The Centers for Medicare and Medicaid Services (CMS) released its final 2021 Notice of Benefit and Payment Parameters rule on May 7, 2020. An earlier post addressed the rule’s changes in plan benefits, market reforms, and special enrollment periods. This post considers proposed changes to the exchanges. A third post will cover the proposed changes to the risk adjustment program.
Automatic Reenrollment Process
CMS did not move forward with what would have been the most significant change regarding the automatic reenrollment process. There has long been speculation that the Trump administration would end or limit the automatic reenrollment process. And, for the second year in a row, CMS used the proposed payment rule as an opportunity to explore (but not adopt) changes to this process.
Under current regulations, exchange enrollees that remain eligible for a qualified health plan (QHP) from one year to the next are automatically reenrolled in the same plan, unless they terminate that coverage or actively enroll in a different plan. If the same plan is not available, the exchange uses a hierarchy to enroll the individual in a similar plan based on metal level, product, and insurer. This process includes individuals who qualify for $0 premium plans as a result of advance premium tax credits (APTC). CMS estimated that there were about 270,000 of these individuals that were automatically reenrolled in coverage for 2019. Automatic reenrollment has been in place since the initial year of the exchanges.
Stakeholders widely support automatic reenrollment. CMS solicited comment on whether to end or make changes to this process in the proposed payment rule for 2020. There, commenters unanimously supported retaining automatic reenrollment and pointed to benefits such as risk pool stabilization, reduced administrative costs, lower premiums, and higher insured rates. In the final payment rule for 2020, CMS agreed that automatic reenrollment reduces insurer administrative expenses, makes enrollment more convenient for consumers, and is consistent with broader industry practices. In an internal analysis, CMS found that ending automatic reenrollment would result in coverage losses, higher premiums, and stress on the HealthCare.gov system.
Notwithstanding prior comments, CMS proposed to again make changes to the automatic reenrollment process. In the proposed 2021 payment rule, CMS proposed to reenroll those who qualify for $0 premium plans in the same QHP but without the application of all or some of their APTC. Thus, even if a consumer’s income qualified them for a $0 plan, they would be reenrolled in a plan at the full premium (or some premium that is greater than $0).
Once again, commenters near unanimously urged CMS not to adopt any changes to the automatic reenrollment process. Commenters argued that the policy would result in coverage losses, unfairly burden lower-income individuals, and generate significant consumer and insurer confusion. Commenters also argued that CMS lacks the legal authority to make such a change. Some pointed to the fact that Congress directed the Secretary to establish an automatic reenrollment process for plan year 2021 for the federally facilitated exchange (FFE). Others noted operational concerns with implementing such a change and noted that CMS already has robust program integrity requirements in place to safeguard against inappropriate eligibility and APTC.
In light of this “overwhelming opposition,” CMS declined to modify the automatic reenrollment process. CMS acknowledged that existing exchange safeguards are sufficient to mitigate the risks it was concerned about. These safeguards include new data matching requirements and the APTC reconciliation process (including the “failure to reconcile” process put in place in 2018 that ends APTC for enrollees that fail to reconcile their subsidies in a tax return).
Premium Adjustment Percentage
The annual premium adjustment percentage is a measure of premium growth that is used to set the rate of increase for the maximum annual limit on cost-sharing, the required contribution percentage for exemption eligibility, and the employer mandate penalty amounts. The percentage must be determined by the Secretary of the Department of Health and Human Services (HHS) on an annual basis.
Beginning with the 2015 plan year, CMS adopted a methodology that determined the premium adjustment percentage based on projections of average per enrollee employer-sponsored insurance premiums from the National Health Expenditure Account. CMS used employer-sponsored premium data because it reflected health care cost trends without being skewed by individual market premium fluctuations.
CMS updated this methodology beginning with the 2020 plan year to additionally include increases in individual market premiums. The shift resulted in a higher premium adjustment percentage and thus a higher annual limit on out-of-pocket costs, a higher required contribution from subsidy-eligible consumers, and higher employer mandate penalties relative to 2019. Given concerns that the change raises costs for millions of consumers, Democratic members of Congress have introduced legislation to reverse this change in the methodology, with bills pending in the Senate and the House.
CMS will maintain the same methodology for the 2021 plan year. This means a slightly higher premium adjustment percentage for 2021 of 1.3542376277, which is an increase of about 5 percent over the premium adjustment percentage for 2020. All commenters on this part of the rule raised concerns about the rate of increase, noting that the new measure will lead to more rapid increases in consumer costs. Some commenters urged CMS to impose an annual cap on the premium adjustment percentage increase of no more than 3 percent. CMS did not adopt this change.
Maximum Annual Out-Of-Pocket Limit On Cost-Sharing
The maximum annual out-of-pocket limit on cost-sharing for 2021 is $8,550 for self-only coverage and $17,100 for other than self-only coverage. This is a 4.9 percent increase over 2020 (when the limits were $8,150 for self-only coverage and $16,300 for other than self-only coverage).
CMS also adopts cost-sharing reduction plan variations to ensure that these plans continue to meet their specific AV levels. Under the final rule, these amounts are reduced by the cost-sharing reductions to a $2,850 cost-sharing limit for self-only coverage and a $5,700 cost-sharing limit for other than self-only coverage for individuals with incomes below 200 percent FPL, and to $6,800 and $13,600 cost-sharing limits for individuals and families, respectively, with incomes between 201 and 250 percent FPL. States could have asked to use state-specific datasets to calculate AV, but no state submitted a dataset by the September 1, 2019 deadline.
Required Contribution Percentage
CMS set the required contribution percentage at 8.27 percent for 2021, a slight increase from 8.24 percent for 2020. The required contribution was used to assess whether an individual was exempt from the requirement to enroll in minimum essential coverage: if an individual had to pay more of their household income towards health insurance than the required contribution, they were exempt from the individual mandate. Now that the individual mandate penalty has been set to $0, this requirement is less relevant but still used for determining whether individuals over the age of 30 qualify to enroll in a catastrophic plan.
User Fee For Federally Facilitated Exchange
CMS maintained the same user fee as for the 2020 plan year. The FFE will charge insurers a user fee of 3 percent of total monthly premiums for 2021. In states with an SBE-FPs, insurers will pay a slightly lower user fee of 2.5 percent of total monthly premiums for 2021.
Although it did not ultimately do so, CMS considered reducing the user fee and solicited comment on that issue as well as ways to streamline FFE use and premium and enrollment projections. Some commenters supported lower user fees if the reduction would not adversely affect FFE operations. Others supported the current user fees but urged CMS to invest excess user fees into consumer outreach and education, improvements to HealthCare.gov, and other changes to promote enrollment and access to coverage. CMS would not commit to increased funding for outreach and education and declined to provide more data and transparency on how user fee rates are calculated.
Some commenters suggested that insurers that participate in enhanced direct enrollment (EDE) should pay lower user fees. CMS did not adopt this suggestion, noting that it incurs costs associated with EDE. But CMS will continue to review those costs and potential interactions between EDE implementation and user fee costs. One commenter suggested much more dramatic changes to the user fee for SBE-FPs, suggesting that states can take on federal tasks and insurers can take on call center activities. CMS rejected this notion, noting that the 2.5 percent user fee for SBE-FPs is based on the percent of costs of the total FFE functions utilized by SBE-FPs.
Termination Of Coverage, Data Matching, And Verification
Building off other data matching and verification changes outlined in the recently finalized program integrity rule, CMS updated its methods of verifying eligibility or enrollment in employer-sponsored plans and its procedures for the termination of coverage.
Termination Of Coverage For Dual Enrollment
Generally speaking, if a consumer is eligible for minimum essential coverage—including job-based coverage that meets certain requirements, Medicare, Medicaid, CHIP, or the Basic Health Program (BHP)—they are ineligible for APTC and cost-sharing reductions (CSRs). A consumer can be dually enrolled in a QHP and another type of coverage; however, they cannot receive subsidies towards the QHP. When applying for a QHP, consumers who qualify for APTC have the option of allowing the exchange to terminate their QHP coverage if they are found to be eligible for or dually enrolled in other qualifying coverage. A dually enrolled consumer who does not terminate their QHP and continues to receive APTC may have to repay the APTC they received during the months they were enrolled in other coverage.
Currently, the FFE only ends QHP coverage or APTC when a consumer is dually enrolled in a QHP and Medicare. In this instance, an enrollee receives a notice identifying all of the dually enrolled QHP/Medicare individuals in that household. Enrollees have 30 days to respond to the notice before the exchange ends their subsidies or QHP coverage. Non-dual enrollees that remain on the plan will have their subsidy eligibility redetermined and adjusted as needed.
The final rule extends this process to other types of minimum essential coverage, so long as an enrollee has opted into the voluntary termination process. The final rule thus eliminates the requirement that an exchange complete an eligibility redetermination for APTC or CSRs prior to terminating coverage for enrollees who 1) are dually enrolled in QHP coverage and Medicare, Medicaid/CHIP, or the BHP; 2) have not responded to an exchange notice to update their information within 30 days; and 3) have provided written consent to the exchange to end their QHP coverage if they were dually enrolled. Said another way, exchanges will not redetermine eligibility for APTC/CSRs (as occurs currently) when processing a voluntary termination for a dual enrollee. CMS suggests this new policy will streamline the termination process and help prevent consumers from being enrolled in duplicative coverage.
Termination of Coverage For Death
Exchanges must regularly check data sources to identify and then terminate QHP coverage for enrollees that died during the plan year. CMS will terminate coverage (in the event of periodic data matching for death) retroactively to the date of an enrollee’s death. There is no need to redetermine the deceased person’s eligibility, and termination would only occur after the enrollee was sent a notice and given an opportunity to contest the updated information during a 30-day period.
Verifying Eligibility For Job-Based Coverage
Consumers who are eligible to enroll in employer-sponsored coverage are generally not eligible for APTC unless the plan’s coverage is unaffordable or does not provide minimum value. Thus, when determining eligibility for APTC, exchanges must assess whether an applicant is enrolled in or eligible for qualifying employer-sponsored coverage. To verify this information, exchanges have historically used electronic verification data (such as federal employment data from HHS). If sufficient data does not exist, exchanges can alternatively select a random sample of applicants and then contact the enrollee’s employer to verify that they qualify for APTC and CSRs.
Under the final rule, CMS will not take enforcement action against exchanges that fail to perform this alternative random sampling process for plan years 2020 and 2021. This nonenforcement policy applies to all SBEs, including those with corrective action plans that include random sampling. SBEs have existing flexibility to propose an alternative approach to current employer-sponsored verification procedures (including the random sampling process).
In adopting this position, CMS notes concerns such as low employer response rates and the burdens of a manual verification process. In a 2016 study, for instance, CMS could only verify an enrollee’s information with their employer in 13 percent of cases. These burdens were hard felt in SBEs as well. The average per-exchange cost of implementing sampling was estimated to be about $4.5 million, with a total price tag of $58.5 million for the 13 SBEs. And four SBEs already incurred costs to implement sampling to the tune of $18 million. Combined with ongoing costs, elimination of this requirement is expected to result in annual savings of about $99 million for 2020 and 2021.
To further address this verification issue, CMS is studying the characteristics of the population with job-based coverage that meets minimum value and affordability standards, comparing job-based coverage to exchange coverage, and identifying incentives that might drive applicants to enroll in a QHP over their employer’s coverage. This study will be published later this year and may inform CMS’s approach going forward. CMS encourages SBEs to conduct a similar analysis in anticipation of future rulemaking and suggests that exchanges could, in the future, design a verification process based on a risk assessment of inappropriate eligibility or payment of APTC or CSRs.
Enrollee-Initiated Termination
Insurers must follow certain effective dates when an enrollee asks to end their coverage. In the 2019 payment rule, CMS considered a proposal to terminate all coverage on the day of an enrollee’s request to terminate coverage—or a future date selected by the enrollee. CMS did not finalize this change and instead made it optional for exchanges. This change did not, however, extend to the rules on terminations because of a technical error. The final rule aligns this termination option with current rules for enrollee-initiated terminations: at the option of the exchange, an enrollee no longer needs to provide 14 days advance notice before terminating due to a technical error.
CMS will additionally require insurers to send a termination notice for all termination events, regardless of whether termination was initiated by the enrollee or the exchange. CMS believes this requirement will help reduce confusion for insurers and promote continuity of coverage for consumers by informing them of the termination effective date.
Enrollment Reconciliation Data And Payment And Collections Reports
Under current rules, insurers must reconcile enrollment with the exchange at least once per month. Insurers that offer coverage through the FFE update data on an ongoing basis through 834 transactions, a monthly enrollment reconciliation cycle, and enrollment and payment disputes processes.
While much of this data exchange is ongoing, CMS adopts more explicit standards by requiring insurers to 1) submit the latest available verified enrollment information in its enrollment reconciliation submissions; and 2) update enrollment records as directed by the exchange and inform the exchange of any errors within 30 days. Access to the most current data from insurers will help exchanges have the most accurate data and better respond to consumer questions. Insurers must also confirm to CMS that the amounts in its most recent payment and collections report are accurate reflections of the payments owed to or by the federal government.
CMS additionally lengthens the time during which insurers can report payment errors and inaccuracies from 15 days to 90 days. Extending the reporting timeline gives insurers more time to research, report, and correct inaccuracies. The extension also better accommodates the processing of reconciliation updates, which could help resolve potential disputes. CMS adopted a handful of other technical changes to the rules governing enrollment and payment operations.
Value-Based Insurance Design
CMS continues to emphasize the need for a consumer-driven health care system and reports that the agency is working to assist insurers in developing and offering value-based insurance designs (VBID) that empower consumers. CMS did not propose new regulatory requirements but instead described a new “value-based model QHP” that it encourages insurers to consider.
Much of CMS’s framework—including a list of high-value services that insurers could cover with little no impact on premiums—comes from the University of Michigan’s Center for Value-Based Insurance Design. The list includes many of the same preventive care benefits that can be newly provided by a high-deductible health plan paired with a health savings account on a pre-deductible basis under Treasury guidance from July 2019. CMS also notes that PrEP, an HIV prevention medication, must soon be covered without cost-sharing by all non-grandfathered private health plans (including individual, small group, large group, and self-insured plans).
Commenters generally supported the use of VBID as a tool while encouraging CMS to maintain flexibility for insurers and “incrementally” introduce VBID options for consumers. Some urged CMS to defer to states on VBID; others pushed CMS to go further by mandating VBID. Still others raised concerns that VBID could lead to discriminatory benefit design and unfairly affect those with chronic conditions.
Although CMS encourages the use of VBID, VBID plans will not receive preferential display on HealthCare.gov nor will CMS pursue or require the development of a value-based standardized option. CMS will, however, consider other ways to allow consumers to identify a value-based QHP through HealthCare.gov (such as including “value-based” in the plan name or other methods for HHS to designate a plan as “value-based”). Commenters provided a significant amount of feedback on this idea, which CMS will consider. But the agency has no plans to introduce a VBID indicator for 2021; additional changes, including any criteria to identify VBID plans, will be addressed in future rulemaking.
Quality Rating System
CMS slowly phased in a quality rating system for the FFE, using an extended pilot program in a handful of states before announcing that the exchanges in all states would display quality rating data for most QHPs beginning with the 2020 plan year. In that guidance, CMS recognized that many SBEs were already displaying quality rating information and that there was a need for continued SBE flexibility to customize the display of quality ratings data.
CMS reaffirms this flexibility (and some limitations) for SBEs in the final rule. The final rule requires all exchanges to prominently display quality rating information in a form and manner specified by the federal government. SBEs that operate their own eligibility and enrollment platforms have some flexibility to customize the display of quality rating information (which reflects both quality ratings and enrollee satisfaction surveys). SBEs can, for instance, make some state-specific customizations (such as incorporating additional state or local quality information or modifying the display names of the star ratings).
SBEs cannot, however, develop their own program to fully replace the quality ratings calculated by CMS. This is because this requirement—to develop a quality ratings system and calculate quality ratings—is delegated to the Secretary of HHS under the ACA.
Some commenters asked for additional flexibility for SBEs to, for instance, calculate their own quality rating information. The preamble confirms that, per the statute, SBEs have flexibility on the display of quality rating information but not the development of separate ratings (including the recalculation or modification of the quality ratings from CMS). One commenter asked that the same level of flexibility offered to SBEs extend to SBE-FPs so that all SBEs have the same option to customize the display of quality rating information. This is not possible because HealthCare.gov is currently unable to accommodate state-specific customizations for quality rating information.
CMS expects to release additional information about the display of quality rating information in future guidance and issued its draft 2020 call letter for the quality rating system and QHP enrollee experience survey in late March. CMS also notes its intent to conduct consumer focus groups and cognitive testing to improve the enrollee experience survey measures and produce additional materials to clarify the details and uses of quality rating information.
These efforts notwithstanding, quality rating efforts may ultimately be put on hold for 2021 in light of COVID-19. As discussed more here, CMS suspended its quality reporting requirements for QHP insurers for the 2021 QHP certification period. This includes collection and reporting requirements for the quality rating system, the QHP enrollee survey, and the quality improvement strategy.
Eligibility Appeals
Consumers can appeal a wide array of adverse exchange decisions, such as a denial of eligibility for QHP coverage or subsidies. Under current rules, individuals have the right to maintain their coverage during the appeals process. This is known as “eligibility pending appeal.” CMS did not propose major changes to its rules regarding eligibility pending appeal but posed many questions and asked for comment on ways to promote clarity for exchanges, insurers, and consumers. One question, for instance, is whether those who receive eligibility pending appeal can enroll in any plan—or should be limited to a particular insurer or plan category.
Comments focused on the need to preserve state flexibility for SBEs, insufficient data about appeals, and questions about why changes were needed in this area. Commenters generally supported enrollment flexibility (such as the ability to enroll in a plan with any insurer and at any metal level) for those ultimately deemed eligible. Some suggested additional guardrails, such as allowing the enrollee to switch plans at the end of the appeal. Another suggested that unrestricted enrollment changes would be confusing to consumers. Additional comments focused on a timeliness requirement on appeals, the possibility of experiencing a qualifying life event during an appeal, and premium payment grace periods for appellants. CMS may use the comments to inform future rulemaking but did not adopt any changes in this rule.
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The 2021 Final Payment Notice, Part 2: Exchange Provisions - Health Affairs
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