On April 9, 2018, the Centers for Medicare and Medicaid Services (CMS) released the final version of the annual Notice of Benefit and Payment Parameters (NBPP) for 2019. The NBPP provides the ground rules for the individual and small group health insurance markets for 2019, and is the main body of federal regulation for Exchange plans established by the Affordable Care Act.
Of particular note are provisions granting states additional flexibility to the definition of Essential Health Benefits (EHBs), and other new authorities for states regarding the certification of Qualified Health Plans (QHPs) for network adequacy. CMS stated that, “issuer exits and increasing premiums have threatened the stability of the individual and small group Exchanges” may best be addressed through greater state control over their insurance markets and to support innovative insurance models.
The NBPP is scheduled to be published in the Federal Register on April 17, 2018.
Starting in the 2020 plan year, states will have three additional methods for selecting the benchmark plan to establish the state’s standard for the statutorily-mandated EHBs. First, a state may adopt another state’s 2017 EHB benchmark plan in its entirety for its 2020 EHB benchmark plan. Second, for any category of EHB, a state may choose from any other state’s benefits standards from the 2017 plan year. Third, a state may propose an entirely new EHB standard. After 2020, EHB benchmark plans will be submitted on an annual basis. In all instances, states that select a new EHB benchmark plan face a “generosity standard” where they are not permitted to increase the scope of benefits in relation to their own 2017 benchmark plan.
In the proposed rule, CMS requested feedback on establishing a Federal default definition of EHB for future plan years further in the future that would allow states flexibility to adopt their own EHB-benchmark plans, provided they defray costs that exceed the Federal default. CMS may revisit this policy in future rulemaking.
CMS is recalibrating the risk adjustment models used for the 2018 benefit year to better capture drug classes and prescription drug usage, as well as making technical changes to the data sources behind the risk adjustment model, including using 3 years of blended claims data to reduce volatility in risk adjustment coefficients. The final demographic, diagnostic, pharmaceutical, and enrollment duration risk adjustment model factors are included in the final rule.
States are granted additional latitude in requesting reductions to their federal risk adjustment calculations. Such a change is intended to lower the barriers to entry for smaller insurers, who have historically faced difficulties in maintaining the capital necessary to make larger risk adjustment payments.
CMS is maintaining a $1 million threshold and 60 percent coinsurance rate for the high-cost risk pool portion of the risk adjustment program.
CMS finalized a proposal to raise the threshold for rate review from 10 percent to 15 percent, along with greater leeway to states with effective rate review programs regarding plan submission deadlines and shortening the period of advance notice to HHS on rate increases from 30 down to 5 business days. CMS declined to finalize a proposal to eliminate the requirement for uniform posting so states that have an effective rate review program would have the option to post proposed and final rate filing information on a rolling basis, citing comments on the potential for market volatility or manipulation from frequent restatements of premiums.
The NBPP also exempts student health insurance from federal rate review requirements.
QHP minimum certification standards
CMS further devolves decisionmaking on QHP certification to the state level, with network adequacy and essential community provider reviews entirely in the hands of the state. In instances where a state does not have statutory authority to conduct such reviews, states will be allowed to rely on an issuer’s accreditation from an HHS-recognized accrediting entity as a proxy for these review standards. CMS declined to finalize a proposal to defer to states in the review of service areas, noting comments that states currently lack the resources needed to adequately assume this responsibility.
Agents, brokers and direct enrollment
In keeping with an interest in increasing the role of agents, brokers, and issuers in enrollment, CMS finalizes a new approach to assessing their operational readiness for direct enrollment, allowing those entities to select a third party of their choosing for those assessments, provided that the third party meets certain HHS specifications.
Standardized plan options and meaningful difference standards
Citing a support for free market principles and a need for innovation in the individual and small group insurance markets, CMS finalized a proposal to eliminate standardized plan designs from QHP offerings on the federally facilitated exchanges. CMS also finalized the removal of meaningful difference standards in a similar fashion to rulemaking for Part D and Medicare Advantage plans, and with the same aim of encouraging plan innovation and flexibility.
Maximum annual out-of-pocket limitations
The 2019 maximum annual limitation on cost sharing will be $7,900 for self-only coverage and $15,800 for other coverage categories. This represents a 7 percent increase from the 2018 plan year limitations. CMS believes that this change will permit more flexible plan design while still ensuring adequate consumer protections under the law.
Establishing of exchanges and user fees
The NBPP finalizes a provision grant authorities of State-based Exchanges on the Federal Platform (SBE-FPs) to assess network adequacy, essential community provider, and meaningful difference standards without federal oversight. CMS also set the user fee percentages for SBE-FPs at 3.0 percent, with plans sold on the federally facilitated exchanges maintaining the current rate of 3.5 percent.
In general, CMS shows an interest in supporting states to leverage the efficiencies of the federal exchange platform while allowing them the greater flexibilities available to state-based marketplaces. To that end, CMS has sought comment on options around expanding the role of SBE-FPs, as well as regional exchanges that operate across state lines.
Navigator program standards
By law, each state must establish a Navigator program to conduct public education activities to raise awareness of QHPs, and to provide impartial information on consumer options. In the final NBPP, CMS eliminated requirements that each exchange have at least two Navigator entities, and that one must be a community and consumer-focused non-profit group. The final rule also removes requirements that Navigator programs maintain a physical presence in the exchange service area.
Program integrity and income verification
NBPP makes some substantive changes related to income verification requirements, including no longer relying entirely on consumer attestation of income, but instead drawing from IRS and Social Security income projections to drive data matching algorithms. These changes are expected to require states to revisit their exchanges’ premium tax credit eligibility systems.
The rule also mentions forthcoming guidance on program integrity, including thresholds for changes in income that trigger data matching inconsistencies, processes for denying eligibility for advance subsidies for individuals who do not reconcile advance payments on their tax returns, and matching enrollment data with Medicare and Medicaid to avoid duplicate enrollment.
Although the recent tax reform law makes the individual mandate penalty $0 for not retaining minimum essential coverage, hardship exemptions are still necessary for consumers who want access to exchange-based catastrophic health coverage due to the unavailability of affordable health plans. For that reason, CMS made a series of revisions and clarifications on when a hardship exemption may be granted.
Future rule-making and guidance
In line with an Administration-wide initiative to address rising drug costs, CMS invites comment on proposals in future rulemaking to reduce drug costs and promote drug price transparency in the Exchange market. CMS also sought comment on how they might better encourage value-based insurance design in the individual and small-group insurance markets. CMS encourages issuers to offer high-deductible health plans that can be paired with a health savings account.
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