment period for qualified individuals and
dependents who are provided a QSEHRA with a non-calendar year plan year
will have some federalism implications, because it will require State
Exchanges to update the wording of their applications, and to update
instructions for verifying a special enrollment period due to a loss of
MEC to include applicants with a non-calendar year plan year QSEHRA.
Additionally, State Exchanges, as well as FFE Direct Enrollment and
Enhanced Direct Enrollment partners, may see a nominal increase in the
number of consumers obtaining coverage through the non-calendar year
plan year special enrollment period at Sec. 155.420(d)(1)(ii).
However, we expect this number to be low.
We do not anticipate any federalism implications related to our
revision providing that special enrollment periods currently following
regular effective date rules would instead be effective on the first of
the month following plan selection in the Exchanges using the Federal
platform. We believe State Exchanges are best positioned to determine
which effective date rules meet the needs of their issuers and
consumers. As such, under our changes, State Exchanges may retain their
current effective date rules or implement faster ones without needing
to demonstrate issuer concurrence.
We do not expect there to be federalism implications related to
removing the separate retroactive effective date rule for enrollments
pended due to special enrollment period verification under Sec.
155.420(b)(5). Neither the retroactive binder payment rule specific to
enrollments pended due to special enrollment period eligibility
verification at Sec. 155.400(e)(1)(v), nor the original retroactive
binder payment rule at Sec. 155.400(e)(1)(iii), applies outside of
Exchanges using the Federal platform. Although previous Sec.
155.420(b)(5) did apply to State Exchanges, a State Exchange that has
implemented special enrollment period verification will retain
flexibility to apply the policy that if a consumer's enrollment is
delayed until after the verification of the consumer's eligibility for
a special enrollment period, and the assigned effective date would
require the consumer to pay 2 or more months of retroactive premium to
effectuate coverage or avoid cancellation, the consumer has the option
to choose a coverage effective date that is no more than 1 month later
than had previously been assigned.
We do not anticipate any federalism implications related to our
requirement for QHP issuers to send to enrollees a termination notice
for all termination events described in Sec. 155.430(b).
We do not anticipate any federalism implications related to our
provision described in Sec. 155.430(d) to align the provision for
termination after experiencing a technical error that did not allow the
enrollee to terminate his or her coverage or enrollment through the
Exchange with all other enrollee-initiated termination effective date
rules under Sec. 155.430 that, at the option of the Exchange, no
longer require 14-days advance notice.
We continue to believe there may be federalism implications related
to the requirement we are finalizing that states annually report to
HHS, in a form and manner specified by HHS, any state-required benefits
in addition to EHB in accordance with Sec. 155.170 that are applicable
to QHPs in the individual and/or small group market. States that do not
report to HHS their required benefits considered to be in addition to
EHB by the annual reporting submission deadline, or do not do so in the
form and manner specified by HHS, will be relying on HHS to identify
such benefits. We acknowledge that the state-required benefits HHS
identifies as in addition to EHB and that therefore require defrayal,
might conflict with the opinion of a state that does not annually
report to HHS. However, such concerns are mitigated because states can
avoid such a result by submitting the report. Further, as previously
noted, HHS must ensure that APTC is paid in accordance
[[Page 29259]]
with federal law. If a state is not defraying the cost of a state-
required benefit that is in addition to EHB, resulting in improper
federal expenditures, we believe section 1313(a)(4) of the PPACA
empowers HHS to take action consistent with its enforcement authorities
to address a state's failure to comply with the PPACA's defrayal
requirements. However, as also noted earlier in the preamble, we intend
to continue the collaborative process we have cultivated with states up
to this point, and to provide non-reporting states with an opportunity
to review our identifications prior to releasing the annual reports on
the CMS website for public viewing in an effort to mitigate the
potential for disagreement between the state and HHS.
H. Congressional Review Act
This 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 the Congress and to the Comptroller General a report
containing a copy of the rule along with other specified information.
Therefore, the rule has been transmitted to the Congress and the
Comptroller. Pursuant to the Congressional Review Act, the Office of
Information and Regulatory Affairs designated this final rule as a
``major rule'' as that term is defined in 5 U.S.C. 804(2), because it
is likely to result in an annual effect on the economy of $100 million
or more.
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 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. We estimate
cost savings of approximately $147.15 million in 2020 and $98.89
million in 2021 and annual costs of approximately $59,000 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 $11.40
million.
List of Subjects
45 CFR Part 146
Health care, Health insurance, Reporting and recordkeeping
requirements.
45 CFR Part 149
Health care, Health insurance, 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, 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.
45 CFR Part 158
Administrative practice and procedure, Claims, Health care, Health
insurance, Penalties, Reporting and recordkeeping requirements.
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
subtitle A, subchapter B, 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 146.145 is amended by adding paragraph (b)(3)(viii)(E) to
read as follows:
Sec. 146.145 Special rules relating to group health plans.
* * * * *
(b) * * *
(3) * * *
(viii) * * *
(E) Notice requirement. For plan years beginning on or after
January 11, 2021, the HRA or other account-based group health plan must
provide a notice that describes conditions pertaining to eligibility to
receive benefits, annual or lifetime caps, or other limits on benefits
under the plan, and a description or summary of the benefits. This
notice must be provided no later than 90 days after an employee becomes
a participant and annually thereafter, in a manner reasonably
calculated to ensure actual receipt by participants eligible for the
HRA or other account-based group health plan.
* * * * *
PART 149--[REMOVED and RESERVED]
0
3. Part 149 is removed and reserved.
PART 155--EXCHANGE ESTABLISHMENT STANDARDS AND OTHER RELATED
STANDARDS UNDER THE AFFORDABLE CARE ACT
0
4. The authority citation for part 155 continues to read as follows:
Authority: 42 U.S.C. 18021-18024, 18031-18033, 18041-18042,
18051, 18054, 18071, and 18081-18083.
0
5. Section 155.330 is amended by revising paragraph (e)(2)(i)(D) to
read as follows:
Sec. 155.330 Eligibility redetermination during a benefit year.
* * * * *
(e) * * *
(2) * * *
(i) * * *
(D) If the enrollee does not respond contesting the updated
information within the 30-day period specified in paragraph
(e)(2)(i)(B) of this section, proceed in accordance with paragraphs
(e)(1)(i) and (ii) of this section, provided the enrollee has not
directed the Exchange to terminate his or her coverage under such
circumstances, in which case the Exchange will terminate the enrollee's
coverage in accordance with Sec. 155.430(b)(1)(ii), and provided the
enrollee has not been determined to
[[Page 29260]]
be deceased, in which case the Exchange will terminate the enrollee's
coverage in accordance with Sec. 155.430(d)(7).
* * * * *
0
6. Section 155.400 is amended by revising paragraphs (e)(1)(i) through
(iii) and removing paragraph (e)(1)(iv) to read as follows:
Sec. 155.400 Enrollment of qualified individuals into QHPs.
* * * * *
(e) * * *
(1) * * *
(i) For prospective coverage to be effectuated under regular
coverage effective dates, as provided for in Sec. 155.410(f), the
binder payment must consist of the first month's premium, and the
deadline for making the binder payment must be no earlier than the
coverage effective date, and no later than 30 calendar days from the
coverage effective date.
(ii) For prospective coverage to be effectuated under special
effective dates, as provided for in Sec. 155.420(b)(2) and (3), the
binder payment must consist of the first month's premium, and the
deadline for making the binder payment must be no earlier than the
coverage effective date and no later than 30 calendar days from the
date the issuer receives the enrollment transaction or the coverage
effective date, whichever is later.
(iii) For coverage to be effectuated under retroactive effective
dates, as provided for in Sec. 155.420(b)(2), including when
retroactive effective dates are due to a delay until after special
enrollment period verification, the binder payment must consist of the
premium due for all months of retroactive coverage through the first
prospective month of coverage, and the deadline for making the binder
payment must be no earlier than 30 calendar days from the date the
issuer receives the enrollment transaction. If only the premium for 1
month of coverage is paid, only prospective coverage should be
effectuated, in accordance with Sec. 155.420(b)(3).
* * * * *
0
7. Section 155.420 is amended by--
0
a. Revising paragraphs (a)(4)(ii) and (iii), (b)(1) introductory text,
and (b)(3);
0
b. Removing paragraph (b)(5); and
0
c. Revising paragraph (d)(1)(ii).
The revisions and addition read as follows:
Sec. 155.420 Special enrollment periods.
(a) * * *
(4) * * *
(ii)(A) If an enrollee and his or her dependents become newly
eligible for cost-sharing reductions in accordance with paragraph
(d)(6)(i) or (ii) of this section and are not enrolled in a silver-
level QHP, the Exchange must allow the enrollee and his or her
dependents to change to a silver-level QHP if they elect to change
their QHP enrollment; or
(B) Beginning January 2022, if an enrollee and his or her
dependents become newly ineligible for cost-sharing reductions in
accordance with paragraph (d)(6)(i) or (ii) of this section and are
enrolled in a silver-level QHP, the Exchange must allow the enrollee
and his or her dependents to change to a QHP one metal level higher or
lower, if they elect to change their QHP enrollment.
(iii) For the other triggering events specified in paragraph (d) of
this section, except for paragraphs (d)(2)(i), (d)(4), and (d)(6)(i)
and (ii) of this section for becoming newly eligible or ineligible for
CSRs and paragraphs (d)(8), (9), (10), (12), and (14) of this section:
(A) If an enrollee qualifies for a special enrollment period, the
Exchange must allow the enrollee and his or her dependents, if
applicable, to change to another QHP within the same level of coverage
(or one metal level higher or lower, if no such QHP is available), as
outlined in Sec. 156.140(b) of this subchapter;
(B) If a dependent qualifies for a special enrollment period, and
an enrollee who does not also qualify for a special enrollment period
is adding the dependent to his or her QHP, the Exchange must allow the
enrollee to add the dependent to his or her current QHP; or, if the
QHP's business rules do not allow the dependent to enroll, the Exchange
must allow the enrollee and his or her dependents to change to another
QHP within the same level of coverage (or one metal level higher or
lower, if no such QHP is available), as outlined in Sec. 156.140(b) of
this subchapter, or enroll the new qualified individual in a separate
QHP; or
(C) If a qualified individual who is not an enrollee qualifies for
a special enrollment period and has one or more dependents who are
enrollees who do not also qualify for a special enrollment period, the
Exchange must allow the newly enrolling qualified individual to add
himself or herself to a dependent's current QHP; or, if the QHP's
business rules do not allow the qualified individual to enroll in the
dependent's current QHP, to enroll with his or her dependent(s) in
another QHP within the same level of coverage (or one metal level
higher or lower, if no such QHP is available), as outlined in Sec.
156.140(b) of this subchapter, or enroll himself or herself in a
separate QHP.
* * * * *
(b) * * *
(1) Regular effective dates. Except as specified in paragraphs
(b)(2) and (3) of this section, for a QHP selection received by the
Exchange from a qualified individual--
* * * * *
(3) Option for earlier effective dates. (i) For a QHP selection
received by the Exchange under a special enrollment period for which
regular effective dates specified in paragraph (b)(1) of this section
would apply, the Exchange may provide a coverage effective date that is
earlier than specified in such paragraph, and, beginning January 2022,
a Federally-facilitated Exchange or a State Exchange on the Federal
platform will ensure that coverage is effective on the first day of the
month following plan selection.
(ii) For a QHP selection received by the Exchange under a special
enrollment period for which special effective dates specified in
paragraph (b)(2)(ii) of this section would apply, the Exchange may
provide a coverage effective date that is earlier than specified in
such paragraph.
* * * * *
(d) * * *
(1) * * *
(ii) Is enrolled in any non-calendar year group health plan,
individual health insurance coverage, or qualified small employer
health reimbursement arrangement (as defined in section 9831(d)(2) of
the Internal Revenue Code); even if the qualified individual or his or
her dependent has the option to renew or re-enroll in such coverage.
The date of the loss of coverage is the last day of the plan year;
* * * * *
0
8. Section 155.430 is amended by revising paragraphs (b)(1)(ii) and
(d)(9) to read as follows:
Sec. 155.430 Termination of Exchange enrollment or coverage.
* * * * *
(b) * * *
(1) * * *
(ii) The Exchange must provide an opportunity at the time of plan
selection for an enrollee to choose to remain enrolled in a QHP if he
or she becomes eligible for other minimum essential coverage and the
enrollee does not request termination in accordance with paragraph
(b)(1)(i) of this section. If an enrollee does not choose to remain
enrolled in a QHP in such situation, the Exchange must initiate
termination of his or her enrollment in the QHP upon
[[Page 29261]]
completion of the process specified in Sec. 155.330(e)(2).
* * * * *
(d) * * *
(9) In case of a retroactive termination in accordance with
paragraph (b)(1)(iv)(A) of this section, the termination date will be
no sooner than the date that would have applied under paragraph (d)(2)
of this section, based on the date that the enrollee can demonstrate he
or she contacted the Exchange to terminate his or her coverage or
enrollment through the Exchange, had the technical error not occurred.
* * * * *
0
9. Section 155.1400 is revised to read as follows:
Sec. 155.1400 Quality rating system.
The Exchange must prominently display quality rating information
for each QHP on its website, in accordance with Sec. 155.205(b)(1)(v),
in a form and manner specified by HHS.
0
10. Section 155.1405 is revised to read as follows:
Sec. 155.1405 Enrollee satisfaction survey system.
The Exchange must prominently display results from the Enrollee
Satisfaction Survey for each QHP on its website, in accordance with
Sec. 155.205(b)(1)(iv), in a form and manner specified by HHS.
PART 156--HEALTH INSURANCE ISSUER STANDARDS UNDER THE AFFORDABLE
CARE ACT, INCLUDING STANDARDS RELATED TO EXCHANGES
0
11. 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.
Sec. 156.20 [Amended]
0
12. Section 156.20 is amended by removing the definition of
``Generic''.
0
13. Section 156.111 is amended by--
0
a. Revising the section heading and paragraph (d) introductory text;
and
0
b. Adding paragraphs (d)(2) and (f).
The revisions and additions read as follows:
Sec. 156.111 State selection of EHB-benchmark plan for plan years
beginning on or after January 1, 2020, and annual reporting of state-
required benefits.
* * * * *
(d) A State must notify HHS of the selection of a new EHB-benchmark
plan by a date to be determined by HHS for each applicable plan year
and, in accordance with paragraph (f) of this section, of any State-
required benefits that are in addition to EHB identified under Sec.
155.170(a)(3) of this subchapter.
* * * * *
(2) If the State does not notify HHS of its State-required benefits
that are in addition to EHB identified under Sec. 155.170(a)(3) of
this subchapter in accordance with paragraph (f) of this section, HHS
will identify which benefits are in addition to EHB for the applicable
plan year in the State, consistent with Sec. 155.170(a)(2) of this
subchapter.
* * * * *
(f) A State must submit to HHS in a form and manner and by a date
specified by HHS, a document that:
(1) Is accurate as of the day that is at least 60 days prior to the
annual reporting submission deadline set by HHS and that lists all
State benefit requirements applicable to QHPs in the individual and/or
small group market under state mandates imposed on or before December
31, 2011, and that were not withdrawn or otherwise no longer effective
before December 31, 2011, and any State benefit requirements that were
imposed any time after December 31, 2011;
(2) Specifies which of those State-required benefits listed in
accordance with paragraph (f)(1) of this section the State has
identified as in addition to EHB and subject to defrayal in accordance
with Sec. 155.170 of this subchapter;
(3) Specifies which of those State-required benefits listed in
accordance with paragraph (f)(1) of this section the State has
identified as not in addition to EHB and not subject to defrayal in
accordance with Sec. 155.170 of this subchapter, and describes the
basis for the state's determination;
(4) Provides other information about those State-required benefits
listed in accordance with paragraph (f)(1) of this section that is
necessary for HHS oversight, as specified by HHS;
(5) Is signed by a state official with authority to make the
submission on behalf of the state certifying the accuracy of the
submission; and
(6) Is updated annually, in a form and manner and by a date
specified by HHS, to include any new State benefit requirements, and to
indicate whether benefit requirements previously reported to HHS under
this paragraph (f) have been amended, repealed, or otherwise affected
by state regulatory or legislative action.
0
14. Section 156.130 is amended by revising paragraph (h) to read as
follows:
Sec. 156.130 Cost-sharing requirements.
* * * * *
(h) Use of direct support offered by drug manufacturers.
Notwithstanding any other provision of this section, and to the extent
consistent with State law, amounts paid toward reducing the cost
sharing incurred by an enrollee using any form of direct support
offered by drug manufacturers for specific prescription drugs may be,
but are not required to be, counted toward the annual limitation on
cost sharing, as defined in paragraph (a) of this section.
0
15. Section 156.265 is amended by revising paragraphs (f) and (g) to
read as follows:
Sec. 156.265 Enrollment process for qualified individuals.
* * * * *
(f) Enrollment reconciliation. A QHP issuer must reconcile
enrollment files with the Exchange in a format specified by the
Exchange (or, for QHP issuers in State Exchanges on the Federal
Platform, the Federal Platform) and resolve assigned updates no less
than once a month in accordance with Sec. 155.400(d) of this
subchapter, using the most recent enrollment information that is
available and that has been verified to the best of the issuer's
knowledge or belief.
(g) Timely updates to enrollment records. A QHP issuer offering
plans through an Exchange must, in a format specified by the Exchange
(or, for QHP issuers in State Exchanges on the Federal Platform, the
Federal Platform), either:
(1) Verify to the Exchange (or, for QHP issuers in State Exchanges
on the Federal Platform, the Federal Platform) that the information in
the enrollment reconciliation file received from the Exchange (or, for
QHP issuers in State Exchanges on the Federal Platform, the Federal
Platform) accurately reflects its enrollment data for the applicable
benefit year in its next enrollment reconciliation file submission to
the Exchange (or, for QHP issuers in State Exchanges on the Federal
Platform, the Federal Platform), and update its internal enrollment
records accordingly; or
(2) Describe to the Exchange (or for QHP issuers in State Exchanges
on the Federal Platform, the Federal Platform) within one
reconciliation cycle any discrepancy it identifies in the enrollment
reconciliation files it received from the Exchange (or for QHP issuers
in State Exchanges on the Federal Platform, the Federal Platform).
0
16. Section 156.270 is amended by revising paragraph (b) introductory
text to read as follows:
[[Page 29262]]
Sec. 156.270 Termination of coverage or enrollment for qualified
individuals.
* * * * *
(b) Termination of coverage or enrollment notice requirement. If a
QHP issuer terminates an enrollee's coverage or enrollment in a QHP
through the Exchange in accordance with Sec. 155.430(b) of this
subchapter, the QHP issuer must, promptly and without undue delay:
* * * * *
0
17. Section 156.1210 is revised to read as follows:
Sec. 156.1210 Dispute Submission.
(a) Responses to reports. Within 90 calendar days of the date of a
payment and collections report from HHS, the issuer must, in a form and
manner specified by HHS describe to HHS any inaccuracies it identifies
in the report.
(b) Confirmation of HHS payment and collections reports. At the end
of each payment year, the issuer must, in a form and manner specified
by HHS, confirm to HHS that the amounts identified in the most recent
payment and collections report for the coverage year accurately reflect
applicable payments owed by the issuer to the Federal Government and
the payments owed to the issuer by the Federal Government, or that the
issuer has disputed any identified inaccuracies.
PART 158--ISSUER USE OF PREMIUM REVENUE: REPORTING AND REBATE
REQUIREMENTS
0
18. The authority citation for part 158 is revised to read as follows:
Authority: 42 U.S.C. 300gg-18.
0
19. Section 158.110 is amended by revising paragraph (a) to read as
follows:
Sec. 158.110 Reporting requirements related to premiums and
expenditures.
(a) General requirements. For each MLR reporting year, an issuer
must submit to the Secretary a report which complies with the
requirements of this part, concerning premium revenue and expenses
related to the group and individual health insurance coverage that it
issued. Reporting requirements of this part that apply to expenses
incurred directly by the issuer also apply to expenses for functions
outsourced to or services provided by other entities retained by the
issuer.
* * * * *
0
20. Section 158.140 is amended by revising paragraph (b)(1)(i) to read
as follows:
Sec. 158.140 Reimbursement for clinical services provided to
enrollees.
* * * * *
(b) * * *
(1) * * *
(i)(A) For MLR reporting years before 2022, prescription drug
rebates received by the issuer;
(B) Beginning with the 2022 MLR reporting year, prescription drug
rebates and other price concessions received and retained by the
issuer, and prescription drug rebates and other price concessions that
are received and retained by an entity providing pharmacy benefit
management services to the issuer and are associated with administering
the issuer's prescription drug benefits.
* * * * *
0
21. Section 158.150 is amended by revising paragraph (b)(2)(iv)(A)(5)
to read as follows:
Sec. 158.150 Activities that improve health care quality.
* * * * *
(b) * * *
(2) * * *
(iv) * * *
(A) * * *
(5)(i) For MLR reporting years before 2021, actual rewards,
incentives, bonuses, and reductions in copayments (excluding
administration of such programs) that are not already reflected in
premiums or claims should be allowed as a quality improvement activity
for the group market to the extent permitted by section 2705 of the PHS
Act;
(ii) Beginning with the 2021 MLR reporting year, actual rewards,
incentives, bonuses, reductions in copayments (excluding administration
of such programs) that are not already reflected in premiums or claims,
to the extent permitted by section 2705 of the PHS Act;
* * * * *
0
22. Section 158.160 is amended by adding paragraph (b)(2)(vii) to read
as follows:
Sec. 158.160 Other non-claims costs.
* * * * *
(b) * * *
(2) * * *
(vii) Beginning with the 2022 MLR reporting year, prescription drug
rebates and other price concessions that are received and retained by
an entity providing pharmacy benefit management services to the issuer
and are associated with administering the issuer's prescription drug
benefits.
Dated: April 27, 2020.
Seema Verma,
Administrator, Centers for Medicare & Medicaid Services.
Dated: April 28, 2020.
Alex M. Azar II,
Secretary, Department of Health and Human Services.
[FR Doc. 2020-10045 Filed 5-7-20; 4:15 pm]
BILLING CODE 4120-01-P