The Proposed 2025 Notice of Benefit and Payment Parameters: Implications for States

Sabrina Corlette, Georgetown University’s Center on Health Insurance Reforms, and Jason Levitis, Urban Institute

On November 15, 2023, the Centers for Medicare & Medicaid Services (CMS) released its proposed Notice of Benefit and Payment Parameters (NBPP) for 2025. This annual regulation governs core provisions of the Affordable Care Act (ACA), including operation of the health insurance Marketplaces, standards for health plans, agents, and brokers, and the risk adjustment program. This expert perspective focuses on provisions of the proposed rule likely to be of interest to state officials. A more comprehensive summary of the proposed rule can be found on Health Affairs Forefront, here and here.

The proposed 2025 NBPP includes several provisions requiring State-Based Marketplaces (SBMs) to align with the standards and requirements of the Federally Facilitated Marketplace (FFM), proposals to clarify and improve the process for states to determine and update essential health benefits, and initiatives to ease the eligibility and enrollment process for consumers. The proposal also contains provisions relating to the methodology used for Medicaid eligibility determinations for non-modified adjusted gross income (MAGI) populations and requiring states to pay for certain income verification services. The administration is encouraging states to comment on numerous aspects of the draft rule; comments are due by January 8, 2024.

Raising the Bar for State-Based Marketplaces

Eighteen states and the District of Columbia operate an SBM, with two more states, Georgia and Illinois, expected to transition for plan year 2025. Several other states are considering legislation to begin operating their own SBM. In this draft rule, CMS includes proposals to set minimum national standards for the operation of the Marketplaces and the plans they offer.

A Gradual Transition and a More Robust Approval Process

CMS is proposing that any state wanting to transition from the FFM to an SBM must spend at least one year operating as an SBM using the federal platform (SBM-FP). CMS argues that states need considerable lead time to make the necessary investments in staffing, consumer education, brand development and marketing, and the Navigator program. States also need to determine how they will work with key partners such as the state Medicaid agency and department of insurance, insurance companies, brokers and other assisters, IT vendors, and other parties.

In its request for comments on this proposal, CMS asks states for feedback on whether a year is an appropriate duration for a state to operate as an SBM-FP before transitioning to an SBM.

CMS would also require states that wish to transition to an SBM to submit more documentation to CMS through their Exchange Blueprint. Specifically, states would be asked to submit detailed plans regarding consumer assistance programs and activities. The draft rule would further clarify that CMS has the authority to request from the state whatever information they deem required for the agency to assess the state’s ability to meet all the requirements of running an SBM.

CMS’ proposal also requires a greater degree of public engagement in the SBM transition process. A state seeking to transition to an SBM would have to provide the public with notice and a copy of its Blueprint application upon submission to CMS. The agency would then post the Blueprint application within 90 days. The state would also be required to hold at least one “public engagement,” such as a townhall meeting, once the Blueprint is submitted, and periodic similar public engagements until CMS approves the application.

Standards for Call Centers

The draft NBPP would establish new requirements for SBM call centers. First, SBMs must provide consumers with access to a live call center representative during published hours of operation. Second, those call center representatives must be able to help consumers complete their Marketplace applications, understand their eligibility for coverage and financial assistance, and select a plan. While CMS believes that all the current SBMs comply with these requirements, the agency wants to ensure that any future SBMs do as well. In particular, CMS warns that SBMs cannot solely rely on an automated telephone system to provide consumer assistance; customers must be able to access a live representative.

Minimum Standards for Network Adequacy

Health plans participating in the FFM must comply with federal standards for network adequacy that set a cap on the time or distance enrollees must travel to obtain provider services. The draft 2025 NBPP would require SBMs and SBM-FPs to establish their own time and distance standards that are “at least as stringent” as those required of plans in the FFM. SBMs and SBM-FPs would also be required to conduct reviews of plan networks to ensure they meet those standards, before those plans can be certified to participate. However, SBMs and SBM-FPs could permit insurers who cannot meet those standards to submit justifications, such as explanations of workforce shortages or topographical challenges, in order to be certified. SBMs and SBM-FPs would also have to require insurers to submit information about whether their network providers offer telehealth services.

CMS has noted that many Marketplace plans now come with narrow provider networks, resulting in potential access challenges for enrollees. The agency has further observed that approximately one-quarter of SBMs and SBM-FPs do not have any quantitative standards for network adequacy of Marketplace plans. SBMs and SBM-FPs that have their own quantitative network adequacy standards that differ from the FFM’s standards, would be allowed to seek exceptions to the requirement to maintain time and distance standards as stringent as the federal ones. Such states must be able to show that their standards ensure reasonable access to services for plan enrollees, and that they conduct compliance reviews prior to plan certification. SBMs or SBM-FPs that fail to comply with the new expectations for network adequacy oversight could be subject to remedial action by CMS under its program integrity authority.

A Centralized Eligibility and Enrollment Platform

The proposed 2025 NBPP would clarify that SBMs must operate a centralized eligibility and enrollment platform on their own website. Further, it must be the SBM, and not any other entity, that is responsible for making all final decisions about a consumer’s eligibility for coverage and financial assistance. Although SBMs do not currently rely on Direct Enrollment (DE) entities to mediate Marketplace enrollments, CMS notes that some are considering doing so. The agency argues that these clarifications of existing rules will protect consumers from the harm that could arise if a non-Marketplace entity, such as a web-broker, makes an incorrect eligibility determination. The proposal would also ensure that SBMs can meet the existing expectation that they maintain a record of all effectuated enrollments.

National Standards for Web-Brokers and Direct Enrollment Entities

For the FFM, CMS has promulgated standards for web-brokers and DE providers that help consumers enroll in Marketplace coverage. Noting the “increased interest” among SBMs in using web-brokers or DE entities to assist with eligibility and enrollment functions, the draft NBPP would extend the FFM’s standards for these entities nationwide.

CMS’ standards for web-brokers include requirements for the display of plan information, disclaimer language, and information about Marketplace financial assistance. They also speak to operational readiness, standards of conduct, and the behavior of downstream agents and brokers. For DE providers, federal standards currently govern the display of Marketplace and non-Marketplace plans, require adherence to certain rules of conduct, regulate the marketing of non-Marketplace plans, establish disclaimer language, and describe requirements for operational readiness. For example, DE entities must display Marketplace plans, off-Marketplace plans, and other products, such as excepted benefit products, on separate webpages of their non-Marketplace website. DE providers must also limit the marketing of off-Marketplace products during the Marketplaces’ open enrollment period.

These standards are designed to reduce consumer confusion between Marketplace and non-Marketplace plans, ensure appropriate eligibility determinations, and protect against privacy and security breaches. In general, the proposed rule would require web-brokers and DE entities in SBM states to follow the federal standards, although SBMs would be able to modify those standards, so long as they don’t conflict with federal requirements. For example, some SBMs have modified the display of consumer-facing plan quality ratings. Under this proposed rule, web-brokers in those SBM states would need to follow the quality rating displays as prescribed by the SBM. Similarly, web-brokers and DE providers in SBM states would need to follow CMS’ disclaimer language, but SBMs could add state-specific language as needed. States could also require web-brokers or DE entities to translate disclaimer text into additional languages, depending on the needs of the state’s population. CMS also would set broad standards for operational readiness, and would leave it to the SBMs to determine the details of those standards.

Separately, CMS is proposing to amend its rules for DE entities to require them to adopt and display changes made by HealthCare.gov onto their own websites, within a specified notice period set by CMS. CMS argues that, as an increasing number of people enroll in Marketplace coverage through DE entities, it is important that their websites quickly and accurately reflect changes in the Marketplace website. Under this proposal, SBMs would also be required to establish and communicate standards for required display changes to DE entities, and set time periods by which those changes must be implemented.

CMS argues that, by establishing minimum national standards for web-brokers and DE entities, it would relieve SBMs of some of the administrative burdens of establishing and maintaining oversight of these entities. CMS encourages public comments on these proposals, particularly from states operating, or seeking to operate, an SBM. These proposals, if finalized, would be made effective upon publication of the final rule.

Standardizing Open Enrollment Periods

Most SBMs hold their open enrollment period from November 1 to on or after January 15 of the following year, but some do not. As more states transition, or consider transitioning, to an SBM, CMS is proposing to require that all SBMs align their open enrollment period dates with the FFM, which runs November 1 to January 15. SBMs would have the option to extend the open enrollment period beyond January 15. CMS argues that a standard open enrollment period across states will help reduce consumer confusion.

Special Enrollment Periods: Aligning Coverage Effective Dates

Under this draft rule, beginning no later than January 1, 2025, SBMs would need to align the coverage effective dates for consumers enrolling through a special enrollment period (SEP) with those of the FFM. Under current federal rules, a consumer in the FFM who enrolls through an SEP would generally have their coverage begin on the first day of the following month. If a consumer selects a plan on July 31, their Marketplace coverage would start on August 1. In some SBMs, if a consumer enrolls through a SEP during the latter half of a month, their coverage would not become effective until the first day of the second month after their plan selection. For example, in such an SBM, if a consumer enrolled in a Marketplace plan on July 17, their coverage would not be effective until September 1. CMS has observed that such policies can result in consumers experiencing unnecessary gaps in coverage.

Essential Health Benefits: Updating the Benchmark

Under federal rules, the cost of state benefit mandates that apply to Marketplace plans enacted after December 31, 2011 that are in addition to essential health benefits (EHB) must be borne by the state. At the same time, states can select a new or revised EHB-benchmark plan without facing an obligation to defray the cost of additional benefits so long as the plan meets certain standards. In its draft NBPP, CMS proposes adjustments to the EHB defrayal policy and the standards governing updates to the EHB-benchmark plan.

States have reported to CMS that the “defrayal” policy is hard to understand and operationalize. CMS is thus proposing to amend its rules such that a covered benefit in the state’s EHB-benchmark plan is considered an EHB. In other words, if a state legislature mandates coverage of a benefit that is already in the EHB-benchmark plan, the benefit would continue to be considered an EHB, and there would be no defrayal requirement. CMS notes that there are some states currently defraying the cost of certain benefits that would no longer need to do so, if this rule is finalized.

In addition, CMS is proposing to change the standards by which states select a new or updated EHB-benchmark plan, beginning on or after January 1, 2027. Under current rules, states have to meet two scope-of-benefit standards:

1. The typicality standard: The proposed EHB-benchmark plan must have a scope of benefits that equals those in a typical employer plan. A “typical” employer plan could be either one of the state’s 10 base-benchmark plan options from the 2017 plan year, or the largest health insurance plan by enrollment within one of the five largest large group health insurance products.
2. The generosity standard: The proposed EHB-benchmark plan must have a scope of benefits that is not more generous than the most generous plan among a set of comparison plans used for the 2017 plan year.

CMS is proposing to remove the generosity standard and streamline the typicality standard so that a state’s proposed EHB-benchmark would need to have a scope of benefits that is:

1. As or more generous than the scope of benefits in the state’s least generous typical employer plan (aka, the floor).
2. As or less generous than the scope of benefits in the state’s most generous typical employer plan (aka, the ceiling).

States would therefore only need to assess two typical employer plan options (the most and least generous available). CMS argues that these proposals should reduce the time and cost to states seeking to update their EHB-benchmark plans.

States have also commented that the current requirement to provide CMS with a formulary drug list as part of their EHB-benchmark updating process is an onerous one when the state is not seeking to change the prescription drug benefits. CMS is therefore proposing to remove this requirement, unless the state is proposing to change the prescription drug benefit.

Inclusion of Adult Dental Services in Essential Health Benefits

Current federal rules prohibit Marketplace insurers from including routine adult dental services as an EHB, even if a state’s EHB-benchmark plan includes those services as covered benefits. In this proposal, CMS would remove that regulatory prohibition. The agency notes research suggesting that routine non-pediatric dental services are commonly covered as an employer-sponsored benefit. Under this proposal, states seeking to improve access to oral healthcare would need to update to their EHB-benchmark plans, in accordance with the standards outlined above, to include coverage of routine adult dental services. States would also be permitted to include routine adult dental services as an EHB for purposes of their Medicaid Alternative Benefit or Basic Health Program health plans.

Improving Consumers’ Enrollment Experience

The proposed rule includes several provisions designed to expand consumers’ enrollment opportunities, reduce paperwork burdens, and simplify the process of enrolling in and keeping Marketplace coverage.

Special Enrollment Periods for Low-Income Individuals

Individuals at or below 150% of the federal poverty level are currently eligible for a monthly SEP, at the option of the Marketplaces, but only while the Inflation Reduction Act (IRA) premium subsidy enhancements are in place (through plan year 2025). Most, but not all, SBMs have implemented this SEP. Noting that the availability of this SEP has expanded enrollment opportunities for people with low-incomes and helped limit potential gaps in coverage for those transitioning from Medicaid to the Marketplaces, CMS proposes that this SEP no longer be contingent on the availability of the IRA subsidies. SBMs would continue to have the option of whether or not to offer this SEP.

Advance Notice of Advanced Premium Tax Credit Risk Due to Failure to Reconcile

The 2024 NBPP modified long-standing rules for individuals who fail to reconcile (FTR) their advanced premium tax credits (APTC) when they file their tax return for the year, providing that they would be denied APTC only after two consecutive years of failing to reconcile. But that rule did not address how the Marketplaces should notify consumers of their risk of losing APTC due to FTR status. The proposed 2025 NBPP would require that Marketplaces notify consumers of this risk after one year of failing to reconcile APTC—a year in advance of APTC loss. Because of tax data privacy rules, these notices may need to be less than fully clear about the problem. For example, if the primary applicant for the coverage unit does not file a tax return for all members of the coverage unit, the notice may need to note multiple possible reasons for APTC loss.

Standardized Plan Options

CMS introduced standardized plan designs for the 2023 plan year. It is proposing only modest changes to those designs for plan year 2025, and is seeking comment on whether to require insurers in SBMs to offer some version of standardized plan options.

Additional Flexibility for Basic Health Program Effectuation Dates

CMS proposes to give states an additional option for the effective dates of Basic Health Program (BHP) coverage that could speed up some enrollments. Under current rules, states with BHPs must uniformly use either the Medicaid rules or the Marketplace rules for determining the effective date of all BHP coverage. The Medicaid rules generally allow for the earliest possible effective date for enrollees but can be challenging for some states to implement. The Marketplace rules may substantially delay enrollment for some consumers. CMS proposes to permit states to choose a middle ground, where all coverage is effective on the first day of the month after the eligibility determination is made. This will permit states that are unable to adopt the Medicaid rule to effectuate enrollment more quickly.

Increase State Flexibility to Use Income and Resource Disregards for Non-MAGI Medicaid Eligibility

Under the ACA, Medicaid eligibility is generally based on modified adjusted gross income (MAGI)—the same income measure used for APTC eligibility. However, the pre-existing, non-MAGI rules continue to apply for specific populations, including individuals who are aged 65 years or older, are blind or disabled, or are being evaluated for coverage as medically needy. Under these non-MAGI rules, states may ease eligibility by “disregarding” specified amounts of income and resources. However, long-standing regulations limit states’ ability to target these disregards to specific populations, for example, individuals with a cognitive impairment. These restrictions have limited states’ ability to target assistance to those most in need.

CMS proposes to expand flexibility to tailor disregards by eliminating this “all or nothing” rule, allowing states to target disregards “at discrete subpopulations in the same eligibility group, provided the subpopulation is reasonable and does not violate other federal statutes (for example, it does not discriminate based on race, gender, sexual orientation or disability).”

Flexibility to Accept Attestation as to Incarceration Status

The ACA prohibits Marketplace enrollment of incarcerated individuals, unless they are incarcerated pending the disposition of charges. Marketplaces are currently required to check a third-party database for indications of incarceration and generate a “data matching issue” (DMI) if an applicant attests to not being incarcerated but the database suggests they may be. Resolving the DMI requires applicants to submit documentation, creating administrative burdens.

CMS has found that lags and inaccuracies in these databases lead to many unnecessary DMIs, which aggravates racial inequities while providing little benefit. They propose to permit Marketplaces to accept applicants’ attestation that they are not incarcerated to establish eligibility, rather than requiring a search of third-party data. A Marketplace could still choose to use an electronic data source for verifying incarceration status, if approved by CMS, in which case current DMI rules would continue to apply.

Periodic Data Matching During a Benefit Year

Marketplaces must conduct periodic data matching (PDM) to identify individuals enrolled in Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), or BHP coverage (where applicable), and for evidence of enrollee death. The checks for other coverage must occur no less than twice per year, but the frequency of PDM for death has not been specified. CMS proposes to require PDM for death to follow the same twice-a-year cadence. CMS notes that 11 SBMs are not currently meeting this standard but expects that complying would have minimal cost.

CMS also proposes to revise PDM rules to grant the Secretary authority to temporarily suspend PDM requirements in situations that may cause PDM data to be less available, such as a declared national public health emergency.

Automatic Re-Enrollment for People with Catastrophic Coverage

The Marketplaces routinely automatically re-enroll a significant proportion of enrollees who do not actively select a new plan into coverage for the next plan year. The draft NBPP would update automatic re-enrollment policies to require all Marketplaces to automatically re-enroll people enrolled in catastrophic plans for the next plan year, if they do not actively select a plan. The FFM and some SBMs already do this, but not all. CMS believes that making it a national requirement will help ensure continuity of coverage when an insurer discontinues a catastrophic plan and people enrolled in that plan do not actively select a new Marketplace plan. CMS asks for comments on these proposals, particularly from SBMs regarding whether these policies reflect their current automatic re-enrollment practices.

Premium Payment Deadline Extensions

Current regulations permit insurers to extend deadlines for binder payments when they are “experiencing billing or enrollment problems due to high volume or technical errors.” CMS proposes to clarify that Marketplaces may, and that Marketplaces using the federal platform will, permit Marketplace insurers to provide reasonable extensions to deadlines for making additional premium payments and in certain additional circumstances. Specifically, deadlines may be extended for any premium payments and when required by federal or state authorities. This is consistent with past practice, including the COVID-19 pandemic guidance permitting insurers to extend premium deadlines generally.

Permitting Retroactive Termination for Medicare Enrollment

Retroactive termination of Marketplace coverage is currently permitted in only very limited circumstances—where coverage was effectuated or extended due to a mistake or malfeasance outside the enrollee’s control. In addition, SBMs and SBM-FPs have the option to permit retroactive termination of Marketplace coverage in cases of retroactive Medicaid enrollment.

CMS now proposes that Marketplaces could—and the FFMs would—also allow retroactive termination to avoid duplicate coverage where Medicare Part A or Part B coverage takes effect retroactively. This can happen where an individual turning 65 years old is not automatically enrolled and does not immediately enroll themselves, or if an individual is retroactively approved for social security disability insurance benefits extending back more than 25 months.

CMS declines to further broaden retroactive termination, noting that individuals with little utilization might seek to game the system by terminating coverage to recover premiums paid, and that providers could be left with no one to bill for services they provided.

Other Proposals

The proposed 2025 NBPP includes additional provisions establishing user fee rates, updating public notice requirements for section 1332 waivers, requiring states to start paying for a federal data service, and updating numerical parameters.

User Fees

Marketplace issuers pay user fees to support Marketplace operations, including eligibility and enrollment processes; outreach and education; managing Navigators, agents, and brokers; consumer assistance tools; and certification and oversight of Marketplace plans. CMS proposes to hold the 2025 Exchange user fees rates steady at 2024 levels: 2.2% of premiums in the FFM and 1.8% in SBM-FPs.

1332 Waivers

Section 1332 and implementing regulations require states to hold public hearings before a waiver application is submitted and to conduct annual forums post-approval. Current regulations, which originated during the COVID-19 pandemic, generally require the meetings to be in person but allow states to ask permission to make these meetings virtual. CMS and the Treasury Department now propose to modify these requirements to permit the meetings to be virtual or hybrid (in-person and virtual) without any special permission. The Departments note that states report that virtual hearings have worked well, do not seem to have adversely affected attendance, and address some concerns about accessibility. The proposal would not change requirements for public notice, comment periods, or consultation with Indian tribes.

Requiring States to Pay to Use a Data Hub Income Service

The federal Data Services Hub (“the Hub”) permits secure information sharing between federal agencies and state Marketplaces and Medicaid agencies, including data to help states make eligibility determinations. One data source available through the Hub is “Verify Current Income” (VCI), an optional private service providing recent income information that can supplement tax data from the Internal Revenue Service. VCI has long been free to states, but CMS has now determined that the use of VCI is properly considered a state agency function, so states must pay for it. CMS notes that Medicaid agencies could receive federal matching funds for this expense, and Marketplaces could fund them through their user fees. CMS also proposes procedures by which states would pay for the service.

This change would be effective July 1, 2024, though CMS specifically requests comment on this effective date. CMS notes that, as of June 2023, 32 states and the District of Columbia and Puerto Rico use VCI for their Medicaid and CHIP programs, and 10 of those also use the service for their SBMs.

Updated Numerical Parameters

Along with the proposed rule, CMS released its annual guidance providing updated values for numerical parameters that are indexed based on premium changes. For 2025, the premium adjustment percentage—a measure of estimated premium growth between 2013 and the prior year (2024)—is about 1.45, meaning premiums grew about 45% over that timespan, for an average annual increase of about 3.45%. Using this factor, the guidance provides updated values for the caps on maximum out-of-pocket expenditures for various types of plans and the updated affordability percentage for purposes of eligibility for catastrophic coverage. These values are all lower for 2025 than for 2024, due to CMS incorporating updated premium data showing smaller increases than they had expected.

CMS also released a fact sheet on the 2025 proposed rule, a proposed 2025 Actuarial Value Calculator and methodology, and a draft 2025 Letter to Issuers. Comments on the Letter to Issuers are due by January 2, 2024.