Rule2022-09438
Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2023
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 6, 2022
Effective
July 1, 2022
Issuing agencies
Health and Human Services Department
Abstract
This final rule includes payment parameters and provisions related to the risk adjustment and risk adjustment data validation programs, as well as 2023 user fee rates for issuers offering qualified health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). This final rule also includes requirements related to guaranteed availability; the offering of QHP standardized plan options through Exchanges on the Federal platform; requirements for agents, brokers, and web-brokers; verification standards related to employer sponsored coverage; Exchange eligibility determinations during a benefit year; special enrollment period verification; cost-sharing requirements; Essential Health Benefits (EHBs); Actuarial Value (AV); QHP issuer quality improvement strategies; accounting for quality improvement activity (QIA) expenses and provider incentives for medical loss ratio (MLR) reporting and rebate calculation purposes; and re-enrollment. This final rule also responds to comments on how the Department of Health and Human Services (HHS) can advance health equity through QHP certification standards and otherwise in the individual and group health insurance markets, and how HHS might address plan choice overload in the Exchanges.
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 88 (Friday, May 6, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 88 (Friday, May 6, 2022)]
[Rules and Regulations]
[Pages 27208-27393]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-09438]
[[Page 27207]]
Vol. 87
Friday,
No. 88
May 6, 2022
Part II
Department of Health and Human Services
-----------------------------------------------------------------------
45 CFR Parts 144, 147, 153, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2023; Final Rule
Federal Register / Vol. 87 , No. 88 / Friday, May 6, 2022 / Rules and
Regulations
[[Page 27208]]
-----------------------------------------------------------------------
DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 144, 147, 153, 155, 156, and 158
[CMS-9911-F]
RIN 0938-AU65
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2023
AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: This final rule includes payment parameters and provisions
related to the risk adjustment and risk adjustment data validation
programs, as well as 2023 user fee rates for issuers offering qualified
health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and
State-based Exchanges on the Federal platform (SBE-FPs). This final
rule also includes requirements related to guaranteed availability; the
offering of QHP standardized plan options through Exchanges on the
Federal platform; requirements for agents, brokers, and web-brokers;
verification standards related to employer sponsored coverage; Exchange
eligibility determinations during a benefit year; special enrollment
period verification; cost-sharing requirements; Essential Health
Benefits (EHBs); Actuarial Value (AV); QHP issuer quality improvement
strategies; accounting for quality improvement activity (QIA) expenses
and provider incentives for medical loss ratio (MLR) reporting and
rebate calculation purposes; and re-enrollment. This final rule also
responds to comments on how the Department of Health and Human Services
(HHS) can advance health equity through QHP certification standards and
otherwise in the individual and group health insurance markets, and how
HHS might address plan choice overload in the Exchanges.
DATES: These regulations are effective July 1, 2022.
FOR FURTHER INFORMATION CONTACT:
Cam Moultrie Clemmons, (206) 615-2338, or Anthony Galace, (301)
492-4400, for matters related to past-due premiums.
Allison Yadsko, (410) 786-1740, John Barfield, (301) 492-4433,
Jacqueline Wilson, (301) 492-4286, or Leanne Klock, (410) 786-1045, for
matters related to risk adjustment or risk adjustment data validation.
Aaron Franz, (410) 786-8027, or John Barfield, (301) 492-4433, for
matters related to Federally-facilitated Exchange and State-based
Exchange on the Federal platform user fees.
Nora Simmons, (410) 786-1981, for matters related to advance
payment of the premium tax credit proration.
Aaron Franz, (410) 786-8027, or Hi'ilei Haru, (301) 492-4363, for
matters related to cost-sharing reduction reconciliation.
Josh Van Drei, (410) 786-1659, for matters related to actuarial
value.
Becca Bucchieri, (301) 492-4341, Agata Pelka, (301) 492-4400, or
Leigha Basini, (301) 492-4380, for matters related to nondiscrimination
based on sexual orientation and gender identity, essential health
benefit benchmark plans, and defrayal of State-required benefits.
Marisa Beatley, (301) 492-4307, for matters related to employer
sponsored coverage verification.
Susan Kalmus, (301) 492-4275, for matters related to agent, broker,
and web-broker guidelines.
Dena Nelson, (240) 401-3535, or Carly Rhyne, (301) 492-4188, for
matters related to eligibility standards.
Katherine Bentley, (301) 492-5209, or Ariel Kennedy, (301) 492-
4306, for matters related to special enrollment period verification.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.
Nidhi Singh Shah, (301) 492-5110, for matters related to quality
improvement strategy standards for Exchanges.
Dan Brown, (301) 492-5146 for matters related to downstream and
delegated entities.
Nikolas Berkobien, (301) 492-4400, or Leigha Basini, (301) 492-4380
for matters related to standardized plan options.
Erika Melman, (301) 492-4348, Deborah Hunter, (443) 386-3651,
Whitney Allen, (667) 290-8748, or Emily Martin, (301) 492-4423, for
matters related to network adequacy and essential community providers.
Linus Bicker, (803) 931-6185, for matters related to State Exchange
improper payment measurement.
Phuong Van, (202) 570-5594, for matters related to advancing health
equity through qualified health plans.
Angelica Torres-Reid, (410) 786-1721, and Robert Yates, (301) 492-
5151, for matters related to State Exchange general program integrity
and oversight requirements.
Zarah Ghiasuddin, (301) 492-4308, for matters related to re-
enrollment in the Exchanges.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Stakeholder Consultation and Input
C. Structure of Final Rule
III. Provisions of the Final HHS Notice of Benefit and Payment
Parameters for 2023
A. Part 144--Requirements Relating to Health Insurance Coverage
B. Part 147--Health Insurance Reform Requirements for the Group
and Individual Health Insurance Markets
C. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
D. Part 155--Exchange Establishment Standards and Other Related
Standards Under the Affordable Care Act
E. Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
F. Part 158--Issuer Use of Premium Revenue: Reporting and Rebate
Requirements
G. Solicitation of Comments Regarding Health Equity and
Qualified Health Plans
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding State Flexibility for Risk Adjustment (Sec.
153.320)
C. ICRs Regarding Distributed Data and Risk Adjustment Data
Submission Requirements (Sec. Sec. 153.610,153.700, and 153.710)
D. ICRs Regarding Ability of States To Permit Agents and Brokers
and Web-Brokers To Assist Qualified Individuals, Qualified
Employers, or Qualified Employees Enrolling in QHPs (Sec. 155.220)
E. ICRs Regarding Verification of Eligibility for Special
Enrollment Periods (Sec. 155.420)
F. ICRs Regarding General Program Integrity and Oversight
Requirements (Sec. 155.1200)
G. ICRs Regarding State Exchange Improper Payment Measurement
Program (Sec. Sec. 155.1500-155.1540)
H. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan
Years Beginning on or After January (Sec. 156.111)
I. ICRs Regarding Differential Display of Standardized Plan
Options on the Websites of Web-Brokers (Sec. 155.220) and QHP
Issuers (Sec. 156.265)
J. ICRs Regarding Network Adequacy and Essential Community
Providers (Sec. Sec. 156.230 and 156.235)
K. ICRs Regarding Payment for Cost-Sharing Reductions (Sec.
156.430)
L. ICRs Regarding Quality Improvement Strategy (Sec. 156.1130)
M. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.140,
158.150, 158.170)
N. Summary of Annual Burden Estimate for Proposed Requirements
V. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Impact Estimates of the Payment Notice Provisions and
Accounting Table
D. Regulatory Alternatives Considered
E. Regulatory Flexibility Act
F. Unfunded Mandates
G. Federalism
[[Page 27209]]
H. Congressional Review Act
Background
In the proposed rule, ``Patient Protection and Affordable Care Act;
HHS Notice of Benefit and Payment Parameters for 2023'' (87 FR 584),
published in the January 5, 2022 edition of the Federal Register (2023
Payment Notice proposed rule), HHS proposed amendments to certain
regulations prohibiting discrimination in health insurance coverage,
including discrimination in the design and implementation of health
plans, under Sec. Sec. 147.104(e), 155.120(c), 155.220(j), 156.125(b),
156.200(e), and 156.1230(b) under title 45 of the Code of Federal
Regulations (CFR). HHS proposed to amend these regulations to
explicitly identify and recognize discrimination on the basis of sexual
orientation and gender identity as prohibited forms of discrimination
based on sex consistent with the Supreme Court's decision in Bostock v.
Clayton County, 140 S. Ct. 1731 (2020), and HHS nondiscrimination
policy that existed prior to the 2020 regulatory amendments HHS made in
conformance with the ``Nondiscrimination in Health and Health Education
Programs or Activities, Delegation of Authority'' final rule (85 FR
37160), published in the June 19, 2020 edition of the Federal
Register.\1\ In connection with discriminatory benefit designs
prohibited under Sec. 156.125, HHS also included in the proposed rule
an example related to gender-affirming care that was intended to
illustrate a health plan design that presumptively discriminates
against enrollees based on gender identity.
---------------------------------------------------------------------------
\1\ See also 85 FR 37160, 37218 through 21 (the 2020 final rule
implementing section 1557 of the ACA revised the following CMS
regulations: 45 CFR 147.104, 155.120, 155.220, 156.200, 156.1230).
---------------------------------------------------------------------------
Currently, HHS is developing a proposed rule \2\ that also will
address prohibited discrimination based on sex in health coverage under
section 1557 of the Patient Protection and Affordable Care Act (ACA)
\3\ (42 U.S.C. 18116). Section 1557 prohibits discrimination on the
basis of race, color, national origin, sex, age, or disability in any
health program or activity, any part of which is receiving Federal
financial assistance, including credits, subsidies, or contracts of
insurance, or under any program or activity that is administered by an
Executive Agency or any entity established under Title I of the ACA or
its amendments. Because HHS' proposed rule implementing section 1557 of
the ACA will also address issues related to prohibited discrimination
based on sex, HHS is of the view that it would be most prudent to
address the nondiscrimination proposals related to sexual orientation
and gender identity in the 2023 Payment Notice proposed rule at a later
time, to ensure that they are consistent with the policies and
requirements that will be included in the section 1557 rulemaking.
Therefore, HHS will not address in this final rule the
nondiscrimination proposals related to sexual orientation and gender
identity included in the 2023 Payment Notice proposed rule or the
comments submitted in response to those proposals.
---------------------------------------------------------------------------
\2\ HHS submitted a draft notice of proposed rulemaking
addressing section 1557 of the Patient Protection and Affordable
Care Act and its implementing regulations to the Office of
Management and Budget on or around March, 22, 2022. See <a href="https://www.reginfo.gov/public/do/eoDetails?rrid=234566">https://www.reginfo.gov/public/do/eoDetails?rrid=234566</a>.
\3\ The Patient Protection and Affordable Care Act (Pub. L. 111-
148) was enacted on March 23, 2010. The Healthcare and Education
Reconciliation Act of 2010 (Pub. L. 111-152), which amended and
revised several provisions of the Patient Protection and Affordable
Care Act, was enacted on March 30, 2010. In this rulemaking, the two
statutes are referred to collectively as the ``Patient Protection
and Affordable Care Act,'' ``Affordable Care Act'' or ``ACA.''
---------------------------------------------------------------------------
HHS is committed to robust civil rights protections in health care
for all consumers, including protections to combat discrimination on
the basis of gender identity or sexual orientation.\4\ Moreover, to the
extent that entities subject to the relevant regulations prohibiting
discrimination in health insurance coverage are also covered by section
1557, they are already under the statutory obligation not to
discriminate on the basis of sex.\5\ Consistent with the Supreme
Court's decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020),
and the HHS Notice of Interpretation and Enforcement of Section 1557 of
the Affordable Care Act and Title IX of the Education Amendments of
1972 (86 FR 27984), published in the May 25, 2021 edition of the
Federal Register, HHS will continue to interpret and enforce section
1557 of the ACA and its protections against sex discrimination to
prohibit discrimination on the basis of sexual orientation and gender
identity in all aspects of health insurance coverage governed by
section 1557.\6\ Thus, notwithstanding that the Department will address
in future rulemaking the proposals related to sexual orientation and
gender identity and the example related to gender-affirming care, HHS
will continue to scrutinize the activities of covered health plans to
root out practices that unlawfully discriminate on the basis of sexual
orientation or gender identity. HHS' interpretation of section 1557
will guide HHS in processing complaints and conducting investigations,
but does not itself determine the outcome in any particular case or set
of facts. In enforcing Section 1557, HHS will comply with the Religious
Freedom Restoration Act, 42 U.S.C. 2000bb et seq., and all other legal
requirements.\7\
---------------------------------------------------------------------------
\4\ HHS' proposals related to sexual orientation and gender
identity in the 2023 Payment Notice proposed rule resulted, in part,
from reviews HHS conducted as directed in President Biden's January
20, 2021, Executive Order 13988 (86 FR 7023), which stated the
Administration's policy on preventing and combating discrimination
on the basis of gender identity and sexual orientation and the
President's conclusion that ``[u]nder Bostock's reasoning, laws that
prohibit sex discrimination . . . , along with their respective
implementing regulations--prohibit discrimination on the basis of
gender identity or sexual orientation, so long as the laws do not
contain sufficient indications to the contrary.'' This Executive
Order instructed the Secretary of Health and Human Services
(Secretary of HHS, or HHS Secretary) to review all existing
regulations, guidance documents, and other agency actions to
determine whether they are consistent with the aforementioned policy
and construction of the laws, and to consider whether to suspend,
revise, or rescind any agency actions that are inconsistent with
that policy and construction.
\5\ See 85 FR 37219 (explaining that section 1557 governs
entities established under Title I of the ACA, including Exchanges).
\6\ See also Hammons v. Univ. of Maryland Med. Sys. Corp., No.
20-cv-2009, 2021WL 3190492, at *17 (D. Md. July 28, 2021) (stating
Bostock ``made clear that the position stated in HHS's [Bostock
Notice] was already binding law'').
\7\ 86 FR 27985.
---------------------------------------------------------------------------
I. Executive Summary
American Health Benefit Exchanges, or ``Exchanges,'' are entities
established under the ACA through which qualified individuals and
qualified employers can purchase health insurance coverage in qualified
health plans (QHPs). Many individuals who enroll in QHPs through
individual market Exchanges are eligible to receive a premium tax
credit (PTC) to reduce their costs for health insurance premiums and to
receive reductions in required cost-sharing payments to reduce out-of-
pocket expenses for health care services. The ACA also established the
risk adjustment program, which transfers funds from issuers that
attract lower-than-average risk populations to issuers that attract
higher-than-average risk populations to reduce incentives for issuers
to avoid higher-risk enrollees.
In previous rulemakings, we established provisions and parameters
to implement many ACA requirements and programs. In this final rule, we
amend some of these provisions and parameters, with a focus on
maintaining a stable regulatory environment. These changes are intended
to provide issuers with greater predictability for upcoming plan years
(PYs), while simultaneously enhancing the role of States in these
programs. They will also provide States
[[Page 27210]]
with additional flexibilities, reduce unnecessary regulatory burdens on
stakeholders, empower consumers, ensure program integrity, and improve
affordability.
Risk adjustment continues to be a core program in the individual,
small group, and merged markets both on and off Exchanges. We published
a technical paper, the 2021 HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes \8\ in October 2021 (2021 RA Technical
Paper), and sought comment on three potential updates to the risk
adjustment models. We are finalizing two of the three proposed updates
to the HHS risk adjustment models beginning with the 2023 benefit year.
Specifically, beginning with the 2023 benefit year, we are finalizing
the removal of the current severity illness factors from the adult
models and the addition of an interacted hierarchical condition
category (HCC) count model specification to the adult and child models.
We also are finalizing the replacement of the current enrollment
duration factors in the adult models with HCC-contingent enrollment
duration factors. We are not finalizing the proposed model
specification change to add a two-stage weighted approach to the adult
and child models. We are finalizing the use of the 2017, 2018, and 2019
enrollee-level External Data Gathering Environment (EDGE) data to
recalibrate the 2023 benefit year risk adjustment models. For 2023, we
are also finalizing the continued application of a market pricing
adjustment to the plan liability associated with Hepatitis C drugs in
the risk adjustment models, consistent with the approach adopted
beginning with the 2020 models.
---------------------------------------------------------------------------
\8\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
In addition, we are finalizing the targeted removal of the mapping
of hydroxychloroquine sulfate to Immune Suppressants and
Immunomodulators (RXC 09) in the 2018 and 2019 benefit year enrollee-
level EDGE data used for the 2023 benefit year model recalibration.\9\
We are also finalizing, for the 2024 benefit year and beyond, the
proposal to recalibrate the adult models using the final, fourth
quarter (Q4) RXC mapping document that was applicable for each benefit
year of data that is included in the current year's model
recalibration. We will begin to use this approach for recalibration of
the 2023 adult risk adjustment models, with the exception of the 2017
enrollee-level EDGE data year, for which we will use the most recent
RXC mapping document that was available when we first processed the
2017 enrollee-level EDGE data (that is, Q2 2018).
---------------------------------------------------------------------------
\9\ The same concern was not present for the 2016 or 2017
enrollee-level EDGE data because hydroxychloroquine was not included
in the crosswalk until 2018.
---------------------------------------------------------------------------
Additionally, we are finalizing the proposal to repeal the ability
of States, other than prior participants, to request a reduction in
risk adjustment State transfers starting with the 2024 benefit year. We
are also finalizing the changes that limit a prior participant's
ability to request a reduction in risk adjustment transfers under Sec.
153.320(d) to only those that meet the de minimis threshold criteria.
In future rulemaking, HHS intends to propose to eliminate the prior
participant exception starting with the 2025 benefit year. For the 2023
benefit year, we are announcing approval of Alabama's request to reduce
risk adjustment State transfers for its individual and small group
markets, but at lower percentages than requested. We approve a 25
percent reduction in Alabama's individual market transfers (including
the catastrophic and non-catastrophic risk pools) and a 10 percent
reduction in Alabama's small group market transfers for the 2023
benefit year.
We are finalizing the 2023 benefit year risk adjustment user fee
for States where HHS operates the risk adjustment program of $0.22 per
member per month (PMPM). We are also finalizing the proposal to collect
and extract five new data elements as part of the enrollee-level EDGE
data beginning with the 2023 benefit year. We are also finalizing the
proposal to extract three data elements issuers already report to their
EDGE servers--plan ID, rating area, and subscriber indicator--as part
of the required risk adjustment data. Plan ID and rating area will be
extracted beginning with the 2021 benefit year, and subscriber
indicator will be extracted beginning with the 2022 benefit year.
Finally, we are finalizing that whenever HHS recoups high-cost risk
pool funds as a result of audits of risk adjustment covered plans,
actionable discrepancies, or successful appeals, the recouped funds
will be used to reduce high-cost risk pool charges for that national
high-cost risk pool for the next applicable benefit year for which
high-cost risk pool payments have not already been calculated.
We are finalizing as proposed the refinements to the HHS risk
adjustment data validation (HHS-RADV) error estimation methodology
beginning with the 2021 benefit year to: (1) Extend the application of
Super HCCs \10\ (which are currently based on the coefficient
estimation groups defined in the applicable benefit year's ``Additional
Adult Variables'' Table of the ``Do It Yourself (DIY)'' software (Table
6 in the 2021 Benefit Year DIY Software), which is published on the
CCIIO website \11\) from their current application only in the sorting
step that assigns HCCs to failure rate groups to broader application
throughout the HHS-RADV error rate calculation process; (2) specify
that Super HCCs will be defined separately according to the age group
model to which an enrollee is subject, except when the child and adult
coefficient estimation groups have identical definitions; and (3)
constrain to zero any failure rate group outlier with a negative
failure rate, regardless of whether the outlier issuer has a negative
or positive error rate.
---------------------------------------------------------------------------
\10\ As finalized in this rule, beginning with the 2021 benefit
year of HHS-RADV, a Super HCC will be defined as the aggregate de-
duplicated frequencies of EDGE HCCs that share an HCC coefficient
estimation group determined based on the enrollees' risk adjustment
model.
\11\ Regulations and Guidance. (2022). CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance</a>. The January 7, 2022
version of the DIY software is available at 2021 Benefit Year Risk
Adjustment Updated HHS-Developed Risk Adjustment Model Algorithm
``Do It Yourself (DIY)'' Software. (2022). CMS.
---------------------------------------------------------------------------
As we do every year in the HHS Notice of Benefit and Payment
Parameters, we are finalizing updated parameters for the individual and
small group markets. For the PY 2023, we are maintaining FFE and SBE-FP
user fees at the current PY 2022 rates, 2.75 and 2.25 percent of total
monthly premiums, respectively. On December 28, 2021, we released the
Premium Adjustment Percentage, Maximum Annual Limitation on Cost
Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and
Required Contribution Percentage for the 2023 Benefit Year guidance
setting forth these parameters for PY 2023.\12\
---------------------------------------------------------------------------
\12\ Premium Adjustment Percentage. (2021, December 28). CMS.
<a href="https://www.cms.gov/files/document/2023-papi-parameters-guidance-v4-final-12-27-21-508.pdf">https://www.cms.gov/files/document/2023-papi-parameters-guidance-v4-final-12-27-21-508.pdf</a>.
---------------------------------------------------------------------------
We are not finalizing the proposal to require all Exchanges to
prorate premiums and advance payments of the premium tax credit (APTC).
After considering the comments received, we are finalizing the policy
to clarify the APTC proration methodology which Exchanges on the
Federal platform will be subject to under HHS' authority to administer
APTC, but we are not finalizing the requirement for State Exchanges to
prorate premium or APTC amounts as described in the proposed rule.
Rather, beginning in PY 2024, State
[[Page 27211]]
Exchanges must report to HHS through existing State Exchange oversight
mechanisms the methodology the State Exchange will use that does not
cause total monthly APTC amounts to exceed an enrollee's monthly PTC
eligibility. This will ensure compliance with HHS and Internal Revenue
Service (IRS) regulations particularly when an enrollee is enrolled in
a policy for less than the full coverage month, including when the
enrollee is enrolled in multiple policies within a month, each lasting
less than the full coverage month.
We are finalizing changes to clarify that the cost-sharing
reduction (CSR) data submission process is mandatory only for those
issuers that received CSR payments from HHS for any part of the benefit
year and voluntary for other issuers that did not. We also finalize a
technical correction to the definition of large group market in Sec.
144.103 to delete the concluding phrase ``unless otherwise provided
under State law.''
We are finalizing new display requirements for web-broker non-
Exchange websites, including requirements related to QHP comparative
information and standardized disclaimer language; a prohibition on
displaying QHP advertisements or otherwise providing favored or
preferred display of QHPs based on compensation agents, brokers, or
web-brokers receive from QHP issuers; and a requirement to prominently
display a clear explanation of the rationale for explicit QHP
recommendations and the methodology for the default display of QHPs on
web-broker non-Exchange websites to better inform and protect consumers
using such websites.
We also finalize policies to address certain agent, broker, and
web-broker practices. These policies will be added as part of the FFE
standards of conduct codified at Sec. 155.220(j)(2), improving CMS'
ability to enforce existing responsibilities and requirements
applicable to agents, brokers, and web-brokers participating in the
FFEs and SBE-FPs, while also providing more detail about specific
business practices that are prohibited.
We are finalizing a revision to our interpretation of the
guaranteed availability requirement to prohibit issuers from applying a
premium payment to an individual's or employer's past debt owed for
coverage and refusing to effectuate enrollment in new coverage.
We are finalizing flexibility under which Exchanges may conduct
risk-based employer sponsored coverage verification in connection with
eligibility determinations for APTC. This policy will help States more
effectively balance the need to prevent improper APTC payments with the
costs of verification.
We are finalizing amendments to implementing regulations to codify
existing MLR policy that only those provider incentives and bonuses
that are tied to clearly defined, objectively measurable, and well-
documented clinical or quality improvement standards that apply to
providers may be included in incurred claims for MLR reporting and
rebate calculation purposes. We are also updating the MLR regulations
to specify that only expenses directly related to activities that
improve health care quality may be included as QIA expenses for MLR
reporting and rebate calculation purposes. In addition, we are
finalizing a technical amendment to the MLR provisions to remove a
reference to a provision that was vacated by the United States District
Court for the District of Maryland in City of Columbus, et al. v.
Cochran, 523 F. Supp. 3d 731 (D. Md. 2021), and thus rescinded the
provision in a final rule published in the Federal Register on May 5,
2021 (86 FR 24140) (part 2 of the 2022 Payment Notice final rule).
With regard to the EHBs, we are finalizing a permanent annual
deadline in early-May for EHB-benchmark plan applications by States, as
well as the repeal of the ability for States to permit issuers to
substitute benefits between EHB categories. In addition, we are
finalizing changes to the de minimis thresholds for the AV for plans
subject to EHB requirements, as well as narrower de minimis thresholds
for individual market silver QHPs and income-based CSR plan variations.
We also finalize the proposal to remove the State annual reporting
requirement to report State-required benefits in addition to the EHB to
HHS.
We are finalizing policies to strengthen and clarify our network
adequacy standards, including expanding the provider specialty list for
time and distance standards and adding appointment wait time standards.
We will begin implementation of appointment wait time standards in PY
2024. We are also finalizing the requirement for issuers to submit
information about whether providers offer telehealth services. For
plans with tiered networks, we are finalizing that, to count toward the
issuer's satisfaction of the essential community provider (ECP)
standards, providers must be contracted within the network tier that
results in the lowest cost-sharing obligation. This rule finalizes that
the ECP threshold will increase from 20 percent to 35 percent.
We are finalizing the proposed amendments to the current HHS
regulation that establishes standards for QHP issuer downstream and
delegated entities. These changes will hold QHP issuers in all models
of Exchange responsible for their downstream and delegated entities'
adherence to applicable Federal standards, and make their oversight
obligations, and the obligations of their downstream and delegated
entities, explicit.
We solicited comments on incorporating the net premium, maximum
out-of-pocket (MOOP), deductible, and annual out-of-pocket costs (OOPC)
of a plan into the Exchange re-enrollment hierarchy, as well as
additional criteria or mechanisms HHS could consider to ensure the
Exchange hierarchy for re-enrollment aligns with plan generosity and
consumer needs, such as re-enrolling a current bronze QHP enrollee into
an available silver QHP with a lower net premium and higher plan
generosity offered by the same QHP issuer. We also finalize the
proposal to update 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.
We also proposed and are finalizing policies related to
requirements that issuers of QHPs in FFEs and SBE-FPs offer
standardized QHP options through the Exchange beginning in PY 2023.
Finally, we solicited comments regarding additional ways HHS could
incentivize QHP issuers to design plans that improve health equity and
health conditions in enrollees' environments, as well as how QHP
issuers could address other social determinants of health (SDOH)
outside of the QHP certification process and provide responses to the
public comments received.
II. Background
A. Legislative and Regulatory Overview
Title I of the Health Insurance Portability and Accountability Act
of 1996 (HIPAA) added a new title XXVII to the Public Health Service
Act (PHS Act) to establish various reforms to the group and individual
health insurance markets.
These provisions of the PHS Act were later augmented by other laws,
including the ACA. Subtitles A and C of title I of the ACA reorganized,
amended, and added to the provisions of part A of title XXVII of the
PHS Act relating to group health plans and health insurance
[[Page 27212]]
issuers in the group and individual markets. The term ``group health
plan'' includes both insured and self-insured group health plans.\13\
---------------------------------------------------------------------------
\13\ The term ``group health plan'' is used in title XXVII of
the PHS Act and is distinct from the term ``health plan'' as used in
other provisions of title I of ACA. The term ``health plan'' does
not include self-insured group health plans.
---------------------------------------------------------------------------
Section 2702 of the PHS Act, as added by the ACA, establishes
requirements for guaranteed availability of coverage in the group and
individual markets.
Section 2718 of the PHS Act, as added by the ACA, generally
requires health insurance issuers to submit an annual MLR report to
HHS, and provide rebates to enrollees if the issuers do not achieve
specified MLR thresholds.
Section 2791 of the PHS Act defines several terms, including
``large group market''.
Section 1301(a)(1)(B) of the ACA directs all issuers of QHPs to
cover the EHB package described in section 1302(a) of the ACA,
including coverage of the services described in section 1302(b) of the
ACA, adherence to the cost-sharing limits described in section 1302(c)
of the ACA, and meeting the AV levels established in section 1302(d) of
the ACA. Section 2707(a) of the PHS Act, which is effective for plan or
policy years beginning on or after January 1, 2014, extends the
requirement to cover the EHB package to non-grandfathered individual
and small group health insurance coverage, irrespective of whether such
coverage is offered through an Exchange. In addition, section 2707(b)
of the PHS Act directs non-grandfathered group health plans to ensure
that cost sharing under the plan does not exceed the limitations
described in sections 1302(c)(1) of the ACA.
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHBs (as defined by the Secretary of
HHS), cost-sharing limits, and AV requirements. The law directs that
EHBs be equal in scope to the benefits provided under a typical
employer plan, and that they cover at least the following 10 general
categories: Ambulatory patient services; emergency services;
hospitalization; maternity and newborn care; mental health and
substance use disorder services, including behavioral health treatment;
prescription drugs; rehabilitative and habilitative services and
devices; laboratory services; preventive and wellness services and
chronic disease management; and pediatric services, including oral and
vision care. Section 1302(d) of the ACA describes the various levels of
coverage based on their AV. Consistent with section 1302(d)(2)(A) of
the ACA, AV is calculated based on the provision of EHB to a standard
population. Section 1302(d)(3) of the ACA directs the Secretary of HHS
to develop guidelines that allow for de minimis variation in AV
calculations. Sections 1302(b)(4)(A) through (D) of the ACA establishes
that the Secretary must define EHB in a manner that: (1) Reflects
appropriate balance among the 10 categories; (2) is not designed in
such a way as to discriminate based on age, disability, or expected
length of life; (3) takes into account the health care needs of diverse
segments of the population; and (4) does not allow denials of EHBs
based on age, life expectancy, disability, degree of medical
dependency, or quality of life.
Section 1311(c) of the ACA provides the Secretary the authority to
issue regulations to establish criteria for the certification of QHPs.
Section 1311(c)(1)(B) of the ACA requires among the criteria for
certification that the Secretary must establish by regulation that QHPs
ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA
grants the Exchange the authority to certify a health plan as a QHP if
the health plan meets the Secretary's requirements for certification
issued under section 1311(c) of the ACA, and the Exchange determines
that making the plan available through the Exchange is in the interests
of qualified individuals and qualified employers in the State. Section
1311(c)(6)(C) of the ACA establishes special enrollment periods and
section 1311(c)(6)(D) of the ACA establishes the monthly enrollment
period for Indians, as defined by section 4 of the Indian Health Care
Improvement Act.\14\
---------------------------------------------------------------------------
\14\ The Indian Health Care Improvement Act (IHCIA), the
cornerstone legal authority for the provision of health care to
American Indians and Alaska Natives, was made permanent when
President Obama signed the bill on March 23, 2010, as part of the
Patient Protection and Affordable Care Act.
---------------------------------------------------------------------------
Section 1311(c)(1)(E) of the ACA specifies that to be certified as
a QHP, each health plan must implement a QIS, which is described in
section 1311(g)(1) of the ACA. Section 1311(g)(1) of the ACA describes
this strategy as a payment structure that provides increased
reimbursement or other incentives to improve health outcomes of plan
enrollees, to prevent hospital readmissions, improve patient safety and
reduce medical errors, promote wellness and health, and reduce health
and health care disparities.
Section 1311(d)(3)(B) of the ACA permits a State, at its option, to
require QHPs to cover benefits in addition to EHB. This section also
requires a State to make payments, either to the individual enrollee or
to the issuer on behalf of the enrollee, to defray the cost of these
additional State-required benefits.
Section 1312(c) of the ACA generally requires a health insurance
issuer to consider all enrollees in all health plans (except
grandfathered health plans) offered by such issuer to be members of a
single risk pool for each of its individual and small group markets.
States have the option to merge the individual and small group market
risk pools under section 1312(c)(3) of the ACA.
Section 1312(e) of the ACA provides the Secretary with the
authority to establish procedures under which a State may allow agents
or brokers to (1) enroll qualified individuals and qualified employers
in QHPs offered through Exchanges and (2) assist individuals in
applying for PTC and CSRs for QHPs sold through an Exchange.
Sections 1313 and 1321 of the ACA provide the Secretary with the
authority to oversee the financial integrity of State Exchanges, their
compliance with HHS standards, and the efficient and non-discriminatory
administration of State Exchange activities. Section 1313(a)(5)(A) of
the ACA provides the Secretary with the authority to implement any
measure or procedure that the Secretary determines is appropriate to
reduce fraud and abuse in the administration of the Exchanges. Section
1321 of the ACA provides for State flexibility in the operation and
enforcement of Exchanges and related requirements.
Section 1321(a) of the ACA provides broad authority for the
Secretary to establish standards and regulations to implement the
statutory requirements related to Exchanges, QHPs, and other components
of title I of the ACA, including such other requirements as the
Secretary, determines appropriate. When operating an FFE under section
1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1)
and 1311(d)(5)(A) of the ACA to collect and spend user fees. Office of
Management and Budget (OMB) Circular A-25 Revised \15\ establishes
Federal policy regarding user fees and specifies that a user charge
will be assessed against each identifiable recipient for special
benefits derived from Federal activities
[[Page 27213]]
beyond those received by the general public.
---------------------------------------------------------------------------
\15\ Office of Management and Budget. (2004). Circular A-25
Revised. <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf</a>.
---------------------------------------------------------------------------
Section 1321(d) of the ACA provides that nothing in title I of the
ACA must be construed to preempt any State law that does not prevent
the application of title I of the ACA. Section 1311(k) of the ACA
specifies that Exchanges may not establish rules that conflict with or
prevent the application of regulations issued by the Secretary.
Section 1343 of the ACA establishes a permanent risk adjustment
program to provide payments to health insurance issuers that attract
higher-than-average risk populations, such as those with chronic
conditions, funded by payments from those that attract lower-than-
average risk populations, thereby reducing incentives for issuers to
avoid higher-risk enrollees.
Section 1401(a) of the ACA amended the Internal Revenue Code (the
Code) to add section 36B, which, among other things, requires that a
taxpayer reconcile APTC for a year of coverage with the amount of the
PTC the taxpayer is allowed for the year.
Section 1402 of the ACA provides for, among other things,
reductions in cost sharing for EHB for qualified low- and moderate-
income enrollees in silver level QHPs offered through the individual
market Exchanges. This section also provides for reductions in cost
sharing for Indians enrolled in QHPs at any metal level.
Section 1411(c) of the ACA requires the Secretary to submit certain
information provided by applicants under section 1411(b) of the ACA to
other Federal officials for verification, including income and family
size information to the Secretary of the Treasury. Section 1411(d) of
the ACA provides that the Secretary must verify the accuracy of
information provided by applicants under section 1411(b) of the ACA for
which section 1411(c) does not prescribe a specific verification
procedure, in such manner as the Secretary determines appropriate.
Section 1411(f) of the ACA requires the Secretary, in consultation
with the Treasury and Homeland Security Department Secretaries and the
Commissioner of Social Security, to establish procedures for hearing
and making decisions governing appeals of Exchange eligibility
determinations. Section 1411(f)(1)(B) of the ACA requires the Secretary
to establish procedures to redetermine eligibility on a periodic basis,
in appropriate circumstances, including eligibility to purchase a QHP
through the Exchange and for APTC and CSRs.
Section 1411(g) of the ACA allows the use of applicant information
only for the limited purposes of, and to the extent necessary to,
ensure the efficient operation of the Exchange, including by verifying
eligibility to enroll through the Exchange and for APTC and CSRs, and
limits the disclosure of such information.
Section 1557 of the ACA applies certain long-standing civil rights
nondiscrimination requirements to ``any health program or activity, any
part of which is receiving Federal financial assistance, including
credits, subsidies, or contracts of insurance, or under any program or
activity that is administered by an Executive agency, or any entity
established under'' Title I of the ACA (or amendments). It did so by
referencing statutes that specify prohibited grounds of discrimination,
namely, race, color, national origin, sex, age, or disability, in an
array of federally funded and administered programs or activities.\16\
In addition, HHS has previously finalized rules unrelated to section
1557 of the ACA to address populations that have historically been
subject to discrimination.
---------------------------------------------------------------------------
\16\ 42 U.S.C. 18116.
---------------------------------------------------------------------------
Section 5000A of the Code, as added by section 1501(b) of the ACA,
requires individuals to have minimum essential coverage (MEC) for each
month, qualify for an exemption, or make an individual shared
responsibility payment. Under the Tax Cuts and Jobs Act, which was
enacted on December 22, 2017, the individual shared responsibility
payment is reduced to $0, effective for months beginning after December
31, 2018.\17\ Notwithstanding that reduction, certain exemptions are
still relevant to determine whether individuals age 30 and above
qualify to enroll in catastrophic coverage under Sec. Sec. 155.305(h)
and 156.155(a)(5).
---------------------------------------------------------------------------
\17\ Public Law 115-97, 131 Stat. 2054 (2017).
---------------------------------------------------------------------------
1. Premium Stabilization Programs
The premium stabilization programs refer to the risk adjustment,
risk corridors, and reinsurance programs established by the ACA.\18\
For past rulemaking, we refer readers to the following rules:
---------------------------------------------------------------------------
\18\ See 42 U.S.C. 18061, 18062, and 18063.
---------------------------------------------------------------------------
<bullet> In the March 23, 2012 Federal Register (77 FR 17219)
(Premium Stabilization Rule), we implemented the premium stabilization
programs.
<bullet> In the March 11, 2013 Federal Register (78 FR 15409) (2014
Payment Notice), we finalized the benefit and payment parameters for
the 2014 benefit year to expand the provisions related to the premium
stabilization programs and set forth payment parameters in those
programs.
<bullet> In the October 30, 2013 Federal Register (78 FR 65046), we
finalized the modification to the HHS-operated methodology related to
community rating States.
<bullet> In the November 6, 2013 Federal Register (78 FR 66653), we
published a correcting amendment to the 2014 Payment Notice final rule
to address how an enrollee's age for the risk score calculation would
be determined under the HHS-operated risk adjustment methodology.
<bullet> In the March 11, 2014 Federal Register (79 FR 13743) (2015
Payment Notice), we finalized the benefit and payment parameters for
the 2015 benefit year to expand the provisions related to the premium
stabilization programs, set forth certain oversight provisions and
established payment parameters in those programs.
<bullet> In the May 27, 2014 Federal Register (79 FR 30240), we
announced the 2015 fiscal year sequestration rate for the risk
adjustment program.
<bullet> In the February 27, 2015 Federal Register (80 FR 10749)
(2016 Payment Notice), we finalized the benefit and payment parameters
for the 2016 benefit year to expand the provisions related to the
premium stabilization programs, set forth certain oversight provisions,
and established the payment parameters in those programs.
<bullet> In the March 8, 2016 Federal Register (81 FR 12203) (2017
Payment Notice), we finalized the benefit and payment parameters for
the 2017 benefit year to expand the provisions related to the premium
stabilization programs, set forth certain oversight provisions and
established the payment parameters in those programs.
<bullet> In the December 22, 2016 Federal Register (81 FR 94058)
(2018 Payment Notice), we finalized the benefit and payment parameters
for the 2018 benefit year, added the high-cost risk pool parameters to
the HHS risk adjustment methodology, incorporated prescription drug
factors in the adult models, established enrollment duration factors
for the adult models, and finalized policies related to the collection
and use of enrollee-level EDGE data.
<bullet> In the April 17, 2018 Federal Register (83 FR 16930) (2019
Payment Notice), we finalized the benefit and payment parameters for
2019 benefit year, created the State flexibility framework permitting
States to request a reduction in risk adjustment State transfers
calculated by HHS, and adopted a new methodology for HHS-RADV
adjustments to transfers.
<bullet> In the May 11, 2018 Federal Register (83 FR 21925), we
published a correction to the 2019 risk adjustment
[[Page 27214]]
coefficients in the 2019 Payment Notice final rule.
<bullet> On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i),
we updated the 2019 benefit year final risk adjustment model
coefficients to reflect an additional recalibration related to an
update to the 2016 enrollee-level EDGE dataset.\19\
---------------------------------------------------------------------------
\19\ Updated 2019 Benefit Year Final HHS Risk Adjustment Model
Coefficients. (2018, July 27). CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf</a>.
---------------------------------------------------------------------------
<bullet> In the July 30, 2018 Federal Register (83 FR 36456), we
adopted the 2017 benefit year risk adjustment methodology as
established in the final rules published in the March 23, 2012 (77 FR
17220 through 17252) and March 8, 2016 editions of the Federal Register
(81 FR 12204 through 12352). The final rule set forth an additional
explanation of the rationale supporting the use of Statewide average
premium in the HHS-operated risk adjustment State payment transfer
formula for the 2017 benefit year, including the reasons why the
program is operated in a budget-neutral manner. The final rule also
permitted HHS to resume 2017 benefit year risk adjustment payments and
charges. HHS also provided guidance as to the operation of the HHS-
operated risk adjustment program for the 2017 benefit year in light of
the publication of the final rule.\20\
---------------------------------------------------------------------------
\20\ Update on the HHS-operated Risk Adjustment Program for the
2017 Benefit Year. (2018, July 27). <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf</a>.
---------------------------------------------------------------------------
<bullet> In the December 10, 2018 Federal Register (83 FR 63419),
we adopted the 2018 benefit year HHS-operated risk adjustment
methodology as established in the final rules published in the March
23, 2012 (77 FR 17219) and the December 22, 2016 (81 FR 94058) editions
of the Federal Register. In the rule, we set forth an additional
explanation of the rationale supporting the use of Statewide average
premium in the HHS-operated risk adjustment State payment transfer
formula for the 2018 benefit year, including the reasons why the
program is operated in a budget-neutral manner.
<bullet> In the April 25, 2019 Federal Register (84 FR 17454) (2020
Payment Notice), we finalized the benefit and payment parameters for
2020 benefit year, as well as the policies related to making the
enrollee-level EDGE data available as a limited data set for research
purposes and expanding the HHS uses of the enrollee-level EDGE data,
approval of the request from Alabama to reduce risk adjustment
transfers by 50 percent in the small group market for the 2020 benefit
year, and updates to HHS-RADV program requirements.
<bullet> On May 12, 2020, consistent with 153.320(b)(1)(i), we
released 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients
to the CCIIO website.\21\
---------------------------------------------------------------------------
\21\ Final 2021 Benefit Year Final HHS Risk Adjustment Model
Coefficients. (2020, May 12). CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf</a>.
---------------------------------------------------------------------------
<bullet> In the May 14, 2020 Federal Register (85 FR 29164) (2021
Payment Notice), we finalized the benefit and payment parameters for
2021 benefit year, as well as adopted updates to the risk adjustment
models' HCCs to transition to ICD-10 codes, approved the request from
Alabama to reduce risk adjustment transfers by 50 percent in small
group market for the 2021 benefit year, and modified the outlier
identification process under the HHS-RADV program.
<bullet> In the December 1, 2020 Federal Register (85 FR 76979)
(Amendments to the HHS-Operated Risk Adjustment Data Validation Under
the Patient Protection and Affordable Care Act's HHS-Operated Risk
Adjustment Program (2020 HHS-RADV Amendments Rule)), we adopted the
creation and application of Super HCCs in the sorting step that assigns
HCCs to failure rate groups, finalized a sliding scale adjustment in
HHS-RADV error rate calculation, and added a constraint for negative
error rate outliers with a negative error rate. We also established a
transition from the prospective application of HHS-RADV adjustments to
apply HHS-RADV results to risk scores from the same benefit year as
that being audited.
<bullet> In the September 2, 2020 Federal Register (85 FR 54820),
we issued an interim final rule containing certain policy and
regulatory revisions in response to the COVID-19 public health
emergency (PHE), wherein we set forth risk adjustment reporting
requirements for issuers offering temporary premium credits in the 2020
benefit year.
<bullet> In the May 5, 2021 Federal Register (86 FR 24140), we
issued part 2 of the 2022 Payment Notice final rule containing policy
and regulatory revisions related to the risk adjustment program,
including finalization of the benefit and payment parameters for the
2022 benefit year and approval of the request from Alabama to reduce
risk adjustment transfers by 50 percent in the individual and small
group markets for the 2022 benefit year. In addition, this final rule
established a revised schedule of collections for HHS-RADV and updated
the provisions regulating second validation audit (SVA) and initial
validation audit (IVA) entities.
<bullet> On July 19, 2021, consistent with Sec. 153.320(b)(1)(i),
we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the CCIIO website, announcing some minor revisions to
the 2022 benefit year final risk adjustment adult model
coefficients.\22\
---------------------------------------------------------------------------
\22\ Updated 2022 Benefit Year Final HHS Risk Adjustment Model
Coefficients. (2021, July 19). CMS <a href="https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf">https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf</a>.
---------------------------------------------------------------------------
2. Program Integrity
We have finalized program integrity standards related to the
Exchanges and premium stabilization programs in two rules: The ``first
Program Integrity Rule'' published in the August 30, 2013 Federal
Register (78 FR 54069) and the ``second Program Integrity Rule''
published in the October 30, 2013 Federal Register (78 FR 65045). We
also refer readers to the 2019 Patient Protection and Affordable Care
Act; Exchange Program Integrity rule published in the December 27, 2019
Federal Register (84 FR 71674).
3. Market Rules
For past rulemaking related to the market rules, we refer readers
to the following rules:
<bullet> In the April 8, 1997 Federal Register (62 FR 16894), HHS,
with the Department of Labor and Department of the Treasury, published
an interim final rule relating to the HIPAA health insurance reforms.
In the February 27, 2013 Federal Register (78 FR 13406) (2014 Market
Rules), we published the health insurance market rules.
<bullet> In the May 27, 2014 Federal Register (79 FR 30240) (2015
Market Standards Rule), we published the Exchange and Insurance Market
Standards for 2015 and Beyond.
<bullet> In the December 22, 2016 Federal Register (81 FR 94058),
we provided additional guidance on guaranteed availability and
guaranteed renewability.
<bullet> In the April 18, 2017 Federal Register (82 FR 18346)
(Market Stabilization final rule), we further interpreted the
guaranteed availability provision.
<bullet> In the in the April 17, 2018 Federal Register (83 FR
17058) (2019 Payment Notice final rule), we clarified that certain
exceptions to the special enrollment periods only apply to
[[Page 27215]]
coverage offered outside of the Exchange in the individual market.
<bullet> In the June 19, 2020 Federal Register (85 FR 37160) (2020
section 1557 final rule), in which HHS discussed section 1557 of the
ACA, HHS removed nondiscrimination protections based on gender identity
and sexual orientation from the guaranteed availability regulation.
<bullet> In part 2 of the 2022 Payment Notice final rule in the May
5, 2021 Federal Register (86 FR 24140), we made additional amendments
to the guaranteed availability regulation regarding special enrollment
periods and finalized new special enrollment periods related to
untimely notice of triggering events, cessation of employer
contributions or government subsidies to COBRA continuation coverage,
and loss of APTC eligibility.
<bullet> In the September 27, 2021 Federal Register (86 FR 53412)
(part 3 of the 2022 Payment Notice final rule), which was published by
HHS and the Department of the Treasury, we finalized additional
amendments to the guaranteed availability regulations regarding special
enrollment periods.
4. Exchanges
We published a request for comment relating to Exchanges in the
August 3, 2010 Federal Register (75 FR 45584). We issued initial
guidance to States on Exchanges on November 18, 2010. In the March 27,
2012 Federal Register (77 FR 18309) (Exchange Establishment Rule), we
implemented components of the Exchanges and set forth standards for
eligibility for Exchanges, as well as network adequacy and ECP
certification standards.
In the 2014 Payment Notice and the Amendments to the HHS Notice of
Benefit and Payment Parameters for 2014 interim final rule, published
in the March 11, 2013 Federal Register (78 FR 15541), we set forth
standards related to Exchange user fees. We established an adjustment
to the FFE user fee in the Coverage of Certain Preventive Services
under the Affordable Care Act final rule, published in the July 2, 2013
Federal Register (78 FR 39869) (Preventive Services Rule).
In the 2016 Payment Notice, we also set forth the ECP certification
standard at Sec. 156.235, with revisions in the 2017 Payment Notice in
the March 8, 2016 Federal Register (81 FR 12203) and the 2018 Payment
Notice in the December 22, 2016 Federal Register (81 FR 94058).
In an interim final rule, published in the May 11, 2016 Federal
Register (81 FR 29146), we made amendments to the parameters of certain
special enrollment periods (2016 Interim Final Rule). We finalized
these in the 2018 Payment Notice final rule, published in the December
22, 2016 Federal Register (81 FR 94058).
In the April 18, 2017 Market Stabilization final rule Federal
Register (82 FR 18346), we amended standards relating to special
enrollment periods and QHP certification. In the 2019 Payment Notice
final rule, published in the April 17, 2018 Federal Register (83 FR
16930), we modified parameters around certain special enrollment
periods. In the April 25, 2019 Federal Register (84 FR 17454), the
final 2020 Payment Notice established a new special enrollment period.
We published the final rule in the May 14, 2020 Federal Register
(85 FR 29164) (2021 Payment Notice).
In the January 19, 2021 Federal Register (86 FR 6138), we finalized
part 1 of the 2022 Payment Notice final rule that finalized only a
subset of the proposals in the 2022 Payment Notice proposed rule. In
the May 5, 2021 Federal Register (86 FR 24140), we published (part 2 of
the 2022 Payment Notice final rule). In the September 27, 2021 Federal
Register (86 FR 53412) (part 3 of the 2022 Payment Notice final rule),
in conjunction with the Department of the Treasury, we finalized
amendments to certain policies in part 1 of the 2022 Payment Notice
final rule.
In the January 5, 2022 Federal Register (87 FR 584), we published a
proposed rule that outlined proposals to maintain the user fee rate for
issuers offering plans through the FFEs and maintain the user fee rate
for issuers offering plans through the SBE-FPs. We also proposed
various policies to address certain agent, broker, and web broker
practices and conduct. We also proposed updates to the requirement that
all Exchanges conduct special enrollment period verifications.
5. Essential Health Benefits
On December 16, 2011, HHS released a bulletin that outlined an
intended regulatory approach for defining EHB, including a benchmark-
based framework.\23\ We established requirements relating to EHBs in
the Standards Related to Essential Health Benefits, Actuarial Value,
and Accreditation Final Rule, which was published in the February 25,
2013 Federal Register (78 FR 12833) (EHB Rule). In the 2019 Payment
Notice, published in the April 17, 2018 Federal Register (83 FR 16930),
we added Sec. 156.111 to provide States with additional options from
which to select an EHB-benchmark plan for PYs 2020 and beyond.
---------------------------------------------------------------------------
\23\ Essential Health Benefits Bulletin. (2011, December 16).
CMS. <a href="https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf">https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf</a>.
---------------------------------------------------------------------------
6. Medical Loss Ratio (MLR)
We published a request for comment on section 2718 of the PHS Act
in the April 14, 2010 Federal Register (75 FR 19297), and published an
interim final rule with a 60-day comment period relating to the MLR
program on December 1, 2010 (75 FR 74863). A final rule with a 30-day
comment period was published in the December 7, 2011 Federal Register
(76 FR 76573). An interim final rule with a 60-day comment period was
published in the December 7, 2011 Federal Register (76 FR 76595). A
final rule was published in the Federal Register on May 16, 2012 (77 FR
28790). The MLR program requirements were amended in final rules
published in the March 11, 2014 Federal Register (79 FR 13743), the May
27, 2014 Federal Register (79 FR 30339), the February 27, 2015 Federal
Register (80 FR 10749), the March 8, 2016 Federal Register (81 FR
12203), the December 22, 2016 Federal Register (81 FR 94183), the April
17, 2018 Federal Register (83 FR 16930), the May 14, 2020 Federal
Register (85 FR 29164), an interim final rule that was published in the
September 2, 2020 Federal Register (85 FR 54820), and the May 5, 2021
Federal Register (86 FR 24140).
7. Quality Improvement Strategy
We promulgated regulations in 45 CFR 155.200(d) to direct Exchanges
to evaluate quality improvement strategies, and 45 CFR 156.200(b) that
direct QHP issuers to implement and report on a quality improvement
strategy or strategies consistent with section 1311(g) standards as QHP
certification criteria for participation in an Exchange. In the 2016
Payment Notice, published in the February 27, 2015 Federal Register (80
FR 10749), we finalized regulations at Sec. 156.1130 to establish
standards and the associated timeframe for QHP issuers to submit the
necessary information to implement QIS standards for QHPs offered
through an Exchange.
8. Nondiscrimination
Section 1302 of the ACA provides for the establishment of an EHB
package that includes coverage of EHB and AV requirements. In the
February 25, 2013 Federal Register (78 FR 12834), HHS published the
``Patient Protection and Affordable Care Act; Standards Related to
Essential Health Benefits, Actuarial
[[Page 27216]]
Value, and Accreditation'' final rule, which included nondiscrimination
protections.
In the 2020 section 1557 final rule on section 1557 of the ACA,
published in the June 19, 2020 Federal Register (85 FR 37160), HHS
removed nondiscrimination protections on the basis of gender identity
and sexual orientation from various CMS nondiscrimination regulations.
In the HHS Notice of Interpretation and Enforcement of Section 1557 of
the Affordable Care Act and Title IX of the Education Amendments of
1972, published in the May 25, 2021 Federal Register (86 FR 27984), HHS
informed the public that HHS will interpret and enforce section 1557's
and Title IX's prohibition on discrimination on the basis of sex to
include discrimination based on sexual orientation and gender identity.
B. Stakeholder Consultation and Input
HHS consulted with stakeholders on policies related to the PHS Act
and ACA Federal market reform requirements, including the operation of
Exchanges and the risk adjustment program (including HHS-RADV). For
example, related to risk adjustment, HHS released the 2021 HHS-Operated
Risk Adjustment Technical Paper on Possible Model Changes \24\ and the
HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes:
Summary Results for Transfer Simulations.\25\ We also held a number of
meetings with consumers, providers, employers, health plans, advocacy
groups, and the actuarial community to gather public input. We
solicited input from State representatives on numerous topics,
particularly EHBs, State mandates, and risk adjustment. We consulted
with stakeholders through regular meetings with the National
Association of Insurance Commissioners (NAIC), regular contact with
States through the Exchange Blueprint approval and general Exchange
oversight processes, and meetings with Tribal leaders and
representatives, health insurance issuers, trade groups, consumer
advocates, employers, and other interested parties. We considered all
public input and written comments we received in response to the
proposed rulemaking as we developed the policies in this final rule.
---------------------------------------------------------------------------
\24\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\25\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes: Summary Results for Transfer Simulations. (2021,
December 28). CMS. <a href="https://www.cms.gov/files/document/report-summary-results-transfer-simulations.pdf">https://www.cms.gov/files/document/report-summary-results-transfer-simulations.pdf</a>.
---------------------------------------------------------------------------
C. Structure of Final Rule
The regulations outlined in this final rule will be codified in 45
CFR parts 144, 147, 153, 155, 156, and 158.
The changes to 45 CFR part 144 will remove superfluous language
from the definition of a large group market.
The changes to 45 CFR part 147 will ensure that issuers cannot
refuse to effectuate new coverage based on the failure of an individual
or employer to pay premiums owed for prior coverage.
The policies relating to 45 CFR part 153 involve recalibration of
the 2023 benefit year risk adjustment models using the 2017, 2018, and
2019 enrollee-level EDGE data. We also finalize updates to the adult
and child risk adjustment models for 2023 and beyond to better predict
plan liability for certain subpopulations. Specifically, beginning with
the 2023 benefit year, we will update the adult risk adjustment models
by removing the current severity illness factors and replacing the
current enrollment duration factors with enrollment duration factors
contingent on the enrollee having at least one HCC. In addition, we
will add an interacted HCC count model specification for 2023 and
beyond to the adult and child models. We are not finalizing the
proposal to add a two-stage weighted approach to model recalibrations.
We are finalizing a market pricing adjustment to the plan liability
associated with Hepatitis C drugs in the risk adjustment models,
consistent with the approach adopted beginning with the 2020 models. We
are finalizing removing the mapping of hydroxychloroquine sulfate to
RXC 09 (Immune Suppressants and Immunomodulators) in the 2018 and 2019
benefit year enrollee-level EDGE data used for the annual recalibration
of the HHS risk adjustment models.\26\ For the 2024 benefit year and
beyond, we will recalibrate the models using the final, fourth quarter
(Q4) RXC mapping document that was applicable for each benefit year of
data that is included in the current year's model recalibration. We are
finalizing using this approach for recalibration of the 2023 adult risk
adjustment models with the exception of the 2017 enrollee-level EDGE
data year, for which we will use the most recent RXC mapping document
that was available when we first processed the 2017 enrollee-level EDGE
data (that is, Q2 2018).
---------------------------------------------------------------------------
\26\ The same concern was not present for the 2017 enrollee-
level EDGE data because hydroxychloroquine sulfate was not included
in the RXC crosswalk until 2018.
---------------------------------------------------------------------------
We are finalizing the proposal to collect and extract five new data
elements as part of the enrollee-level EDGE data. Beginning with the
2023 benefit year, issuers will be required to populate the ZIP Code
and subsidy indicator fields as part of their EDGE data submissions.
Issuers will also be required to populate the race, ethnicity, and
Individual Coverage Health Reimbursement Arrangement (ICHRA) indicator
fields. For the 2023 and 2024 benefit years, we are adopting a
transitional period for the race, ethnicity, and ICHRA indicator fields
during which time issuers will be required to populate these fields
using available data sources. Then, beginning with the 2025 benefit
year, issuers that do not have an existing source to populate these
fields for particular enrollees will also be required to make a good
faith effort to collect and submit race, ethnicity, and ICHRA indicator
data elements for these enrollees. We are also finalizing the proposal
to extract three data elements--plan ID, rating area, and subscriber
indicator--issuers already report to their EDGE servers as part of the
required risk adjustment data. We are finalizing the extraction of plan
ID and rating area beginning with the 2021 benefit year, and subscriber
indicator will be extracted beginning with the 2022 benefit year.
Additionally, we finalize the proposal to amend Sec. 153.730 to
address situations when April 30 does not fall on a business day and to
provide that when this occurs, the deadline for issuers to submit the
required risk adjustment data in States where HHS operates the program
would be the next applicable business day.
In part 153, we are finalizing policies related to risk adjustment
State flexibility requests. We are finalizing the repeal of the ability
of States to request a reduction in risk adjustment State transfers
starting with the 2024 benefit year, with an exception for prior
participants. We further limit a prior participant's ability to request
a reduction in risk adjustment transfers starting with the 2024 benefit
year to only those that meet the de minimis threshold criteria. In
future rulemaking, HHS intends to propose to eliminate the prior
participant exception starting with the 2025 benefit year. For the 2023
benefit year, we approve Alabama's requests to reduce risk adjustment
State transfers, but at lower percentages, than the State requested. We
approve for the 2023 benefit year a 25 percent reduction in Alabama's
individual market (including the catastrophic and non-
[[Page 27217]]
catastrophic risk pools) transfers and a 10 percent reduction in
Alabama's small group market transfers.
In part 153, we also finalize the risk adjustment user fee for the
2023 benefit year at $0.22 PMPM. We also finalize the proposed update
to the HHS-RADV error estimation process to extend the application of
Super HCCs beyond the sorting step that assigns HCCs to failure rate
groups, to also apply throughout the HHS-RADV error rate calculation
processes. We further specify that Super HCCs will be defined
separately according to the model (infant, child, adult) to which an
enrollee is subject, except for where child and adult coefficient
estimation groups have identical definitions. We also finalize the
proposal to constrain to zero any failure rate group outlier negative
failure rate, regardless of whether the outlier issuer has a negative
or positive error rate. These refinements to the HHS-RADV error rate
methodology and processes will apply beginning with the 2021 benefit
year. Finally, we adopt the policy that whenever HHS recoups high-cost
risk pool funds as a result of audits of risk adjustment covered plans,
an actionable discrepancy, or a successful administrative appeal, the
recouped high-cost risk pool funds will be used to reduce high-cost
risk pool charges for that national high-cost risk pool beginning for
the next benefit year for which a high-cost risk pool payment has not
already been calculated.
In addition, we are finalizing the part 153 proposals related to
MLR reporting requirements and how issuers should report certain ACA
program amounts that could be subject to reconsideration. More
specifically, we add references to HHS-RADV adjustments to Sec.
153.710(h) to make clear that HHS expects issuers to report HHS-RADV
adjustments as part of their MLR reports in the same manner as they
report risk adjustment payment and charge amounts.
We finalize changes to 45 CFR part 155 to allow Exchanges to
implement a verification process for enrollment in or eligibility for
an eligible employer sponsored plan based on the Exchange's assessment
of risk for inappropriate payments of APTC/CSR. We are codifying the
proposed APTC proration methodology as the methodology Exchanges on the
Federal platform will continue to use, but we are not finalizing the
requirement for State Exchanges to prorate premium or APTC amounts
using the methodology described in the proposed rule. Rather, we are
finalizing that beginning in PY 2024, State Exchanges will be required
to report to HHS their methodology that ensures the amount of APTC
applied to an enrollee's monthly premium does not exceed their total
monthly APTC.
We are also finalizing new requirements in part 155 related to the
QHP comparative information and standardized disclaimer required to be
displayed on web-broker non-Exchange websites; a prohibition on
displaying QHP advertisements or otherwise providing favored or
preferred placement in the display of QHPs on web-broker non-Exchange
websites based on compensation agents, brokers, or web-brokers receive
from QHP issuers; and the prominent display of a clear explanation of
the rationale for explicit QHP recommendations and the methodology for
the default display of QHPs on web-broker non-Exchange websites to
better inform and protect consumers using such websites. After
consideration and review of the comments, we will not finalize Sec.
155.220(j)(2)(ii)(A)(1), which would prohibit agents from entering
consumer email addresses with domains that remove email from an inbox
after a set period of time. We encourage agents, brokers, and web-
broker entities to remain aware of, and avoid using, such temporary
email accounts when assisting consumers in obtaining coverage as a best
practice and will likely issue future guidance on the matter.
Otherwise, we are generally finalizing the changes to the remainder of
Sec. 155.220(j)(2)(ii) to clarify the FFE standards of conduct for
agents, brokers, and web-brokers, and what it means to provide the
Exchange with correct information under section 1411(b) of the ACA. We
also finalize the changes to Sec. 155.220(j)(2)(vi) through (viii) to
expand the FFE standards of conduct and codify more detail about
specific business practices that are prohibited.
In 45 CFR part 156, we are finalizing the user fee rates for the
2023 benefit year for all issuers participating on Exchanges that use
the Federal platform. We also finalize technical amendments to Sec.
156.50 to conform with the repeal of the Exchange Direct Enrollment
(DE) option finalized in part 3 of the 2022 Payment Notice (86 FR 53412
at 53424 through 53429 and 53445). Also, we finalize changes to Sec.
156.430 to clarify that the CSR data submission process is mandatory
only for those issuers that receive CSR payments from HHS for any part
of the benefit year as a result of HHS possessing an appropriation to
make CSR payments and voluntary for other issuers.
In part 156, we are also finalizing a refinement to the EHB
nondiscrimination policy to provide that a nondiscriminatory health
plan design that provides EHB is one that is clinically based; a
permanent annual deadline in early May for EHB-benchmark plan
applications by States, a repeal of States' ability to permit issuers
to substitute benefits between EHB categories; changes to the de
minimis thresholds for the AV of plans subject to the AV requirements,
as well as narrower de minimis thresholds for individual market silver
QHPs and income-based CSR plan variations; and a repeal of the annual
requirement for States to report to HHS State-required benefits in
addition to the EHB.
In part 156, we are also finalizing a requirement that issuers of
QHPs in FFEs and SBE-FPs offer through the Exchange standardized QHP
options beginning in PY 2023. We are also finalizing an update to the
QIS standards to require QHP issuers to address health and health care
disparities as a specific topic area within their QIS beginning in
2023.
The changes to 45 CFR part 158 codify that only those provider
incentives and bonuses that are tied to clearly defined, objectively
measurable, and well-documented clinical or quality improvement
standards that apply to providers may be included in incurred claims
for MLR reporting and rebate calculation purposes. The changes to part
158 also specify that only expenses directly related to activities that
improve health care quality may be included as QIA expenses for MLR
reporting and rebate calculation purposes. In addition, we finalize a
technical amendment to Sec. 158.170(b) to correct an oversight and
remove the reference to the percentage of premium QIA reporting option
described in Sec. 158.221(b)(8), a provision that was vacated by the
United States District Court for the District of Maryland in City of
Columbus,\27\ and thus deleted in part 2 of the 2022 Payment Notice
final rule.
---------------------------------------------------------------------------
\27\ City of Columbus, et al. v. Cochran, 523 F. Supp. 3d 731
(D. Md. 2021).
---------------------------------------------------------------------------
III. Provisions of the Final HHS Notice of Benefit and Payment
Parameters for 2023
A. Part 144--Requirements Relating to Health Insurance Coverage
1. Definitions (Sec. 144.103)
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 594), we proposed to remove the phrase
``unless otherwise provided under State law'' from the definition of
large group market at Sec. 144.103. As discussed in the proposed rule,
the phrase has no meaning or application and does not appear in the
[[Page 27218]]
statutory definition of large group market in section 2791(e)(3) of the
PHS Act. That phrase was initially included in the PHS Act regulatory
definitions of large group market, large employer, and small employer
adopted by HHS under HIPAA.\28\ However, in the final rules published
on October 30, 2013 (78 FR 65045), we amended the definitions of large
employer and small employer to make them consistent with section
2791(e) of the PHS Act, as amended by the ACA, and in so doing, removed
that phrase from the definitions. At that time, we inadvertently
neglected to delete the phrase from the regulatory definition of large
group market, and we proposed to do so in the proposed rule, to align
these definitions and make the regulatory definition for large group
market consistent with the definition under the ACA.
---------------------------------------------------------------------------
\28\ 62 FR 16894 and 69 FR 78720.
---------------------------------------------------------------------------
We sought comment on this proposal.
After reviewing public comments, we are finalizing this provision
as proposed. The removal of the phrase ``unless otherwise provided
under State law,'' will add clarity to the regulatory definition of
``large group market,'' and align with the current definition under
section 2791(e) of the PHS Act.
We summarize and respond to public comments received on the
definition of large group market below.
Comment: We received two comments related to the definition of a
large group market. One commenter did not see any adverse consequences
to the revision. Another expressed concern that State law definitions
of ``large group'' would be adversely affected by the change in Federal
law because each State passes laws tailored to the market in their
respective State.
Response: As discussed in the proposed rule, we proposed this
change to align the regulation with the underlying statutory definition
of ``large group market,'' which does not include the phrase ``unless
otherwise provided under State law.'' In addition, removing this
language will not affect State law definitions of large group market to
the extent that they do not prevent the application of Federal law.
B. Part 147--Health Insurance Reform Requirements for the Group and
Individual Health Insurance Markets
1. Guaranteed Availability of Coverage (Sec. 147.104)
a. Past-Due Premiums
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 594 through 595), we proposed to re-interpret
the guaranteed availability requirement at section 2702 of the PHS Act
and its implementing regulation at Sec. 147.104 to require issuers to
accept individuals and employers who apply for coverage, even when the
individual or employer owes past-due premiums for coverage from the
same issuer or another issuer in the same controlled group. Under the
current interpretation of the guaranteed availability requirement, to
the extent permitted by applicable State law, an issuer does not
violate the guaranteed availability requirements under Sec. 147.104
when the issuer attributes a premium payment made for new coverage to
any past-due premiums owed for coverage from the same issuer or another
issuer in the same controlled group within the prior 12-month period
before effectuating enrollment in the new coverage.\29\
---------------------------------------------------------------------------
\29\ 82 FR 18346, 18349 through 18353.
---------------------------------------------------------------------------
On January 28, 2021, President Biden issued Executive Order 14009,
``Strengthening Medicaid and the Affordable Care Act'' (E.O.
14009).\30\ Section 3 of E.O. 14009 directs HHS, and the heads of all
other executive departments and agencies with authorities and
responsibilities related to Medicaid and the ACA, to review all
existing regulations, orders, guidance documents, policies, and any
other similar agency actions to determine whether they are inconsistent
with policy priorities described in Section 1 of E.O. 14009, to include
protecting and strengthening the ACA and making high-quality health
care accessible and affordable for all individuals. On April 5, 2022,
President Biden issued Executive Order 14070, ``Continuing to
Strengthen Americans' Access to Affordable, Quality Health Coverage''
(E.O. 14070).\31\ Section 2 of E.O. 14070 directs agencies with
responsibilities related to Americans' access to health coverage, in
addition to taking the actions directed pursuant to E.O. 14009, to
review agency actions to identify ways to continue to expand the
availability of affordable health coverage, to improve the quality of
coverage, to strengthen benefits, and to help more Americans enroll in
quality health coverage. Consistent with section 3(iv) of E.O. 14009
and section 2(a) of E.O. 14070, the re-interpretation of the guaranteed
availability requirement is intended to remove an unnecessary barrier
and make it easier for consumers to enroll in coverage.
---------------------------------------------------------------------------
\30\ Executive Order 14009 on Strengthening Medicaid and the
Affordable Care Act. (2021, February 2). See 86 FR 7793.
\31\ Executive Order 14070 on Continuing to Strengthen
Americans' Access to Affordable, Quality Health Coverage, April 5,
2022; see 87 FR 20689.
---------------------------------------------------------------------------
In the proposed rule (87 FR 594), we proposed to re-designate Sec.
147.104(i) as Sec. 147.104(j) and add a new Sec. 147.104(i) to
specify that a health insurance issuer that denies coverage to an
individual or employer due to the individual's or employer's failure to
pay premium owed under a prior policy, certificate, or contract of
insurance, including by attributing payment of premium for a new
policy, certificate, or contract of insurance to the prior policy,
certificate, or contract of insurance, violates Sec. 147.104(a). Based
on our experience, we believe that the currently effective
interpretation of guaranteed availability has the unintended
consequence of creating barriers to health coverage that
disproportionately affect low-income individuals.
After reviewing the public comments, we are finalizing this
provision as proposed. We summarize and respond to public comments
received on the proposed re-interpretation of guaranteed availability
requirements for the group and individual health insurance markets
below.
Comment: Many commenters supported the proposal, stating that the
current interpretation of the guaranteed availability requirement is
inconsistent with the ACA and creates barriers to accessing health care
that disproportionately harm persons with low incomes and those
experiencing economic hardship. Other commenters in favor of the
proposal stated that the current interpretation of the guaranteed
availability requirement is a barrier to enrollment that
disproportionately impacts people of color, especially women of color,
persons with disabilities, lesbian, gay, bisexual, transgender, queer,
and intersex (LGBTQI+) people, and immigrants.
Some commenters stated that non-payment of past-due premiums is
typically not an intentional decision to avoid financial
responsibility, and may be the result of a mistake or catastrophic
events such as financial hardship, environmental disaster,
hospitalization, or lack of awareness of past-due premium debt. Some
commenters expressed concern that the current interpretation of the
guaranteed availability requirement permits issuers to adopt punitive
measures against consumers who, without malice, are unable to satisfy
past-due premium debt.
Some commenters stated that the current interpretation of the
guaranteed availability requirement compounds barriers to enrollment by
requiring consumers with past-due premium debt
[[Page 27219]]
to pay multiple months of premiums on top of a binder payment in order
to effectuate coverage. A commenter noted that there is no evidence
that individuals are attempting to ``game the system'' by enrolling in
coverage and paying premiums only when care is needed. Other commenters
stated that the current interpretation poses a steep barrier to
enrollment for consumers responding to catastrophic life events,
particularly given that the amount of past-due premiums owed to payors
is nominal compared to issuer profits.
Other commenters opposed the proposed policy and stated that more
research is necessary to determine why individuals and employers fail
to pay past-due premiums and questioned whether other coverage options
could be made more accessible.
Response: We believe finalizing the proposed re-interpretation of
the guaranteed availability requirement will alleviate a barrier to
enrollment for individuals struggling to access health coverage, which
disproportionately affects historically marginalized populations and
individuals facing financial hardship. The current interpretation of
this policy disincentivizes enrollment by conditioning coverage on the
repayment of the past-due premium debt, which may deter individuals who
have accrued past-due premium debt from seeking coverage altogether.
Conversely, permitting individuals to enroll in coverage, regardless of
past-due premium debt, will help ensure continuous access to health
care, especially for individuals facing dire economic circumstances. We
agree with commenters that enrollees fail to pay premiums for numerous,
valid reasons that have nothing to do with exploiting grace periods or
special enrollment periods to avoid paying for health coverage.
Additionally, many consumers and small businesses face financial
challenges. As such, we believe it is prudent to remove barriers to
accessing health coverage to ease the enrollment process.
While the exact cause of premium non-payment and past-due premium
accrual may not be clear in all cases, we are of the view that this
should not be a reason to deny individuals coverage. We agree with
commenters suggesting that more research is needed to determine why
individuals and employers fail to pay past-due premiums, and believe
that such research could inform future policies to better support
consumers in staying enrolled in coverage.\32\
---------------------------------------------------------------------------
\32\ Cunningham, P.J., Green, T.L., & Braun, R.T. (2018,
February 26). Income Disparities in the Prevalence, Severity, and
Costs of Co-Occurring Chronic and Behavioral Health Conditions.
Medical Care.
---------------------------------------------------------------------------
Comment: Some commenters recommended limiting the re-interpretation
of the guaranteed availability requirement to the individual market and
not making it applicable to the group market. One commenter stated that
the proposed change could have significant impacts on issuer management
of enrollment and billing for group market accounts.
Response: Under section 2702 of the PHS Act and Sec. 147.104, the
guaranteed availability requirement applies to both the individual and
group markets. We believe the same principles underlying this policy
should apply equally to both markets, and therefore, decline to adopt
this recommendation.
Comment: Commenters stated that this proposal restricts issuers'
ability to collect past-due premiums or requires them to forgive such
debt. Some commenters expressed concern that finalizing the proposal
will remove a disincentive that guards against enrollees ceasing to pay
premiums during the last 3 months of the plan year, and will leave
issuers without adequate redress when faced with non-payment. Some
commenters stated that permitting individuals with past-due premium
debt to enroll in coverage before repaying past-due premiums will
ultimately result in fewer choices and higher premiums, harming
consumers with low incomes. One commenter requested that HHS specify
other options for issuers besides collections.
In contrast, another commenter noted that issuers have largely
chosen not to use the flexibility provided under the current
interpretation of the guaranteed availability requirement because the
implementation of a policy that attributes payments made for new
coverage to past-due premiums before effectuating new enrollment would
cost more than the past-due premiums the issuer would recoup through
such a policy. Other commenters agreed that issuers have other tools
for recouping unpaid premiums. Some commenters suggested that issuers
should be prohibited from acting to collect past-due premiums.
Response: We disagree that this proposal restricts issuers from
collecting past-due premiums. Issuers are generally not permitted to
forgive the past-due premium debt and have alternative methods to
collect past-due premiums (such as pursuing debt collection). We
believe this mitigates the risk that some enrollees may take advantage
of the guaranteed availability rules. We also believe that the low
adoption among issuers of policies that rely on the current
interpretation of guaranteed availability demonstrates that there are
sufficient avenues for issuers to collect past-due premium debt without
having to condition enrollment into new coverage on the payment of
past-due premium debt. However, we acknowledge that issuers that
implemented a policy of attributing payment made for new coverage to
past-due premiums before effectuating enrollment will need to make
operational changes as a result of this re-interpretation of the
guaranteed availability requirement. Finally, in response to the
commenter's suggestion that issuers should be prohibited from acting to
collect on debt for past-due premiums, we reiterate that an issuer's
forgiveness of premium debt is generally not permissible under our
rules.
b. Nondiscrimination Based on Sexual Orientation and Gender Identity
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 595 through 597), we proposed to amend 45 CFR
147.104(e) to explicitly prohibit discrimination based on sexual
orientation and gender identity. As we explain in the Supplemental
Information section earlier in the preamble, HHS will address this
policy, as well as the public comments submitted in response to this
proposal, in a future rulemaking.
C. Part 153--Standards Related to Reinsurance, Risk Corridors, and Risk
Adjustment
In subparts A, D, G, and H of part 153, we established standards
for the administration of the risk adjustment program. In accordance
with Sec. 153.310(a), a State that is approved or conditionally
approved by the Secretary to operate an Exchange may establish a risk
adjustment program, or have HHS do so on its behalf.\33\ HHS did not
receive any requests from States to operate risk adjustment for the
2023 benefit year. Therefore, HHS will operate risk adjustment in every
State and the District of Columbia for the 2023 benefit year.
---------------------------------------------------------------------------
\33\ See also 42 U.S.C. 18041(c)(1).
---------------------------------------------------------------------------
1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2022, the permanent risk
adjustment program is subject to the fiscal year 2022
[[Page 27220]]
sequestration.\34\ Therefore, the risk adjustment program will be
sequestered at a rate of 5.7 percent for payments made from fiscal year
2022 resources (that is, funds collected during the 2022 fiscal year).
---------------------------------------------------------------------------
\34\ OMB Report to the Congress on the BBEDCA 251A Sequestration
for Fiscal Year 2022. (2021, May 28). White House. <a href="https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf">https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf</a>.
---------------------------------------------------------------------------
HHS, in coordination with OMB, has determined that, under section
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of
1985 (Pub. L. 99-177, enacted December 12, 1985), as amended, and the
underlying authority for the risk adjustment program, the funds that
are sequestered in the fiscal year 2022 from the risk adjustment
program will become available for payment to issuers in the fiscal year
2023 without further Congressional action. If Congress does not enact
deficit reduction provisions that replace the Joint Committee
reductions, the program would be sequestered in future fiscal years,
and any sequestered funding would become available in the fiscal year
following that in which it was sequestered.
Additionally, we note that the Coronavirus Aid, Relief, and
Economic Security (CARES) Act amended section 251A(6) of the Balanced
Budget and Emergency Deficit Control Act of 1985 and extended
sequestration for the risk adjustment program through the fiscal year
2030 at a rate of 5.7 percent per fiscal year.\35\
---------------------------------------------------------------------------
\35\ CARES Act, S.3548. (2020).
---------------------------------------------------------------------------
We received no comments on the FY2022 sequestration rate for risk
adjustment.
2. HHS Risk Adjustment (Sec. 153.320)
The HHS risk adjustment models predict plan liability for an
average enrollee based on that person's age, sex, and diagnoses (also
referred to as hierarchical condition categories (HCCs)), producing a
risk score. The HHS risk adjustment methodology utilizes separate
models for adults, children, and infants to account for clinical and
cost differences in each age group. In the adult and child models, the
relative risk assigned to an individual's age, sex, and diagnosis is
added together to produce an individual risk score. Additionally, to
calculate enrollee risk scores in the adult models, we added enrollment
duration factors beginning with the 2017 benefit year, and prescription
drug categories (RXCs) beginning with the 2018 benefit year.\36\ Infant
risk scores are determined by inclusion in one of 25 mutually exclusive
groups, based on the infant's maturity and the severity of diagnoses.
If applicable, the risk score for adults, children, or infants is
multiplied by a CSR factor. The enrollment-weighted average risk score
of all enrollees in a particular risk adjustment covered plan (also
referred to as the plan liability risk score or PLRS) within a
geographic rating area is one of the inputs into the risk adjustment
State payment transfer formula, which determines the State transfer
payment or charge that an issuer will receive or be required to pay for
that plan for the applicable State market risk pool. Thus, the HHS risk
adjustment models predict average group costs to account for risk
across plans, in keeping with the Actuarial Standards Board's Actuarial
Standards of Practice for risk classification.
---------------------------------------------------------------------------
\36\ For the 2018 benefit year, there were 12 RXCs, but starting
with the 2019 benefit year, the two severity-only RXCs were removed
from the adult risk adjustment models. See, for example, 83 FR
16941.
---------------------------------------------------------------------------
a. Data for Risk Adjustment Model Recalibration for 2023 Benefit Year
and Beyond
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 598), we proposed to recalibrate the 2023
benefit year risk adjustment models with 2017, 2018, and 2019 enrollee-
level EDGE data. We sought comment on this proposal.
In the proposed rule, we also sought comments on the future use of
the 2020 enrollee-level EDGE data due to the COVID-19 PHE. Under
current policy, 2020 enrollee-level EDGE data would be used in the
recalibration of the HHS risk adjustment models for the 2024 benefit
year, and that data would continue to be used for the 2025 and 2026
benefit years models.\37\ Although HHS has not analyzed the 2020
enrollee-level EDGE data yet, we solicited comment on the future use of
the 2020 enrollee-level EDGE data for the annual recalibration of the
HHS risk adjustment models.
---------------------------------------------------------------------------
\37\ Consistent with the approach finalized in the 2022 Payment
Notice, use of the 3 most recent consecutive years of enrollee-level
EDGE data would result in the use of 2018, 2019, and 2020 enrollee-
level EDGE data for the recalibration of the 2024 benefit year
models; the use of 2019, 2020, and 2021 enrollee-level EDGE data for
recalibration of the 2025 benefit year models; and the use of 2020,
2021, and 2022 enrollee-level EDGE data for recalibration of the
2026 benefit year models.
---------------------------------------------------------------------------
After reviewing the public comments, we are finalizing, as
proposed, the use of the 2017, 2018, and 2019 enrollee-level EDGE data
to recalibrate the 2023 benefit year risk adjustment models. We were
unable to finalize coefficients in time to publish them in this final
rule. Therefore, consistent with Sec. 153.320(b)(1)(i), we will
publish the final coefficients for the 2023 benefit year in guidance
soon after the publication of this final rule.
Additionally, we appreciate comments on the future use of the 2020
enrollee-level EDGE data due to the COVID-19 PHE. We continue to
consider how to handle 2020 enrollee-level EDGE data for recalibration
of the 2024, 2025, and 2026 benefit year models and will work with
stakeholders as we analyze the data. Changes to the established
policies for recalibration of the risk adjustment models, including
proposals related to the use of 2020 enrollee-level EDGE data for such
purposes, would be pursued through notice-and-comment rulemaking.
We summarize and respond to public comments received on data for
risk adjustment model recalibration for the 2023 benefit year and
beyond below.
Comment: Many commenters supported the use of the 2017, 2018, and
2019 enrollee-level EDGE data to recalibrate the 2023 risk adjustment
models. One commenter noted that the 2017, 2018, and 2019 enrollee-
level EDGE data reflect the most recently available health outcomes and
recent treatment patterns in the enrollee population. Another commenter
supported using the most recent 3 years of EDGE data available in time
for publication of the draft coefficients in the proposed rule in order
to give the industry the earliest opportunity to model premium rates
for the next benefit year.
Response: We are finalizing the use of the 2017, 2018, and 2019
enrollee-level EDGE data to recalibrate the 2023 risk adjustment models
as proposed. The 2017, 2018, and 2019 enrollee-level EDGE data were the
3 most recent consecutive years of enrollee-level EDGE data that were
available at the time we incorporated the data in the draft
recalibrated coefficients published in the proposed rule. As discussed
in the 2022 Payment Notice, the purpose of using the 3 most recent
consecutive years of enrollee-level EDGE data that were available at
the time we incorporated the data in the draft recalibrated
coefficients published in the proposed rule was to respond to
stakeholders' request to provide the draft coefficients in the proposed
rule (86 FR 24152). We believe that this approach promotes stability
and avoids the delays in publication of the coefficients while
continuing to develop blended, or averaged, coefficients from the 3
years of separately solved models for model recalibration.
Comment: We received several comments on the use of 2020 enrollee-
level EDGE data for recalibration of the
[[Page 27221]]
2024, 2025, and 2026 benefit years. Some of these commenters supported
the inclusion of 2020 enrollee-level EDGE data in these future benefit
year model recalibrations, stating that 2020 data would accurately
reflect utilization patterns that can be expected in 2021 and beyond
and that the inclusion of 3 years of enrollee-level EDGE data in
recalibration would dampen the impact of 2020 data. Another commenter
noted that failure to include 2020 data would result in an outdated
picture of medical spending.
One commenter opposed the inclusion of 2020 enrollee-level EDGE
data in model recalibration altogether. Another commenter noted that
not relying on 2020 experience to develop risk adjustment coefficients
is consistent with industry practice, asserting that the majority of
Medicare Advantage and ACA issuers used 2019 data in lieu of 2020 data
for 2022 pricing.
Several commenters requested HHS develop a technical paper on using
2020 enrollee-level EDGE data in future model recalibrations, with
several commenters suggesting that HHS do a comparison of coefficients
with and without the 2020 enrollee-level EDGE data to review relative
changes in coefficients, and evaluate changes for clinical
reasonability and consistency with 2018 and 2019 enrollee-level EDGE
data. One commenter requested that HHS release 2020-related statistics
and solicit further comment on how to best proceed with 2020 data,
including whether to instead use 2017, 2018, and 2019 EGDE data for the
2024 benefit year recalibration of the HHS risk adjustment models.
One commenter recommended either assigning 2020 enrollee-level EDGE
data lower weight if used to recalibrate the models in the 2024, 2025,
and 2026 benefit years, or using four years of enrollee-level EDGE data
in the annual model recalibration until 2020 data is no longer included
in recalibration. Another commenter recommended that HHS evaluate if it
would be better to use 1 or 2 years of data for recalibration of the
models in the 2024, 2025, and 2026 benefit years on a transitional
basis until only post-2020 data would be used.
Response: We appreciate comments on the future use of the 2020
enrollee-level EDGE data for risk adjustment model recalibration and
will consider this feedback as we analyze the 2020 enrollee-level EDGE
data and consider options for its use for recalibration of the risk
adjustment models.
b. Risk Adjustment Model Updates
In the proposed rule (87 FR 598 through 605), we proposed three
modeling updates to the risk adjustment models beginning with the 2023
benefit year. Consistent with the potential model updates discussed in
the 2021 RA Technical Paper, we proposed the following model updates,
which are the same as those proposed but not finalized in the 2022
Payment Notice:\38\ (1) Adding a two-stage weighted model specification
to the adult and child models; (2) removing the severity illness
factors in the adult models and replacing them with new severity and
transplant indicators interacted with HCC count factors in the adult
and child models; and (3) replacing the current enrollment duration
factors in the adult models with HCC-contingent enrollment duration
factors in the adult models.
---------------------------------------------------------------------------
\38\ In the 2022 Payment Notice Proposed Rule, we proposed three
model specification changes, see 85 FR 78572 at 78583 through 78586.
In the 2022 Payment Notice Final Rule, in response to comments, we
did not finalize the proposed updates and announced that we would
publish a technical paper on the proposed model changes; see 86 FR
24140 at 24151 through 24162. See also HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes. (2021, October 26). CMS.
<a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a> and
HHS-Operated Risk Adjustment Technical Paper on Possible Model
Changes: Summary Results for Transfer Simulations. (2021, December
28). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
After a review of public comments, we are finalizing two of the
three proposed model specification updates. We are not finalizing the
proposed addition of a two-stage weighted model specification to the
adult and child models. We are finalizing, as proposed, removing the
current severity illness factors in the adult models and replacing them
with new severity and transplant indicators that interacted with HCC
count factors in the adult and child models. We are also finalizing, as
proposed, replacing the current enrollment duration factors in the
adult models with HCC-contingent enrollment duration factors in the
adult models. In the following sections, we describe the proposed model
specification changes, as well as summarize and respond to the comments
received on each of these proposals.
i. Two-Stage Weighted Model Specification
We proposed to use a two-stage weighted model specification to
recalibrate the adult and child risk adjustment models starting with
the 2023 benefit year to improve the underprediction of plan liability
for the lowest-risk enrollees (that is, enrollees in low-risk deciles
and enrollees without HCCs \39\). For a full description of the
proposed two-stage weighted model specification see the proposed rule
(87 FR 599 through 601). We sought comment on the two-stage weighted
model specification proposal.
---------------------------------------------------------------------------
\39\ When we refer to the enrollees without HCCs, we are
referring to enrollees without payment HCCs.
---------------------------------------------------------------------------
After reviewing the public comments, we are not finalizing the
adoption of the two-stage weighted model specification.
We summarize and respond to public comments received on the
proposed two-stage model specification below.
Comment: Several commenters supported the implementation of the
proposed two-stage weighted model specification. Some of these
commenters generally supported all of the proposed model specification
changes, while others specifically noted that the proposed two-stage
model improved prediction for the lowest-risk enrollees.
Conversely, several other commenters opposed the implementation of
the proposed two-stage weighted model specification. Several commenters
were concerned that the proposed two-stage weighted model specification
would have anti-competitive effects, leading to fewer choices for
consumers. These commenters stated that the two-stage weighted model
specification would increase premiums on more generous health insurance
coverage, incentivize issuers to adopt narrow networks and lower-
quality plans, encourage issuers to avoid enrolling consumers with
chronic illnesses, and contribute to the creation and use of
discriminatory benefit designs.
Other commenters did not support a model change that improved risk
predictions for certain subpopulations at the expense of the risk
adjustment program's ability to mitigate adverse selection for high-
cost enrollees. Some commenters stated that the proposed two-stage
weighted model specification ignores current market dynamics in which
plans are already incentivized to attract the healthiest enrollees.
Additionally, some commenters recommended additional analysis of the
two-stage weighted model specification, specifically geographic and
market-specific considerations, before its adoption. One commenter
suggested that if HHS finalizes the two-stage weighted model
specification, HHS should pilot or phase-in the implementation based on
an analysis of localized market conditions.
Response: After consideration of the comments on this proposal, we
are not finalizing the proposed two-stage
[[Page 27222]]
weighted model specification. We pursued the proposed model
specification updates to improve the prediction of certain
subpopulations in response to feedback from stakeholders and internal
analysis where we had observed underprediction in the current models.
As we previously reported in the 2018 Payment Notice, our initial
analysis found that, based on the commercial MarketScan[supreg] data,
the HHS risk adjustment models slightly underpredicted risk for the
lowest-risk enrollees (81 FR 61472 through 61473 and 81 FR 94082
through 94083). Our subsequent analysis of enrollee-level EDGE data
confirmed this preliminary finding.\40\ In addition, stakeholders have
consistently encouraged HHS to adjust the models to address this
underprediction of risk, which affects the PLRSs of plans that enroll
more healthy individuals. HHS has therefore been examining these
issues, considering different options, and soliciting comments on ways
to modify the risk adjustment models to improve prediction for certain
subpopulations, including the lowest-risk enrollees, over several years
(81 FR 61473 and 85 FR 7101 through 7104). Throughout this process, we
consistently emphasized the need to carefully evaluate the impact on
and consider the trade-offs that would need to be made in model
predictive power among subgroups of enrollees.
---------------------------------------------------------------------------
\40\ Section 2. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
The proposed two-stage weighted model specification was targeted at
improving model prediction for lowest-risk enrollees. As previously
explained, we believed that by addressing the underprediction of costs
associated with lowest-risk enrollees in the adult and child models, we
could encourage the offering and retention of plans that enroll a
higher proportion of this subpopulation of enrollees.\41\ We also
recognized that issuers offering these types of plans were at greater
risk of exiting the market if transfers calculated under the State
payment transfer formula under-compensated for the true plan liability
of the lowest-risk enrollees. These concerns, along with stakeholder
comments on these issues, prompted the design of the two-stage weighted
model specification two years ago. However, we acknowledged that there
are trade-offs associated with the adoption of the proposed two-stage
weighted model, including that while it would improve prediction for
the lowest-risk enrollees it would worsen model prediction along other
dimensions, such as reduced R-squared values, less accurate prediction
of plan liability by age-sex factor (especially for younger and older
women), as well as a less accurate prediction of costs for certain
HCCs.\42\ Additionally, since developing the proposed two-stage
weighted model specification, there have been key shifts in the
individual market, including increased enrollment and increased
availability of subsidies,\43\ that have made the market more
attractive to issuers. However, these market shifts have also shown the
pressing need to update the adult model enrollment duration factors,
which we are also finalizing as part of this rule.
---------------------------------------------------------------------------
\41\ Section 2.1. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\42\ Section 2.3. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>. See also 87
FR 600 through 601.
\43\ Biden-Harris Administration Announces 14.5 Million
Americans Signed Up for Affordable Health Care During Historic Open
Enrollment Period. (2022, January 27). CMS. https://www.hhs.gov/
about/news/2022/01/27/biden-harris-administration-announces-14-5-
million-americans-signed-affordable-health-care-during-historic-
open-enrollment-
period.html#:~:text=Today%2C%20the%20Biden%2DHarris%20Administration,
people%20who%20have%20newly%20gained.
---------------------------------------------------------------------------
While the interacted HCC count model specification and the
enrollment duration factor updates finalized in this rule do not
improve predictive accuracy for the lowest-risk enrollees as much as
they would have if they were combined with the proposed two-stage
weighted model specification, we believe the finalized model
specifications will still make significant gains in improved predictive
accuracy for our target subpopulations, including the lowest-risk
enrollees, highest-risk enrollees, and partial-year enrollees.\44\ As
demonstrated in Chapter 4 of the 2021 RA Technical Paper, our analysis
found the proposed interacted HCC counts model specification and the
proposed HCC-contingent enrollment duration factors improved prediction
for the lowest-risk enrollees, compared with the current adult models,
even without accounting for the proposed two-stage weighted model
specification.\45\ Using 2018 enrollee-level EDGE data, the proposed
interacted HCC counts model specification combined with the proposed
HCC-contingent enrollment duration factors improves the PR for adult
silver-plan enrollees in risk decile 1 from 0.52 to 0.81.\46\ This
approach of incremental improvements in predictive accuracy aligns with
our commitment to continuously analyze and refine the risk adjustment
models. After consideration of comments and further evaluation of the
trade-offs, we are finalizing the interacted HCC count model
specification and enrollment duration factor updates but are not
finalizing the proposed two-stage weighted model specification.
---------------------------------------------------------------------------
\44\ Figures 4.2, 4.3, and 4.4. HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes. (2021, October 26). CMS.
<a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\45\ Ibid.
\46\ Section 4. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Since we are not finalizing the proposed two-stage weighted model
specification, we do not intend to pursue or otherwise consider pilot
or phase-in implementation strategies. Similarly, we do not intend to
engage in additional analysis of alternative implementations of the
two-stage weighted model specification, including but not limited to an
analysis of implementation by geographic or market-specific conditions,
at this time.
Comment: One commenter that supported the proposed two-stage
weighted model specification also encouraged HHS to recalibrate the
State payment transfer formula to further ensure that plans do not face
excessive risk adjustment charges when enrolling a high proportion of
young and healthy enrollees. Another commenter supported the
finalization of the two-stage weighted model specification, but noted
that it is unclear to what extent these model changes address
situations in which risk adjustment charges for some issuers exceed the
premium collected for some lower-risk enrollees.
Response: We did not propose and are not finalizing changes to the
State payment transfer formula. However, we intend to continue analysis
of the risk adjustment State payment transfer formula to consider
whether changes are needed to it. For example, in Appendix A of the
2021 RA Technical Paper, we discussed options to potentially update the
risk adjustment State payment transfer formula to improve prediction
for CSR enrollees' plan liability. More specifically, we identified
several potential options to update the risk term and one option to
update the rating term to more precisely account for CSR plan liability
in the State payment transfer formula.\47\ We familiarized stakeholders
with these options and accepted public comments on the considerations
in the 2021 RA Technical Paper. We continue
[[Page 27223]]
to conduct analyses of these options and will propose any changes in
future notice-and-comment rulemaking.
---------------------------------------------------------------------------
\47\ Appendix A. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
As part of future analyses, we also intend to assess the impact of
the State payment transfer formula on risk adjustment covered plans
with lowest-risk enrollees to the extent that our data allows. However,
in response to commenters' concerns that risk adjustment charges exceed
premiums collected for some of the lowest-risk enrollees, we do not
believe that this concern falls within the scope of the proposed two-
stage weighted model specification, and we reiterate that we do not
believe that adjusting the State payment transfer formula to limit
charges to the level of premiums for enrollees is appropriate (86 FR
24140 at 24186). Also, as previously described, we proposed the two-
stage weighted model specification to address the underprediction of
the lowest risk enrollees, not to address the situation described by
the commenter in which risk adjustment charges may exceed premiums
collected for some enrollees. As described in the most recent ``Summary
Report on Permanent Risk Adjustment Transfers for the 2020 Benefit
Year,'' risk adjustment is working as intended to transfer payments
from plans with lower than average actuarial risk to plans with higher
than average actuarial risk.\48\ Furthermore, we do not believe that
limiting risk adjustment charges to the level of enrollee premiums is
consistent with the framework set forth in section 1343 of the ACA,
which requires the establishment of a risk adjustment program focused
on risk differentials at the plan level, not the enrollee level.\49\
Risk adjustment transfers under the State payment transfer formula are
therefore calculated based on the PLRS and the Statewide average
premium, not based on individual enrollees' premiums.
---------------------------------------------------------------------------
\48\ Summary Report on Permanent Risk Adjustment Transfers for
the 2020 Benefit Year. (2021, June 30). CMS. <a href="https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf">https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf</a>.
\49\ Compare 42 U.S.C. 18063 (establishing the permanent risk
adjustment program, which involves an assessment and comparison of
the actuarial risk in each issuer's plans in a State market risk
pool with the average actuarial risk of all plans in the applicable
State market risk pool) and 42 U.S.C. 18061 (establishing the
transitional reinsurance program, which involves an assessment of
actuarial risk of individual enrollees to identify those that
qualify as ``high risk.'')
---------------------------------------------------------------------------
Comment: Some commenters requested that if HHS finalizes the
proposed two-stage weighted model specification, then HHS should
reassess the 14 percent administrative adjustment, which they argue may
already address some of the underprediction seen in predictive ratios.
Response: We did not propose and are not finalizing changes to the
14 percent administrative cost reduction to the Statewide average
premium used in the State payment transfer formula. While HHS is not
finalizing the proposed two-stage weighted model specification, we
reiterate that the proposed two-stage weighted model specification and
administrative cost adjustment to Statewide average premium address
separate considerations. Specifically, the 14 percent administrative
cost reduction is used in the State payment transfer formula to adjust
the Statewide average premium and does not address the predictive
accuracy of the risk adjustment models, as described in the 2021 RA
Technical Paper. As detailed in the 2018 Payment Notice, the purpose of
the administrative cost adjustment to the Statewide average premium is
to exclude fixed administrative costs that are not dependent on
enrollee risk, such as taxes (81 FR 61488 through 61489 and 81 FR 94099
through 94100). In contrast, and as previously described elsewhere,\50\
the proposed two-stage weighted model specification was a targeted
refinement aimed at improving the current adult and child models'
prediction for the lowest-risk enrollees. Therefore, we do not agree
with commenters' assertions that the administrative cost adjustment
addresses the same issue as the two-stage weighted model specification,
specifically the underprediction of costs in the lowest-risk enrollee
subpopulation.
---------------------------------------------------------------------------
\50\ Section 2.2. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>. See also 85
FR 78667 and 86 FR 24283.
---------------------------------------------------------------------------
Comment: Some commenters that opposed the proposed two-stage
weighted model specification were concerned it may be resulting in
overfitting of the models and may not predict future costs accurately.
They also noted that the two-stage weighted model specification is not
a standard procedure for risk adjustment and worsens fit in some areas,
such as the reduced R-squared values,\51\ although the effect is small.
---------------------------------------------------------------------------
\51\ We acknowledge three areas where the two-stage weighed
model specification worsens fit of the risk adjustment models along
other dimensions in Section 2.3 in the HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes. (2021, October 26). CMS.
<a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\52\ Kautter, J., Pope, G., Ingber, M. J., Freeman, S. E.,
Patterson, L. J., Cohen, M. A., & Keenan, D. P. (2014). The HHS-HCC
risk adjustment model for individual and small group markets under
the Affordable Care Act. Medicare & Medicaid Research Review, 4(3),
E1-E46. doi:10.5600/mmrr.004.03.a03. Kautter, J., Pope, G., &
Keenan, D. P. (2014). Affordable Care Act risk adjustment: Overview,
context, and challenges. Medicare & Medicaid Research Review, 4(3),
E1-E11. doi:10.5600/mmrr.004.03.a02.
\53\ For information on the use of hierarchies and constraints,
see Sections 2.1, 3.7 and 3.8 of the March 2016 Risk Adjustment
Methodology White Paper. (2016, March 24). <a href="https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf">https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf</a>. See also the June 2019 Potential
Updates to HHS-HCCs for the HHS-operated Risk Adjustment Program
Technical Paper (2019, June 17). CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf</a>.
---------------------------------------------------------------------------
Response: As previously described, we acknowledged that there are
trade-offs associated with adoption of the proposed two-stage weighted
model, including that it would worsen model prediction along some
dimensions, such as reduced R-squared values. We also recognize that
the two-stage weighted model specification is not a standard procedure
for risk adjustment. After consideration of comments and further
evaluation of the trade-offs, we are not finalizing the proposed two-
stage weighted model specification update to the adult and child
models. In response to commenters' concerns about overfitting, we note
that we do not have concerns with respect to overfitting the models for
a variety of reasons. First, we estimate the models using 3 years of
data and the final model parameters are an average of coefficients
across the 3 years. By using 3 years of data, the potential for one
unusual year to skew the coefficients is limited. Second, for each
model year, the overall sample size is quite large in each adult model,
particularly relative to the number of model predictors used in the
risk adjustment models.\52\ For example, the 2019 recalibration sample
alone has 18.7 million adult enrollees whose data are used to fit adult
models consisting of 181 predictors for the 2023 benefit year.
Additionally, we ensure sample sizes for each coefficient are
reasonable through the application of hierarchies, constraints, and
similar model design choices.\53\ We also note that although the models
perfectly predict past experience, this does not guarantee the models
will perfectly predict when applied to future payment years, as that
will depend, in part, on what happens between the calibration and
payment years. However, this does not reflect overfitting. To the
extent the calibration years are representative of future payment
years, the models are positioned to perform well when used
[[Page 27224]]
for payment.\54\ For all of these reasons, we are not concerned about
the proposed two-stage weighted model specification change resulting in
overfitting of the models; however, as previously described, we are not
finalizing the proposed two-stage weighted model specification.
---------------------------------------------------------------------------
\54\ Section 1.4. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
ii. Interacted HCC Counts Model Specification
In addition to the two-stage weighted model specification, we
proposed to add an interacted HCC counts model specification to the
adult and child risk adjustment models starting with the 2023 benefit
year to address the current models' underprediction of plan liability
for the very highest-risk enrollees (that is, those in the top 0.1
percentile and those enrollees with the most HCCs). While this highest-
risk subpopulation represents a small number of enrollees, it
represents a large portion of expenditures.\55\
---------------------------------------------------------------------------
\55\ Section 4.1. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Therefore, to address the underprediction of the highest-risk
enrollees, we explored the addition of severity and transplant factors
interacted with HCC counts in the adult and child models, wherein a
factor flagging the presence of at least one severe or transplant
payment HCC is interacted with counts of the enrollee's payment HCCs.
The purpose of adding severity and transplant factors interacted with
HCC count factors to the adult and child models is to address the
underprediction of the highest-risk enrollees by accounting for the
fact that costs of certain HCCs rise significantly when they occur with
multiple other HCCs.
In developing this interacted HCC counts model specification, we
tested different types of severity and transplant indicators interacted
with HCC counts with the goal of improving prediction for enrollees
with the highest costs and multiple HCCs to counterbalance the
reciprocal prediction weights that relatively underpredicted costs for
these enrollees. For this approach, we assessed the HCCs for enrollees
with extremely high costs, and HCCs that were being underpredicted in
the current risk adjustment models. We found that many of the HCCs that
were flagged as being underpredicted were those HCCs that indicated
severe illness, such as the transplant HCCs, and other HCCs related to
severity of disease; therefore, we proposed dropping the current
severity illness indicators in the adult models and replacing them with
severity and transplant indicators interacted with HCC counts factors
in the adult and child models.
We proposed the inclusion of the factors in Tables 1 and 2 of the
proposed rule as the severity and transplant interaction factors in the
adult and child models starting with the 2023 benefit year. We
separated out severity and transplant HCCs into two sets of interaction
factors, as expressed in Tables 1 and 2 of the proposed rule, because
we found that this approach improved prediction for the highest-risk
enrollees better than an approach that included a single set of
factors.
If an enrollee has at least one severity HCC in Table 3 of the
proposed rule (shown in Table 1 of this rule as the Final HCCs Selected
for the HCC Interacted Counts), the enrollee will receive an interacted
HCC count factor toward their risk score, and the severity HCC count
factor selected would be based on the enrollee's total payment HCC
count.\56\ If an adult or child enrollee has at least one transplant
HCC in Table 1 of this rule, the enrollee will receive an interacted
HCC count factor for both a severity HCC interacted factor and, if the
enrollee has four or more HCCs, a transplant HCC interacted factor
towards their risk score, and both of those count factors would be
based on the enrollee's total payment HCC count.
---------------------------------------------------------------------------
\56\ For additional information on how the interacted HCC counts
model specification works, see Section 4.3 of the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes. (2021, October
26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>. See also 87 FR at 601 through 603.
---------------------------------------------------------------------------
To further explain, as seen in Table 2 of this rule, the severity-
HCC-count-interaction factors were calculated as 10 separate factors
for the adult models, and seven separate factors for the child models.
In the adult models, the first nine factors specified the presence of
(1) an HCC in the severity list in Table 1 of this rule and (2) exactly
one payment HCC in the enrollee's data, exactly two, exactly three, and
so on, up to exactly nine payment HCCs. The tenth factor specified the
presence of (1) an HCC in the severity list in Table 1 of this rule and
(2) 10 or more payment HCCs in the enrollee's data. For the child
models, the first five factors represent the presence of (1) an HCC in
the severity list in Table 1 of this rule and (2) exactly one payment
HCC in the enrollee's data, exactly two, exactly three, and so on, but
the sixth factor represents the presence of (1) an HCC in the severity
list in Table 1 and (2) six to seven payment HCCs, and the seventh
factor represents the presence of (1) an HCC in the severity list in
Table 1 and (2) eight or more payment HCCs in the enrollee's data.
[[Page 27225]]
[GRAPHIC] [TIFF OMITTED] TR06MY22.000
[GRAPHIC] [TIFF OMITTED] TR06MY22.001
[[Page 27226]]
As seen in Table 3 of this rule, the transplant-HCC-count-
interaction factors are calculated similarly. However, the transplant
factors are calculated using a different range of HCC counts. In the
adult models, five separate transplant interaction factors were
created, representing the presence of (1) an HCC in the transplant list
in Table 1 and (2) payment HCC counts of exactly four, exactly five,
exactly six, exactly seven, and eight or more payment HCCs in the
enrollee's data. For the child models, we created only one transplant
interaction factor indicating the presence of (1) an HCC in the
transplant list in Table 1 of this rule and (2) a total of four or more
payment HCCs in the enrollee's data. Using only one transplant-HCC-
count-interaction factor stabilized the child model estimates by
increasing the sample size used to estimate the factor
coefficients.\57\
---------------------------------------------------------------------------
\57\ For an illustration of how the proposed severity- (or
transplant-) HCC-count-interaction factors would be assigned to an
enrollee, see 87 FR 601 through 602.
[GRAPHIC] [TIFF OMITTED] TR06MY22.002
To implement the severity- and transplant-HCC-count-interaction
factors in the regression model and estimate the value of their factor
coefficients, we proposed to remove the current severity illness
factors in the adult models and add severity- and transplant-HCC-count-
interaction factors for the adult and child models beginning with the
2023 benefit year.
We sought comment on this proposal.
We are finalizing the removal of the current adult model severity
illness factors and adding an interacted HCC count model specification
to the adult and child risk adjustment models starting with the 2023
benefit year, as proposed.
We summarize and respond to public comments received on the
interacted HCC counts model specification updates below.
Comment: Several commenters supported the proposal to add an
interacted HCC counts model specification to the adult and child risk
adjustment models noting that the interacted HCC counts model
specification will improve model prediction and more accurately
quantify risk. Some commenters expressed general agreement with HHS
that the current models may be underpredicting plan liability of the
highest-risk enrollees, but did not otherwise comment on the interacted
HCC count model specification proposals. One commenter suggested that
the proposed refinement will mitigate issuers' concerns about adverse
selection and lead to a more competitive market, while another agreed
that it would address the current models' underestimate of plan
liability for the very highest-risk enrollees.
However, several other commenters opposed the proposed interacted
HCC counts model policy, stating that this change would add undue
complexity to the models and would increase coding and issuer gaming.
Some commenters requested clarification on how the interacted HCC
counts variable would be accommodated in the HHS-RADV process. These
commenters requested that HHS increase program integrity measures and
adopt additional safeguards against upcoding, such as targeted sampling
to test for upcoding in the HHS-RADV process, as an additional measure
to protect against gaming if this model specification change is
finalized. One commenter generally noted they only supported the
interacted HCC counts model specification if the two-stage weighted
model specification was also finalized.
Response: We agree with the commenters that the interacted HCC
counts model specification will improve model prediction, more
accurately quantify risk, and address the underprediction of plan
liability of the highest-risk enrollees that we have observed in the
current adult and child models. The current adult models incorporate a
severe illness adjustment that accounts for combinations of selected
HCCs. However, the total count of an enrollee's HCCs does not currently
independently affect the risk score and, while the current severity
illness indicator helps predict costs accurately among most adult
enrollees with qualifying severe illnesses, it does not fully address
the underprediction for the very highest-risk enrollees. The current
severity of illness indicators also do not extend to the child models.
The proposed interacted HCC counts model specification was targeted at
addressing these concerns and more accurately predicting risks and
capturing costs for the highest-risk enrollees.
We understand that there are concerns about the increased
complexity that the interacted HCC counts model specification may
introduce. However, we see the interacted HCC counts model
specification as an advancement of our current severe illness
indicators, which have been in place since the beginning of the risk
adjustment models, so we believe the interacted HCC counts model
specification change only slightly increases complexity. As described
in our analysis of 2018 enrollee-level EDGE data in the 2021 RA
Technical Paper, the interacted HCC counts model specification, along
with the HCC-contingent enrollment duration factors, significantly
improved prediction for the very highest-risk enrollees, which we
believe outweighs the disadvantages of slightly increasing model
complexity.\58\
---------------------------------------------------------------------------
\58\ Section 4.4. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Additionally, we acknowledge concerns over the potential for
upcoding and issuer gaming and further note that incorporating
safeguards to protect against the potential for gaming was a major
consideration in our investigation of various interacted HCC counts
model specifications. When developing the proposed interacted HCC
counts model specification we were specifically concerned that the
presence of counts across all HCCs, without requiring a
[[Page 27227]]
severe illness or transplant HCC, would further incentivize issuers to
code for more HCCs, thus increasing their payment or reducing their
charge under the State payment transfer formula. This would be
inconsistent with the risk adjustment principle not to encourage coding
proliferation.\59\ However, we believe that implementing the interacted
HCC counts model specification updates, as proposed, which restricts
the incremental risk score adjustment to enrollees with at least one
severe illness or transplant HCC, reduces concerns of issuers inflating
HCC counts to increase their transfers under the State payment transfer
formula. More specifically, our analysis of 2016, 2017, and 2018
enrollee-level EDGE data revealed that severe illness HCCs are
relatively uncommon; less than 2 percent of the adult enrollee-level
EDGE data population across these 3 benefit years had at least one
severe illness HCC, as opposed to about 20 percent of adult enrollees
with any payment HCC. Therefore, opportunities to inflate HCC counts
would be limited to a small fraction of total enrollees.
---------------------------------------------------------------------------
\59\ For information on the principles that guide the HHS risk
adjustment models' diagnostic classification system, see Section
1.1.2 of the HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a> (see, in
particular, Principle 6: The diagnostic classification should not
reward coding proliferation.)
---------------------------------------------------------------------------
Although we believe this approach appropriately balances the
different trade-offs by improving prediction for highest-risk enrollees
while mitigating the potential for gaming or upcoding, we generally
intend to monitor implementation of the model specification updates
finalized in this rule. Specifically, we will look for any notable
changes in HCC failure rates for the interacted severity and transplant
HCCs in HHS-RADV beginning with the 2023 benefit year that could be the
result of implementation of the interacted HCC counts model
specification updates.
Lastly, we note the interacted HCC counts model specification
update finalized in this rule is effective beginning with 2023 risk
adjustment. The HHS-RADV process for the 2023 benefit year would not
begin until spring 2024. Therefore, we intend to consider whether
changes are needed beginning with the 2023 benefit year HHS-RADV error
estimation methodology or processes in recognition of the interacted
HCC counts model specification and would propose any such changes in
future notice-and-comment rulemaking. HHS will also consider whether
targeted sampling, or other approaches, in HHS-RADV are necessary to
detect and address upcoding or coding proliferation as a result of the
implementation of the interacted HCC counts model specification.
Comment: Some commenters questioned whether the exclusion of
capitated claims biases the analysis of the proposed interacted HCC
counts model specification change.
Response: As previously explained,\60\ we have historically
excluded enrollees with capitated claims from the recalibration sample
due to concerns that methods for computing and reporting derived
amounts from capitated claims would not result in reliable data for
recalibration or analysis.\61\ However, in response to comments
submitted to the 2021 RA Technical Paper and the proposed rule, we
conducted additional analyses to investigate how enrollees with
capitated claims could have impacted our assessment of the
underpredicted subpopulations described in the 2021 RA Technical Paper.
This additional analysis did not show that the exclusion of enrollees
with capitated claims biased the analysis or results in the 2021 RA
Technical Paper.
---------------------------------------------------------------------------
\60\ March 2016 Risk Adjustment Methodology White Paper. (2016,
March 24). <a href="https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf">https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf</a>. See
also 87 FR 602 through 603.
\61\ Enrollees with at least one capitated claim in EDGE are
excluded from recalibration, as the risk adjustment models are used
to evaluate enrollees' expenditures, and capitated claims do not
provide meaningful and comparable cost (allowed charges) data in
comparison to non-capitated claims. We are also concerned that
methods for computing and reporting derived amounts from capitated
claims could be inconsistent across issuers and would not provide
reliable or comparable data.
---------------------------------------------------------------------------
To conduct this additional analysis, we compared the recalibration
sample, which excluded enrollees with any capitated claims,\62\ with
the capitation sample, which included only enrollees with capitated
claims. Overall, for the 2023 risk adjustment models, the capitation
exclusion resulted in 15-17 percent of enrollees being dropped from the
recalibration sample. As described in the 2021 RA Technical Paper,
where we utilized the recalibration sample to analyze the proposed
model changes, we observed underpredicted plan liability for the
lowest-risk enrollees (enrollees in low-risk deciles and without HCCs)
and underpredicted plan liability for the highest-risk enrollees
(enrollees in the top 0.1 percent decile and with many HCCs).\63\ In
our additional analysis of the capitation sample, we also observed the
same general trends of underprediction of the lowest-risk and highest-
risk enrollees. Further, we evaluated whether the proposed 2023 model
specification changes produced similar improvements in addressing the
underprediction of these subpopulations in the capitation sample as the
recalibration sample and found that the proposed 2023 model
specification changes resulted in similar prediction improvements for
both samples. Therefore, we do not believe that the exclusion of
enrollees with capitated claims biased the analysis or results, and we
do not believe that their inclusion would have meaningfully impacted
our findings.
---------------------------------------------------------------------------
\62\ The calibration sample is the same sample used for the
analysis in the 2021 RA Technical Paper, which excludes capitated
enrollees.
\63\ Figures 1.2 and 1.3. HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Comment: Some commenters recommended additional information and
analysis on the proposed interacted HCC counts model change
specification, such as its effect on calculations under the State
payment transfer formula for issuers that tend to attract healthier
enrollees, whether small sample sizes were an issue, and an evaluation
of whether removing the interacted severity HCCs would improve PLRS PRs
more than attaching counts to those HCCs. One of the commenters
suggested that it is difficult to assess the net effect of the
interacted HCC count proposals on risk adjustment State transfers
selection incentives. This commenter further noted they would oppose
the proposal if this proposed change reduced State transfers paid by
issuers with lower than average risk scores.
Response: We provided extensive information on the interacted HCC
counts model specification changes and the estimated impact on State
transfers in rulemakings,\64\ the 2021 RA Technical Paper,\65\ and the
HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes:
Summary Results for Transfer Simulations.\66\ In the transfer
simulation report, we provided summary-level information on the
estimated combined
[[Page 27228]]
impact of the proposed model specification changes on the calculation
of plan-level risk scores and State transfers. Issuers that
participated in the simulation also received detailed issuer-specific
data, including risk score and transfer estimates for the simulated
results.
---------------------------------------------------------------------------
\64\ 85 FR 78583 through 78586 and 87 FR 598 through 605.
\65\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\66\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes: Summary Results for Transfer Simulations. (December
28, 2021). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
While we acknowledge stakeholders' requests for additional
analysis, such as the effect of the interacted HCC counts model
specification updates on transfer calculations for issuers who tend to
attract healthier enrollees, operational and technological limitations
within both HHS and the issuer community limited capacity to conduct
additional simulations. Despite these limitations in being able to
conduct additional simulations, we were able to produce and share
evidence and detailed analyses in support of the proposed interacted
HCC counts model specification.\67\ For example, as described in the
2021 RA Technical Paper, the interacted HCC counts model specification
improved prediction for the highest-risk enrollees.\68\
---------------------------------------------------------------------------
\67\ Figures 4.2, 4.3, and 4.4 in the HHS-Operated Risk
Adjustment Technical Paper on Possible Model Changes demonstrate the
improvements in PRs of the interacted HCC counts and HCC-contingent
EDFs. HHS-Operated Risk Adjustment Technical Paper on Possible Model
Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\68\ Section 4.4. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
We also acknowledge the request to evaluate the impact of removing
the current severity and transplant indicators against the proposed
interacted HCC counts model specification. However, we do not believe
this approach warrants further evaluation because we did not propose to
entirely remove the indicators without replacing them. Additionally,
the current severity illness indicators improve the current adult
models' prediction of high-risk enrollees, so we do not believe we
should consider completely removing the severity illness terms from the
models. We reiterate that the proposed interacted HCC counts model
specification further improves the adult and child models' predictive
power beyond the adult models' current severity illness indicators.
Therefore, we do not believe that we should further consider removing
the severity illness indicators and not replacing them.
We recognized that one potential concern with this model
specification change was that the severity- and transplant-HCC-count-
interaction factor coefficients might be based on small sample sizes.
Therefore, we considered sample sizes of the various interacted HCC
count factors when developing this proposal and the proposed factor
coefficients. We explored alternative methods of interacting HCC counts
with severity and transplant HCCs, including interacting the HCC counts
with individually selected severity and transplant HCCs, but found that
interacting the HCC counts with a factor indicating the presence of at
least one of the selected HCCs in each group produced PR improvements
and sufficient sample sizes for reasonably stable factor coefficient
estimates. To that end, we analyzed 2016, 2017, and 2018 enrollee-level
EDGE data and chose the model specifications that grouped the HCC
counts interacted with individual severity and transplant HCCs into two
sets of aggregated factors to maximize sample size, reduce concerns of
overfitting the model, and reduce the number of factors being added to
the models. More specifically, in the adult models, we found that
starting with 4+ HCCs for the transplant interacted factors improved
predictions of enrollees at the very high end in terms of risk and cost
and ending at 8+ HCCs for the transplant interacted factors, instead of
10+ HCCs, addressed the small sample sizes of enrollees with a
transplant and 9+ HCCs. For the child models, we found having one
transplant interacted factor for 4+ HCCs provided more stable estimates
given the smaller sample sizes for children than those for adults. With
the proposed structure for transplant and severity interacted factors
in place, the resulting sample sizes are comparable to the sample sizes
used for individual HCCs in the adult and child risk adjustment models.
iii. Changes to the Adult Model Enrollment Duration Factors \69\
---------------------------------------------------------------------------
\69\ As explained in the 2021 Payment Notice proposed rule, we
found that partial-year enrollees in the child models did not have
the same risk differences as partial-year enrollees in the adult
models, and they tended to have similar risk to full-year enrollees
in the child models. See 85 FR 7103 through 7104. In the infant
models, we found that partial-year infants had higher expenditures
on average compared to their full-year counterparts; however, the
incorporation of enrollment duration factors created interaction
issues with the current severity and maturity factors and did not
have a meaningful impact on the general predictive accuracy of the
infant models. Ibid. Therefore, we proposed to continue to apply
enrollment duration factors to the adult models only.
---------------------------------------------------------------------------
In the proposed rule, we proposed to change the enrollment duration
factors in the adult risk adjustment models to improve prediction for
partial-year adult enrollees with and without HCCs (87 FR 603 through
604). Although the values for the factors change from year to year as
part of the annual recalibration of the adult models, we have not made
changes to the structure of the enrollment duration factors since they
were first adopted for the 2017 benefit year in the 2018 Payment Notice
(81 FR 94071 through 94074).
As described in prior rules and the 2021 RA Technical Paper, we
found that the current adult model enrollment duration factors
underpredicted plan liability for partial-year adult enrollees with
HCCs and overpredicted plan liability for partial-year adult enrollees
without HCCs.\70\ \71\
---------------------------------------------------------------------------
\70\ 85 FR 29164 at 29188 through 29190.; 86 FR 24140 at 24151
through 24162; and the HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\71\ When we refer to the enrollees with and without HCCs, we
are referring to enrollees without payment HCCs.
---------------------------------------------------------------------------
Therefore, beginning with the 2023 benefit year, we proposed to
eliminate the current monthly enrollment duration factors of up to 11
months for all enrollees in the adult models, and replace them with new
monthly enrollment duration factors of up to 6 months that would apply
only to adult enrollees with HCCs. We explained that under this
proposal there would be no enrollment duration factors for adult
enrollees without HCCs starting with the 2023 benefit year, nor would
there be enrollment duration factors for adult enrollees with HCCs and
more than 6 months of enrollment.
We solicited comments on the proposed changes to the enrollment
duration factors for the adult models.
After reviewing the public comments, we are finalizing the proposal
to replace the current enrollment duration factors in the adult models
with HCC-contingent enrollment duration factors as proposed. As such,
beginning with the 2023 benefit year, there will no longer be
enrollment duration factors for adult enrollees without HCCs starting
with the 2023 benefit year, nor will there be enrollment duration
factors for adult enrollees with HCCs and more than 6 months of
enrollment.
We summarize and respond to public comments received on proposed
changes to the adult model enrollment duration factors below.
Comment: Most commenters supported the proposed changes to the
enrollment duration factors for the adult models. Many of these
commenters asserted that the proposed changes would improve model
prediction. One commenter noted that the HCC-contingent enrollment
duration factors would solve the majority of model prediction issues
even in the absence of
[[Page 27229]]
the adoption of the proposed two-stage weighted model and interacted
HCC counts model specification updates. Several commenters also stated
that the proposed HCC-contingent enrollment duration factors would
reduce issuers' incentives for risk selection.
Response: We are finalizing the replacement of the current monthly
enrollment duration factors of up to 11 months for all enrollees in the
adult models with new monthly enrollment duration factors of up to 6
months that would apply only to enrollees in the adult models with
HCCs. As previously explained, our analysis of the current adult model
enrollment duration factors found that plan liability was
underpredicted for partial-year adult enrollees with HCCs and
overpredicted for partial-year adult enrollees without HCCs.\72\ This
targeted refinement was developed in response to this finding and will
improve prediction for partial-year adult enrollees with and without
HCCs. Additionally, HHS agrees that the enrollment duration factor
changes will reduce issuers' incentives for risk selection by improving
model prediction.
---------------------------------------------------------------------------
\72\ HHS-Operated Risk Adjustment Technical Paper on Possible
Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Comment: Several commenters focused on the intersection of special
enrollment periods (SEP) and these proposed changes. Some commenters
suggested that the proposed enrollment duration factor updates would
mitigate the impact of the recent access to SEPs enhanced during the
2020 and 2021 benefit years due to the COVID-19 PHE and ARP,\73\ which
changed the SEP enrollee pool and increased opportunities for adverse
selection. One of these commenters noted the importance of predictive
accuracy for 1 to 6-month enrollees as Exchanges on the Federal
platform and State Exchanges expand plan selection options during SEP
enrollments. Another commenter noted HHS' analysis of the proposed HCC-
contingent duration factors is not representative of the current SEP
landscape and recommended additional analysis before the proposed
enrollment duration factor updates are implemented.
---------------------------------------------------------------------------
\73\ See, for example, HHS Announces Marketplace Special
Enrollment Period for COVID-19 Public Health Emergency. (2021,
January 28). CMS. <a href="https://www.hhs.gov/about/news/2021/01/28/hhs-announces-marketplace-special-enrollment-period-for-covid-19-public-health-emergency.html">https://www.hhs.gov/about/news/2021/01/28/hhs-announces-marketplace-special-enrollment-period-for-covid-19-public-health-emergency.html</a>.
---------------------------------------------------------------------------
Response: We appreciate the comments on the intersection of SEP
opportunities and the proposed updates to the adult model enrollment
duration factors. We agree with commenters that the proposed updates
would mitigate the impact of the recent SEPs enhanced during the 2020
and 2021 benefit years due to the COVID-19 PHE and ARP on potential
opportunities for adverse selection, but note that these updates to the
enrollment duration factors will not be implemented until the 2023
benefit year. We also agree with the commenter on the importance of
predictive accuracy for partial-year enrollees and believe that these
changes will improve the current models' predictive accuracy for
partial-year adult enrollees with and without HCCs.
As noted above, we are finalizing the changes to the adult model
enrollment duration factors as proposed and will implement the new
factors beginning with the 2023 benefit year adult models. To develop
the 2023 benefit year risk adjustment models, we used the 2017, 2018,
and 2019 enrollee-level EDGE data, as these datasets were the 3 most
recent consecutive years of enrollee-level EDGE data that were
available at the time we incorporated the data in the draft
recalibrated coefficients published in the proposed rule. Therefore, we
believe that the data years that we used to develop the HCC-contingent
enrollment duration factors are the most appropriate data years
available at this time for purposes of analyzing the proposal to adopt
these changes beginning with the 2023 benefit year and that further
analysis is not required at this time. As discussed elsewhere in this
rule, we are still assessing whether to use the 2020 enrollee-level
EDGE for model recalibration in the future, and we do not have 2021
benefit year enrollee-level EDGE yet.\74\ As such, we have not yet been
able to analyze the impact of the most recent SEP changes. However, HHS
remains committed to ongoing analysis of these issues and intends to
study the impact of the new factors once implemented.
---------------------------------------------------------------------------
\74\ See 45 CFR 153.730. Since April 30, 2022, falls on a
weekend, CMS will exercise enforcement discretion to shift the
deadline for submission of final 2021 benefit year risk adjustment
data to May 2, 2022.
---------------------------------------------------------------------------
Comment: A few commenters expressed concerns that the proposed HCC-
contingent enrollment duration factors would negatively impact the
small group market or that the changes would not align with small group
market enrollment renewal patterns (for example, non-calendar year
coverage). One commenter that opposed the adoption of the proposed
changes stated that eliminating enrollment duration factors for non-HCC
enrollees would disincentivize issuers from taking on new small group
employers in the fourth quarter. Other commenters that supported the
proposed enrollment duration factors changes noted general concerns
that the proposed updates to the enrollment duration factors may
negatively impact the small group market.
Response: We explored partial-year enrollment patterns between the
individual \75\ and small group markets as part of the consideration of
updates to the enrollment duration factors for the risk adjustment
adult models. In the 2021 Payment Notice (85 FR 29189), we shared our
preliminary analysis of the 2017 enrollee-level EDGE dataset found
separate enrollment duration factors by market in the adult models
could be warranted; therefore, we continued to study these issues as
additional enrollee-level EDGE data became available. Our analysis of
partial-year enrollment using the 2018 enrollee-level EDGE dataset,
which occurred alongside our development of the proposed HCC-contingent
enrollment duration factors in the proposed 2022 Payment Notice, did
not find a meaningful distinction in relative costs between markets on
average once the proposed enrollment duration factors of up to 6 months
for adult enrollees with HCCs were implemented.\76\ Even though reasons
for and patterns of partial-year enrollment differ by market, we
concluded that the patterns most relevant for predicting cost (for
example, how enrollment duration relates to cost conditional on the
presence of HCCs) were the same for both markets.\77\ Therefore, we
determined it would not be necessary to introduce market-specific
factors if the proposed HCC-contingent enrollment duration factors were
adopted in place of the existing enrollment duration factors. We also
explained that if the HCC-contingent factors were to vary by market,
the factors for both markets would generally be very similar, which
would add little value to the models while adding additional
complexity.\78\ Therefore, we proposed the adoption of
[[Page 27230]]
the same HCC-contingent factors for both markets.
---------------------------------------------------------------------------
\75\ Section 3. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>. In the
enrollee-level EDGE dataset, merged market enrollees are assigned to
the individual or small group market indicator based on their plan.
\76\ Section 3.3.2. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>. See also 86
FR 24161.
\77\ Ibid.
\78\ Section 3.3.2. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
In response to comments, we again considered whether the HCC-
contingent enrollment duration factors could have negative impacts on
small group market issuers, such as on those that offer non-calendar
year coverage and take on new business later in the year. Our continued
consideration of these issues did not find evidence of such negative
impacts.\79\ More specifically, while we recognize there are likely
some cases where a partial-year enrollee only receives risk adjustment
ineligible services, our analysis found no evidence that it is
associated with meaningful underpayment in either the individual or
small group market. In other words, on average, costs are sufficiently
low for partial-year enrollees with no HCCs that even a risk score
based only on demographic factors would generally overpredict plan
liability.\80\ Commenters did not provide data or other information in
support of the general assertions or concerns about potential impacts
on the small group market and have not otherwise refuted the
conclusions drawn from our analysis of available enrollee-level EDGE
data. Therefore, we continue to believe it is appropriate to finalize
and apply the proposed changes to the adult model enrollment duration
factors to both the individual and small group (including merged)
markets and to not pursue factors that vary by market. For the reasons
outlined above, we also believe that the presumed negative impact on
new business in the small group market would be limited, and the
guaranteed availability provisions, which require health insurance
issuers offering non-grandfathered coverage in the individual or small
group market to accept every individual and employer in the State that
applies for such coverage unless an exception applies, further protects
against issuers declining to take on new small group employers.
---------------------------------------------------------------------------
\79\ Section 3.4. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\80\ Ibid.
---------------------------------------------------------------------------
Comment: One commenter stated that they were against limiting
enrollment duration factors to up to 6-month enrollees and would
support the proposed changes if the upper limit for the factors was
extended to 9 months. The commenter noted this change to the upper
limit would better account for renewal patterns in the small group
market.
Response: While we considered other enrollment duration factor
structures, we proposed and are finalizing a 6-month limit to the
enrollment duration factors because we found that the monthly average
cost variation by the number of months enrolled is meaningfully reduced
after 6 months for adult enrollees with HCCs, and enrollment duration
factors beyond 6 months did not meaningfully improve prediction for the
adult models.\81\ Specifically, we found that these coefficients would
have been close to 0 (and in some cases negative), which means they
would not have contributed much to the overall risk score for enrollees
or would have had to be constrained to 0 in the risk adjustment adult
models. Given this analysis and in an effort to limit the number of
factors in the models, we are finalizing the HCC-contingent enrollment
duration factors for up to 6 months as proposed.
---------------------------------------------------------------------------
\81\ Section 3.2. HHS-Operated Risk Adjustment Technical Paper
on Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
Additionally, as explained above, we continue to believe it is
appropriate to finalize and apply the proposed changes to the adult
model enrollment duration factors to the small group market and to not
pursue factors that vary by market.
iv. Combined Impact of the Model Changes
As discussed in detail above, after reviewing the public comments
on the proposed risk adjustment model changes, we are finalizing the
addition of the interacted HCC counts factors in the adult and child
models, the removal of the current adult model severity illness
factors, and the replacement of the existing enrollment duration
factors with the HCC-contingent enrollment duration factors in the
adult models, as proposed. Our analysis of the proposed interacted HCC
counts factors combined with the proposed HCC-contingent enrollment
duration factors in the adult models significantly improves predictions
across most deciles and HCC counts for the very highest-risk enrollees,
as well as the lowest-risk enrollees without HCCs.\82\ However, we are
not finalizing the proposal to add a two-stage weighted model
specification to model recalibrations.
---------------------------------------------------------------------------
\82\ Figure 4.2. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
We summarized and responded to public comments received on proposed
model specifications updates in the above sections.
c. Pricing Adjustment for the Hepatitis C Drugs
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 605), for the 2023 benefit year, we proposed
to continue applying a market pricing adjustment to the plan liability
associated with Hepatitis C drugs in the risk adjustment models.\83\
---------------------------------------------------------------------------
\83\ 84 FR 17463 through 17466.
---------------------------------------------------------------------------
We sought comment on this proposal.
After reviewing the public comments, we are finalizing this
proposal to 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 beginning with the 2020
models.
We summarize and respond to public comments received on the pricing
adjustment for Hepatitis C drugs below.
Comment: Most commenters supported the Hepatitis C pricing
adjustment. One commenter noted that the pricing adjustment ensures HHS
is applying the most accurate data, while protecting against issuers
that might seek to influence provider prescribing patterns to the
issuers' benefit. Another commenter noted that without the Hepatitis C
pricing adjustment, issuers would be incentivized to focus on only a
subset of enrollees needing treatment if they can trigger an increase
in an enrollee's risk score that is higher than the actual plan
liability of the drug claim.
Conversely, a few commenters expressed concerns about the Hepatitis
C drugs pricing adjustment. These commenters asserted that the
professional independence and ethical standards of providers would
prevent them from prescribing drugs that they did not believe were
medically necessary and appropriate, reducing the potential for issuers
to game the model. These commenters were concerned about
undercompensating issuers for enrollees with serious chronic
conditions, which would incentivize issuers to avoid these enrollees.
They encouraged HHS to evaluate the models continually to ensure they
fully capture the cost of the current standard of care for conditions
in the models. Additionally, one commenter cautioned against reducing
the coefficient more than the expected decrease, which the commenter
explained would incentivize issuers to reduce the availability of the
treatment. This commenter also recommended that HHS clarify the data
source and approach it is using to constrain the Hepatitis C RXC
[[Page 27231]]
coefficient. Finally, one commenter expressed concern that constraining
the Hepatitis C RXC coefficient would undermine recent progress to
treat Hepatitis C infections.
Response: We continue to believe that the Hepatitis C pricing
adjustment is appropriate at this time, will help avoid perverse
incentives, and will lead to Hepatitis C RXC coefficients that better
reflect anticipated actual 2023 benefit year plan liability associated
with Hepatitis C drugs. Specifically, the purpose of the Hepatitis C
pricing adjustment is to address the significant pricing changes
associated with the introduction of new and generic Hepatitis C drugs
between the data years used for recalibrating the models and the
applicable recalibration benefit year that present a risk of creating
perverse incentives by overcompensating issuers. We reassessed the
pricing adjustment for the Hepatitis C RXC for the 2023 benefit year
model recalibration and found that the data used for the 2023 benefit
year risk adjustment model recalibration (that is, 2017, 2018, and 2019
enrollee-level EDGE data) still does not account for the significant
pricing changes that we have observed for the Hepatitis C drugs due to
the introduction of newer and cheaper Hepatitis C drugs. Therefore, the
data that will be used to recalibrate the models needs to be adjusted
because it does not precisely reflect the average cost of Hepatitis C
treatments expected in the 2023 benefit year.
In making this determination, we consulted our clinical and
actuarial experts, and analyzed the most recent enrollee-level EDGE
data available to further assess the changing costs associated with
Hepatitis C enrollees. Due to the high cost of these drugs reflected in
the 2017, 2018, and 2019 enrollee-level EDGE data, without a pricing
adjustment to plan liability, issuers would be overcompensated for the
Hepatitis C RXC in the 2023 benefit year, and they could be
incentivized to encourage overprescribing practices and game risk
adjustment such that the issuer's risk adjustment payment is increased
or risk adjustment charge is decreased. We also recognize concerns that
applying a pricing adjustment that would reduce the coefficient for the
Hepatitis C RXC by more than the expected decrease in costs could
incentivize issuers to reduce the availability of the treatment.
However, we believe that the Hepatitis C pricing adjustment accurately
captures the costs of Hepatitis C drugs for the applicable risk
adjustment benefit year using the most recently available data,
balances the need to deter gaming practices with the need to ensure
that issuers are adequately compensated, and does not undermine recent
progress in the treatment of Hepatitis C.
Additionally, we recognize the important role that the ethical
standards of providers play in preventing overprescribing of drugs that
they do not believe are medically necessary and appropriate, but we
believe that the Hepatitis C pricing adjustment is the most effective
way to protect against perverse incentives that could affect
prescribing patterns. Furthermore, while we appreciate commenters'
concerns about undercompensating issuers for enrollees with serious
chronic conditions, HHS is adopting several proposals in this
rulemaking to address the adult and child models' underprediction for
enrollees with many HCCs.\84\ Specifically, we finalized the interacted
HCC counts and HCC-contingent enrollment duration factors model
specifications to improve model prediction for the higher risk
enrollees and ensure that issuers are being accurately compensated for
these enrollees.\85\ We intend to continue to reassess this pricing
adjustment as part of future benefit years' model recalibrations using
additional years of available enrollee-level EDGE data.
---------------------------------------------------------------------------
\84\ Figure 1.3. HHS-Operated Risk Adjustment Technical Paper on
Possible Model Changes. (2021, October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
\85\ The Interacted HCC Counts and HCC-contingent enrollment
duration factors also improve the models' predictive accuracy for
the lower risk deciles. See, for example, Figure 4.2. HHS-Operated
Risk Adjustment Technical Paper on Possible Model Changes. (2021,
October 26). CMS. <a href="https://www.cms.gov/files/document/2021-ra-technical-paper.pdf">https://www.cms.gov/files/document/2021-ra-technical-paper.pdf</a>.
---------------------------------------------------------------------------
d. Risk Adjustment RXC Mapping for Recalibration
i. Inclusion and Exclusion Criteria for Drugs in RXC Mapping and
Recalibration
In the HHS Notice of Benefit and Payment Parameters for 2023
proposed rule (87 FR 584, 605), we provided an overview of the
inclusion and exclusion criteria HHS uses to identify drugs for mapping
to RXCs in the adult risk adjustment models, reviewed what version of
the RXC mapping document HHS uses when processing the enrollee-level
EDGE data for a benefit year for recalibration of the adult risk
adjustment models, and outlined the criteria that warrant consideration
for changes to the incorporation (or exclusion) of particular drugs
from the RXC mappings in future benefit year recalibrations. We also
proposed a change to the approach for identifying the version of the
RXC mapping document HHS would use to process a given benefit year's
enrollee-level EDGE data for recalibration of the adult risk adjustment
models.
In accordance with Sec. 153.320, HHS develops and publishes the
risk adjustment methodology applicable in States where HHS operates the
program, including the draft factors to be employed in the models for
the benefit year. This includes information on the annual recalibration
of the adult risk adjustment models' RXC coefficients using data from
the applicable prior benefit years trended forwarded to reflect the
applicable benefit year of risk adjustment. Drugs that appear on claims
data, either through National Drug Codes (NDCs) or Healthcare Common
Procedural Coding System (HCPCS), are cross walked to RxNorm Concept
Unique Identifiers (RXCUIs).\86\ RXCUI mappings are always matched to
the NDCs and HCPCS applicable to the particular EDGE data year as the
NDC and HCPCS reflect the drugs that were available in the market
during the benefit year.\87\ As explained in the proposed rule, we had
been using the most recent RXC mappings (RXCUIs that map to RXCs) that
were available when we first processed the enrollee-level EDGE data for
a benefit year for recalibration of the adult risk adjustment
models.\88\ For example, for the 2022 benefit year, we recalibrated the
adult risk adjustment models using 2016, 2017, and 2018 enrollee-level
EDGE data, and applied the second quarter (Q2) 2018 RXC mapping
document for both 2016 and 2017 \89\ and the Q2 2019 mapping document
for 2018 for recalibration of the adult risk adjustment models' RXC
factors.
---------------------------------------------------------------------------
\86\ See, for example, 81 FR 94074 through 94080.
\87\ See, for example, Creation of the 2018 Benefit Year HHS-
Operated Risk Adjustment Models Draft Prescription Drug (RXCUIs) to
HHS Drug Classes (RXCs) Crosswalk Memorandum. (2017, September 18).
CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf</a>.
\88\ RXCUIs differ by chemical (drug ingredient), strength, and
dose form, but not by manufacturer or package size. This means that
RXCUIs describe the same drugs year-over-year, even as the
underlying NDCs and HCPCs change due to changes in labelers, which
is why it is possible to apply different mappings to different
years. For further information, see RxNorm Overview. (2022, January
3). NIH. <a href="https://www.nlm.nih.gov/research/umls/rxnorm/overview.html">https://www.nlm.nih.gov/research/umls/rxnorm/overview.html</a>.
\89\ RXCs were not added to the risk adjustment models until
2018 benefit year; therefore, we used 2018 RXC mappings for both
2016 and 2017 enrollee-level EDGE data as there were no 2016 and
2017 RXC mapping documents. Note that, even though 2018 RXC mappings
were applied to these earlier years, they were cross walked to the
NDCs and HCPCS that describe the applicable drugs during those
earlier years.
---------------------------------------------------------------------------
As noted in the 2022 Payment Notice (86 FR 26164), we also
continuously
[[Page 27232]]
assess the availability of drugs in the market and the associated
mapping of those drugs to RXCs in the adult risk adjustment models.
More specifically, during a benefit year, HHS conducts quarterly
reviews of RXCUIs that map to RXCs in the adult risk adjustment models
for that benefit year. During our annual review of enrollee-level EDGE
data for recalibration purposes, and to a certain extent during
quarterly reviews of RXCUIs that map to RXCs in the adult risk
adjustment models, HHS evaluates the inclusion and exclusion of RXCUIs
based on criteria such as: (1) Whether costs for an individual drug are
comparable to the costs of other drugs in the same class, (2) whether a
drug is a good predictor of the presence of the diseases that map to
the HCCs that an RXC indicates (which can be evaluated through clinical
expert review in the absence of data), (3) whether the pharmacological
properties and prescribing patterns are consistent with treatment of a
particular condition (also evaluated through clinical expert review),
and (4) stakeholder feedback.\90\ As a result of this ongoing
assessment, we make quarterly updates to the RXC Crosswalk, which
identifies the list of NDCs and HCPCS indicating the presence of an RXC
in the current benefit year ``Do It Yourself'' (DIY) software and EDGE
reference data, to ensure drugs are appropriately mapped to RXCs. This
can include the addition or removal of drugs based on market
availability and the other criteria identified above. As such, the risk
adjustment mapping of RXCUIs to RXCs, along with the list of NDCs and
HCPCS that crosswalk to each RXCUI, may be updated throughout a
particular benefit year of risk adjustment. HHS provides information to
issuers on these updates through the DIY software, which is published
on the CCIIO website,\91\ as well as through the EDGE global reference
updates, which are published on the Distributed Data Collection program
page on the Registration for Technical Assistance Portal (REGTAP).\92\
---------------------------------------------------------------------------
\90\ See, for example, Creation of the 2018 Benefit Year HHS-
Operated Risk Adjustment Models Draft Prescription Drug (RXCUIs) to
HHS Drug Classes (RXCs) Crosswalk Memorandum. (2017, September 18).
CMS. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf</a>.
\91\ The January 7, 2022 version of the DIY software is
available at 2021 Benefit Year Risk Adjustment Updated HHS-Developed
Risk Adjustment Model Algorithm ``Do It Yourself (DIY)'' Software.
(2022). CMS.
\92\ Available at Distributed Data Collection. REGTAP.
---------------------------------------------------------------------------
This ongoing updating process occurs on a different timeline than
the annual model recalibration activities for a given benefit year.
In the proposed rule, we proposed to change the approach for
identifying the version of the RXC mapping document HHS would use to
process a given benefit year's enrollee-level EDGE data for the annual
recalibration of the adult risk adjustment models. More specifically,
we proposed to recalibrate the adult risk adjustment models using each
final, fourth quarter (Q4) RXC mapping document that was applicable for
each benefit year of data that is included in the applicable benefit
year's model recalibration, while continuing to engage in annual and
quarterly review processes using the inclusion and exclusion criteria
described above. For example, if we recalibrate the 2024 benefit year
adult risk adjustment models using 2018, 2019, and 2020 benefit year
enrollee-level EDGE data, we would use the Q4 RXC mapping document for
each of those benefit years (that is, Q4 2018, Q4 2019, and Q4 2020,
respectively) for recalibration purposes. We would also use the
criteria described above to evaluate the inclusion and exclusion of
RXCUIs and may make other updates to the 2024 benefit year RXC
Crosswalk to ensure drugs are appropriately mapped to RXCs.
We proposed to begin to use this approach for recalibration of the
2023 adult risk adjustment models with the exception of the 2017
enrollee-level EDGE data year, for which we proposed to use the most
recent RXC mapping document that was available when we first processed
the 2017 enrollee-level EDGE data (that is, Q2 2018). We proposed to
use the applicable benefit year's Q4 RXC mapping documents for both the
2018 and 2019 benefit years of enrollee-level EDGE data for the
recalibration of the adult risk adjustment models for the 2023 benefit
year. Under this proposal, we would generally hold those mappings
constant when using the 2018 and 2019 enrollee-level EDGE data years in
future benefit year model recalibrations (except under the extenuating
circumstances that are described in the next section that can result in
targeted changes to RXC mappings)--meaning that we would use the
applicable benefit year's Q4 RXC mapping documents when the 2018 or
2019 benefit year of enrollee-level EDGE data is used for future
benefit year model recalibrations.\93\ The purpose of maintaining a
specific version of the same RXC mapping document for future
recalibrations is to limit the volatility of some coefficients from
year-to-year and to ensure that we are capturing the utilization and
costs observed for the underlying drugs in use in that year for the
condition. Because the final DIY software update contains the Q4 list,
this approach would also have the added benefit of providing issuers
the opportunity to see the mappings/crosswalk that are likely to be
applied to that data year in the final DIY software release before it
is used for recalibration.
---------------------------------------------------------------------------
\93\ Consistent with the approach finalized in the 2022 Payment
Notice, the 2018 and 2019 enrollee-level EDGE data would be used for
the recalibration of the 2024 benefit year models and the 2019
enrollee-level EDGE data would be used for the recalibration of the
2025 benefit year models.
---------------------------------------------------------------------------
For purposes of the 2023 benefit year recalibration, we proposed an
exception for the 2017 benefit year enrollee-level EDGE data and would
instead use the most recent RXC mapping document that was available
when we first processed the benefit year's enrollee-level EDGE data for
recalibration purposes (that is, Q2 2018). We proposed this approach
for the 2017 benefit year enrollee-level EDGE data because the RXCs
were still under development in 2017, and were not included in the
adult risk adjustment models until 2018; \94\ therefore, no RXC
mappings existed for the 2017 benefit year. Thus, we proposed to use
the Q2 2018 RXC mapping document for the 2017 benefit year enrollee-
level EDGE data for 2023 model recalibration, consistent with the
mapping used for processing the 2017 data for recalibration of the 2021
and 2022 adult models. We sought comment on this proposal.
---------------------------------------------------------------------------
\94\ See 81 FR 94075.
---------------------------------------------------------------------------
We summarize and respond to public comments received on the
proposals related to the RXC mapping document used for the annual
recalibration of the adult models, along with the comments and
responses on the other risk adjustment RXC mapping proposals.
ii. Targeted Changes to RXC Mappings for Recalibration
Regardless of the version of the RXC mapping document we use during
the annual adult risk adjustment model recalibration, there may be a
relatively small number of drugs that still require additional analysis
and consideration given the changes that can occur in the market
between the data year and the applicable benefit year of risk
adjustment. The targeted changes to particular drugs' mappings
typically occur when performing recalibration for future benefit years.
Based on our experience since the incorporation of RXCs into risk
adjustment models in the 2018 benefit year, we do not believe that the
removal or addition of an RXCUI
[[Page 27233]]
from the RXC mappings (and the associated removal of the NDCs and HCPCS
associated with that RXCUI) are typically material to recalibration
because most drug removals are not associated with utilization and cost
levels that would have a meaningful impact on model coefficients.\95\
However, in extenuating circumstances where HHS believes there will be
a significant impact from a change in an RXCUI to RXC mapping, such as:
(1) Evidence of significant off-label prescribing (as was the case with
hydroxychloroquine sulfate \96\); (2) abnormally large changes in
clinical indications or practice patterns associated with drug usage;
or (3) certain situations in which the cost of a drug (or biosimilars)
become much higher or lower than the typical cost of drugs in the same
prescription drug category, HHS will consider whether changes to the
RXCUI to RXC mapping from the applicable data year crosswalk are needed
for future benefit year recalibrations. In the proposed rule (87 FR 608
through 609), we illustrated cases where we believe extenuating
circumstances existed and how we evaluated whether to make targeted
changes to RXC mappings due to those extenuating circumstances as part
of the annual recalibration process for the 2023 benefit year adult
models. In particular, we considered the cases of RXCUI to RXC mapping
of Descovy[supreg] and hydroxychloroquine sulfate. For Descovy[supreg],
we did not propose to make an exception to remove Descovy[supreg] from
mapping to RXC 01 in 2017, 2018 or 2019 benefit year enrollee-level
EDGE datasets used for the 2023 benefit year recalibration of the adult
models. For hydroxychloroquine sulfate, we proposed that the targeted
removal of this drug from mapping to RXC 09 was again appropriate, but
to effectuate the targeted removal of this drug for purposes of the
2023 benefit year recalibration of the adult models, we would adopt a
different approach than the one used for the 2022 benefit year risk
adjustment model recalibration and would instead remove the RXCUI to
RXC mapping in the 2018 and 2019 enrollee-level EDGE data for
hydroxychloroquine sulfate to RXC 09 (Immune Suppressants and
Immunomodulators) and the related RXC 09 interactions (RXC 09 x HCC056
or 057 and 048 or 041; RXC 09 x HCC056; RXC 09 x HCC
[…truncated; see source link]Indexed from Federal Register on May 6, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.