Policy Brief: Notice of Benefit and Payment Parameters Proposed Rules
In this policy brief, we discuss the high level changes to the recent proposed rule issued by CMS, then do a deeper dive into the changes in the background section, and finally, discuss the impact for states.
The new proposed Marketplace payment rule, issued by the Centers for Medicare and Medicaid Services (CMS), impacts states in several ways. The stated purpose of the changes is to: “increase flexibility in the individual market, improve program integrity, and reduce regulatory burdens”. There are four broad categories of issues of which to be aware:
- Enrollment and benefits changes
- CMS proposes flexibility in the benchmark alternative to the Essential Health Benefits (EHBs) that would allow states to adopt, as a benefit floor, any plan used by an employer of at least 5,000 people. In other words, the most narrow plan currently used by an employer of at least 5,000 could be adopted in lieu of the EHBs and then subsequently adopted by other states.
- Special enrollment periods (SEPs) to be more friendly
- Remove requirement that states have at least two Navigator programs
- Increased auditing of: 1) individuals attesting to income when there are inconsistencies; and 2) opportunities for individuals to enroll in their employer coverage.
- Allow for same-day termination by consumers from their plan instead of the current 14-day notice
- CHIP buy-in programs automatically receive Minimum Essential Coverage (MEC) status
- Maximum cost-sharing increases by seven percent
- Changes to Small Business Health Options Program (SHOP)
- Cessation of federal online enrollment support for the SHOP
- Introduction of new ways to enroll (e.g., through a state or broker)
- State and Federal Marketplaces
- Change the issuer user fee for state based exchanges that rely on the federally facilitated marketplace (FFM) for certain functionality from two percent to three percent of premiums
- Increase the issuer user fee for the FFM from three percent to 3.5 percent of premiums
- CMS is seeking comments on how to make the FFM more attractive for states to use
- Oversight of Qualified Health Plans (QHPs) and rate changes:
- Risk adjustment methods to change
- Medical Loss Ratio (MLR) to be more favorable to carriers
- Criteria triggering a second-level rate review to be relaxed
- Rely on states’ carrier compliance determinations for QHP certifications
- Remove the actuarial value requirements for plans that only cover dental benefits
- Seeking comments on how “social risk factors” such as: “low income subsidy; race and ethnicity; and geographic area of residence” should be reflected in the Quality Rating System program
On Friday, October 27, 2017, CMS issued a Notice of Proposed Rulemaking (NPRM) addressing a number of issues for the 2019 Open Enrollment Period. This NPRM has a 30-day public comment period that ends on November 27, 2017. During this time, anyone may submit comments on the NPRM and CMS must address them before finalizing and enforcing these changes. However, the changes to the SHOP provisions, the first to be implemented, are also somewhat effectuated by the SHOP sub-regulatory guidance that accompanied the rule.
Enrollment and benefits changes
There are a number of changes to the method by which people enroll in QHPs, as well as eligibility for and benefits under the plans. The most integral of these changes is that the proposed rule would allow interested states to downgrade benefit packages for QHPs from the current ACA requirements. Currently, states use a “benchmark plan” that covers ten EHBs, is actuarially similar to a common large employer plan. The Secretary must approve which benchmark plan is used.
The proposed changes would allow a state to do three critical things to downgrade current EHBs:
- Removes the current list of ten EHBs as a baseline list of benefits and lets a state “selec[t] a set of benefits that would become the State’s EHB-benchmark plan.”;
- Use as a benchmark a plan from any employer with over 5,000 employees; and
- Let any state adopt another state’s benchmark plan (elements can come from one or more states).
The net effect would be that a plan of any employer of more than 5,000 people could become the new benchmark for any interested state. CMS also issued a sample benchmark methods document. This will likely reduce benefits, but make cheaper options available to people shopping for a QHP.
The proposed rule would give new additional flexibility for SEPs. Specifically, a pregnant woman qualifying for coverage under CHIP’s unborn child provision could get an SEP when her CHIP coverage is terminated. Also, the interpretation of which dependents (i.e., only new, or new and all other dependents) qualify for an SEP with certain triggering events for the new dependent.
Another provision addresses the prior coverage requirement in an SEP. An individual could still qualify for a SEP if there were no QHPs in his or her service area for any part of the 60 days leading up to the qualifying event.
The Navigator program currently requires that each Exchange have two Navigator vendors — both of which must have a presence in the service area and one of which must be a community-oriented non-profit. This NPRM strips all of these requirements.
The NPRM also suggests removing the current 14-day notification requirements for enrollees who want to terminate coverage with a QHP. They could do so for the same day or a future date.
The proposed rule would allow certain CHIP buy-in programs to automatically qualify for MEC. Currently, there is an application process. Finally, there is a proposed seven percent increase over 2018 to cost sharing maximums.
The proposed rule continues to withdraw any federal online support for SHOP enrollment and instead proposes that SHOP enrollment take place through states or brokers. Furthermore, there are a series of proposed changes that would reduce requirements for employers and plans and replace most of the online federal support for SHOP with state support.
As previously mentioned, while the proposed provisions in the NPRM would not take effect until finalized, CMS issued sub-regulatory guidance alongside the NPRM. The sub-regulatory guidance has less legal enforceability, but still communicates policy changes, which are expected to be implemented when plans that were in effect in 2018 ended.
State and Federal Marketplaces
Due to the SHOP changes related to withdrawing federal support, the new NPRM would withdraw the ability for states to operate a SHOP exchange with (what will be non-existent) federal support. The proposed rule also seeks comments about how to make the FFM a more attractive service for states, especially to “support innovation.” Additionally, CMS is encouraging carriers to offer more High Deductible Health Plans (HDHPs) that can be paired with a Health Savings Account (HSA) as a cost effective option for potential enrollees.
The NPRM also suggests maintaining the current issuer user fee at 3.5 percent of premiums and removing the requirement that a certain portion of that will be used for enrollee outreach and education, instead making a judgment call about the appropriate level of funding. Additionally, states relying on the FFM will be charged three percent instead of the current two percent.
Oversight of QHPs and rate changes
Most of the rule is focused on explaining the process for and methods behind risk adjustment changes and maintenance. The proposed rule would change risk adjustment in three key ways:
- Recalibrate 2019 risk score;
- Let states handle certain types of risk adjustment transfers; and
- Remove certain drug classes from the model.
With respect to the associated audits for risk adjustment data, known as Risk Adjustment Data Validation (RADV) audits, CMS proposed relaxing the rules. The NPRM seeks comments on simplifying and reducing the error rate trigger for the audit process, as well as removing other carrier obligations.
Additionally, the proposed rule seeks comment on other, carrier-friendly, regulatory requirements. CMS suggests removing the actuarial value requirements for plans that only cover dental benefits, which would reduce the out-of-pocket costs for these plans, but increase confusion over plan comparison. CMS also proposed relaxing the threshold of premium rate increases that triggers a second-level rate review.
CMS also seeks comments on how “social risk factors” such as: “low income subsidy; race and ethnicity; and geographic area of residence” should be reflected in the Quality Rating System, which awards carriers stars, based on a variety of performance metrics. The purpose seems to be to contextualize plan performance “as fairly and accurately as possible” with this information.
CMS also proposed relaxing the QHP certification requirements and relying on state reviews or compliance determinations. They also seek comment on additional areas that could be delegated to states and give the states a bigger role in QHP certification.
Finally, and critically, the rule also seeks to reduce the carrier burden in MLR compliance. The MLR requirements have largely been seen as successful in reducing premium costs. If finalized, this NPRM would simplify the process by which states and carriers are granted waivers to the MLR threshold. The proposed changes would also make the equation more favorable to carriers (i.e., bigger profits) in terms of what they can count towards health care costs and what they must count in administrative costs.
Impacts of the provisions
The NPRM, if finalized in its current state, affects states in several ways. Several aspects will provoke legal challenges.
Nicholas Bagley, a law professor at the University of Michigan, speculated that the changes to the EHBs are not legal. He believes that the federal government cannot abdicate its responsibility to set EHBs by deferring to states’ benchmark coverage.
The proposed changes would transfer a lot of oversight burden to states, while reducing the federal role. The changes are also very friendly towards carriers in an effort to attract more competition back to the market. There are no additional funds for states and there will be an increased fee for using the FFM.
States should be aware of the proposed changes to the Navigator program, which will impact eligibility and enrollment outreach and assistance to all people, including those who eventually enrolled in Medicaid or CHIP. It is also possible that this will present a legal challenge.
Other state Medicaid and CHIP program changes to note include letting CHIP buy-in count as MEC and the MLR changes. The latter may be important insofar as how the Administration will implement and administer the MLR requirements under the 2016 Medicaid and CHIP Managed Care Final Rule. Since many states, through their Departments of Insurance, are already involved in the QHP certification process and this may not be a big change.
Finally, for states’ awareness, carriers will likely find the same-day termination provisions problematic to implement. While this will be consumer-friendly, carriers will protest.
Bagley, Nicholas. The Incidental Economist. “Trump and the Essential Health Benefits,” October 30, 2017.
Centers for Medicare and Medicaid Services. “Medicaid and CHIP Managed Care Final Rule,” April 25, 2016. https://www.medicaid.gov/medicaid/managed-care/guidance/final-rule/index.html
Centers for Medicare and Medicaid Services. “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019,” October 27, 2017.
Centers for Medicare and Medicaid Services. “Draft Example of an Acceptable Methodology for Comparing Benefits of a State’s EHB-benchmark Plan Selection to Benefits of a Typical Employer Plan As Proposed under the HHS Notice of Benefit and Payment Parameters for 2019 (CMS-9930-P),” October 27, 2017.
Jost, Timothy and Katie Keith. Health Affairs Blog. “The 2019 Proposed Payment Notice, Part 1: Insurer And Exchange Provisions,” October 28, 2017.
Jost, Timothy and Katie Keith. Health Affairs Blog. “The 2019 Proposed Payment Notice, Part 2: Insurer And Exchange Provisions,” October 28, 2017.
Centers for Medicare and Medicaid Services. “Fact Sheet: Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019,” October 27, 2017.
Centers for Medicare and Medicaid Services. “CMS to Allow Small Businesses and Issuers New Flexibilities in the Small Business Health Options Program (SHOP) For Plan Year 2018,” October 27, 2017.
 The NPRM was released online, but was not yet published in the Federal Register. The fact that comments are due less than 30 days before the Federal Register publication may not be a trivial matter for the ADministrative Procedures Act.
 CHIP buy-in programs that would qualify would offer the same benefits as the state’s CHIP Program under Title XXI of the Social Security Act.
 Due to lackluster interest from states, small businesses, and plans, the process of withdrawing this federal support started under previous rules. The Obama Administration suggested that CMS might withdraw federal support, then in May 2017, the Trump Administration stated support would end. This proposed rule completes the process and the preamble states SHOP exchanges should “operate in a leaner fashion.”