On Friday, October 27, the Centers for Medicare and Medicaid Services (CMS) published its draft annual Proposed Notice of Benefits and Payment Parameters for Calendar Year 2019. This proposal follows on the heels of a Request for Information (RFI) CMS issued in the summer to solicit ideas on ways to reduce regulatory burden, encourage market-oriented innovation and patient engagement, and cede authority to state policymakers and regulators with respect to Affordable Care Act (ACA)-compliant markets.
This year’s annual regulation is more sweeping in scope than its predecessors, covering not only Exchange-specific policies, such as the Navigator program and Qualified Health Plan (QHP) certification, but also policies that impact the wider commercial small group and individual insurance markets — like essential health benefits, medical loss ratio and rate review rules. However, a number of hot-topic areas are not addressed, including Section 1332 state innovation waivers (for which CMS shares jurisdiction with the Department of Treasury), segregation of abortion funds, and language access standards for Exchanges, QHP issuers and web-brokers. Comments to the proposed rule are due on November 27.
The draft regulation’s key provisions include:
- Essential Health Benefits. CMS proposes significant changes that would allow states to fundamentally alter the nature of Essential Health Benefits (EHBs) in their state, if so inclined. For example, CMS proposes giving states significant new flexibilities in establishing new EHB benchmark plans. These flexibilities are structured around three options:
- Option 1: Select another state’s EHB-benchmark plan.
- Option 2: Replace category or categories from another state’s EHB-benchmark plan.
- Option 3: Select a set of benefits to become the state’s EHB-benchmark plan based upon the state’s “comparison plans.”
In addition, CMS proposes to offer states and issuers additional flexibility by loosening the standards for actuarially equivalent benefit substitutions and broadening the definition of a “typical employer plan” on which EHBs are to be based.
- Risk Adjustment. To address concerns over the size of risk adjustment transfers, CMS proposes to permit states to request a percentage adjustment (up to 50 percent) in the calculation of the risk adjustment transfer amounts in the small group market in their state, beginning for the 2019 benefit year. It also takes steps to strengthen its hand in overseeing issuer risk adjustment submissions.
- Medical Loss Ratio. CMS proposes several changes that are designed to stabilize the individual and small group markets by giving issuers and states new flexibilities to avoid making rebates due to medical loss ratio (MLR) calculations below 80 percent. Specifically, CMS is considering: exempting certain employment taxes from MLR in the interest of promoting market stability; permitting issuers to claim 0.8 percent of earned premium as quality improvement activity expenses; and streamlining the process by which a state demonstrates “that a lower MLR standard could help stabilize its individual market.”
- Rate Review. CMS proposes to make student health insurance plans with coverage beginning on or after January 1, 2019 exempt from rate review. In addition, CMS proposes to increase the threshold for a rate increase reasonableness review to 15 percent (instead of the current 10 percent threshold).
- Qualified Health Plan Certification. CMS proposes to eliminate standard plans for 2019. In addition, CMS proposes to codify its deference to states on network adequacy and essential community provider reviews. It also proposes to eliminate meaningful difference plan reviews.
- Small Business Health Options Program (SHOP). CMS proposes to codify changes already undertaken to de-scope the Federally Facilitated-SHOP and permit state-based Exchanges to do the same. The proposed rule seeks to codify operational changes to FF-SHOP that were already put in place for 2018, in particular the discontinuation of the online SHOP and premium aggregation.
- Web-brokers and Direct Enrollment. CMS proposes to require issuers performing direct enrollment to engage third-party entities to conduct operational readiness reviews, as is currently required of web-brokers. In addition, CMS proposes to allow the web-broker or issuer to use a third party of their choosing to conduct these reviews, rather than requiring HHS to do so, provided the reviewer meets standards outlined in the rule.
- State Based Exchanges Using the Federal Platform (SBE-FP). CMS notes that it is unable at this time to offer a menu of Exchanges services “from which an SBE-FP may select some, but not others.” But the agency also expresses a willingness to develop new capabilities to the Federal platform regarding future customization.
- Contingency Planning for Issuer Exits or Limited Plan Choice. By proposing to consider the lowest cost metal level plan available in a service area where no bronze plans are available, CMS could facilitate an increase in the number of individuals granted affordability exemptions. In addition, with respect to risk adjustment, CMS proposes the right to make a retroactive adjustment to an exited issuer’s payment transfer to prevent harm to a state’s market by the exiting issuer’s inaccurate data.
- Navigators. CMS proposes to remove the requirement that each Exchange have at least two grantees and that one of the entities must be a community and consumer-focused nonprofit group. CMS is also proposing to eliminate the requirement that each Navigator and non-Navigator entity have a physical presence in the Exchange service area.
To request a more complete summary of CMS’s proposed regulations, please contact one of the authors directly.