The Proposed 2023 Notice of Benefit & Payment Parameters: Implications for States
Sabrina Corlette, Georgetown University’s Center on Health Insurance Reforms
On December 28, 2021, the Centers for Medicare & Medicaid Services (CMS) released its proposed 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 proposed rule that are of particular import to the state-based marketplaces (SBMs) and state insurance regulators. A more comprehensive, three-part summary of the proposed rule’s provisions can be found via Health Affairs Forefront (formerly the Health Affairs blog), here, here, and here. Comments are due by January 27, 2022.
Improving Adequacy and Equity of Marketplace Coverage
New Standards for and Oversight of Network Adequacy
CMS is proposing to require insurers that offer plans through the federally facilitated marketplace (FFM) to meet quantifiable standards for network access, including maximum appointment wait times, a maximum time and distance enrollees must travel to receive services, and new requirements for plans with tiered provider networks. These standards will be detailed in future guidance. The agency argues that such standards are necessary to achieve greater equity in access to healthcare.
CMS is further proposing to ensure that marketplace plans receive prospective network adequacy reviews before they are marketed and sold. Beginning this year (for plans to be sold in 2023), the FFM will evaluate the adequacy of marketplace plan provider networks, except for those offered in states that are performing marketplace plan management functions and elect to perform their own network adequacy reviews. However, these states’ network adequacy standards must be at least as stringent as the federal network adequacy standards, and their reviews must take place prior to certifying the plan for marketplace participation.
CMS is seeking comments on a range of elements in this proposal, but state-based marketplaces (SBMs) should note that they are also asking for comment on requiring network adequacy standards in states with SBMs. While CMS suggests it is not currently inclined to impose network adequacy standards for insurers in SBMs, the agency is considering whether there is a need for “greater alignment” of network adequacy across the FFM and SBMs. The agency states: “We are concerned that there is no preferred network adequacy model that is shared among states, which indicates that there is no general agreement among states or Exchanges regarding what exactly constitutes an adequate network. Moreover, the proliferation of narrower networks in recent years presents a number of potential consumer protection concerns….”
CMS is also proposing to increase the required participation 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.
Prohibiting Discrimination Based on Sexual Orientation or Gender Identity
The ACA prohibits states, marketplaces, insurers, and agents and brokers from engaging in discrimination based on race, color, national origin, present or predicted disability, age, sex, expected length of life, degree of medical dependency, quality of life, or other health conditions. Prior CMS nondiscrimination regulations had included sexual orientation and gender identity protections in the prohibition against discrimination based on sex, but these were removed in a rulemaking published in June 2020. On January 20, 2021, the President issued an Executive Order stating that it is the Administration’s policy to prevent and combat discrimination on the basis of gender identity and sexual orientation, and that laws that prohibit sex discrimination also prohibit discrimination on the basis of gender identity and sexual orientation. Consistent with this Executive Order, the proposed rule would amend several ACA regulations to restore the prohibitions against gender identity and sexual orientation discrimination. This includes potential discrimination in marketing practices and benefit designs.
Essential Health Benefits: Limiting Discriminatory Benefit Designs, Easing Burdens on States
CMS is proposing several changes to federal rules governing plan benefit design and the selection of states’ essential health benefit (EHB) benchmark plans.
A clear nondiscrimination policy
CMS proposes to provide insurers with “a clear regulatory framework” to help reduce the risk that a plan’s benefits would be discriminatory. This proposal is designed to ensure consistent application of the nondiscrimination policy as well as to provide greater protections for consumers.
First, CMS would require that benefit designs, and particularly any benefit limitations or coverage requirements, be based on “clinical evidence.” Such benefit designs must incorporate evidence-based guidelines into coverage and rely on “current and relevant” peer-reviewed medical journal articles, practice guidelines, or recommendations from “reputable governing bodies.”
Second, CMS will provide examples of benefit designs that are “presumptively discriminatory.” The agency notes that such benefit designs must be cured, regardless of how they originated. For example, if a state’s existing EHB benchmark plan or existing state law includes the discriminatory benefit or practice, insurers would be prohibited from replicating it. CMS notes that while states remain the primary enforcers of EHB requirements, the agency is available to assist states with technical assistance, data, and research.
Providing states with a certain deadline
CMS is proposing to formalize a “consistent, permanent annual deadline” for states to submit proposals for revised or new EHB benchmark plans. This deadline would be the first Wednesday in May that is two years before the effective date of the new EHB benchmark plan. States would still be required to provide a public comment period on the proposed new plan prior to submitting its application to CMS.
Eliminating states’ annual reporting requirement
CMS is proposing to repeal 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. Under the ACA, states are required to defray the cost of such additional benefits. This reporting requirement, published in a 2020 regulation but never implemented, received numerous negative comments from stakeholders arguing that the requirement was unnecessary and burdensome on states.
Eliminating benefit substitution
Beginning in plan year 2019, states were permitted to allow insurers to substitute benefits between EHB benefit categories. At the time, the administration argued that doing so would promote greater flexibility and plan “innovation.” However, that policy was heavily criticized for creating greater potential for benefit designs that discriminate against people living with chronic conditions and disabilities. Furthermore, CMS notes that no state has ever notified CMS that it would begin allowing insurers to substitute benefits. CMS thus finds that “whatever theoretical flexibility this policy could have afforded to states, such untapped flexibility is not justified given the potential negative effects on consumers.” The agency is proposing to return to the prior blanket ban on benefit substitution between EHB benefit categories.
Automatic Re-Enrollment Procedures that Optimize Plan Value
CMS has established criteria for re-enrolling eligible individuals into coverage if they do not proactively return to the marketplace and select a plan. Where possible, enrollees are re-enrolled into the same plan, but when that plan is not available, federal rules establish a hierarchy for mapping the individual to a new plan. In this proposed rule, CMS is asking for comments on whether they should incorporate a plan’s net premium, maximum out-of-pocket amount, deductible, annual out-of-pocket costs, or other criteria into a re-enrollment hierarchy for all the marketplaces (FFM and SBM). CMS is seeking to enhance the existing framework to better align consumers with plans that meet their needs. For example, this could include potentially re-enrolling a current bronze plan enrollee into a silver plan with a lower net premium and higher plan generosity.
All marketplace plans must have in place a quality improvement strategy (QIS). In this proposed rule, CMS would require that each insurer’s QIS include reducing health disparities as a topic area.
Lowering Barriers to Marketplace Enrollment: Easing Consumer Decision-Making, Reducing Paperwork Burdens
Standardized Benefit Designs
CMS is proposing to require insurers participating in the FFM and in SBMs using the federal eligibility and enrollment platform (SBM-FP) to offer standardized plan options for every product network type, at every metal level and in every service area in which they offer plans. Future guidance will detail the specific required benefit designs, but CMS indicates it will take into account existing state laws that establish cost-sharing standards.
The requirement to offer standardized benefit designs would not extend to insurers offering plans in SBMs, nor would it apply in Oregon, a state with an SBM-FP that already requires standardized plan designs. CMS argues that standardized plans can enhance the consumer shopping experience, improve consumers’ understanding of their plan options, combat discriminatory benefit designs, and advance health equity. CMS makes several requests for public comment, including on whether SBMs should be exempted from these requirements.
Although it has declined to do so for plan year 2023, CMS is considering whether, in future years, it should limit the number of plans an insurer can offer through the FFM in order to further optimize consumer decision-making. CMS is also considering resuming a requirement that an insurer’s plan offerings have “meaningful differences” between them, a standard that was in place until 2018. The agency also notes that a number of SBMs have successfully used an “active purchaser” model to improve the value they offer to consumers, and is considering whether such a model would be appropriate for the FFM.
Limiting Variations in Plan Value
The ACA requires insurers in the individual and small-group markets to offer plans with specified levels of generosity (called “actuarial value”), labeled bronze (covering 60 percent of an average enrollee’s costs), silver (70 percent), gold (80 percent), and platinum (90 percent). Current rules allow insurers flexibility in meeting these actuarial value levels. For example, insurers may offer silver-level plans that are either 2 percentage points above the target actuarial value of 70 percent or 4 percentage points below (i.e., between 66 and 72 percent). For expanded bronze plans (which cover at least one major preventive service pre-deductible) the allowable range is +5/-4 percentage points.
However, CMS argues that this range of variation inhibits consumers’ ability to make meaningful comparisons between plan options, particularly between the silver and bronze levels of coverage. CMS is proposing to change the de minimis ranges from +2/-4 percentage points to +2/-2 percentage points for individual and small-group market plans sold outside the marketplaces, except for expanded bronze plans. CMS is proposing changing the de minimis range from +5/-4 to +5/-2 percentage points for such bronze plans. For plans sold through the health insurance marketplaces, CMS is proposing a de minimis range of +2/0 percentage points for silver plans, and +1/0 percentage points for cost-sharing reduced silver marketplace plans. In proposing the silver plan changes, CMS notes that it will enable consumers to maximize the premium tax credits for which they are eligible. States will remain the primary enforcers of this policy.
New Requirements for Web-Brokers
CMS is proposing to expand the required information that web-brokers must display to help consumers understand their plan options. Specifically, web-brokers would be required to display premium and cost-sharing information, the summary 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 the web-broker does not facilitate enrollment into a particular marketplace plan, CMS would 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 also proposes to expand on existing rules prohibiting web-brokers from displaying marketplace plans based on the compensation they receive from insurers. CMS has found that some web-brokers offer insurers preferred placement on their website in exchange for a fee, without disclosing such arrangements to consumers. The proposed rule would make clear that web-brokers are prohibited from providing favored or preferred placement or displaying plan advertisements based on the compensation they receive from insurers. Web-brokers would also be required to 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.
Reducing Special Enrollment Period (SEP) Paperwork
Beginning in plan year 2017, the FFM began conducting reviews of consumer requests for a special enrollment period (SEP) to verify their eligibility, and most SBMs have a similar process in place to verify the vast majority of SEPs requested by consumers. This process requires that consumers have their eligibility electronically verified via available data sources or to submit supporting documentation to verify their eligibility before they are able to enroll in a plan. CMS’ analysis of this verification process has found that it deters many consumers, particularly young and healthy ones, from enrolling in marketplace coverage due to the paperwork burden. CMS has further found that the pre-enrollment SEP verification process disproportionately negatively impacts Black and African American consumers, who submit acceptable documentation at much lower rates than White consumers.
CMS is thus proposing to provide the SBMs with greater flexibility over whether and how to conduct this pre-enrollment verification. CMS would further allow the SBMs to provide an exception to pre-enrollment SEP verification for special circumstances, such as natural disasters or public health emergencies.
Reversing Policy on Past-Due Premiums
The proposed rule would also reverse a rule adopted for plan year 2018 that allows 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 would no longer be allowed to require an applicant to pay outstanding debt from previous coverage or use that debt as a condition of new enrollment. Noting that the current policy disproportionately harms low-income individuals, CMS argues that reversing it will promote more equitable access to insurance and help ensure greater continuity of coverage. This policy, if adopted, would apply in all states and most state departments of insurance would be responsible for enforcing insurer compliance.
Strengthening Program Integrity
A New “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. However, SBMs would be able to satisfy the existing requirement for an annual independent external audit by completing the annual SEIPM program process. The proposed new program would not apply to the SBM-FPs.
New Rules for Broker-Facilitated Enrollments
CMS has found that some agents, brokers, and web-brokers (collectively referred to below as brokers) have been submitting marketplace applications for consumers without their knowledge or consent. These brokers submit inaccurate income projections to garner a $0 monthly premium, and then collect commissions from insurers based on those enrollments. Because there is no monthly payment, the consumer may only become aware they have been enrolled during premium tax credit reconciliation, when they are told they will receive a smaller refund or must repay advance premium tax credits. In an attempt to curtail such fraudulent practices, CMS is proposing several new requirements. 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 is “secure, not disposable, and 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 would be required to only use an identity that belongs to the consumer. Sixth, when facilitating an enrollment via a SEP, CMS would 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.
The proposed rule would also prohibit brokers 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 proposes to require SBMs to prorate premiums and advance premium tax credits for individuals enrolled in a policy for less than one month; the premium calculation methodology currently used by the FFM will also be extended to the SBMs, beginning in plan year 2024. CMS argues this uniformity is needed because SBMs handle the proration of premiums and advance premium tax credits “inconsistently,” which may lead to over-payment of premium tax credits, and potentially trigger a federal income tax liability for the consumer.
Greater Flexibility to Verify Access to Employer-Sponsored Insurance (ESI)
CMS is proposing to give the SBMs greater flexibility in how they verify whether applicants or enrollees have access to ESI. The agency has found that the risk of consumers receiving inappropriate marketplace subsidies because they are eligible for ESI to be low, while the administrative burden of monitoring consumers’ access to ESI is high. Under the proposed change, SBMs would have flexibility to design their ESI verification process based on each SBM’s assessment of the risk of enrollees receiving 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. To the extent an SBM will be contacting an individual’s employer, federal rules would still require notice to the individual. But CMS is proposing to lift the requirement that the SBM make reasonable attempts to contact employers listed in marketplace applications to verify whether the applicant is enrolled or eligible for an employer-sponsored health plan.
Monitoring Downstream and Delegated Entities
CMS proposes to amend current rules to require that all agreements between marketplace insurers and their downstream and delegated entities include language stating that the marketplace – the FFM and SBM marketplaces – 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.
Risk Adjustment: Limiting State Flexibility to Request Changes and Methodology Updates
To date, only the state of Alabama has requested changes to payment transfers under the ACA’s risk adjustment program. CMS has received stakeholder feedback arguing against allowing states to request such changes. To the extent states allow insurers with lower-risk enrollees to reduce their payments to insurers with higher-risk enrollees, it could incentivize risk selection, and lead to market destabilization, increased premiums, and smaller provider networks.
CMS notes that the risk adjustment program is integral to the ACA’s protections for people with pre-existing conditions. Preserving the integrity of that program, combined with the general low level of interest that states have expressed in the policy, has prompted CMS to propose, beginning for plan year 2024, to repeal states’ ability to request a reduction in risk adjustment transfer payments.
In making this proposal, CMS asks for comment on whether the repeal should be limited just to the individual market. They also ask for comment on the healthy equity impact of such a repeal, particularly for underserved and minority communities.
CMS is proposing methodological changes to its risk adjustment model, which it argues will improve the model’s performance. CMS notes that its 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. CMS proposes three changes aimed at addressing its concerns about these aspects of model fit.
The first would adopt a “two-stage” estimation procedure that would place a higher weight on enrollees with low expected costs when fitting the model. This change would increase predicted claims risk for lower-risk enrollees and reduce it for higher-risk enrollees. This, in turn, would reduce the payments that insurers with lower-risk enrollees make to insurers with higher-risk enrollees, which could increase premiums for more generous plans and encourage plan design changes (like narrowing networks) aimed at avoiding high-risk enrollees.
Two other proposals would change how information related to enrollee diagnoses is used in risk adjustment, specifically for partial-year enrollees and enrollees with certain severe conditions. These changes could improve the model’s ability to distinguish higher- and lower-risk enrollees and thereby diminish incentives for risk selection, although the overall effect of these proposals on selection incentives is unclear. CMS seeks comments on all three proposals.
Marketplace User Fee Rates
CMS is proposing FFM and SBM-FP user fee rates for 2023 to equal those charged in 2022. Specifically, insurers participating in the FFM would be charged 2.75 percent of monthly premiums and insurers in the SBM-FPs would be charged 2.25 percent of monthly premiums.
Seeking Comments on Health Equity and Climate Change Preparedness
CMS is considering a range of ways to use its authority with respect to marketplace operations and plan certification to improve health equity and enrollees’ environments, as well as to address other social determinants of health (SDOH). To that end, CMS is asking for comments on how to advance health equity and climate change preparedness. Some of the specific areas in which CMS is seeking input include:
- Whether or not to require insurers to obtain a Health Equity accreditation from the National Committee for Quality Assurance;
- What demographic and/or SDOH data would help insurers and marketplaces gain a better understanding of the populations they serve?
- What are ways CMS could incentivize insurers to advance health equity, outside of the marketplace certification process?
- How can the marketplaces more fully prepare for the harmful effects of climate change on their enrollees?
- Do the marketplaces have plans to assess, reduce, or mitigate emissions in their operations?
- What data do the marketplaces currently collect with respect to climate threats?
- What would incentivize the marketplaces to more fully prepare for climate change’s impacts on vulnerable populations?
- What measures would be appropriate for assessing marketplace plan performance on climate change and health equity?