The Final 2021 Notice of Benefit and Payment Parameters: Implications for States

Sabrina Corlette, Georgetown University Center on Health Insurance Reforms

On May 7, 2020, the U.S. Department of Health & Human Services (HHS) published its final annual rule governing core provisions of the Affordable Care Act (ACA), including the operation of the marketplaces, standards for individual and small-group market health plans, and premium stabilization programs. Referred to as the “Notice of Benefit and Payment Parameters” or NBPP, a detailed summary of the proposed rule is available through a 3-part blog series for Health Affairs, here, here, and here. This article focuses on several policies that have implications for state insurance regulation and the operation of the state-based marketplaces (SBMs).

No Change to Automatic Re-enrollment

In its proposed rule, HHS sought comment on whether it should adjust the automatic re-enrollment process so that any enrollee whose premium tax credit (PTC) would be enough to cover their entire premium would be re-enrolled without any PTC unless they returned to the Marketplace for a new eligibility determination. However, in light of “overwhelming opposition” to such a change, HHS has decided to maintain its current automatic re-enrollment procedures for 2021.

New Annual Reporting Obligation on Benefit Mandates

HHS proposed requiring states, beginning July 1, 2021, to annually report all state benefit mandates and indicate whether any are in addition to the essential health benefits (EHB). Although a majority of the public comments opposed this new state obligation, HHS is moving forward, arguing that they believe some states have enacted benefit mandates that exceed EHB, but without defraying the costs, as required by federal law. HHS asserts that state reporting will serve a critical program integrity function and help ensure that there are no “improper expenditures” of federal premium tax credits. Furthermore, although states will continue to be responsible for determining whether any benefit mandates are in addition to EHB, if a state chooses not to submit an annual report, HHS will conduct its own analysis of the state’s benefit mandates and identify any that exceed EHB.

HHS also received several comments arguing that HHS has failed, to date, to articulate in rules or guidance any standards for determining what benefit mandates would trigger a defrayal obligation. HHS says that it will continue to “engage with states” on these issues and hopes that “additional technical assistance” will ease states’ concerns about how benefit mandates that require defrayal will be identified.

No Change in User Fees for the FFM

HHS had sought public comment on whether they should lower the rate charged to operate the federally facilitated marketplace (FFM) in 2021 to less than the current 3.0 percent (2.5 percent for SBMs using the federal platform). In its final rule, HHS chose to leave the user fee rate unchanged.

New Flexibility for Insurers on Application of Drug Manufacturers’ Coupons

In its regulations for 2020, HHS allowed insurers to discount the use of drug manufacturers’ coupons to defray cost-sharing associated with brand-name drugs when determining an enrollee’s annual out-of-pocket spending, so long as an equally effective generic is available. For 2021, HHS will expand the flexibility for insurers by allowing them to exclude those coupon amounts from the calculation of enrollees’ annual cost-sharing, even if a generic equivalent is not available. However, this flexibility will only apply to the extent consistent with state law. If a state wants to require insurers to count manufacturers’ coupons towards the annual limit on cost-sharing, they may do so. In its rule, HHS encourages, but does not require, insurers to inform enrollees of their policy with respect to the use of drug coupons and enrollees’ out-of-pocket liability under their plans.

Improving Special Enrollment Period (SEP) Policies

HHS proposed several changes to SEP policy to enhance consumers’ choices and improve efficiency. These included:

• Allowing enrollees who become newly ineligible for cost-sharing reduction (CSR) plans to switch from a Silver plan to either a Bronze or a Gold plan. HHS is finalizing this proposal, but delaying the effective date to January 2022 to allow more time for exchanges to implement the change.
• Allowing individuals who are not dependents, but whose dependents are enrolled in a Marketplace plan, and who qualify for a SEP, to be added to their dependent’s current plan or into a separate Marketplace plan. HHS is finalizing this proposal.
• Allowing individuals who enroll through a SEP after the 15^th of the month to effectuate coverage on the 1^st of the following month (i.e., if the individual enrolls on May 17, their coverage would be effective on June 1). SBMs would be allowed to retain their current coverage effective dates. HHS is finalizing this proposal, but delaying implementing until January 2022 to allow more time for the exchanges to implement it.
• Allowing individuals who are eligible for retroactive coverage, whether due to a SEP, a favorable appeal decision, or a processing delay, the option to pay the premiums for all the months of retroactive coverage, or only the premium for 1 month of coverage and receive prospective coverage only. HHS is finalizing this proposal.

Quality Rating: Some (Limited) State Flexibility

In August 2019, HHS extended its Quality Rating Information pilot to all Marketplaces for plan year 2020. Up to that time, SBMs had been permitted to display their own quality rating information. The 2021 NBPP provides that SBMs will have some flexibility to customize the display of quality rating information, but they must use the quality ratings that have been developed by HHS.

Program Integrity Changes to Improve Efficiency

HHS is implementing several changes to periodic data matching (PDM) and other program integrity processes to improve efficiencies. These include:

• Giving SBMs greater flexibility to verify applicants’ eligibility for or enrollment in employer-sponsored coverage through their own risk assessments. HHS is conducting a study to support its own risk assessment and is encouraging SBMs to do the same.
• Allowing SBMs not to re-determine eligibility for subsidies for enrollees who are (1) dually enrolled in Marketplace and Medicare, Medicaid/CHIP or the Basic Health Plan, (2) have not responded to update their information within 30 days, and (3) consent to the Marketplace terminating their coverage if data show they are dually enrolled or eligible.
• Allowing SBMs, when they identify a deceased enrollee through PDM, to terminate coverage retroactively to the date of death, without undertaking a redetermination of eligibility.

At the same time it released this final rule, HHS also released its final 2021 Letter to Issuers, which provides technical and operational guidance to insurers offering marketplace plans. HHS has also revised its timeline for the annual rate review process in order to give insurers more time to assess the impact of the COVID-19 pandemic on health care utilization and costs. In most states, insurers will be required to submit proposed marketplace rates no later than July 22; final 2021 rates will be due no later than August 26 for FFM insurers (an extension of one week) and no later than October 15 for SBM insurers.