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Patient Protection and Affordable Care Act; 2020 Proposed Notice of Benefit and Payment Parameters

This week, our In Focus reviews the Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2020. The new proposed rule does not contain as many major changes as the 2019 rule, but there are requests for comment on potentially important rulemaking starting in 2021 and guidance on important policy, such as:

  • Streamlining of Direct Enrollment regulations for and new definitions of entities participating in Direct Enrollment
  • New rules related to plan formularies and Essential Health benefits
  • A decrease in Federally-Facilitated Exchange (FFE) and State-Based Exchange on the Federal Platform (SBE-FP) user fees
  • The practice of “silver-loading” was not prohibited, but rulemaking could be forthcoming in the absence of Congressional action to appropriate funds for cost-sharing reductions
  • A new methodology for calculating Premium Adjustment Percentage that reflects a faster premium growth rate, which could have significant effects on premiums and enrollment
  • A new Special Enrollment Period for off-Exchange individual market enrollees who experience a decrease in household income and receive a new determination of eligibility for advanced payment of the premium tax credit by an Exchange
  • An admonition against discrimination related to Medication-Assisted Treatment
  • Creation of “mirror Qualified Health Plans” to encourage enrollment by consumers who wish to enroll in a QHP but object to having non-Hyde abortion benefits included in their coverage.

1. Automatic Re-Enrollment

The Centers for Medicare & Medicaid Services (CMS) expresses concerns related to automatic re-enrollment of enrollees in Qualified Health Plans (QHPs). The agency states that automatic re-enrollment might prevent QHP enrollees from updating their coverage and premium tax credit eligibility as their personal circumstances change, potentially leading to less than adequate coverage, eligibility errors, tax credit miscalculations, and unrecoverable federal spending on such credits. CMS seeks comment on the automatic re-enrollment processes and capabilities for potential future rulemaking no sooner than plan year 2021.

2. Guaranteed Renewability and Formularies

The rule proposes to allow issuers to update their prescription drug formularies by allowing certain mid-year formulary changes, subject to applicable state law, to optimize the use of new generic drugs as they become available. An issuer must provide affected enrollees with at least 60 days’ notice before removing or moving a drug to a higher-cost tier. Issuers also must provide a coverage appeal process for affected enrollees. This change would apply to the individual, small group, and large group markets.

3. Risk Adjustment

The rule proposes to recalibrate the risk adjustment models consistent with the methodology finalized for the 2019 plan year and the incorporation of blended plan years of MarketScan (2017) and enrollee-level EDGE (2016 and 2017) data that are available. The rule maintains the risk adjustment model categories used for the 2019 plan year and retains, for high-cost risk pooling, the same $1 million exclusion threshold and 60 percent coinsurance rate for all state individual and small group markets.

4. Navigators

CMS proposes to provide more flexibility to Navigators by streamlining training requirements and making permissive, not required, certain types of post-enrollment assistance unless required by an SBE or an SBE-FP. The rule also proposes to give Exchanges increased flexibility related to Navigator training to insure coverage of the most important topics related to the operation of that exchange.

5. Direct Enrollment

To better describe functions and responsibilities of entities participating in direct enrollment, the proposed rule provides definitions of “direct enrollment entities,” “web-brokers,” and “direct enrollment technology providers.”

The proposed rule includes new provisions to require that web-broker websites used to complete QHP selection comply with applicable federal requirements and prohibits websites from displaying recommendations for QHPs based on compensation that the web-broker, agent, or broker receives from QHP issuers. Additionally, the proposed rule allows the Department of Health and Human Services (HHS) immediately to suspend an agent’s or broker’s ability to transact business with The Exchange if that entity’s actions create an unacceptable risk to Exchange operations. HHS also would be able to terminate the entity’s Exchange agreement if that entity is not licensed in every state within which the entity actively assists Exchange consumers to select or enroll in QHPs.

The rule proposes to revise 45 CFR 155.221 to apply to all types of direct enrollment entities, expanding the requirements included in that regulation beyond only audits of direct enrollment entities. The rule proposes that third-party auditors of direct enrollment entities must demonstrate operational readiness and must be independent of the entities they are auditing. The rule also proposes to require direct enrollment entities to display and market QHPs and non-QHPs on separate website pages on their non-Exchange websites.

6. Special Enrollment Periods

The rule proposes to authorize Exchanges to provide an optional special enrollment period (SEP) to enroll in Exchange coverage for off-Exchange individual market enrollees who experience a decrease in household income and receive a new determination of eligibility for advanced payment of the premium tax credit (APTC) by an Exchange. This SEP would apply to qualified individuals (QIs) and their dependents whose household income decreases and the QI or his or her dependent are both newly determined eligible for APTC by an Exchange and had coverage (pregnancy Medicaid, CHIP unborn child, Medically-Needy Medicaid, and minimum essential coverage as described at 26 CFR 1.5000A-1(b)), in which they were enrolled and under which they were entitled to receive benefits for one or more days during the 60 days preceding the change in circumstances. QIs or their dependents must verify the attested change in household income and health prior coverage.

7. User Fees

The rule proposes to lower for the 2020 plan year user fees for participating FFE issuers to 3.0 percent of total monthly premiums (from 3.5 percent) and the fee for issuers offering QHPs through an SBE-FP to 2.5 percent of total monthly premiums (from 3.0 percent). CMS notes that this fee decrease reflects their expectation for premium increases and enrollment decreases for the 2020 plan year.

8. Exemptions

For tax year 2018 only, the rule proposes to allow individuals to claim hardship exemptions through the IRS tax filing process alone, with no need to obtain an exemption certificate from the Exchange.

9. Silver-Loading

The proposed rule does not prohibit “silver-loading,” the practice of increasing premiums on silver plans in order to increase premium assistance, in the form of premium tax credits, to offset the loss of cost-sharing reduction (CSR) payments. Increasing the premium on silver plans, the benchmark for the calculation of premium tax credits, has increased federal expenditures and the practice might be the subject of future rulemaking (in the absence of the Trump Administration’s preferred alternative, the appropriation of funds by Congress for the resumption of CSR payments) occurring no earlier than 2021.

10. Essential Health Benefits

CMS proposes to require that QHP issuers who made a mid-year formulary change during the prior plan year under the proposed amendment to 45 CFR 147.106(e) submit notice to CMS, including information such as (but not limited to) the name of the drug being removed from the formulary, the dosage, and the generic equivalent. The rule seeks comment on whether such generic substitution policies, along with therapeutic substitution, should be pursued together in order to offset any premium impact of either strategy. The rule also seeks comment on whether certain drug categories and classes are better suited to therapeutic substitution than others and on existing standards of practice for therapeutic substitution, including whether those standards are nationally recognized and readily available for providers to use. Finally, the rule seeks comment on the opportunities and risks of implementing or incentivizing reference-based pricing for prescription drugs.

CMS also discusses potential discrimination related to Medication-Assisted Treatment (MAT), noting that some issuers utilize plan designs which exclude coverage of certain drugs when used for MAT although the same drugs are covered for other medically-necessary purposes, such as analgesia or alcohol use disorder. CMS reminds QHP issuers that an issuer does not provide EHB if its benefit design, or the implementation of its benefit design, discriminates based on an individual’s age, expected length of life, present or predicted disability, degree of medical dependency, quality of life, or other health conditions. CMS also states that indication of a reduction in the generosity of a benefit for certain individuals that is not based on clinically indicated, reasonable medical management practices is potentially discriminatory. If a plan excludes certain treatment of opioid use disorder but covers the same treatment for other medically necessary purposes, the issuer must be able to justify such an exclusion with supporting documentation explaining how such a plan design is not discriminatory.

11. Premium Adjustment Percentage

CMS proposes an alternative premium measure that captures increases in individual market premiums, both on and off Exchanges, in addition to increases in employer-sponsored insurance premiums for purposes of calculating the premium adjustment percentage for the 2020 plan year and beyond. CMS foresees that the proposed premium adjustment percentage calculation could result in a faster premium growth rate for the foreseeable future than if it continued to use only employer-sponsored insurance premiums as in prior plan years.

Such a measure of premium growth reflecting a faster premium growth rate probably would increase the portion of the premium the consumer is responsible for paying, decreasing the amount of premium tax credit for which consumers qualify. It also might cause more individuals with an offer of employer-sponsored insurance to be ineligible for the premium tax credit and would give rise to higher employer shared responsibility payment amounts. CMS notes that the purpose of this policy change is to counteract the effects of “silver-loading” in 2018, which resulted in a significant increase in tax credit expenditures. This new methodology would help to slow the increase in premium tax credit expenditures that results from “silver-loading,” reducing taxpayer burden but possibly contributing to a decline in Exchange enrollment among premium tax credit-eligible consumers, resulting in net premium increases for enrollees that remain in the individual market, both on and off the Exchanges, as healthier enrollees elect not to purchase Exchange coverage.

12. Cost-Sharing

CMS proposes, subject to applicable state law, to allow a plan that covers both a brand prescription drug and its generic equivalent, for plan years beginning on or after January 1, 2020, to consider the brand drug to not be EHB, if the generic drug is available and medically appropriate for the enrollee, unless coverage of the brand drug is determined to be required under an exception process. CMS also is considering allowing an issuer to except from the annual limitation on cost-sharing the entire amount paid by a patient for a brand drug for which there is a medically appropriate generic alternative. These proposed alternatives would apply to group health plans, group health insurance coverage, and individual market coverage, regardless of whether they are required to cover EHBs. If either option is finalized, the change would permit all group health plans and group health insurance issuers to impose lifetime and annual dollar limits on such brand drugs because they would no longer be considered EHB subject to the prohibition on such limits. Additionally, neither the premium tax credit nor APTC could be applied to any portion of the premium attributable to coverage of brand name drugs not covered as EHB, so QHP issuers would be required to calculate that portion of premium and report it to the applicable Exchange.

CMS also proposes that amounts paid toward cost-sharing using any form of direct support offered by drug manufacturers to insured patients to reduce or eliminate immediate out-of-pocket costs for specific prescription brand drugs that have a generic equivalent are not required to be counted toward the annual limitation on cost-sharing.

13. Segregation of Funds for Non-Hyde Abortion Services

CMS expresses concern that some consumers who wish to enroll in a QHP may object, based on religious or moral beliefs, to having non-Hyde abortion benefits included in their health insurance coverage. CMS proposes that, to the extent permissible under state law, if a QHP issuer provides coverage of non-Hyde abortion services in one or more QHPs, the QHP issuer also must offer, in each applicable service area, at least one “mirror QHP” that provides benefit coverage identical to one of the QHPs with non-Hyde abortion coverage, omitting coverage of non-Hyde abortion services. The QHP issuer would determine at which metal level the “mirror QHP” is offered.

Link to Proposed Rule

For more information, please contact Ryan Mooney.