On April 28, 2022, the U.S. Department of Health and Human Services (HHS) and the Centers for Medicare & Medicaid Services (CMS) issued the final 2023 Notice of Benefit and Payment Parameters. See the Press Release here and the Fact Sheet here. In a statement, HHS Secretary Becerra said that “[b]y including new standardized plan options on HealthCare.gov, we are making it even easier for consumers to compare quality and value across health care plans. The Biden-Harris Administration will continue to ensure coverage is more accessible to every American by building a more competitive, transparent, and affordable health care market.”

Finalized proposals include the following:

• Updates certification standards for the adequacy of plans’ provider network by implementing time and distance standards, appointment and wait time standards, and telehealth requirements,
• Requires certain issuers to offer standardized plan options at every product network type, metal level, and in every service area that offers non-standardized plan options in plan year 2023,
• Maintains a Federally-facilitated Exchange user fee of 2.75 percent and a State-based Exchange on the Federal Platform user fee of 2.25 percent,
• Removes current severity illness factors from adult risk adjustment models and replaces current enrollment duration factors with hierarchical condition category-contingent enrollment duration factors,
• Specifies that Indirect Quality Improvement Activity (QIA) expenses that can be included for Medical Loss Ratio reporting and rebate calculation must be directly related to activities that improve health care quality,
• Changes to advance health equity,
• Refines Essential Health Benefits (EHB) nondiscrimination policy for health plan designs, and
• New consumer protections.

This rule sets for the stage for the upcoming HealthCare.Gov Open Enrollment Period that begins on November 1, 2022. The rule has been submitted to the Office of the Federal Register (OFR) for publication and has not yet been placed on public display in the Federal Register.

CMS Strengthens and Clarified Network Adequacy Standards

Provisions in the Affordable Care Act (ACA) directed HHS to create criteria for the certification of health plans as qualified health plans (QHPs), including the requirement that QHPs must “ensure a sufficient choice of providers.” Subsequent rulemaking required that an issuer of a QHP that uses a provider network must provide for a network that has sufficient numbers and types of providers, including mental health and substance use disorder providers.

The 2017 marketplace stabilization rule and 2019 payment rule eliminated separate federal network adequacy standards for QHPs. In March 2021, a federal district court vacated this policy in City of Columbus v. Cochran. For the QHP certification cycle beginning in Plan Year (PY) 2023, CMS finalizes changes to evaluate the adequacy of provider networks of QHPs offered through Federally-facilitated Exchanges (FFEs), or plans pursuing certification as FFE QHPs, except for in certain states. CMS will not evaluate QHP network adequacy in FFE states that perform their own reviews of plans pursing QHP certification, but the state must apply and enforce network adequacy standards that are at least as strict as the federal standards.

Beginning in PY 2023, CMS finalizes updates to the FFE’s QHP certification standards for adequacy of plans’ provider network by implementing time and distance standards, appointment and wait time standards, and telehealth requirements. CMS did not finalize standards for tiered networks.

Time and Distance Standards: The final provider specialty lists for time and distance standards were informed by previous HHS network adequacy requirements and stakeholder input. In an effort to create more robust QHP networks, the provider specialty list includes more provider types than previously included under FFE standards and are generally consistent with standards used by the Medicare Advantage program. The final additional specialties are Emergency Medicine, Outpatient Clinical Behavioral Health, Pediatric Primary Care, and Urgent Care. The time and distance standards would be calculated at the county level and vary by county designation. CMS notes that county-specific time and distance standards will be addressed in future rulemaking.

Appointment Wait Times: The appointment wait time standards will apply to QHPs for behavioral health services, routine primary care, and non-urgent specialty care. The standards for non-urgent specialty care will also apply to stand-alone dental plans. CMS is delaying the implementation of network adequacy review for appointment wait time parameters until PY 2024.

Telehealth Services: CMS finalizes proposals to require all issuers pursuing certification to be offered as a QHP through FFEs to submit information on their telehealth offerings. The first year of data collection in PY 2023 will be for informational purposes but would help inform the development of future telehealth standards.

Tiered networks: In the proposed rule, CMS proposed that for plans that use tiered networks, , providers must be contracted within the network tier that results in the lowest cost-sharing obligation in order to count toward the issuer’s satisfaction of the network adequacy standards. After considering comments that this policy would restrict plan network designs and innovation, CMS has decided not to finalize this policy, but notes that further research is warranted in this area to evaluate the drawbacks of requiring providers to be contracted in network tiers.

CMS Standardizes Plan Options to Enhance Consumer Options and Choice

CMS finalizes changes requiring issuers in the FFE and State-based Exchange on the Federal Platform (SBM-FPs) to offer standardized plan options at every product network type, metal level, and in every service area that offers non-standardized plan options in PY 2023. For example, if an issuer offers a non-standardized silver plan in a service area, then it must also offer a standardized silver plan in that service area.

CMS finalizes two sets of standardized plan options at each of the bronze, expanded bronze, silver, silver cost-sharing reduction (CSR) variations, gold, and platinum levels of coverage, with accommodations for cost-sharing laws in specific states. Issuers of QHPs and SBM-FPs that are already required to provide standardized plans options to comply with state rules will be exempt from these requirements. CMS confirms that it will not place a limit on the number of non-standard QHPs that insurers can offer.

Additionally, CMS finalizes a proposal to publish standardized plan options differently on HealthCare.Gov and will resume enforcement of these display requirements on web brokers and QHP issuers utilizing a Classic Direct Enrollment or Enhanced Direct Enrollment pathway.

CMS Will Maintain 2022 FFE and SBM-FP User Fees

CMS finalized its proposal to maintain its user fee for insurers to use the Federal platform in 2023, keeping the same rates from 2022:

• FFE – user fee of 2.75 percent of total monthly premiums; and
• SBE-FP – user fee of 2.25 percent of total monthly premiums based on the portion of FFE user fee-eligible costs allocated to SBE-FP activities.

CMS believes that this would mitigate substantial premium increases and provide sufficient funding for the exchanges.

CMS Issues Premium Adjustment Percentage and Other Parameters In Separate Guidance

As established in the HHS Notice of Benefit and Payment Parameters for 2022 final rule part two released in May 2021, CMS indicated it would publish the premium adjustment percentage, maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and the required contribution percentage in separate annual guidance beginning with the 2023 benefit year. CMS issued the guidance with these parameters on December 28, 2021 for plan year 2023. CMS calculated the premium adjustment percentage (the measure of premium growth) using the most recent National Health Expenditure Account data projections from 2019 to 2028.^[1]

CMS Adopts Two Risk Adjustment Model Proposals

The risk adjustment program, included in the Patient Protection and Affordable Care Act (ACA, Pub. L. 111-148), is a stabilization program which transfers funds from lower-risk to higher-risk plans, to balance out plans with healthier populations versus more costly populations. Risk scores are used to predict plan liability for the average enrollee in a plan, and are based off of each enrollee’s age, sex, and diagnoses or hierarchical condition category (HCC). There are different models for children, adults, and infants. In October 2021, CMS published the ‘HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes’[2] and solicited feedback on three potential risk adjustment model updates.

For the 2023 benefit year, CMS is finalizing two of its three risk adjustment model proposals:

• Remove current severity illness factors from the adult models and adding an interacted hierarchical condition category (HCC) count model specification to both child and adult models, and
• Replace current enrollment duration factors with HCC-contingent enrollment duration factors.

CMS considered but did not adopt a proposal to add a two-stage weighted approach to both child and adult models’ recalibrations. This is in response to stakeholder concerns that, among other things, this proposal would have anti-competitive effects and increase premiums on more generous health insurance coverage. Because CMS did not adopt this proposal, the agency does not intend to pursue additional implementation strategies or analysis.

CMS is also finalizing its proposal to recalibrate 2023 benefit year risk adjustment models using 2017, 2018, and 2019 enrollee-level External Data Gathering Environment (EDGE) data.

CMS will continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs in the risk adjustment models consistent with the approach adopted with 2020 models. In the proposed rule, the agency expressed concern that the prescription drug category for Hepatitis C does not account for pricing changes of Hepatitis C drugs due to generics coming to market in 2019.

In addition, CMS finalizes changes to risk adjustment models, with the goal of better predicting plan liability for certain subpopulations:

• Removal of hydroxychloroquine sulfate to Immune Suppressants and Immunomodulators (RXC 09) in the 2018 and 2019 benefit year enrollee-level EDGE data used for risk adjustment recalibration for the 2023 benefit year, as proposed,
• Use the fourth quarter prescription drug categories (RXC) mapping document for each benefit year of recalibration data (except 2017 enrollee-level EDGE data) to recalibrate the adult models. CMS will use the most recent RXC mapping document that was available when the 2017 enrollee-level EDGE data was processed (Q2 2018).
• Beginning with the 2024 benefit year, repeal the ability of states (except for prior participants) to request a reduction in risk adjustment state transfers,[3]
• Beginning with the 2024 benefit year, limit the ability of a prior participant to request a reduction in risk adjustment transfers to only those that meet the de minimis threshold criteria,
• Application of a risk adjustment user fee of $0.22 per member per month for 2023. (This is a slight decrease from the $0.25 user fee in 2022).
• Collect and disclose through issuers’ EDGE servers five new data elements as part of the required risk adjustment data that issuers must make accessible to HHS in states where HHS is operating a risk adjustment program. These elements include ZIP code, race, ethnicity, individual coverage health reimbursement arrangement (ICHRA) indicator, and a subsidy indicator,
• Extract three new data elements (plan ID, rating area, and subscriber indicator) that issuers already provide. CMS will extract Plan ID and rating beginning with the 2021 benefit year, and extract subscriber indicator beginning with the 2022 benefit year. CMS will adopt a transitional period for the 2023 and 2024 benefit years, during which issuers are only required to populate race and ethnicity fields using only enrollee data that is accessible or already collected,
• Reduce high-cost risk pool charges for the next applicable benefit year from recouped high-cost risk pool funds resulting from risk adjustment covered plans, actionable discrepancies successful appeal audits.

In a future rulemaking, CMS intends to eliminate the prior participant exception beginning with the 2025 benefit year. Consistent with the agency’s approach in prior years, CMS will release final 2023 benefit year coefficients in guidance after the final rule’s publication. CMS was unable to finalize them in time for this final rule.

As proposed, CMS will maintain the current cost-sharing reduction adjustment to risk scores, which help balance the difference in use of services between enrollees with higher and lower cost-sharing.

Lastly, CMS finalizes refinements to the HHS Risk Adjustment Data Validation (HHS-RADV) to better align the calculation and application of error rates with the intent of the program. The RADV process validates data collected from insurers to ensure that risk adjustment transfers are accurate. Specifically, CMS will extend application of Super HCCs more broadly throughout the HHS-RADV error rate calculation process. Currently, Super HCCs are applied only in the sorting step that assigns HCCs to failure rate groups. CMS also defines Super HCCs separately according to the enrollee’s age group model,[4] and constrains any failure rate group outlier with a negative failure rate to zero.

CMS Addresses Medical Loss Ratio Requirements

CMS finalizes its proposal specifying that the only Indirect Quality Improvement Activity (QIA) expenses that can be included for Medical Loss Ratio (MLR)[5] reporting and rebate calculation are those that are directly related to activities that improve health care quality. Current regulation specifies what activities qualify as QIA. CMS clarifies the types of expenses that can be included in the MLR numerator because of wide discrepancies in insurer reporting. Particularly, incentives and bonuses paid to a provider must be tied to clearly defined, objectively measurable, and documented clinical or quality improvement standards to be included in the MLR numerator. Despite commenter feedback, CMS indicates that expenses such as office space, equipment, and IT infrastructure should not be included in the MLR numerator.

CMS Finalizes Most Proposed Changes to Advance Health Equity

In this final rule, CMS finalizes several changes to further the Biden-Harris Administration’s goal of addressing health disparities to advance health equity and ensure greater access to health care for vulnerable populations.

CMS is finalizing refinements to the Essential Health Benefits (EHB) Nondiscrimination Policy for Health Plan Designs to ensure benefit designs, including benefit limitations and plan coverage requirements, are based on clinical evidence.

The finalized proposals for Special Enrollment Period (SEP) Verification include the following:

• Exchanges may conduct pre-enrollment verification of eligibility for SEP and may provide exceptions to pre-enrollment SEP verification under special circumstances,
• Exchanges’ pre-enrollment verification must not be on a prohibited discriminatory basis, and
• Exchanges will only conduct pre-enrollment verification of eligibility for only the SEP for new consumers who attest to losing minimum essential coverage.

CMS noted that pre-enrollment SEP verification can deter eligible consumers from enrolling in coverage through a SEP due to documentation verification barriers, despite the potential of decreasing adverse selection risk and improving program integrity. Additionally, CMS has found that this verification disproportionately affects Black and African American consumers.

CMS also updates the Quality Improvement Strategy (QIS) Standards to require QHP issuers to address health and health care disparities as a specific topic area within their QIS beginning in 2023. And, CMS finalized its proposal to raise the Essential Community Provider (ECP) Threshold from 20% to 35% of the available ECPs in each plan’s service area. The agency also noted topics CMS is considering in future rulemaking that were not addressed in this final rule:

• In the proposed rule, CMS proposed explicitly prohibiting marketplaces, issuers, agents, and brokers from discriminating against consumers based on sexual orientation and gender identity, aligning with Biden’s Executive Order. HHS is not finalizing this proposal and will address this proposed policy and associated public comments in a future rulemaking.
• As part of its efforts to incorporate health equity standards in the certification of QHPs, HHS sought public comment on ways to incentivize QHP issuers to improve health equity and to address social determinants of health (SDOH). HHS responded to comments in the final rule and noted that the agency will consider these comments while developing strategies to advance health equity through QHPs.

CMS Refines Essential Health Benefits Nondiscrimination Policy

CMS is finalizing its proposals to refine its Essential Health Benefits (EHB) nondiscrimination policy for health plan designs. Specifically, CMS is finalizing that the 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; and that a non-discriminatory benefit design that provides EHB is one that is clinically based. This final rule clarifies and refines the nondiscrimination standard under 42 CFR § 156.125(a).

CMS is also finalizing almost all the proposals provided for presumptively discriminatory benefit designs such as discrimination based on age, health conditions, and sociodemographic factors. The only example that was not finalized was related to gender-affirming care which will be addressed in future rulemaking. CMS has also provided the following additional clarifications regarding these examples:

• Requirement § 156.125 and HHS’ refined EHB nondiscrimination policy apply only to services that are covered as EHB under a plan and do not require a plan to cover services that the plan does not already cover as EHB,
• Neither § 156.125 nor the examples reflecting HHS’ refined EHB nondiscrimination policy require health care professionals to perform services outside of their normal specialty area or scope of practice.

One such example that CMS is finalizing is adverse tiering that impacts access to prescription drugs for chronic health conditions. CMS defines adverse tiering as when plans structure the formulary by assigning all or the majority of drugs for certain medical conditions to a high-cost prescription drug tier. In this final rule, CMS reiterates that plans and issuers are permitted to consider cost in structuring plan designs and cost-sharing, but it is presumptively discriminatory for an issuer providing

EHB to place all drugs for a particular condition on a high-cost tier to discourage enrollment by those with that condition. CMS advises issuers and Pharmacy Benefit Managers (PBMs) assigning tiers to drugs to weigh cost of drugs with clinical guidelines used to treat high-cost chronic health conditions to avoid discriminatory tiering.

According to a prior 2014 Letter to Issuers,[6] CMS will notify an issuer when there is a reduction in the generosity of a benefit for certain individuals that is not based on clinically indicated, reasonable medical management practices, and expects plans and issuers to demonstrate that neutral principles were used in assigning tiers to such drugs and consistently applied across types of drugs.

While many commenters voiced support for this adverse tiering example, CMS also received comments noting concern that the proposed EHB example would undermine the role and ability of pharmacy and therapeutics (P&T) committees to establish and manage formularies. In response, CMS stated it did not agree with commenters and believed that the adverse tiering example and the existing P&T committee requirements operate together to require issuers to base their drug formulary tier decisions on clinically indicated evidence.

In response to comments asking for the agency to monitor issuers for compliance with nondiscrimination requirements and to assist states with oversight and enforcement, CMS reiterated its position that it will continue to monitor issuer compliance with EHB nondiscrimination requirements and states’ oversight and enforcement activities to determine if additional guidance, policy changes, or rulemaking are necessary.

CMS is not finalizing its proposed applicability date for the HHS’ refined EHB nondiscrimination policy, but instead finalizing that the policy will be applicable starting on January 1, 2023 (the start of PY 2023) or upon renewal of any plan subject to the EHB requirements to allow sufficient time for issuers to come in compliance and better align with ability of plans to make uniform modifications of coverage at the time of renewal.

CMS Proposes New Consumer Protections

CMS finalizes a number of requirements for marketplaces and web broker websites to protect enrollees, remove barriers to enrollment, and help customers to make more informed decisions. This includes:

• Requiring web broker websites to display an explanation of the rationale for QHP recommendations; and
• Prohibiting QHP advertising or preferred placement on web broker websites.

CMS considered but did not adopt its proposal to require all marketplaces to prorate Advanced Payments of the Premium Tax Credit (APTC) due to issuers when an enrollee is enrolled in a policy for less than the full month of coverage. Instead, beginning in plan year 2024, CMS will require state exchanges to report through existing state exchange oversight mechanisms to HHS the methodology the exchange intends to use that will not cause total monthly APTC amounts to exceed an enrollee’s monthly premium tax credit (PTC) eligibility. CMS believes this will ensure appropriate compliance with HHS and Internal Revenue Services (IRS) rules in situations where an enrollee is enrolled in a policy or policies for less than a full coverage month.

CMS additionally clarifies that the CSR data submission process is required only for issuers who received CSR payments during the benefit year. This is optional for issuers who did not receive CSR payments.

 

 

[1] The premium adjustment percentage for 2023 is 1.4408219719 and the maximum annual out-of-pocket limit on cost-sharing is $9,100 for self-only coverage and $18,200 for other coverage according to this data. This is about a 4.6 percent increase from the limits in 2022.
[2] CMS. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (Oct. 26, 2021). https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.
[3] For the 2023 benefit year, CMS is approving Alabama’s request to reduce risk adjustment State transfers for its small group and individual markets at a rate lower than requested. CMS approved a 25 percent reduction in Alabama’s individual market transfers and a 10 percent reduction in the state’s small group market transfers.
[4] Beginning with the 2021 HHS-RADV benefit year, CMS defines a super HCC “as the aggregate de-duplicated frequencies of EDGE HCCs that share an HCC coefficient estimation group determined based on the enrollees’ risk adjustment model.”
[5] The MLR encourages health plans to provide value to enrollees by measuring the percentage of every premium dollar the plan pays toward customers’ medical claims and other activities improving the quality of care of its customers.
[6] HHS. https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/2014_letter_to_issuers_04052013.pdf.

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