HHS Notice of Benefit and Payment Parameters for 2023 Proposed Rule Fact Sheet
In the HHS Notice of Benefit and Payment Parameters for 2023 Proposed Rule released today, the Centers for Medicare & Medicaid Services (CMS) proposed standards for issuers and Marketplaces, as well as requirements for agents, brokers, web brokers, and issuers assisting consumers with enrollment through Marketplaces that use the federal platform.
Overall, the proposed rule minimizes the number of significant regulatory changes to provide states and issuers with a more stable and predictable regulatory framework that facilitates a more efficient and competitive market. These changes would further the Biden-Harris Administration’s goal of advancing health equity by addressing the health disparities that underlie our health system. They also build on the Affordable Care Act (ACA) to expand access to quality, affordable health coverage and care by lowering premiums, strengthening markets, and enhancing the consumer experience.
Enhancing Consumer Options & Choice
CMS proposes to conduct network adequacy reviews in all Federally-facilitated Marketplace (FFM) states except for states performing plan management functions that adhere to a standard as stringent as the federal standard and elect to perform their own reviews. The federal standard would be based on quantitative time and distance standards and appointment wait time standards, and reviews would occur prospectively during the Qualified Health Plan (QHP) certification process. Issuers that are unable to meet the specified standards would be able to submit a justification to explain why they are not meeting the standards, what they are doing to work towards meeting them, and how they are protecting consumers in the meantime. CMS also proposes to collect data from issuers on which of their in-network providers offer telehealth services.
Standardized Plan Options
CMS proposes to require issuers in the FFMs and State-based Marketplaces on the Federal Platform (SBM-FPs) to offer standardized plan options at every product network type, metal level, and throughout every service area that they offer non-standardized options in plan year (PY) 2023. For example, if an issuer offers a non-standardized gold plan in a particular service area, that issuer must also offer a standardized gold plan in that same service area. CMS is not proposing to require issuers to offer standardized plan options at product network types, metal levels, and throughout services areas in which they do not offer non-standardized options. CMS has designed two sets of standardized plan options at each of the bronze, expanded bronze, silver, silver cost-sharing reduction (CSR) variations, gold, and platinum metal levels of coverage, with each set being tailored to the unique cost-sharing laws in different sets of states. CMS also proposes to display these standardized options differentially on HealthCare.gov and to resume enforcement of the existing standardized plan option differential display requirements for web brokers and QHP issuers utilizing a Classic Direct Enrollment or Enhanced Direct Enrollment pathway.
Advancing Health Equity
Prohibit Discrimination Based on Sexual Orientation and Gender Identity
CMS proposes to prohibit Marketplaces, issuers, agents, and brokers from discriminating against consumers based on sexual orientation and gender identity. CMS rules previously prohibited discrimination based on “race, color, national origin, disability, age, sex, gender identity or sexual orientation,” but in 2020 the HHS final rule on Section 1557 removed gender identity and sexual orientation from these non-discrimination protections by revising CMS regulations. Prohibiting discrimination based on sexual orientation and gender identity would increase access to health care, decrease health disparities, and align with the Executive Order on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation.
Refine Essential Health Benefits (EHBs) Nondiscrimination Policy for Health Plan Designs
CMS proposes to refine the EHB nondiscrimination policy to ensure that benefit designs, and particularly benefit limitations and plan coverage requirements, are based on clinical evidence. CMS proposes refining CMS regulations and providing examples that illustrate presumptive discriminatory plan designs, such as discrimination based on age, health conditions, and sociodemographic factors. CMS current rules provide that an issuer does not provide EHB “if its benefit design, or the implementation of its benefit design, discriminate based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions.”
Special Enrollment Period (SEP) Verification
CMS proposes scaling back pre-enrollment SEP verification in the FFMs and SBM-FPs to include only the SEP for loss of minimum essential coverage—the SEP type that comprises the majority of all SEP enrollments on the Marketplaces on the federal platform—and to clarify that Marketplaces maintain the option to verify eligibility for any SEP types and may provide an exception to pre-enrollment SEP verification for circumstances that could include natural disasters or public health emergencies impacting consumers or the Marketplace. The FFM currently conducts verification for five SEP types (loss of minimum essential coverage, Medicaid/Children’s Health Insurance Program (CHIP) denial, permanent move, marriage, and dependent addition); 90% of applications successfully verify. While pre-enrollment SEP verification can decrease the risk for adverse selection and improve program integrity, it can also deter eligible consumers from enrolling in coverage through a SEP because of the barrier of document verification. Our experience operating the FFMs and the federal platform shows that pre-enrollment SEP verification disproportionately negatively impacts Black and African American consumers who submit acceptable documentation to verify their SEP eligibility at much lower rates than white consumers. We have also found that younger, often healthier consumers submit acceptable documentation to verify their SEP eligibility at much lower rates than older, often less healthy consumers, which can negatively impact the risk pool. Scaling back SEP verification would mitigate the negative impacts of pre-enrollment SEP verification on populations that have historically faced barriers to accessing health care, and would decrease overall consumer burden without substantially sacrificing program integrity.
Updating Quality Improvement Strategy (QIS) Standards to Require Issuers to Address Health and Health Care Disparities
CMS proposes to update the QIS standards beginning in PY2023 to require QHP issuers to address health and health care disparities as a specific topic area within their QIS. Currently, QHP issuers participating in a Marketplace for two or more consecutive years are required to implement and report on a QIS that includes at least one topic area defined in section 1311(g)(1) of the ACA (activities to improve health outcomes, prevent hospital readmissions, improve patient safety and reduce medical errors, promote wellness and health and reduce health and health care disparities). In PY2020, an estimated 60% of QHP issuer QIS submissions across the FFM did address health care disparities. CMS is now proposing to require QHP issuers to address the topic of reducing health and health care disparities in their QIS submissions in addition to at least one other topic area described in section 1311(g)(1) of the ACA beginning in 2023.
Raise the Essential Community Provider (ECP) Threshold from 20 to 35 percent
For PY2023 and beyond, we propose increasing the ECP threshold from 20 to 35 percent of available ECPs in each plan’s service area. For PY2021, the percentages of medical and dental FFM issuers that could have satisfied a 35 percent ECP threshold were 80 and 74 percent, respectively. CMS anticipates that issuers will be able to meet the 35 percent threshold with only minimal reliance on our ECP write-in and justification processes, if needed. CMS does not anticipate any meaningful premium impact, and believes that raising the ECP threshold will help ensure greater access to health care for vulnerable populations.
Lowering Premiums and Strengthening Markets
FFM and SBM-FP User Fees
For the 2023 benefit year, CMS proposes to maintain the FFM user fee rate of 2.75% of premium and the SBM-FP user fee rate of 2.25% of premium based on the portion of FFM user fee-eligible costs allocated to SBM-FP activities.
CMS proposes a number of changes to the risk adjustment models that would improve prediction in the adult and child models for the lowest-risk enrollees, the highest-risk enrollees, and partial-year enrollees, whose plan liabilities are underpredicted in the current models. Beginning with the 2023 benefit year, CMS proposes the following risk adjustment model changes: (1) adding a two-stage weighted approach to the adult and child models; (2) removing the current severity illness factors from the adult models and adding an interacted hierarchical condition category (HCC) count model specification to the adult and child models; and (3) replacing the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors.
CMS also proposes the following changes to model recalibration for the 2023 benefit year risk adjustment models: (1) using the 2017, 2018, and 2019 enrollee-level EDGE data for model recalibration; (2) applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs; and (3) using the fourth quarter (Q4) prescription drug categories (RXC) mapping document for each benefit year of recalibration data, with the exception of 2017 enrollee-level EDGE data. In addition, CMS discusses considerations of the targeted removal of the mapping of hydroxychloroquine sulfate to Immune Suppressants and Immunomodulators (RXC 09) in the 2018 and 2019 benefit year enrollee-level EDGE data used for the 2023 benefit year model recalibration, as well as the targeted removal of Descovy® from mapping to Anti-HIV Agents (RXC 01) in all three benefit year enrollee-level EDGE datasets used for the 2023 benefit year model recalibration.
CMS also proposes to collect and extract through issuers’ EDGE servers five new data elements including ZIP code, race, ethnicity, individual coverage health reimbursement arrangement (ICHRA) indicator, and a subsidy indicator as part of the required risk adjustment data that issuers must make accessible to HHS in states where HHS is operating the risk adjustment program. CMS also proposes to extract three new data elements issuers already provide through their EDGE servers as part of the required risk adjustment data submissions (plan ID, rating area, and subscriber indicator), and to expand the permitted uses of the risk adjustment data and reports. CMS also proposes a risk adjustment user fee for the 2023 benefit year of $0.22 per member per month.
Finally, CMS proposes to repeal the ability for states to request a reduction in risk adjustment state transfers starting with the 2024 benefit year, while proposing to provide an exception for states that previously requested such flexibility. CMS also solicits comments on the requests submitted by Alabama to reduce risk adjustment state transfers in the individual (catastrophic and non-catastrophic risk pools) and small group markets for the 2023 benefit year.
HHS Risk Adjustment Data Validation (HHS-RADV)
CMS proposes further refinements to the HHS-RADV error rate calculation methodology beginning with the 2021 benefit year and beyond to: (1) extend the application of Super HCCs to also apply coefficient estimation groups throughout the HHS-RADV error rate calculation processes; (2) specify that the Super HCCs will be defined separately according to the age group model to which an enrollee is subject; and (3) constrain to zero any outlier negative failure rate in a failure rate group, regardless of whether the outlier issuer has a negative or positive error rate. We believe that these proposed changes will better align the calculation and application of error rates with the intent of the HHS-RADV program, thereby enhancing the integrity of HHS-RADV and the HHS-operated risk adjustment program.
Premium Adjustment Percentage and Payment Parameters
CMS will issue the 2023 benefit year premium adjustment percentage, the maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and the required contribution percentage (payment parameters) in guidance by January 2022, consistent with policy finalized in the 2022 Payment Notice (86 FR 24140).
Prohibit Inclusion of Indirect Quality Improvement Activity (QIA) Expenses in Medical Loss Ratio (MLR)
CMS proposes to specify that QIA expenses that may be included for MLR reporting and rebate calculation purposes are only those expenses that are directly related to activities that improve health care quality. Some issuers appropriately include only direct QIA expenses, such as salaries of the staff actually performing QIA functions, while others additionally allocate indirect expenses, such as a portion of overhead (including holding group overhead), marketing, office space, IT infrastructure (such as IT mainframes, which are primarily used to process claims), and vendor profits that have no traceable or quantifiable connection to QIA.
Enhancing the Consumer Experience
Advanced Payments of the Premium Tax Credit (APTC) Proration
CMS proposes that beginning in the 2024 benefit year, all Marketplaces, specifically certain State-based Marketplaces that have not done so, would be required to prorate APTC due to issuers when an enrollee is enrolled in a particular policy for less than the full coverage month. This method of administering APTC would help prevent APTC overpayment that exceeds an enrollee’s premium tax credit, and thus protect the enrollee from potentially incurring additional income tax liability.
Require the Display of Explanations for QHP Recommendations on Web Broker Websites
CMS proposes to require web broker websites to display a prominent and clear explanation of the rationale for explicit QHP recommendations and the methodology for default display of QHPs on their websites (for example, alphabetically based on plan name, from lowest to highest premium, etc.) to ensure consumers are better able to make informed decisions and shop for and select QHPs that best fit their needs.
Prohibit QHP Advertising on Web Broker Websites
CMS proposes prohibiting QHP advertising, or otherwise providing favored or “preferred placement” in the display of QHPs on web broker websites based on compensation an agent, broker, or web-broker receives from QHP issuers.
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