The Final 2023 Notice of Benefit & Payment Parameters: Implications for States

Sabrina Corlette, Georgetown Center on Health Insurance Reforms

On April 28, 2022, the Centers for Medicare & Medicaid Services (CMS) released its final Notice of Benefit & Payment Parameters for plan year 2023. This annual regulation governs core provisions of the Affordable Care Act (ACA), including operation of the health insurance marketplaces, standards for insurers, and the risk adjustment program. This expert perspective focuses on provisions of the final rule that are of particular import to the state-based marketplaces (SBMs) and state insurance regulators. A more comprehensive summary of the proposed rule’s provisions can be found via Health Affairs Forefront, here, here, and here.

New Standards for and Oversight of Network Adequacy

CMS is partially finalizing proposals to require insurers offering plans through the federally facilitated marketplace (FFM) to meet quantifiable standards for network access. Beginning in 2023, plans must ensure that enrollees can access services within a maximum time or distance. These standards are specified in the Final 2023 Letter to Issuers, which CMS also released on April 28, 2022. Insurers that cannot meet these time and distance standards will be permitted to submit a justification, such as provider supply shortages within their service area. Though CMS sought comment on whether these standards should apply to SBMs, they ultimately decided to limit the rules to the FFM.

CMS will delay requirements that plans meet a maximum appointment wait time standard until plan year 2024, in order to minimize “issuer burden.” The agency also decided not to move forward with a proposal to solely assess the adequacy of plans with tiered networks based on providers in the lowest cost-sharing tiers.

CMS is finalizing an increase in the required inclusion of essential community providers in FFM plans. For plan year 2023 and beyond, FFM insurers must have 35 percent of available essential community providers participating in their plan networks, up from the currently required 20 percent.

CMS is also reversing its past policy of deferring to state departments of insurance (DOIs) for the assessment of FFM plans’ network adequacy. Going forward, CMS will conduct its own network adequacy reviews, unless a DOI can demonstrate that its standards are at least as “stringent” as the federal standards, and that it conducts the reviews prior to certifying the plan for FFM participation. However, even in states where CMS is conducting the network adequacy reviews, the agency notes its intention to partner with state regulators in a “two-way exchange of information” to better understand local patterns of care and inform future adjustments to the access standards.

Lastly, CMS sought comment on whether federal network adequacy standards should be applied to plans offered in state-based marketplaces. CMS notes that about 75 percent of SBMs have at least one quantitative standard for time and distance, appointment wait times, or both. Although the agency considered whether greater alignment in network adequacy across FFM and SBM states would be helpful, it will only apply the new federal standards to insurers in the FFM for now.

Prohibiting Discrimination Based on Sexual Orientation or Gender Identity

In its proposed rule, CMS would have amended several ACA regulations to restore prohibitions against discrimination based on gender identity and sexual orientation. Prior protections against such discrimination had been removed in a 2020 rulemaking. In its final rule, CMS decided not to include these protections, largely because it is in the process of incorporating similar protections into a proposed rule to implement Section 1557 of the ACA. Section 1557 is the primary nondiscrimination provision of the ACA, and the agency seeks to avoid any potential inconsistencies in the policies and requirements that will be part of that rulemaking.

Essential Health Benefits: Limiting Discriminatory Benefit Designs, Easing Burdens on States

CMS is finalizing several changes to federal rules governing plan benefit design and the selection of states’ essential health benefit (EHB) benchmark plans.

A Clearer Nondiscrimination Policy

CMS proposed to provide insurers with “a clear regulatory framework” to help reduce the risk that a plan’s benefits would be discriminatory. The agency is finalizing a requirement that a nondiscriminatory benefit design must be “clinically based,” but in response to public comment decided not to finalize a proposed requirement that insurers rely on peer-reviewed medical journals, practice guidelines, or recommendations from reputable governing bodies. They also declined to proceed with a proposal to identify and list approved sources (such as medical journals) for countering a claim that an insurer’s benefit design is discriminatory.

The agency also provides examples of benefit designs that are “presumptively discriminatory,” although they declined to finalize an example of a design illustrating discrimination based on gender identity. As noted above, the agency intends to address such discrimination in the rule to implement Section 1557 of the ACA. If a state’s existing EHB benchmark plan or law includes a discriminatory benefit or practice, it must be cured.

Providing States with a Certain Deadline

CMS is finalizing an annual, consistent deadline for states to submit proposals for revised or new EHB benchmark plans. This deadline is the first Wednesday in May that is two years before the effective date of the new EHB benchmark plan.

Eliminating States’ Annual Reporting Requirement

CMS is repealing a requirement that states annually submit a report of any state benefit mandates that are “in addition to” those offered under the state’s EHB. However, the agency notes that states remain under the obligation to defray the cost of such additional benefits. CMS will pursue a “more targeted approach” to the enforcement of the ACA’s defrayal requirement by providing states with written guidance on how to assess state benefit mandates and individualized technical assistance.

Eliminating Benefit Substitution

Going forward, states will no longer be permitted to allow insurers to substitute benefits between EHB benefit categories, although they may still do so within a benefit category. In finalizing this policy, CMS notes that no state has ever notified CMS that it would allow insurers to substitute benefits across benefit categories. CMS concludes that “whatever theoretical flexibility this policy could have afforded to states is not justified given the potential negative effects on consumers.”

Automatic Re-Enrollment Procedures that Optimize Plan Value

In its proposed rule, CMS sought comment on whether it should incorporate a plan’s net premium, maximum out-of-pocket amount, deductible, annual out-of-pocket costs, or other criteria when mapping marketplace enrollees into a new plan during the automatic re-enrollment process. Such a process could be modeled on Covered California’s program to auto-renew lower-income Bronze plan enrollees into a Silver plan with a $0 premium, if available. Although CMS states that it will consider amendments to the re-enrollment hierarchy in the future, several commenters observed that the marketplace is not well-positioned to accurately predict the factors most valuable to consumers in selecting a plan, raising the risk that a new re-enrollment hierarchy could lead to consumer confusion and dissatisfaction.

Quality Improvement

CMS is finalizing a requirement that each insurer’s “Quality Improvement Strategy” (QIS) for its marketplace plans include reducing health disparities as a topic area. The agency further clarifies that this requirement will extend to insurers in both the FFM and SBMs, although SBMs have the flexibility to change “certain details,” such as the timeframe and format for submitting relevant QIS data. SBMs can also impose QIS requirements in addition to the federal requirements.

Standardized Benefit Designs

CMS is finalizing its proposal to require insurers participating in the FFM and in SBMs using the federal eligibility and enrollment platform (SBM-FPs) to offer standardized plan options for every product network type, at every metal level and in every service area in which they offer plans. The agency has published the specifications for these standardized plans in the preamble to the final rule. It also has provided additional specifications for plans in Delaware and Louisiana, two states that have state-level cost-sharing standards for specialty tier prescription drugs. The agency notes that the standardized plans have been designed to have an actuarial value near the “floor” of the actuarial value de minimis range, in order to ensure that the standardized plans offer competitive premiums.

The requirement to offer standardized benefit designs does not extend to insurers offering plans in SBMs, nor does it apply in Oregon, a state with an SBM-FP that already requires standardized plan designs. Insurers in the FFM will continue to be allowed to offer an unlimited number of non-standardized options, and CMS has decided not to impose a “meaningful difference” requirement for plans at this time, arguing that doing so would be too disruptive. However, HealthCare.gov will “differentially display” the standardized plans to facilitate consumers’ ability to make plan-to-plan comparisons.

Limiting Variation in Plan Value

The final rule removes some of the flexibility insurers have had to meet the ACA’s prescribed actuarial value levels for Bronze and Silver-level plans in the individual and small-group markets. CMS argued that allowing insurers to have a wide range of actuarial values at each metal level inhibits consumers’ ability to make meaningful comparisons among plan options.

As proposed, CMS is changing the de minimis ranges from +2/-4 percentage points to +2/-2 percentage plans for individual and small-group market plans that must comply with EHB requirements, except for expanded bronze plans that cover at least one major preventive service pre-deductible. For these plans, the de minimis range will change from +5/-4 to +5/-2 percentage points. For individual market plans sold in the marketplaces, the de minimis range for silver plans will be +2/0 percentage points, and +1/0 percentage points for cost-sharing reduced silver marketplace plans.

CMS notes that states remain the primary enforcers of this policy, and can apply stricter actuarial value standards if they wish. However, any such state-level standards must be “consistent” with the federal standards. CMS acknowledges that while their adjustment to the actuarial value standards for silver-level plans will make the silver benchmark plan more generous, thereby increasing premium tax credits, it will also increase gross premiums. The agency estimates that premiums will increase approximately two percent on average because of this change.

New Requirements for Web-Brokers

CMS will expand the information that web-brokers in all states must display to help consumers understand their plan options. Specifically, web-brokers that facilitate marketplace enrollments will be required to display premium and cost-sharing information, plan summaries of benefits and coverage, metal level information, quality and enrollee satisfaction results, and provider directory information for all marketplace plans available to potential enrollees. Additionally, if a web-broker does not facilitate enrollment into a particular marketplace plan, CMS will require it to “prominently display” a standardized disclaimer that enrollment in that plan is available on the marketplace website, with a link to that website.

CMS is also expanding on existing rules prohibiting web-brokers from displaying marketplace plans based on the compensation they receive from insurers. Research by CMS found that some web-brokers offer insurers preferred placement on their website in exchange for a fee, without disclosing such arrangements to consumers. Going forward, web-brokers are prohibited from providing favored or preferred placement or displaying plan advertisements based on the compensation they receive from insurers. Web-brokers must also prominently display a clear explanation of the rationale for their marketplace plan recommendations, as well as the methodology for any default display of marketplace plans on their websites. CMS argues that these changes will enable consumers to make more informed plan choices.

Reducing Special Enrollment Period (SEP) Paperwork

CMS has found that marketplace requirements that consumers submit documentation to prove their eligibility for a SEP has deterred many, particularly those who are young and healthy, from enrolling in coverage. CMS also found that the marketplaces’ pre-enrollment SEP verification processes disproportionately negatively impacts Black and African American consumers. The agency is finalizing a proposal to give SBMs greater flexibility over when and how to conduct SEP pre-enrollment verification, and will allow SBMs to provide exceptions to pre-enrollment verification for special circumstances such as natural disasters and public health emergencies. CMS notes that the coming end of the COVID-19 public health emergency and the “unwinding” of the Medicaid continuous coverage requirement is likely the kind of special circumstance in which SBMs would want to ease the paperwork burdens for consumers.

Reversing Policy on Past-Due Premiums

The rule reverses a rule that had created an exception to the ACA’s guaranteed issue requirement, allowing insurers to deny a policy to an individual or small employer that owes past-due premiums for prior coverage. Specifically, beginning in plan year 2023, insurers are no longer allowed to require an applicant to pay outstanding debt from previous coverage or use that debt as a condition of new enrollment. This policy will apply in all states and most state departments of insurance will be responsible for enforcing insurer compliance.

The “State Exchange Improper Payment Measurement” Program

CMS is in the planning phases of establishing a State Exchange Improper Payment Measurement (SEIPM) program. The agency expresses concern that current SBM policies and procedures may result in “significant improper” advance premium tax credit payments. The proposed new program would require SBMs to give CMS access to eligibility determinations, enrollment information, and other data. SBMs with significant improper payments may also be required to implement corrective action plans. In response to comments expressing concern about the burden and proposed timeline for implementation, CMS has decided not to finalize its SEIPM proposals. The agency indicates it will codify the SEIPM program in a future rulemaking. In the meantime, SBMs will report on their compliance through the existing State-based Marketplace Annual Reporting Tool.

New Rules for Broker-Facilitated Enrollments

In an attempt to curtail fraudulent practices in which some brokers have submitted marketplace applications for consumers without their knowledge or consent, CMS is finalizing several new requirements for broker-facilitated enrollments. Although these apply to brokers that work with the FFM, to fully protect consumers the SBMs and state insurance departments may wish to adopt similar standards of conduct.

First, brokers may only enter an email address on a marketplace application that belongs to the consumer or the consumer’s authorized representative. Second, brokers may only enter a telephone number on a marketplace application that belongs to the consumer or their authorized representative. Third, the broker may only enter a mailing address on the application that belongs to, or is primarily accessible by the consumer or their authorized representative. Fourth, a broker may only enter a household income projection if the consumer or their representative has authorized and confirmed, through attestation, that it is an accurate projection. Fifth, when identity proofing accounts via the FFM, brokers will be required to only use an identity that belongs to the consumer. Sixth, when facilitating an enrollment via a SEP, CMS will require brokers to obtain authorization from the consumer to submit the request for a SEP, and make the consumer aware of the specific triggering event and SEP for which the broker is submitting the request.

Brokers will also be prohibited from automating their interactions with the FFM, unless approved in advance in writing by CMS. CMS has found that automated browser-based interactions with FFM systems have led to unauthorized enrollments, application changes, and access to consumers’ personal information.

Extending Premium Calculation Methodology to the SBMs

CMS has decided not to finalize a proposal to require SBMs to prorate premiums and advance premium tax credits for individuals enrolled in a policy for less than one month. Several public commenters argued that such a change would have been burdensome for the SBMs and also would reduce the generosity of premium tax credits for some enrollees. Although CMS will not require SBMs to conform to the FFM’s methodology of prorating premiums and advance premium tax credits, SBMs will be expected to demonstrate to CMS that their methodology does not cause an enrollee who has a policy for less than a month to receive more than they are entitled in advance premium tax credits.

Greater Flexibility to Verify Access to Employer-Sponsored Insurance (ESI)

SBMs will now have greater flexibility to verify whether applicants or enrollees have access to ESI. Going forward, SBMs can design their ESI verification process based on an assessment of the risk that enrollees could receive inappropriate marketplace subsidies. CMS will require that any risk-based verification process be “reasonably designed” to ensure data accuracy, and urges the SBMs to pay special attention to “known risks,” such as risk pool manipulation or the steering of high-risk employees from the group market into the marketplace.

Monitoring Downstream and Delegated Entities

CMS is finalizing requirements that all agreements between marketplace insurers and their downstream and delegated entities include language stating that the marketplace—the FFM and SBM—may demand and receive the entity’s books, contracts, computers, and other records relating to the insurer’s obligations until 10 years from the final date of the agreement period.

State-Requested Changes

CMS is finalizing a proposal to repeal states’ ability to request reductions in risk adjustment transfer payments, beginning in plan year 2024. In doing so, the agency expresses the concern that allowing insurers with lower-risk enrollees to reduce their payments to insurers with higher-risk enrollees could incentivize risk selection, and lead to market destabilization, increased premiums, and smaller provider networks.

To date, Alabama is the only state that has requested changes to the risk adjustment transfer payments. Under the final rule, Alabama’s ability to make such requests will be extended one extra year, to 2025, in order to allow affected insurers time to prepare.

Methodological Changes

CMS decided not to finalize a proposed methodological change to its risk adjustment model. CMS had argued that the current methodology under-predicts claims risk for enrollees with the lowest and highest expected costs, while over-predicting claims risk for some enrollees with intermediate expected costs. However, CMS decided not to move forward after receiving comments that the proposed change would reduce the payments that insurers with lower-risk enrollees make to those with higher-risk enrollees. This in turn would increase premiums for more generous plans and incentivize insurers to offer more narrow network plans.

FFM and SBM-FP user fee rates for 2023 will be equal those charged in 2022. Specifically, insurers participating in the FFM will be charged 2.75 percent of monthly premiums and insurers in the SBM-FPs will be charged 2.25 percent of monthly premiums.

On April 28, CMS released a suite of additional regulatory guidance and tools relating to the ACA marketplaces, including the final 2023 Letter to Issuers, the final actuarial value calculator and methodology, Qualified Health Plan application templates, instructions, supporting documents, and review tools, and a final quality rating system information bulletin.