Rule2023-08368
Patient Protection and Affordable Care Act, HHS Notice of Benefit and Payment Parameters for 2024
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
April 27, 2023
Effective
June 18, 2023
Issuing agencies
Health and Human Services Department
Abstract
This final rule includes payment parameters and provisions related to the HHS-operated risk adjustment and risk adjustment data validation programs, as well as 2024 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 has requirements related to updating standardized plan options and reducing plan choice overload; the automatic re-enrollment hierarchy; plan and plan variation marketing name requirements for QHPs; essential community providers (ECPs) and network adequacy; failure to file and reconcile; special enrollment periods (SEPs); the annual household income verification; the deadline for QHP issuers to report enrollment and payment inaccuracies; requirements related to the State Exchange improper payment measurement program; and requirements for agents, brokers, and web-brokers assisting FFE and SBE-FP consumers.
Full Text
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<title>Federal Register, Volume 88 Issue 81 (Thursday, April 27, 2023)</title>
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[Federal Register Volume 88, Number 81 (Thursday, April 27, 2023)]
[Rules and Regulations]
[Pages 25740-25923]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-08368]
[[Page 25739]]
Vol. 88
Thursday,
No. 81
April 27, 2023
Part II
Department of Health and Human Services
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45 CFR Parts 153, 155, and 156
Patient Protection and Affordable Care Act, HHS Notice of Benefit and
Payment Parameters for 2024; Final Rule
Federal Register / Vol. 88 , No. 81 / Thursday, April 27, 2023 /
Rules and Regulations
[[Page 25740]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
45 CFR Parts 153, 155, and 156
[CMS-9899-F]
RIN 0938-AU97
Patient Protection and Affordable Care Act, HHS Notice of Benefit
and Payment Parameters for 2024
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Final rule.
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SUMMARY: This final rule includes payment parameters and provisions
related to the HHS-operated risk adjustment and risk adjustment data
validation programs, as well as 2024 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 has requirements related to updating
standardized plan options and reducing plan choice overload; the
automatic re-enrollment hierarchy; plan and plan variation marketing
name requirements for QHPs; essential community providers (ECPs) and
network adequacy; failure to file and reconcile; special enrollment
periods (SEPs); the annual household income verification; the deadline
for QHP issuers to report enrollment and payment inaccuracies;
requirements related to the State Exchange improper payment measurement
program; and requirements for agents, brokers, and web-brokers
assisting FFE and SBE-FP consumers.
DATES: These regulations are effective on June 18, 2023.
FOR FURTHER INFORMATION CONTACT: Jeff Wu, (301) 492-4305, Rogelyn
McLean, (301) 492-4229, Grace Bristol, (410) 786-8437, for general
information.
Joshua Paul, (301) 492-4347, Jacquelyn Rudich, (301) 492-5211, John
Barfield, (301) 492-4433, or Bryan Kirk, (443) 745-8999, for matters
related to HHS-operated risk adjustment.
Leanne Klock, (410) 786-1045, or Joshua Paul, (301) 492-4347, for
matters related to risk adjustment data validation (HHS-RADV).
John Barfield, (301) 492-4433, or Leanne Klock, (410) 786-1045, for
matters related to FFE and SBE-FP user fees.
Jacob LaGrand, (301) 492-4400, for matters related to actuarial
value (AV).
Brian Gubin, (410) 786-1659, for matters related to agent, broker,
and web-broker guidelines.
Claire Curtin, (301) 492-4400 or Marisa Beatley, (301) 492-4307,
for matters related to failure to file and reconcile.
Grace Bridges, (301) 492-5228, or Natalie Myren, (667) 290-8511,
for matters related to the verification process related to eligibility
for insurance affordability programs.
Carolyn Kraemer, (301) 492-4197, for matters related to auto re-
enrollment in the Exchanges.
Nicholas Eckart, (301) 492-4452, for matters related to termination
of Exchange enrollment or coverage for qualified individuals.
Marisa Beatley, (301) 492-4307, or Dena Nelson, (240) 401-3535, for
matters related to qualified individuals losing minimum essential
coverage (MEC) and qualifying for SEPs.
Samantha Nguyen Kella, (816) 426-6339, for matters related to plan
display error SEPs.
Eva LaManna, (301) 492-5565, or Ellen Kuhn, (410) 786-1695, for
matters related to the eligibility appeals requirements.
Linus Bicker, (803) 931-6185, for matters related to State Exchange
improper payment measurement.
Alexandra Gribbin, (667) 290-9977, for matters related to stand-
alone dental plans.
Nikolas Berkobien, (667) 290-9903, for matters related to
standardized plan options.
Carolyn Kraemer, (301) 492-4197, for matters related to plan and
plan variation marketing name requirements for QHPs.
Emily Martin, (301) 492-4423, or Deborah Hunter, (443) 386-3651,
for matters related to network adequacy and ECPs.
Rebecca Braun-Harrison, (667) 290-8846 for matters related to
reporting enrollment and payment inaccuracies and administrative
appeals.
Jenny Chen, (301) 492-5156, or Shilpa Gogna, (301) 492-4257, for
matters related to State Exchange Blueprint approval timelines.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
A. Legislative and Regulatory Overview
B. Summary of Major Provisions
III. Provisions of the Proposed Regulations
A. Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
B. Part 155--Exchange Establishment Standards and Other Related
Standards under the Affordable Care Act
C. Part 156--Health Insurance Issuer Standards under the
Affordable Care Act, Including Standards Related to Exchanges
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding Repeal of Risk Adjustment State Flexibility to
Request a Reduction in Risk Adjustment State Transfers (Sec.
153.320(d))
C. ICRs Regarding Risk Adjustment Issuer Data Submission
Requirements (Sec. Sec. 153.610, 153.700, and 153.710)
D. ICRs Regarding Risk Adjustment Data Validation Requirements
When HHS Operates Risk Adjustment (HHS-RADV) (Sec. 153.630)
E. ICRs Regarding Navigator, Non-Navigator Assistance Personnel,
and Certified Application Counselor Program Standards (Sec. Sec.
155.210 and 155.225)
F. ICRs Regarding Providing Correct Information to the FFEs
(Sec. 155.220(j))
G. ICRs Regarding Documenting Receipt of Consumer Consent (Sec.
155.220(j))
H. ICRs Regarding Failure to File and Reconcile Process (Sec.
155.305(f))
I. ICRs Regarding Income Inconsistencies (Sec. Sec. 155.315 and
155.320)
J. ICRs Regarding the Improper Payment Pre-Testing and
Assessment (IPPTA) for State-based Exchanges (Sec. Sec. 155.1500
through 155.1515)
K. ICRs Regarding QHP Rate and Benefit Information (Sec.
156.210)
L. ICRs Regarding Establishing a Timeliness Standard for Notices
of Payment Delinquency (Sec. 156.270)
M. Summary of Annual Burden Estimates for Proposed Requirements
N. Submission of PRA-Related Comments
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 (RFA)
F. Unfunded Mandates Reform Act (UMRA)
G. Federalism
I. Executive Summary
We are finalizing changes to the provisions and parameters
implemented through prior rulemaking to implement the Patient
Protection and Affordable Care Act (ACA).\1\ These requirements are
published under the authority granted to the Secretary by the ACA and
the Public Health Service (PHS) Act.\2\ In this final rule, we are
finalizing changes related to some of the ACA provisions and parameters
we previously implemented and are implementing new provisions. Our goal
with these requirements is providing quality,
[[Page 25741]]
affordable coverage to consumers while minimizing administrative burden
and ensuring program integrity. The changes finalized in this rule are
also intended to help advance health equity and mitigate health
disparities.
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\1\ 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.''
\2\ See sections 1311, 1312, 1313, 1321, and 1343 of the ACA and
section 2792 of the PHS Act.
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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 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 issuers in the
group and individual markets. The term ``group health plan'' includes
both insured and 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 1301(a)(1)(B) of the ACA directs all issuers of QHPs to
cover the essential health benefit (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 section 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 establish
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 directs the Secretary of HHS to require an
Exchange to provide for special enrollment periods and section
1311(c)(6)(D) of the ACA directs the Secretary of HHS to require an
Exchange to provide for a monthly enrollment period for Indians, as
defined by section 4 of the Indian Health Care Improvement Act.
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 advance payments of the premium tax credit (APTC) and
cost-sharing reductions (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 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 beyond those received by the general
public.
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.
[[Page 25742]]
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 1343(b) of the ACA provides that
the Secretary, in consultation with States, shall establish criteria
and methods to be used in carrying out the risk adjustment activities
under this section. Consistent with section 1321(c) of the ACA, the
Secretary is responsible for operating the risk adjustment program in
any State that fails to do so.\3\
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\3\ In the 2014 through 2016 benefit years, HHS operated the
risk adjustment program in every State and the District of Columbia,
except Massachusetts. Beginning with the 2017 benefit year, HHS has
operated the risk adjustment program in all 50 States and the
District of Columbia.
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Section 1401(a) of the ACA added section 36B to the Internal
Revenue Code (the Code), which, among other things, requires that a
taxpayer reconcile APTC for a year of coverage with the amount of the
premium tax credit (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) of the ACA 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 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. 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).
1. Premium Stabilization Programs
The premium stabilization programs refer to the risk adjustment,
risk corridors, and reinsurance programs established by the ACA.\4\ For
past rulemaking, we refer readers to the following rules:
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\4\ See ACA section 1341 (transitional reinsurance program), ACA
section 1342 (risk corridors program), and ACA section 1343 (risk
adjustment program).
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<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 External Data Gathering Environment (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 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 data set.\5\
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\5\ CMS. (2018, July 27). Updated 2019 Benefit Year Final HHS
Risk Adjustment Model Coefficients. <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>.
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[[Page 25743]]
<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.
<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 Sec. 153.320(b)(1)(i),
we published the 2021 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the Center for Consumer Information and Insurance
Oversight (CCIIO) website.\6\
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\6\ CMS. (2020, May 12). Final 2021 Benefit Year Final HHS Risk
Adjustment Model Coefficients. <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>.
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<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' hierarchical condition categories (HCCs) to transition to
International Classification of Diseases, Tenth Revision (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 (2022 Payment
Notice) finalizing a subset of proposals from the 2022 Payment Notice
proposed rule, including policy and regulatory revisions related to the
risk adjustment program, 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.\7\
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\7\ See CMS. (2021, July 19). 2022 Benefit Year Final HHS Risk
Adjustment Model Coefficients. <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>.
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<bullet> In the May 6, 2022 Federal Register (87 FR 27208) (2023
Payment Notice), we finalized revisions related to the risk adjustment
program, including the benefit and payment parameters for the 2023
benefit year, risk adjustment model recalibration, and collection and
extraction of enrollee-level EDGE data. We also finalized the adoption
of the interacted HCC count specification for the adult and child
models, along with modified enrollment duration factors for the adult
model models, beginning with the 2023 benefit year.\8\ We also repealed
the ability for States, other than prior participants, to request a
reduction in risk adjustment State transfers starting with the 2024
benefit year. In addition, we approved a 25 percent reduction to 2023
benefit year transfers in Alabama's individual market and a 10 percent
reduction to 2023 benefit year transfers in Alabama's small group
market. We also finalized further refinements to the HHS-RADV error
rate calculation methodology beginning with the 2021 benefit year and
beyond.
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\8\ On May 6, 2022, we also published the 2023 Benefit Year
Final HHS Risk Adjustment Model Coefficients at <a href="https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf">https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf</a>.
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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.
[[Page 25744]]
<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 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 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.
<bullet> In the May 6, 2022 Federal Register (87 FR 27208), we
finalized 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.
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 the Affordable Insurance Exchanges (``Exchanges''),
consistent with title I of the ACA, to provide competitive marketplaces
for individuals and small employers to directly compare available
private health insurance options on the basis of price, quality, and
other factors. This included implementation of components of the
Exchanges and 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 May 6, 2022 Federal Register (87 FR 27208), we finalized
changes 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 for the 2023 benefit year. We also finalized
various policies to address certain agent, broker, and web-broker
practices and conduct. We also finalized 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. 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 plan years (PYs) 2020 and
beyond.
B. Summary of Major Provisions
The regulations outlined in this final rule will be codified in 45
CFR parts 153, 155, and 156.
1. 45 CFR part 153
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2023, the permanent risk
adjustment program is subject to the fiscal year 2023 sequestration.\9\
Therefore, the risk adjustment program will be sequestered at a rate of
5.7 percent for payments made from fiscal year 2023 resources (that is,
funds collected during the 2023 fiscal year). The funds that are
sequestered in fiscal year 2023 from the risk adjustment program will
become available for payment to issuers in fiscal year 2024 without
further congressional action. We did not receive any requests from
States to operate risk adjustment for the 2024 benefit year; therefore,
HHS will operate risk adjustment in every
[[Page 25745]]
State and the District of Columbia for the 2024 benefit year.
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\9\ OMB. (2022, March 28). OMB Report to the Congress on the
BBEDCA 251A Sequestration for Fiscal Year 2023. <a href="https://www.whitehouse.gov/wpcontent/uploads/2022/03/BBEDCA_251A_Sequestration_Report_FY2023.pdf">https://www.whitehouse.gov/wpcontent/uploads/2022/03/BBEDCA_251A_Sequestration_Report_FY2023.pdf</a>.
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We will recalibrate the 2024 benefit year risk adjustment models
using the 2018, 2019, and 2020 benefit year enrollee-level EDGE data,
with no exceptions. For the 2024 benefit year, we will continue to
apply a market pricing adjustment to the plan liability associated with
Hepatitis C drugs in the risk adjustment models (see, for example, 84
FR 17463 through 17466). We will also continue to maintain the CSR
adjustment factors finalized in the 2019, 2020, 2021, 2022, and 2023
Payment Notices.\10\
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\10\ See 83 FR 16930 at 16953; 84 FR 17454 at 17478 through
17479; 85 FR 29164 at 29190; 86 FR 24140 at 24181; and 87 FR 27208
at 27235 through 27235.
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We are finalizing the repeal of the ability under Sec. 153.320(d)
for prior participant States to request reductions of State risk
adjustment transfers calculated by HHS under the State payment transfer
formula in all State market risk pools for the 2025 benefit year and
beyond. We are approving Alabama's requests to reduce risk adjustment
State transfers in its individual and small group markets by 50 percent
for the 2024 benefit year.
Additionally, we are finalizing, beginning with the 2023 benefit
year, the proposal to collect and extract from issuers' EDGE servers
through issuers' EDGE Server Enrollment Submission (ESES) files and
risk adjustment recalibration enrollment files a new data element, a
Qualified Small Employer Health Reimbursement Arrangement (QSEHRA)
indicator. In addition, we are finalizing our proposal to extract the
plan identifier and rating area data elements from issuers' EDGE
servers for certain benefit years prior to the 2021 benefit year. We
are finalizing the proposed risk adjustment user fee for the 2024
benefit year of $0.21 per member per month (PMPM).
Beginning with the 2022 benefit year HHS-RADV, we are changing the
materiality threshold established under Sec. 153.630(g)(2) for random
and targeted sampling from $15 million in total annual premiums
Statewide to 30,000 total billable member months (BMM) Statewide,
calculated by combining an issuer's enrollment in a State's individual
non-catastrophic, catastrophic, small group, and merged markets, as
applicable, in the benefit year being audited.
Beginning with the 2021 benefit year of HHS-RADV, we are no longer
exempting exiting issuers from adjustments to risk scores and risk
adjustment transfers when they are negative error rate outliers in the
applicable benefit year's HHS-RADV. Thus, we are applying HHS-RADV
results to adjust the plan liability risk scores of all exiting and
non-exiting issuers identified as outliers in the benefit year being
audited.
Beginning with the 2022 benefit year of HHS-RADV, we announce that
we are discontinuing the use of the lifelong permanent condition list
and the use of non-EDGE claims in HHS-RADV. Additionally, beginning
with the 2022 benefit year of HHS-RADV, we are finalizing the
shortening of the window to confirm the findings of the second
validation audit (SVA) (if applicable),\11\ or file a discrepancy
report to dispute the SVA findings, to within 15 calendar days of the
notification by HHS.
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\11\ Only those issuers who have insufficient pairwise agreement
between the Initial Validation Audit (IVA) and SVA receive SVA
findings. See 84 FR 17495; 86 FR 24201.
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We are amending the EDGE discrepancy materiality threshold set
forth at Sec. 153.710(e) to align with and mirror the policy finalized
in preamble in part 2 of the 2022 Payment Notice (86 FR 24194 through
24195). That is, the materiality threshold at Sec. 153.710(e) will be
revised to provide that the amount in dispute must equal or exceed
$100,000 or one percent of the total estimated transfer amount in the
applicable State market risk pool, whichever is less.
2. 45 CFR part 155
In part 155, we are finalizing the revision of the Exchange
Blueprint approval timelines for States transitioning from either a FFE
to a SBE-FP or to a State-based Exchange (SBE), or from a SBE-FP to a
SBE. We are finalizing the removal of the existing deadlines for when
we provide approval, or conditional approval, on an Exchange Blueprint,
and instead will require that such approval be provided at some point
prior to the date on which the Exchange proposes to begin open
enrollment either as a SBE or SBE-FP.
We are finalizing the proposal to address the standards applicable
to Navigators and other assisters and their consumer service functions.
At Sec. 155.210(d)(8), we are finalizing the removal of the
prohibition on Navigators from going door-to-door or using other
unsolicited means of direct contact to provide application or
enrollment assistance. This will also apply to non-Navigator assistance
personnel in FFEs and in State Exchanges if funded with section 1311(a)
Exchange Establishment grants, through the reference to Sec.
155.210(d) in Sec. 155.215(a)(2)(i). In Sec. 155.225(g)(5), we are
finalizing the removal of the prohibition on certified application
counselors from going door-to-door or using unsolicited means of direct
contact to provide application or enrollment assistance. We believe
policies as finalized will allow Navigators and other assisters in the
FFEs to help more consumers.
In part 155, we are finalizing changes to address certain agent,
broker, and web-broker practices. We are finalizing the proposal to
allow HHS up to an additional 15 calendar days to review evidence
submitted by agents, brokers, or web-brokers to rebut allegations that
led to the suspension of their Exchange agreement(s). We also are
finalizing the proposal to allow HHS up to an additional 30 calendar
days to review evidence submitted by agents, brokers, or web-brokers
that led to the termination of their Exchange agreement(s). The
amendments adopted in this final rule will provide HHS with up to 45 or
60 calendar days to review and respond to such evidence or requests for
reconsideration submitted by agents, brokers, or web-brokers stemming
from the suspension or termination of their Exchange agreement(s),
respectively.
Further, we are finalizing the proposal to require agents, brokers,
or web-brokers assisting consumers with completing eligibility
applications through the FFEs and SBE-FPs or assisting an individual
with applying for APTC and CSRs for QHPs to document that eligibility
application information has been reviewed by and confirmed to be
accurate by the consumer or their authorized representative prior to
application submission. We are finalizing the proposal that the
documentation will be required to include: the date the information was
reviewed; the name of the consumer or their authorized representative;
an explanation of the attestations at the end of the eligibility
application; and the name of the assisting agent, broker, or web-
broker. Furthermore, the agent, broker, or web-broker will be required
to maintain the documentation for a minimum of 10 years and produce it
upon request in response to monitoring, audit, and enforcement
activities.
We also are finalizing the proposal to require agents, brokers, or
web-brokers assisting consumers with applying and enrolling through
FFEs and SBE-FPs, making updates to an existing application, or
assisting an individual with applying for APTC and CSRs for QHPs to
document the receipt of consent from the consumer seeking assistance or
their authorized
[[Page 25746]]
representative prior to providing assistance. We are finalizing the
proposal that the documentation will be required to include: a
description of the scope, purpose, and duration of the consent provided
by the consumer or their authorized representative; the date consent
was given; name of the consumer or their authorized representative; the
name of the agent, broker, web-broker, or agency being granted consent;
and the process by which the consumer or their authorized
representative may rescind consent. Further, we are finalizing the
requirement that agents, brokers, or web-brokers will be required to
maintain the consent documentation for a minimum of 10 years and
produce it upon request in response to monitoring, audit, and
enforcement activities.
We are finalizing the revisions to the failure to file and
reconcile (FTR) process at Sec. 155.305(f)(4). First, we are
finalizing the proposal to amend the FTR process described in Sec.
155.305(f)(4) so that an Exchange may only determine enrollees
ineligible for APTC after a taxpayer (or a taxpayer's spouse, if
married) has failed to file a Federal income tax return and reconcile
their past APTC for two consecutive years (specifically, years for
which tax data will be utilized for verification of household income
and family size). In the proposed rule (87 FR 78256), we proposed that
this policy would be effective January 1, 2024, with the intent that
the proposed rule would apply to eligibility determinations made in
2024 for PY 2025 (and beyond). We are clarifying in the final rule that
this will become effective on the general effective date of the final
rule. Second, we are finalizing the proposal to continue to pause FTR
operations until HHS and the Internal Revenue Service (IRS) will be
able to implement the new FTR policy.
We are finalizing revisions to Sec. 155.320, which will require
Exchanges to accept an applicant's attestation of projected annual
household income when the Exchanges request tax return data from the
IRS to verify attested projected annual household income, but the IRS
confirms there is no such tax return data available. Further, we are
finalizing revisions to Sec. 155.315, which will require that an
enrollee with a household income inconsistency receive a 60-day
extension to present satisfactory documentary evidence to resolve a
data matching issue (DMI) in addition to the 90 days currently provided
in Sec. 155.315(f)(2)(ii). These changes will ensure consumers are
treated equitably, ensure continuous coverage, and strengthen the risk
pool.
We are finalizing amendments and additions to Sec. 155.335(j),
including the clarification that when an enrollee is determined upon
annual redetermination eligible for income-based CSRs, is currently
enrolled in a bronze level QHP, and would be re-enrolled in a bronze
level QHP, then to the extent permitted by applicable State law, unless
the enrollee terminates coverage, including termination of coverage in
connection with voluntarily selecting a different QHP, in accordance
with Sec. 155.430, at the option of the Exchange, the Exchange may re-
enroll such enrollee in a silver level QHP within the same product,
with the same provider network, and with a lower or equivalent premium
after the application of APTC as the bronze level QHP into which the
Exchange would otherwise re-enroll the enrollee. We are also finalizing
modifications to the proposed policy to specify that Exchanges
implementing this policy may auto re-enroll enrollees from a bronze QHP
to a silver QHP provided that the net monthly silver plan premium for
the future year is not more than the net monthly bronze plan premiums
for the future year, as opposed to comparing net monthly bronze plan
premiums for the current year with future year silver plan premiums.
Lastly, for enrollees whose current QHP or product will no longer be
available in the coming year, we are finalizing the policy to require
Exchanges to incorporate network similarity into auto re-enrollment
criteria.
We are finalizing the proposed changes related to SEPs at Sec.
155.420. First, we are finalizing two technical corrections to Sec.
155.420(a)(4)(ii)(A) and (B) to align the text with Sec.
155.420(a)(d)(6)(i) and (ii). The revisions will clarify that only one
person in a household applying for coverage or financial assistance
through the Exchange must qualify for a SEP in order for the entire
household to qualify for the SEP. Second, we are finalizing the change
to the current coverage effective date requirements at Sec.
155.420(b)(2)(iv) to permit Exchanges to offer earlier coverage
effective dates for consumers attesting to a future loss of MEC. This
change will ensure qualifying individuals are able to seamlessly
transition from other forms of coverage to Exchange coverage as quickly
as possible with minimal coverage gaps.
Third, to mitigate coverage gaps, we are finalizing the proposed
new rule at Sec. 155.420(c)(6) with a modification that will give
Exchanges the option to allow consumers who are eligible for a SEP
under Sec. 155.420(d)(1)(i) due to loss of Medicaid or Children's
Health Insurance Program (CHIP) coverage up to 90 days after their loss
of Medicaid or CHIP coverage to select a plan and enroll in coverage
through the Exchange. The modification will grant an Exchange the
option to provide more than 90 days to select a plan and enroll in
coverage through the Exchange up to the length of the applicable
Medicaid or CHIP redetermination period if the State Medicaid Agency
allows or provides for a Medicaid or CHIP reconsideration period
greater than 90 days. Fourth, we are finalizing Sec. 155.420(d)(12) to
align the policy of the Exchanges on the Federal platform for granting
SEPs to consumers who enrolled in a plan influenced by a material plan
display error with current plan display error SEP operations. The
proposal will remove the burden from the consumer to solely demonstrate
to the Exchange that a material plan display error has influenced the
consumer's decision to purchase a QHP through the Exchange.
We are finalizing Sec. 155.430(b)(3) to explicitly prohibit
issuers participating in Exchanges on the Federal platform from
terminating coverage for a dependent child prior to the end of the plan
year because the dependent child has reached the applicable maximum
age. This change will clarify to issuers participating in Exchanges on
the Federal platform their obligation to maintain coverage for
dependent children, as well as to enrollees regarding their ability to
maintain coverage for dependent children. This change is optional for
State Exchanges.
We are finalizing Sec. 155.505(g), which acknowledges the ability
of the CMS Administrator to review Exchange eligibility appeals
decisions prior to judicial review. This change will provide appellants
and other parties with accurate information about the availability of
administrative review by the CMS Administrator if they are dissatisfied
with their eligibility appeal decision.
We are finalizing the Improper Payment Pre-Testing and Assessment
(IPPTA) program under which SBEs will be required to participate in
pre-audit activities that will prepare SBEs for complying with audits
required under the Payment Integrity Information Act of 2019 (PIIA).
Activities under the proposed IPPTA program will provide SBEs
experience helpful to preparing for future PIIA audits and will help
HHS design and refine appropriate requirements for future PIIA audits
of SBEs.
[[Page 25747]]
3. 45 CFR part 156
In part 156, after revising our projections based on newly
available data that impacted enrollment projections, we are finalizing
for the 2024 benefit year a user fee rate for all issuers offering QHPs
through an FFE of 2.2 percent of the monthly premium charged by issuers
for each policy under plans where enrollment is through an FFE, and a
user fee rate for all issuers offering QHPs through an SBE-FP of 1.8
percent of the monthly premium charged by issuers for each policy under
plans offered through an SBE-FP.
We are also finalizing the proposal to maintain a large degree of
continuity with our approach to standardized plan options finalized in
the 2023 Payment Notice, making only minor updates to each set of plan
designs. In particular, for PY 2024 and subsequent PYs, we are
finalizing two sets of plan designs that, in contrast to the policy
finalized in the 2023 Payment Notice (87 FR 28278 through 28279), no
longer include a standardized plan option for the non-expanded bronze
metal level, mainly due to AV constraints.
Thus, for PY 2024 and subsequent PYs, we are finalizing revisions
to Sec. 156.201 to require issuers to offer standardized plan options
for the following metal levels throughout every service area that they
also offer non-standardized plan options: one bronze plan that meets
the requirement to have an AV up to five percentage points above the 60
percent standard, as specified in Sec. 156.140(c) (known as an
expanded bronze plan); one standard silver plan; one version of each of
the three income-based silver CSR plan variations; one gold plan; and
one platinum plan.
We also will continue to differentially display standardized plan
options, including those standardized plan options required under State
action that took place on or before January 1, 2020, on <a href="http://HealthCare.gov">HealthCare.gov</a>,
and continue enforcement of the standardized plan options display
requirements for approved web-brokers and QHP issuers using a direct
enrollment pathway to facilitate enrollment through an FFE or SBE-FP--
including both the Classic Direct Enrollment (Classic DE) and Enhanced
Direct Enrollment (EDE) Pathways.
To mitigate the risk of plan choice overload, we are finalizing
Sec. 156.202, which limits the number of non-standardized plan options
that QHP issuers may offer through the Exchanges using the Federal
platform to four non-standardized plan options per product network
type, metal level (excluding catastrophic plans), and inclusion of
dental and/or vision benefit coverage, in any service area for PY 2024,
and to two non-standardized plan options per product network type,
metal level (excluding catastrophic plans), and inclusion of dental
and/or vision benefit coverage, in any service area for PY 2025 and
subsequent PYs.
We are finalizing new Sec. 156.210(d)(1) to require stand-alone
dental plan (SADP) issuers to use an enrollee's age at the time of
policy issuance or renewal (referred to as age on effective date) as
the sole method to calculate an enrollee's age for rating and
eligibility purposes, as a condition of QHP certification, beginning
with Exchange certification for PY 2024. We believe requiring SADPs to
use the age on effective date methodology to calculate an enrollee's
age as a condition of QHP certification, and consequently removing the
less commonly used and more complex age calculation methods, will
reduce consumer confusion and promote operational efficiency. This
policy will apply to Exchange-certified SADPs, whether they are sold
on- or off-Exchange.
In addition, we are finalizing new Sec. 156.210(d)(2) to require
SADP issuers to submit guaranteed rates as a condition of QHP
certification, beginning with Exchange certification for PY 2024. We
believe this change will help reduce the risk of incorrect APTC
calculation for the pediatric dental EHB portion of premiums, thereby
reducing the risk of consumer harm. This policy will apply to Exchange-
certified SADPs, whether they are sold on- or off-Exchange.
We are finalizing a new rule at Sec. 156.225(c) to require that
plan and plan variation marketing names for QHPs include correct
information, without omission of material fact, and not include content
that is misleading. We will review plan and plan variation marketing
names during the annual QHP certification process in close
collaboration with State regulators in States with Exchanges on the
Federal platform.
We are finalizing revisions to the network adequacy and ECP
standards at Sec. Sec. 156.230 and 156.235 to provide that all
individual market QHPs, including individual market SADPs, and all
Small Business Health Options Program (SHOP) QHPs, including SHOP
SADPs, across all Exchanges must use a network of providers that
complies with the network adequacy and ECP standards in those sections,
and to remove the exception that these sections do not apply to plans
that do not use a provider network. However, we are finalizing a
limited exception at Sec. 156.230(a)(4) for certain SADP issuers that
sell plans in areas where it is prohibitively difficult for the issuer
to establish a network of dental providers. Specifically, under this
exception, an area is considered ``prohibitively difficult'' for the
SADP issuer to establish a network of dental providers based on
attestations from State departments of insurance in States with at
least 80 percent of their counties classified as Counties with Extreme
Access Considerations (CEAC) that at least one of the following factors
exists in the area of concern: a significant shortage of dental
providers, a significant number of dental providers unwilling to
contract with Exchange issuers, or significant geographic limitations
impacting consumer access to dental providers.
To expand access to care for low-income and medically underserved
consumers, we are finalizing our proposal to establish two additional
stand-alone ECP categories at Sec. 156.235(a)(2)(ii)(B) for PY 2024
and subsequent PYs, Mental Health Facilities and Substance Use Disorder
Treatment Centers, and adding rural emergency hospitals (REHs) as a
provider type in the Other ECP Providers category. In addition, we are
finalizing our proposed revisions to Sec. 156.235(a)(2)(i) to require
QHPs to contract with at least a minimum percentage of available ECPs
in each plan's service area within certain ECP categories, as specified
by HHS. Specifically, we will require that QHPs contract with at least
35 percent of available Federally Qualified Health Centers (FQHCs) that
qualify as ECPs in the plan's service area and at least 35 percent of
available Family Planning Providers that qualify as ECPs in the plan's
service area for PY 2024 and subsequent PYs. Furthermore, we are
finalizing revisions to Sec. 156.235(a)(2)(i) to clarify that these
threshold requirements will be in addition to the existing provision
that QHPs must satisfy the overall 35 percent ECP threshold requirement
in the plan's service area. In addition, we revised Sec.
156.235(b)(2)(i) to reflect that these policies would also affect
issuers subject to the Alternate ECP Standard under Sec. 156.235(b).
We are finalizing revisions to Sec. 156.270(f) to require QHP
issuers in Exchanges operating on the Federal platform to send
enrollees a notice of payment delinquency promptly and without undue
delay. Specifically, we will require QHP issuers in Exchanges operating
on the Federal platform to send such notices within 10 business days of
the date the issuer should have
[[Page 25748]]
discovered the delinquency. This requirement will help ensure that
enrollees are aware they are at risk of losing coverage and can avoid
losing coverage by paying any outstanding premium amounts promptly.
We are finalizing the proposal to revise the final deadline in
Sec. 156.1210(c) for issuers to report data inaccuracies identified in
payment and collections reports for discovered underpayments of APTC to
the issuer and user fee overpayments to HHS. Specifically, we will
retain only the deadline at Sec. 156.1210(c)(1), which requires that
issuers describe all inaccuracies identified in a payment and
collections report within 3 years of the end of the applicable plan
year to which the inaccuracy relates to be eligible to receive an
adjustment to correct an underpayment of APTC to the issuer and user
fee overpayments to HHS. Under this policy, beginning with the 2015 PY
coverage, we will not pay additional APTC payments or reimburse user
fee payments for FFE, SBE-FP, and SBE issuers for data inaccuracies
reported after the 3-year deadline. Further, for PYs 2015 through 2019,
to be eligible for resolution, an issuer must describe before January
1, 2024, all inaccuracies identified in a payment and collections
report for these PYs that relate to discovered underpayments to the
issuer of APTC or user fee overpayments to HHS, thus allowing issuers
additional time to submit and seek resolution of such inaccuracies for
the 2015 through 2019 PY coverage. These policies will better align
with the existing limitation under the Code on amending a Federal
income tax return and reduce administrative and operational burden on
issuers, State Exchanges, and HHS when handling payment and enrollment
disputes.
III. Provisions of the Proposed Regulations
A. 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. The risk
adjustment program is a permanent program created by section 1343 of
the ACA that transfers funds from lower-than-average risk, risk
adjustment covered plans to higher-than-average risk, risk adjustment
covered plans in the individual, small group markets, or merged
markets, inside and outside the Exchanges. 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.\12\ We did not receive any
requests from States to operate a risk adjustment program for the 2024
benefit year. Therefore, we will operate risk adjustment in every State
and the District of Columbia for the 2024 benefit year.
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\12\ See also 42 U.S.C. 18041(c)(1).
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1. Sequestration
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2023, the permanent risk
adjustment program is subject to the fiscal year 2023
sequestration.\13\ The Federal Government's 2023 fiscal year began on
October 1, 2022. Therefore, the risk adjustment program will be
sequestered at a rate of 5.7 percent for payments made from fiscal year
2023 resources (that is, funds collected during the 2023 fiscal year).
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\13\ OMB. (2022, March 28). OMB Report to the Congress on the
BBEDCA 251A Sequestration for Fiscal Year 2023. <a href="https://www.whitehouse.gov/wp-content/uploads/2022/03/BBEDCA_251A_Sequestration_Report_FY2023.pdf">https://www.whitehouse.gov/wp-content/uploads/2022/03/BBEDCA_251A_Sequestration_Report_FY2023.pdf</a>.
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HHS, in coordination with OMB, has determined that, under section
256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of
1985,\14\ as amended, and the underlying authority for the risk
adjustment program, the funds that are sequestered in fiscal year 2023
from the risk adjustment program will become available for payment to
issuers in fiscal year 2024 without further Congressional action. If
Congress does not enact deficit reduction provisions that replace the
Joint Committee reductions, the program will be sequestered in future
fiscal years, and any sequestered funding will become available in the
fiscal year following that in which it was sequestered.
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\14\ Public Law 99-177 (1985).
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Additionally, we note that the Infrastructure Investment and Jobs
Act \15\ amended section 251A(6) of the Balanced Budget and Emergency
Deficit Control Act of 1985 and extended sequestration for the risk
adjustment program through fiscal year 2031 at a rate of 5.7 percent
per fiscal year.<SUP>16 17</SUP>
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\15\ Public Law 117-58, 135 Stat. 429 (2021).
\16\ 2 U.S.C. 901a.
\17\ The Coronavirus Aid, Relief, and Economic Security (CARES)
Act previously amended section 251A(6) of the Balanced Budget and
Emergency Deficit Control Act of 1985 and extended sequestration for
the risk adjustment program through fiscal year 2023 at a rate of
5.7 percent per fiscal year. Section 4408 of the CARES Act, Public
Law 116-136, 134 Stat. 281 (2020).
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We received no comments on the fiscal year 2023 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 diagnoses are
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,\18\ and
prescription drug categories (RXCs) beginning with the 2018 benefit
year.\19\ Starting with the 2023 benefit year, we added interacted HCC
count factors to the adult and child models applicable to certain
severity and transplant HCCs.
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\18\ For the 2017 through 2022 benefit years, there is a set of
11 binary enrollment duration factors in the adult models that
decrease monotonically from one to 11 months, reflecting the
increased annualized costs associated with fewer months of
enrollments. See, for example, 81 FR 94071 through 94074. These
enrollment duration factors were replaced beginning with the 2023
benefit year with HCC-contingent enrollment duration factors for up
to 6 months in the adult models. See, for example, 87 FR 27228
through 27230.
\19\ 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.
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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 cost-sharing reduction (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 (PLRS)) within a geographic rating area is one of
the inputs into the risk adjustment State payment transfer formula,\20\
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
[[Page 25749]]
Standards of Practice for risk classification.
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\20\ The State payment transfer formula refers to the part of
the HHS risk adjustment methodology that calculates payments and
charges at the State market risk pool level prior to the calculation
of the high-cost risk pool payment and charge terms that apply
beginning with the 2018 benefit year (BY). See, for example, 81 FR
94080.
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a. Data for Risk Adjustment Model Recalibration for 2024 Benefit Year
In the HHS Notice of Benefit and Payment Parameters for 2024
proposed rule (87 FR 78206, 78214), we proposed to use 2018, 2019, and
2020 benefit year enrollee-level EDGE data to recalibrate the 2024
benefit year risk adjustment models with an exception to exclude the
2020 benefit year data from the blending of the age-sex coefficients
for the adult models. However, after consideration of comments, we are
not finalizing the 2024 benefit year model recalibration approach as
proposed. Instead, based on our analysis and in response to comments,
we are finalizing the use of 2018, 2019 and 2020 benefit year enrollee-
level EDGE data for recalibration of the 2024 benefit year risk
adjustment models for all model coefficients, including the adult age-
sex coefficients, with no exceptions.
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 related to the annual
recalibration of the risk adjustment models using data from the most
recent available prior benefit years trended forwarded to reflect the
applicable benefit year of risk adjustment.
Our proposed approach for 2024 recalibration aligns with the
approach finalized in the 2022 Payment Notice (86 FR 24151 through
24155) and reiterated in the 2023 Payment Notice (87 FR 27220 through
27221), that involves use of the 3 most recent consecutive years of
enrollee-level EDGE data that are available at the time we incorporate
the data in the draft recalibrated coefficients published in the
proposed rule for the applicable benefit year, and not updating the
coefficients between the proposed and final rules if an additional year
of enrollee-level EDGE data becomes available for incorporation.
We proposed to determine coefficients for the 2024 benefit year
based on a blend of separately solved coefficients from the 2018, 2019,
and 2020 benefit years of enrollee-level EDGE data, with an exception
to exclude the 2020 benefit year data from the blending of the age-sex
coefficients for the adult models. For all adult model age-sex
coefficients, we proposed to use only 2018 and 2019 benefit year
enrollee-level EDGE data in recalibration to account for the observed
anomalous decreases in the unconstrained coefficients \21\ for the 2020
benefit year enrollee-level EDGE data for older adult enrollees,
especially older adult female enrollees.
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\21\ HHS constrains the risk adjustment models in multiple
distinct ways during model recalibration. These include (1)
coefficient estimation groups, also referred to as G-Groups in the
Risk Adjustment Do It Yourself (DIY) Software, (2) a priori
stability constraints, and (3) hierarchy violation constraints. Of
these, coefficient estimation groups and a priori stability
constraints are applied prior to model fitting. The hierarchy
violation constraints are applied after the initial estimates of
coefficients are produced. We refer to the models and coefficients
prior to the application of hierarchy violation constraints as the
``unconstrained models'' and ``unconstrained coefficients,''
respectively. For a description of the various constraints we apply
to the risk adjustment models, see, CMS' ``Potential Updates to HHS-
HCCs for the HHS-operated Risk Adjustment Program'' (the ``2019
White Paper'') (June 17, 2019). <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>.
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To further explain, due to the potential impact of the COVID-19 PHE
on costs and utilization of services in 2020, we considered whether the
2020 enrollee-level EDGE data was appropriate for use in the annual
model recalibration for the HHS-operated risk adjustment program
applicable to the individual and small group (including merged)
markets. As part of this analysis, we considered: (1) comments received
in response to the 2023 Payment Notice proposed rule (87 FR 598); (2)
the current policy that involves using the 3 most recent years of EDGE
data available as of the proposed rule for the annual risk adjustment
model recalibration which promotes stability and ensures the models
reflect the year-over-year changes to the markets' patterns of
utilization and spending without over-relying on any factors unique to
one particular year; and (3) our experience that every year of data can
be unique and therefore some level of deviation from year to year is
expected.\22\ All of these general considerations weigh in favor of
including the 2020 benefit year data in the recalibration of the risk
adjustment models.
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\22\ Every year we expect some shifting in treatment and cost
patterns, for example as new drugs come to market. Our goal in using
multiple years of data for model calibration is to capture some
degree of year-to-year cost shifting without over-relying on any
factors unique to one particular year.
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However, we recognized that if a benefit year has significant
changes that differentially impact certain conditions or populations
relative to others, or is sufficiently anomalous relative to expected
future patterns of care, we should carefully consider what impact that
benefit year of data could have if it is used in the annual model
recalibration for the HHS-operated risk adjustment program. This
includes consideration of whether to exclude or adjust that benefit
year of data to increase the models' predictive validity or otherwise
limit the impact of anomalous trends. The situation presented by the
COVID-19 PHE and its potential impact on utilization and costs in the
2020 benefit year is an example \23\ of a situation that requires this
additional consideration. Thus, to help further inform our decision on
whether it is appropriate to use 2020 enrollee-level EDGE data to
calibrate the risk adjustment coefficients, we analyzed the 2020
benefit year enrollee-level EDGE recalibration data to assess how it
compares to 2019 benefit year enrollee-level EDGE recalibration data.
For more information on our analysis of the 2020 benefit year enrollee-
level EDGE recalibration data see the proposed rule (87 FR 78215
through 78218). Based on this analysis, we determined that on many key
dimensions, the 2019 benefit year and 2020 benefit year enrollee-level
EDGE data recalibration were largely comparable. However, there were
some observed anomalous decreases in the unconstrained age-sex
coefficients in the 2020 benefit year data for older adult enrollees,
especially older female enrollees.
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\23\ In the 10 years since the start of model calibration for
the HHS-operated risk adjustment program, which began with benefit
year 2014, the COVID-19 PHE has been the only such situation to
date. Other events and policy changes have not risen to the same
level of uniqueness or potential impact.
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With this analysis in mind, and based on the comments received in
response to the 2023 Payment Notice proposed rule,\24\ we outlined six
different options the Department considered for handling the 2020
benefit year enrollee-level EDGE recalibration data for purposes of the
annual recalibration of the HHS risk adjustment models for the 2024
benefit year.\25\ Four options involved the use of 2020 benefit year
enrollee-level EDGE recalibration data in the risk adjustment
[[Page 25750]]
model recalibration, and two involved the exclusion of the 2020 benefit
year data. These six options were as follows:
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\24\ These comments offered a variety of perspectives with some
commenters stating that 2020 enrollee-level EDGE data should be used
for model recalibration as normal, a few commenters suggesting that
2020 enrollee-level EDGE data should be excluded entirely, one
commenter recommending that 2020 enrollee-level EDGE data should be
used with a different weight assigned, and several commenters
suggesting HHS release a technical paper on the use of 2020
enrollee-level EDGE data, with several suggesting 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. See 87 FR 27220 through 27221.
\25\ See 87 FR 78214 through 78218.
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<bullet> Option 1: Maintain the current policy, recalibrating the
2024 benefit year risk adjustment models using 2018, 2019, and 2020
enrollee-level EDGE data with no exceptions or modifications.
<bullet> Option 2: Maintain the current policy, recalibrating the
2024 benefit year risk adjustment models using 2018, 2019, and 2020
benefit year enrollee-level EDGE recalibration data, but assign a lower
weight to 2020 data.
<bullet> Option 3: Utilize 4 years of enrollee-level EDGE data,
instead of three, to recalibrate the 2024 benefit year risk adjustment
models using 2017, 2018, 2019, and 2020 benefit year data.
<bullet> Option 4: Maintain the current policy, recalibrating the
2024 benefit year risk adjustment models using 2018, 2019, and 2020
enrollee-level EDGE recalibration data with an exception to exclude the
2020 benefit year data from the blending of the age-sex coefficients
for the adult models. Under this option, we would have determined
coefficients for the 2024 benefit year based on a blend of separately
solved coefficients from the 2018, 2019, and 2020 benefit years of
enrollee-level EDGE recalibration data and would exclude the 2020
benefit year from the blending of the adult models' age-sex
coefficients. Instead, only 2018 and 2019 benefit year enrollee-level
EDGE recalibration data would be used in blending the adult risk
adjustment models age-sex coefficients.
<bullet> Option 5: Exclude the 2020 benefit year enrollee-level
EDGE recalibration data and instead use the 2017, 2018, and 2019
benefit year enrollee-level EDGE recalibration data, trended forward to
the 2024 benefit year, in recalibration of the risk adjustment models
for the 2024 benefit year, or use the final 2023 risk adjustment model
coefficients for the 2024 benefit year without trending the data to
account for inflation and changes in costs and utilization between the
2023 and 2024 benefit years.
<bullet> Option 6: Exclude the 2020 benefit year enrollee-level
EDGE recalibration data and instead use only 2 years of enrollee-level
EDGE data for recalibration--that is, use only 2018 and 2019 benefit
year data to recalibrate the 2024 risk adjustment models.
As noted above, we proposed to use the 3 most recent available
consecutive benefit year data sets (the 2018, 2019, and 2020 benefit
year enrollee-level EDGE recalibration data), with a narrowly tailored
exception to exclude the 2020 benefit year data from the blending of
the age-sex coefficients for the adult models (Option 4).
After reviewing the public comments, we are finalizing the use of
2018, 2019, and 2020 enrollee-level EDGE data with no exceptions or
modifications for recalibration of the risk adjustment models for the
2024 benefit year (Option 1). Consistent with prior benefit model
recalibrations and the proposed adoption of Option 4 to recalibrate the
HHS risk adjustment models for the 2024 benefit year, this will involve
the use of the 3 most recent consecutive years of enrollee-level EDGE
data that were available for the applicable benefit year and not
updating the coefficients between the proposed and final rules if an
additional year of enrollee-level EDGE data becomes available for
incorporation. The coefficients listed in Tables 1 through 6 of this
final rule reflect the use of 2018, 2019, and 2020 benefit year
enrollee-level EDGE recalibration data for all coefficients, including
adult age-sex coefficients, as well as the pricing adjustment for
Hepatitis C drugs finalized in this final rule.<SUP>26 27</SUP> We
summarize and respond to public comments received on the proposed
approach to recalibration of the HHS risk adjustment models for the
2024 benefit year below.
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\26\ Similar to recalibration of the 2023 risk adjustment adult
models and consistent with the policies adopted in the 2023 Payment
Notice, the 2024 benefit year factors in this rule also reflect the
removal of the mapping of 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 057; RXC 09 x HCC048, 041) from the 2018 and
2019 benefit year enrollee-level EDGE data sets for purposes of
recalibrating the 2024 benefit year adult models. See 87 FR 27232
through 27235. Additionally, the factors for the adult models
reflect the use of the final, fourth quarter (Q4) RXC mapping
document that was applicable for each benefit year of data included
in the current year's model recalibration (except under extenuating
circumstances that can result in targeted changes to RXC mappings).
See 87 FR 27231 through 27232.
\27\ The adult, child and infant models have been truncated to
account for the high-cost risk pool payment parameters by removing
60 percent of costs above the $1 million threshold. We did not
propose changes to the high-cost risk pool parameters for the 2024
benefit year. See 87 FR 78237. Therefore, as detailed below, we are
maintaining the $1 million threshold and 60 percent coinsurance
rate.
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Comment: Several commenters supported our proposal to recalibrate
the 2024 risk adjustment models with 2018, 2019, and 2020 enrollee-
level EDGE data, except for the age-sex coefficients, which would be
calculated by blending the age-sex coefficients from the 2018 and 2019
enrollee-level EDGE data only. One of these commenters stated that, of
the options presented by HHS, Option 4 struck the best balance between
maintaining HHS's established practice of recalibrating the models
based on the 3 most recent years of available EDGE data while also
accounting for the anomalous decreases in the age-sex coefficients
observed in the 2020 benefit year enrollee-level EDGE recalibration
data. Another commenter stated that using 2017, 2018, and 2019
enrollee-level EDGE data for recalibration (Option 5), or using only
2018 and 2019 enrollee-level EDGE data (Option 6) would also be
reasonable approaches. One commenter supported the proposal to adopt
Option 4, but generally objected to the use of age-sex factors in the
HHS-operated risk adjustment program due to concerns about
discrimination.
However, several commenters opposed the finalization of Option 4,
objecting to the use of different data years to recalibrate different
coefficients for the same benefit year of the HHS-operated risk
adjustment program (that is, blending benefit year 2024 adult age-sex
coefficients using 2018 and 2019 enrollee-level EDGE data, and blending
all other benefit year 2024 coefficients using 2018, 2019, and 2020
enrollee-level EDGE data) on the grounds that model coefficients are
interrelated, so the 2020 enrollee-level EDGE data adult age-sex
coefficients that were excluded from blending had an influence during
initial model fitting on 2020 enrollee-level EDGE data adult model
coefficients that were used in blending. One commenter urged HHS to
include 2020 enrollee-level EDGE data, but to weight that data year
less than other data years (Option 2).
Several other commenters supported using the 2017, 2018, and 2019
enrollee-level EDGE data for the 2024 benefit year model recalibration
(Option 5). One commenter suggested that HHS might identify fixable
anomalies in the 2020 enrollee-level EDGE recalibration data prior to
model fitting and then refit the models as an alternative option to use
2018, 2019 and 2020 data for all coefficients across all models.
Response: In light of our analysis and further consideration of the
previously identified model recalibration options along with the
benefit of interested party comments on the six options, we are
finalizing the use of 2018, 2019, and 2020 enrollee-level EDGE data to
recalibrate the 2024 risk adjustment models for all model coefficients,
with no exceptions (Option 1). As stated in the proposed rule, although
our analyses found that the 2019 and 2020 benefit year enrollee-level
EDGE data were largely comparable, there were observed anomalous
decreases in the unconstrained age-sex coefficients for the 2020
benefit year enrollee-level
[[Page 25751]]
EDGE data for older adult enrollees, especially older female enrollees.
Therefore, our proposed adoption of Option 4 included an exception
narrowly tailored to account for the observed anomalous decreases in
the unconstrained coefficients for the 2020 benefit year enrollee-level
EDGE data. At the same time, as explained in the proposed rule (87 FR
78215 through 78216), our analysis generally found that the 2020
enrollee-level EDGE data were anomalous primarily in the volume and
frequencies of certain types of claims, but that the relative costs of
specific services, at least those associated with payment HCCs in the
HHS risk adjustment models, were largely unaffected. Because the risk
adjustment models predict relative costs of care for specific
conditions on an enrollee-level basis and tend not to rely on overall
patterns of utilization, the minimal impacts to relative costs of care
for payment HCCs likewise resulted in minimal impacts on the
coefficients fitted by the 2020 enrollee-level EDGE recalibration data.
Although we found anomalous trends in the adult age-sex factors,
they were limited to the direction of coefficient changes.
Specifically, age and sex in the adult models seemed to be predictive
of whether an age-sex coefficient would go up or down with older female
enrollees more likely to see a decrease in their age-sex coefficient
fit to 2020 enrollee-level EDGE data relative to their age-sex
coefficient fit to 2019 enrollee-level EDGE data, and younger male
enrollees more likely to see an increase in the coefficient fit to 2020
data relative to the coefficient fit with 2019 data. To put these
directional changes into perspective, the magnitudes of these changes
were small and did not appear as anomalous when further compared to
previous benefit years. Specifically, as part of our consideration of
comments we further investigated these anomalies and found that:
<bullet> For the risk adjustment model coefficients from the 2016
through the 2023 benefit years, the adult age-sex factors varied in
magnitude from their prior benefit year by a historic median value of
16.1 percent.
<bullet> Using only 2018 and 2019 data to blend the adult age-sex
factors (as in our proposed approach, Option 4,\28\) across metal
levels, the median change in magnitude between the 2023 final adult
age-sex coefficients \29\ and the 2024 proposed adult age-sex
coefficients was 2.0 percent and the maximum change in magnitude was
12.0 percent.
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\28\ See the 2024 Payment Notice proposed rule, Table 2 at 87 FR
78220.
\29\ See the 2023 Benefit Year Final HHS Risk Adjustment Model
Coefficients, Table 1, available at <a href="https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf">https://www.cms.gov/files/document/2023-benefit-year-final-hhs-risk-adjustment-model-coefficients.pdf</a>.
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<bullet> Using all 3 years of enrollee-level EDGE data (2018, 2019,
and 2020), the median change in magnitude between the 2023 final adult
age-sex coefficients and the 2024 adult age-sex coefficients was 3.6
percent and the maximum change in magnitude was 13.2 percent.
<bullet> The median magnitude of the differences between the
proposed age-sex coefficients, and blended age-sex coefficients using
2018, 2019, and 2020 enrollee-level EDGE data \30\ was 2.7 percent.
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\30\ See the 2024 Payment Notice proposed rule, Table 1 at 87 FR
78218.
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These values show that although the pattern of the direction of the
changes in adult age-sex coefficients might appear to be anomalous,
with older female enrollees showing more decreases than expected, the
coefficients were actually more consistent between the 2023 final risk
adjustment models and those proposed or explored as alternatives for
the 2024 benefit year than we have seen in previous benefit years. As
noted in the proposed rule (78 FR 78217), we know from our experience
that every year of data can be unique and therefore some level of
deviation from year to year is expected. Although the adult age-sex
trends may have displayed a systematic effect such that older female
enrollees were more likely to see lower coefficients, the magnitude of
this effect appears very small and does not rise above what we have
seen in prior year-to-year variation.
Moreover, the intent of the established policy to use the 3 most
recent consecutive years of enrollee-level EDGE data for recalibration
of the risk adjustment models is to provide stability within the HHS-
operated risk adjustment program and minimize volatility in changes to
risk scores between benefit years due to differences in the data set's
underlying populations, while reflecting the most recent years' claims
experience available.\31\ Given that the magnitude of differences in
the coefficients between separately solved models from the 2019 and
2020 enrollee-level EDGE data sets are similar in magnitude to the
normal variation we see between data years, despite the initially
observed anomalous trends, after review of comments and further
consideration and analysis of the options presented, we now believe
that the blending of 3 years of data for all coefficients, including
the adult model age-sex coefficients, is the better approach for
recalibration of the 2024 benefit year risk adjustment models, because
we continued to find that there may not be a sufficient justification
to exclude 2020 benefit year enrollee-level EDGE data in the
recalibration of the risk adjustment models. Additionally, this
approach will continue to serve the purpose of providing stability in
risk scores by maintaining the policy to use the 3 most recent
consecutive years of enrollee-level data available at the time we
incorporated the data in the draft recalibrated coefficients published
in the proposed rule and will update the models to reflect the most
recent year's claims experience available.
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\31\ For a discussion of the established policy governing the
data used for the annual risk adjustment model recalibration, see 86
FR 24151 through 24155.
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Additionally, we agree with commenters and recognize there are
disadvantages with Option 4 and the use of different benefit years to
recalibrate the adult model age-sex coefficients because model
coefficients are interdependent. For example, if the 2020 data differed
from the 2019 data in that some risk had shifted from an HCC to an age-
sex category for which that HCC was common, the removal of the age-sex
category from blending would result in that HCC being slightly
underpredicted relative to its predicted value if all three benefit
years of data were used because the shifted risk would not be captured
in the blended age-sex coefficient with that benefit year of data being
included. Another example may include vaccinations. Costs associated
with vaccinations have an impact on age-sex coefficients because they
are not associated with a diagnosis that would be captured by an HCC.
As such, if there were changes in the relative costs of common
vaccinations between the 2019 and 2020 years of enrollee-level EDGE
data, removing the 2020 enrollee-level EDGE data age-sex coefficients
from blending would prevent the models from capturing these changes.
We also continue to believe that the COVID-19 PHE is an example of
the type of situation that requires a close examination of the
potential impact on utilization and costs to identify whether there are
sufficiently anomalous trends relative to expected future patterns of
care or significant changes that differentially impact certain
conditions or populations relative to others that could impact the use
of that benefit year in the annual recalibration of the HHS risk
adjustment models. HHS intends to similarly examine 2021 enrollee-level
EDGE data, which will be available for use in recalibration of the 2025
benefit
[[Page 25752]]
year HHS risk adjustment models,\32\ and would propose any changes to
current policies for recalibration of the models in future benefit
years through notice-and-comment rulemaking.
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\32\ Consistent with the policies 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 2019, 2020, and 2021 enrollee-
level EDGE data for recalibration of the 2024 benefit year models;
the use of 2020, 2021, and 2022 enrollee-level EDGE data for
recalibration of the 2025 benefit year models; and the use of 2021,
2022, and 2023 enrollee-level EDGE data for recalibration of the
2026 benefit year models. See 86 FR 24151 through 24155.
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We recognize that some commenters preferred alternative options
that would use 2017, 2018, and 2019 enrollee-level EDGE data (Option 5)
or only 2018 and 2019 enrollee-level EDGE data (Option 6). We remain
concerned about these options, which would completely exclude 2020
enrollee-level EDGE data, because these options would result in the HHS
risk adjustment models reflecting older costs and utilization trends
than would be desirable. As previously stated, our analyses of the 2020
benefit year enrollee-level EDGE recalibration data found that it was
largely comparable to the 2019 benefit year data set and we did not
identify other major anomalous trends in our comparison of the
unconstrained HCC coefficients in the 2019 and 2020 enrollee-level EDGE
recalibration data sets. This raises the question about whether there
is a sufficient justification to completely exclude 2020 benefit year
enrollee-level EDGE data in the recalibration of the HHS risk
adjustment models. Beyond the concern about using older data and the
question about the justification to completely exclude 2020 benefit
year data, Option 6 has the additional drawback of decreasing the
stabilizing effect of using multiple years of data. As our goal in
using the 3 most recent consecutive years of data that are available at
the time we incorporate data to recalibrate the models and determine
draft coefficients based on a blend of equally-weighted, separately
solved coefficients from each year is to capture some degree of year-
to-year cost shifting without over-relying on any factors unique to one
particular year. When using 2 years of data under this approach, each
year is weighted at 50 percent, but with 3 years of data, each year is
weighted at 33.3 percent. As such, a change in a coefficient occurring
in 1 year of the data that is actually included in recalibration would
have a greater impact on the HHS risk adjustment model coefficients if
only using 2 years of data rather than 3 years, due to the increase in
the reliance of the blended coefficients on the remaining 2 years of
data.
Option 2, which was supported by one commenter and would have
weighted 2020 enrollee-level EDGE data less than the other two benefit
years (2018 and 2019 enrollee-level EDGE data) used in recalibration
while continuing to include it in the blended coefficients, would
represent a middle ground between Option 1 and Option 6. However, we
continue to be concerned that this approach would require identifying
an appropriate weighting methodology other than the equal weighting
that we generally use to blend coefficients from the 3 data years, and
we do not believe there is a self-evident method of weighting 2020 data
differently for this purpose. Furthermore, although Option 2 would not
completely eliminate the effect of the 2020 benefit year data in all of
the models for all factors (as opposed to just the age-sex factors in
the adult models), this option would dampen the effect of 2020 benefit
year data, raising similar concerns as Options 5 and 6 in that Option 2
would also, to some extent, prevent the models from reflecting changes
in utilization and cost of care that are unrelated to the impact of the
COVID-19 PHE.
Regarding the recommendation to identify and address fixable
anomalies in the underlying data and then refit the models using the
modified data, we do not believe this recommendation is feasible or
prudent. Although it may be possible to identify an increase or a
decrease in the frequency of particular diagnosis or service codes,
these checks and procedures do not presently allow HHS to identify
whether a diagnosis or service code on a given enrollee's record was
directly attributable to the COVID-19 PHE. We are also presently unable
to determine whether an enrollee had care deferred due to office
closures or other logistical issues or what care would have been
provided in the absence of the PHE. We generally consider this sort of
enrollee-level adjustment to be out of scope for model calibration
unless there is a clear data error. As such, we generally \33\ use the
data as is, with only some basic trending assumptions \34\ to ensure
the costs are measured for the year in which the coefficients will be
used. Furthermore, as previously stated, the HHS risk adjustment models
rely more on relative cost of care for a given diagnosis than they do
on how many such diagnoses are present in the underlying data.
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\33\ As previously stated in the March 2016 Risk Adjustment
Methodology White Paper (March 24, 2016; available at <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>), we exclude 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. See also 87 FR 27227.
\34\ These trending assumptions include the pricing adjustment
for Hepatitis C drugs. See 84 FR 17463 through 17466. See also 87 FR
78218.
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Regarding the general concerns about use of age-sex factors in the
HHS risk adjustment models, HHS takes very seriously our obligation to
protect individuals from discrimination and generally disagrees that
the use of these factors in risk adjustment is inappropriate.
Consistent with section 1343 of the ACA, the HHS-operated risk
adjustment program reduces the incentives for issuers to avoid higher-
than-average risk enrollees, such as those with chronic conditions, by
using charges collected from issuers that attract lower-than-average
risk enrollees to provide payments to health insurance issuers that
attract higher-than-average risk enrollees. The ACA also prohibits
issuers from establishing or charging premiums on the basis of sex,\35\
and limits issuers ability to do so on the basis of age.\36\ However,
the cost of care for and actuarial risk of enrollees is, in part,
predicted by their age and sex. As such, without the inclusion of age-
sex factors in the HHS risk adjustment models, some issuers would be
incentivized to design plans that are less attractive to potential
enrollees whose age-sex category is predicted to create a higher
liability for the issuer. The age-sex factors in the HHS risk
adjustment models help alleviate this incentive by ensuring issuers
whose enrollees' actuarial risk is greater than the average actuarial
risk of all enrollees in the State market risk pool, such as issuers
that enroll a higher-than-average proportion of enrollees who fall into
a high-cost age-sex category, are appropriately compensated. The use of
age and sex factors in the HHS risk adjustment models is therefore
necessary, appropriate, and helps reduce the likelihood that
discrimination based on age or sex will occur with respect to health
insurance coverage issued or renewed in the individual and small group
(including merged) markets.
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\35\ See section 2701 of the Public Health Service Act (42
U.S.C. 300gg) as amended by section 1201 of the ACA.
\36\ Ibid. See also the Market Rules and Rate Review final rule
(78 FR 13411 through 13413).
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After review of comments and further consideration of the options
presented, for the reasons outlined above, we are finalizing adoption
of Option 1 for recalibrating the HHS risk adjustment models for the
2024 benefit year. The
[[Page 25753]]
model coefficients for the 2024 benefit year listed in Tables 1 through
6 of this final rule are based on a blend of equally-weighted,
separately solved coefficients from the 2018, 2019, and 2020 benefit
years of enrollee-level EDGE data for all
coefficients.<SUP>37 38 39</SUP>
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\37\ The coefficients listed in Tables 1 through 6 of this final
rule also reflect the pricing adjustment for Hepatitis C drugs
finalized in this rule. In addition, the factors in this rule also
reflect the removal of the mapping of 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 057; RXC 09 x HCC048, 041) from the 2018 and
2019 benefit year enrollee-level EDGE data sets for purposes of
recalibrating the 2024 benefit year adult models. See 87 FR 27232
through 27235. Additionally, the factors for the adult models
reflect the use of the final, fourth quarter (Q4) RXC mapping
document that was applicable for each benefit year of data included
in the current year's model recalibration (except under extenuating
circumstances that can result in targeted changes to RXC mappings).
See 87 FR 27231 through 27232.
\38\ The adult, child and infant models have also been truncated
to account for the high-cost risk pool payment parameters by
removing 60 percent of costs above the $1 million threshold.
\39\ Starting with the 2024 risk adjustment adult models, HHS
will group HCC 18 Pancreas Transplant Status and CC 83 Kidney
Transplant Status/Complications to reflect that these transplants
frequently co-occur for clinical reasons and to reduce volatility of
coefficients across benefit years due to the small sample size of
HCC 18. This change will also be reflected in the DIY Software for
the 2024 benefit year.
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Comment: Several commenters were concerned about some of the
proposed RXC adult model coefficients, in particular RXCs 1 (Anti-HIV
Agents), 8 (Multiple Sclerosis Agents), and 9 (immune suppressants and
immunomodulators), for which the majority of filled prescriptions fall
into the category of specialty drugs. As a result, many of these
commenters supported Option 5, described above, for addressing 2020
enrollee-level EDGE data in model recalibration and recommended that
the 2017, 2018 and 2019 enrollee-level EDGE data not be trended forward
to the 2024 benefit year (that is, that HHS should use the 2023 final
model coefficients for the 2024 benefit year). These commenters also
requested that HHS publish additional information on these
coefficients, including the separately solved model coefficients from
each data year, the trending methodology, and how these trend factors
were applied as part of the 2024 benefit year risk adjustment model
recalibration. Some of these commenters questioned whether the changes
for these coefficients were due to anomalies in the 2020 enrollee-level
EDGE data or, as others suggested, if the changes may be due to the
trending methodology applied. One of these commenters suggested
different trend factors may need to be applied differently for
different RXCs, noting that market patterns for non-RXC specialty drugs
may not align with market patterns for specialty drugs included in the
affected RXCs.
Response: We are finalizing the RXC coefficients as proposed
because we believe the 2024 risk adjustment models' RXCs are accurately
predicting the costs of RXCs in the market for the applicable benefit
year. Although there are RXC coefficients changes between the 2023 and
2024 benefit year models, these changes are not due to anomalies in the
2020 enrollee-level EDGE data and are of a similar magnitude to RXC
changes found in previous benefit years. The change in these RXC
coefficients relative to the previous benefit year are due to decisions
HHS made in trending costs for traditional and specialty drugs, as
suggested by some commenters.
To explain, we analyzed separately solved model coefficients from
each data year used in the proposed 2024 risk adjustment model
recalibration and found that all 3 data years used for 2024 model
recalibration exhibited similar changes in these RXC coefficients. This
indicates that the 2020 enrollee-level EDGE data (or any potential
anomalies related to that data year) were not driving the decrease.
Although we understand the importance of transparency, we do not
believe it is necessary to release the separately solved model
coefficients from each data year.
However, we appreciate it is important to share more information
about the RXC coefficients identified by commenters and generally note
that, between benefit years, the RXC coefficients are typically less
stable than HCC coefficients in the HHS risk adjustment models due to
smaller sample sizes than their corresponding HCC coefficients, and
multicollinearity with HCC coefficients and HCC-RXC interaction
factors. In addition, as part of our consideration of these comments
and to investigate whether the 2020 enrollee-level EDGE data
coefficients for these three RXCs were substantially different from the
2018 and 2019 years of enrollee-level EDGE data coefficients, we
engaged in a further analysis of the differences between coefficients
solved from each year of enrollee-level EDGE data (2018, 2019, and 2020
enrollee-level EDGE data) for these three RXCs and found:
<bullet> In the HHS risk adjustment adult model coefficients from
the 2018 through the 2023 benefit years, across the five metal levels,
the distance between RXC coefficient values from the 2 most dissimilar
data years used in the annual model recalibration for RXC 1 have ranged
between 9.2 percent and 40.7 percent. Across the five metal levels, the
median distance between RXC 1 coefficients from the 2 most dissimilar
data years for the 2024 benefit year risk adjustment adult models is
30.9 percent.
<bullet> For RXC 8, the distance between values from the 2 most
dissimilar data years used in the annual model recalibration for this
adult model coefficient across the 2018 through 2023 benefit years
ranged from between 5.1 percent and 28.4 percent, with the median value
for the 2024 benefit year risk adjustment adult models at 7.0 percent
across metal levels.
<bullet> For RXC 9, the range of distance between values from the 2
most dissimilar data years used in the annual model recalibration for
this adult model coefficient across the 2018 through 2023 benefit years
has fallen between 1.6 percent and 60.1 percent, with the median value
for the proposed and final 2024 risk adjustment adult models at 4.7
percent across the five metal levels.
Although coefficients for these three RXCs decreased between the
2023 and 2024 benefit year risk adjustment adult models, the similarity
of the coefficients among the 3 data years used to fit the 2024 benefit
year risk adjustment models and the consistency of the dispersion
between data years with the range of dispersion observed for previous
benefit years' HHS risk adjustment models demonstrates that these
decreases are not due to any anomalous patterns in the 2020 enrollee-
level EDGE data. As noted above, in past benefit years, we have
attributed the lower level of stability among RXC and RXC-HCC
interaction factors to the high level of collinearity between these
variables. Due to their close association with one another, the models
may fit coefficients that divide risk between an interaction factor and
its related RXC and HCC(s) differently for different years of enrollee-
level EDGE data.
However, the change in these RXC coefficients relative to the
previous benefit year are due to decisions we made in trending costs
for traditional and specialty drugs, as suggested by some commenters,
which have been trended separately from medical expenditures since the
2017 benefit year.\40\ More specifically, in our annual assessment of
the trending factors for the 2024 HHS risk adjustment models, we
determined that the trend factors used for specialty drugs was higher
than the market data supported. Therefore,
[[Page 25754]]
for the 2024 benefit year, we used trend factors for specialty drugs
that aligned with the market data rather than continuing the
historical, higher trend factors. In determining these trend factors,
we consulted our actuarial experts, reviewed relevant Unified Rate
Review Template (URRT) submission data, analyzed multiple years of
enrollee-level EDGE data, and consulted National Health Expenditure
Accounts (NHEA) data as well as external reports and documents \41\
published by third parties. In this process, we also ensured that the
trends we use reflect changes in cost of care rather than gross growth
in expenditures. As such, we believe the trend factors we used for
specialty drugs are appropriate for the most recent trends we have seen
in the market and the proposed RXC coefficient values that we finalize
in this rule reflect the appropriate amount of growth between the data
years used to fit the model and the 2024 benefit year. As part of our
annual model recalibration activities, we intend to continue to
reassess the trend factors used to update the HHS risk adjustment
models in future benefit years. Consistent with Sec. 153.320(b)(1), we
will also continue to include and solicit comments on the draft model
factors to be employed in the HHS risk adjustment models for a given
benefit year, including but not limited to the proposed coefficients,
as part of the applicable benefit year's Payment Notice proposed rule.
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\40\ See 81 FR 12218.
\41\ See for example, ``How much is health spending expected to
grow?'' by the Peterson-Kaiser Family Foundation, available at
<a href="https://www.healthsystemtracker.org/chart-collection/how-much-is-health-spending-expected-to-grow/">https://www.healthsystemtracker.org/chart-collection/how-much-is-health-spending-expected-to-grow/</a>. See also ``Medical cost trend:
Behind the numbers 2022'' by PwC Health Research Institute,
available at <a href="https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-hri-behind-the-numbers-2022.pdf">https://www.pwc.com/us/en/industries/health-industries/library/assets/pwc-hri-behind-the-numbers-2022.pdf</a>. See also, ``MBB
health trends'' by MercerMarsh Benefits, available at <a href="https://www.mercer.com/content/dam/mercer/attachments/private/gl-2022-mmb-health-trends-report.pdf">https://www.mercer.com/content/dam/mercer/attachments/private/gl-2022-mmb-health-trends-report.pdf</a>.
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b. Pricing Adjustment for the Hepatitis C Drugs
In the HHS Notice of Benefits and Payment Parameters for 2024
proposed rule (87 FR 78206, 78218), for the 2024 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.\42\
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\42\ See for example, 84 FR 17463 through 17466.
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Since the 2020 benefit year risk adjustment models, we have been
making a market pricing adjustment to the plan liability associated
with Hepatitis C drugs to reflect future market pricing prior to
solving for coefficients for the models.\43\ The purpose of this market
pricing adjustment is to account for 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.\44\
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\43\ The Hepatitis C drugs market pricing adjustment to plan
liability is applied for all enrollees taking Hepatitis C drugs in
the data used for recalibration.
\44\ Silseth, S., & Shaw, H. (2021). Analysis of prescription
drugs for the treatment of hepatitis C in the United States.
Milliman White Paper. <a href="https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx">https://www.milliman.com/-/media/milliman/pdfs/2021-articles/6-11-21-analysis-prescription-drugs-treatment-hepatitis-c-us.ashx</a>.
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We have committed to reassessing this pricing adjustment with
additional years of enrollee-level EDGE data, as data become available.
As part of the 2024 benefit year model recalibration, we reassessed the
cost trend for Hepatitis C drugs using available enrollee-level EDGE
data (including 2020 benefit year data) to consider whether the
adjustment was still needed and if it is still needed, whether it
should be modified. We found that the data for the Hepatitis C RXC that
will be used for the 2024 benefit year recalibration \45\ still do not
account for the significant pricing changes due to the introduction of
new Hepatitis C drugs, and therefore, do not precisely reflect the
average cost of Hepatitis C treatments applicable to the benefit year
in question.
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\45\ As detailed above, we are finalizing that we will use 2018,
2019 and 2020 enrollee-level EDGE data for recalibration of the 2024
benefit year HHS risk adjustment models, with no exceptions.
However, for the proposed rule, we also assessed 2017 enrollee-level
EDGE data in the event one of the alternative proposals regarding
use of 2020 enrollee-level EDGE data were to be adopted.
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Specifically, generic Hepatitis C drugs did not become available on
the market until 2019, and we proposed to use 2018 benefit year EDGE
data in the 2024 benefit year model recalibration.\46\ Due to the lag
between the data years used to recalibrate the risk adjustment models
and the applicable benefit year of risk adjustment, as well as the
expectation that the costs for Hepatitis C drugs will not increase at
the same rate as other drug costs between the data year and the
applicable benefit year of risk adjustment, we do not believe that the
trends used to reflect growth in the cost of prescription drugs due to
inflation and related factors for recalibrating the models will
appropriately reflect the average cost of Hepatitis C treatments
expected in the 2024 benefit year. Therefore, we continue to believe a
market pricing adjustment specific to Hepatitis C drugs in our models
for the 2024 benefit year is necessary to account for 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. As noted in the
proposed rule, we intend to continue to assess this pricing adjustment
in future benefit year recalibrations using additional years of
enrollee-level EDGE data.
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\46\ See Miligan, J, (2018). A perspective from our CEO: Gilead
Subsidiary to Launch Authorized Generics to Treat HCV. Gilead.
<a href="https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv">https://www.gilead.com/news-and-press/company-statements/authorized-generics-for-hcv</a>. See also AbbVie. (2017). AbbVie Receives U.S. FDA
Approval of MAVYRET<SUP>TM</SUP> (glecaprevir/pibrentasvir) for the
Treatment of Chronic Hepatitis C in All Major Genotypes (GT 1-6) in
as Short as 8 Weeks. Abbvie. <a href="https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm">https://news.abbvie.com/news/abbvie-receives-us-fda-approval-mavyret-glecaprevirpibrentasvir-for-treatment-chronic-hepatitis-c-in-all-major-genotypes-gt-1-6-in-as-short-as-8-weeks.htm</a>.
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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 2024 benefit year HHS risk adjustment models as proposed.
We summarize and respond to public comments received on the proposed
pricing adjustment for Hepatitis C drugs below.
Comment: Most commenters supported the continued use of the pricing
adjustment for Hepatitis C drugs with one commenter stating that the
proposed Hepatitis C pricing adjustment seems reasonably well
calibrated to reduce the incentives for issuers to create
discriminatory plans that would drive away enrollees with Hepatitis C.
Some commenters expressed concern about the Hepatitis C pricing
adjustment. These commenters cautioned against reducing the Hepatitis C
RXC coefficient more than the expected decrease in cost as that may
incentivize issuers to reduce the availability of treatment. These
commenters were also concerned about undercompensating issuers for
enrollees with serious chronic conditions, which they stated would
incentivize issuers to avoid these enrollees. One commenter asserted
that the professional independence and ethical standards of providers
would prevent providers from prescribing drugs that they did not
believe were medically necessary and appropriate, reducing the
potential for issuers to game the program.
Response: We believe that continuing to apply the Hepatitis C
pricing adjustment in the 2024 benefit year HHS risk adjustment models
is appropriate at this time. This pricing adjustment will help avoid
perverse incentives and will
[[Page 25755]]
lead to Hepatitis C RXC coefficients that better reflect anticipated
actual 2024 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 2024 benefit year model
recalibration and found that the data used for the 2024 benefit year
risk adjustment model recalibration (that is, 2018, 2019, and 2020
enrollee-level EDGE data) still do 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 2024 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 2018, 2019, and 2020 enrollee-level EDGE data, without a pricing
adjustment to plan liability, issuers would be overcompensated for the
Hepatitis C RXC in the 2024 benefit year, and issuers could be
incentivized to encourage overprescribing practices and game risk
adjustment such that their 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 we are
finalizing accurately captures the costs of Hepatitis C drugs for the
2024 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. Nevertheless, 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.
We appreciate commenters' concerns about undercompensating issuers
for enrollees with serious chronic conditions. We note that HHS, in the
2023 Payment Notice (87 FR 27221 through 27230), finalized several risk
adjustment model changes to address the adult and child models'
underprediction for enrollees with many HCCs. Specifically, we
finalized the interacted HCC counts and HCC-contingent enrollment
duration factor model specifications to improve model prediction for
the higher risk enrollees and ensure that issuers are being accurately
compensated for these enrollees. As such, the potential for
underprediction or overprediction in the HHS risk adjustment models is
an area that we are consistently monitoring and addressing as needed
and will continue to monitor and address in the future as part of our
ongoing efforts to continually improve the HHS risk adjustment models.
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.
Comment: One commenter urged HHS to expand the pricing adjustment
to other drugs, noting that biosimilar versions of adalimumab
(Humira[supreg]), a drug that is currently classified in RXC 9 Immune
suppressants and Immunomodulators in the adult risk adjustment models,
will soon enter the market and the logic for applying a market pricing
adjustment to the plan liability associated with Hepatitis C drugs may
be extended to these biosimilar drugs.
Response: We did not propose or solicit comments on extending a
pricing adjustment to drugs treating conditions other than Hepatitis C.
As such, at this time, we will not be finalizing any pricing
adjustments for the RXC 9 drug adalimumab or other specialty drugs with
alternatives (whether generic or biosimilar) entering the market in the
coming year. In the 2023 Payment Notice (87 FR 27231 through 27235), we
explained our criteria for inclusion and exclusion of drugs in RXC
mapping and recalibration. We stated that in extenuating circumstances
where HHS believes there will be a significant impact from a change in
an RxNorm Concept Unique Identifiers (RXCUI) to RXC mapping, such as:
(1) evidence of significant off-label prescribing (as was the case with
hydroxychloroquine sulfate); \47\ (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 (or, in
this case, pricing adjustments) are needed for future benefit year
recalibrations.
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\47\ See, for example, 86 FR 24180.
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Although making a pricing adjustment due to the introduction of new
drugs in a market is not the same as adjusting the RXC mappings, we
take a similar approach in considering whether a pricing adjustment for
new drugs in a market is needed. We do not believe there is evidence at
this time that the introduction of biosimilar alternatives to
adalimumab will create market patterns that meet any of these three
criteria. Our current understanding is that the biosimilar alternatives
to adalimumab entering the market are not analogous to the generic
versions of drugs used to treat Hepatitis C. Biosimilars, in general,
differ from common generic drugs and their market behaviors are
expected to be distinct. Because biosimilars are made from living
material (which is not the case with common generic drugs), they differ
in their interchangeability and manufacturing cost savings from common
generics.\48\ Furthermore, although costs are expected to be lower for
adalimumab biosimilars due to lower costs of development, the nature of
the different production process for biologic drugs means that the
price reductions are expected to be much smaller with biosimilars than
we see with the introduction of generic medications.\49\ As such, we
also do not believe that the costs and prescribing patterns of
adalimumab (and its biosimilars) will be much higher or lower than the
typical cost of drugs in the same prescription drug category in the
near future. Nevertheless, we will continue to monitor the prescription
drug market as part of our ongoing efforts to continually improve the
HHS risk adjustment models.
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\48\ See <a href="https://www.uspharmacist.com/article/biosimilars-not-simply-generics">https://www.uspharmacist.com/article/biosimilars-not-simply-generics</a>. See also <a href="https://www.goodrx.com/humira/biosimilars">https://www.goodrx.com/humira/biosimilars</a>.
\49\ See <a href="https://www.reuters.com/business/healthcare-pharmaceuticals/abbvies-humira-gets-us-rival-costs-could-stay-high-2023-01-31/">https://www.reuters.com/business/healthcare-pharmaceuticals/abbvies-humira-gets-us-rival-costs-could-stay-high-2023-01-31/</a>. See also <a href="https://info.goodrootinc.com/download-our-biosimilars-white-paper">https://info.goodrootinc.com/download-our-biosimilars-white-paper</a>.
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[[Page 25756]]
c. Request for Information: Payment HCC for Gender Dysphoria
In the HHS Notice of Benefit and Payment Parameters for 2024
proposed rule (87 FR 78219), HHS requested information on adding a
payment HCC for gender dysphoria to the HHS risk adjustment models for
future benefit years. We thank commenters for their feedback and will
take these comments into consideration if we pursue this potential risk
adjustment model update for future benefit years through notice-and-
comment rulemaking.
d. List of Factors To Be Employed in the Risk Adjustment Models (Sec.
153.320)
We are finalizing the 2024 benefit year risk adjustment model
factors resulting from the equally weighted (averaged) blended factors
from separately solved models using the 2018, 2019, and 2020 enrollee-
level EDGE data in Tables 1 through 6. The adult, child, and infant
models have been truncated to account for the high-cost risk pool
payment parameters by removing 60 percent of costs above the $1 million
threshold.\50\ Table 1 contains factors for each adult model, including
the age-sex, HCCs, RXCs, RXC-HCC interactions, interacted HCC counts,
and enrollment duration coefficients. Table 2 contains the factors for
each child model, including the age-sex, HCCs, and interacted HCC
counts coefficients. Table 3 lists the HHS-HCCs selected for the
interacted HCC counts factors that apply to the adult and child models.
Table 4 contains the factors for each infant model. Tables 5 and 6
contain the HCCs included in the infant models' maturity and severity
categories, respectively.
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\50\ We did not propose changes to the high-cost risk pool
parameters for the 2024 benefit year. Therefore, we will maintain
the $1 million threshold and 60 percent coinsurance rate.
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BILLING CODE 4120-01-C
After reviewing public comments, we are finalizing the list of
factors to be employed in the HHS risk adjustment models with the
following modifications. In the proposed rule (87 FR 78219 through
78226), the adult risk adjustment model factor coefficients reflected a
blend of separately solved coefficients from the 2018, 2019, and 2020
benefit years of enrollee-level EDGE data, with an exception to exclude
the 2020 benefit year data from the blending of the age-sex
coefficients for the adult models. In this final rule, the adult risk
adjustment model factor coefficients for the 2024 benefit year have
been updated to reflect the finalization of the use of the 2018, 2019
and 2020 benefit year enrollee-level EDGE data for recalibration of the
2024 benefit year risk adjustment models for all model coefficients,
including the adult age-sex coefficients, as detailed in an earlier
section of this rule.
We summarize and respond to public comments received on the list of
factors to be employed in the HHS risk adjustment models below.
Comment: One commenter stated that the enrollment duration factors
do not fully capture the financial impact of enrollment duration for
consumers who enroll during SEPs, and requested HHS further investigate
how the HHS risk adjustment models can be updated and improved to
reflect more recent changes to SEPs.
Response: In the 2023 Payment Notice (87 FR 27228 through 27230),
we changed the enrollment duration factors in the adult risk adjustment
models to improve prediction for partial-year adult enrollees with and
without HCCs. As described in the 2021 Risk Adjustment (RA) Technical
Paper,\51\ we found that the previous 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. Therefore, beginning with the 2023 benefit
year, we eliminated the enrollment duration factors of up to 11 months
for all enrollees in the adult models, and replaced them with new
monthly enrollment duration factors of up to 6 months that would apply
only to adult enrollees with HCCs. HHS did not propose and is not
finalizing any changes to the enrollment duration factors as part of
this rulemaking. However, as more data years become available, we will
continue to investigate the performance of the enrollment duration
factors. Specifically, as the SEP landscape changes and we have new
data to reflect those changes,\52\ we will assess the extent to which
the enrollment duration factors fully capture the financial impact of
enrollment duration for enrollees who enroll during an SEP.
---------------------------------------------------------------------------
\51\ HHS published analysis of CSR population utilization 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\ See, for example, CMS. (2022, October 28). Marketplace
Stakeholder Technical Assistance Tip Sheet on the Monthly Special
Enrollment Period for Advance Payments of the Premium Tax credit--
Eligible Consumers with Household Income at or below 150% of the
Federal Poverty Level. <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/150FPLSEPTATIPSHEET">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/150FPLSEPTATIPSHEET</a>.
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e. CSR Adjustments
In the HHS Notice of Benefit and Payment Parameters for 2024
proposed rule (87 FR 78206, 78235), we proposed to continue including
an adjustment for the receipt of CSRs in the risk adjustment models in
all 50 States and the District of Columbia. We explained that while we
continue to study and explore a range of options to update the CSR
adjustments to improve prediction for CSR enrollees and whether changes
are needed to the risk adjustment transfer formula to account for CSR
plans,\53\ to maintain stability and certainty for issuers for the 2024
benefit year, we proposed to maintain the CSR adjustment factors
finalized in the 2019, 2020, 2021, 2022, and 2023 Payment Notices.\54\
See Table 7. We also proposed to continue to use a CSR adjustment
factor of 1.12 for all Massachusetts wrap-around plans in the risk
adjustment PLRS calculation, as all
[[Page 25773]]
of Massachusetts' cost-sharing plan variations have AVs above 94
percent (81 FR 12228).
---------------------------------------------------------------------------
\53\ See CMS. (2021, October 26). HHS-Operated Risk Adjustment
Technical Paper on Possible Model Changes. Appendix A. <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 are also
considering a letter recently published by the American Academy of
Actuaries regarding accounting for the receipt of CSRs in risk
adjustment and plan rating and are continuing to monitor changes
related to these issues. Bohl, J., Novak, D., & Karcher, J. (2022,
September 8). Comment Letter on Cost-Sharing Reduction Premium Load
Factors. American Academy of Actuaries. <a href="https://www.actuary.org/sites/default/files/2022-09/Academy_CSR_Load_Letter_09.08.22.pdf">https://www.actuary.org/sites/default/files/2022-09/Academy_CSR_Load_Letter_09.08.22.pdf</a>.
\54\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR
29190; 86 FR 24181; and 87 FR 27235 through 27236.
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We sought comment on these proposals. After reviewing the public
comments, we are finalizing the CSR adjustment factors as proposed.
[GRAPHIC] [TIFF OMITTED] TR27AP23.017
We summarize and respond to public comments received on the
proposed CSR adjustment factors below.
Comment: One commenter supported using the proposed CSR adjustment
factors in the HHS-operated risk adjustment program. Another commenter
supported continuing to apply an adjustment for Massachusetts wrap-
around plans to account for its unique market dynamics. A few
commenters supported further evaluation of the CSR adjustment factors.
One commenter requested evaluation of the current CSR adjustment
factors in light of an absence of funding of CSR subsidies and due to
the potential socioeconomic health equity issues associated with lower-
than-anticipated induced utilization levels in the CSR population.\55\
Another commenter requested a technical paper before future proposed
rulemaking with further CSR induced demand analysis.
---------------------------------------------------------------------------
\55\ HHS published analysis of CSR population utilization 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>.
---------------------------------------------------------------------------
One commenter stated that current CSR adjustment factors,
specifically when applied to CSR 87 percent and 94 percent variants, do
not accurately reflect population risk and another commenter requested
the risk adjustment formula reflect actual costs incurred by 87 percent
and 94 percent AV enrollees.
Response: We appreciate the comments in support of these proposals
and are finalizing the 2024 benefit year CSR adjustment factors as
proposed. While we have studied the CSR adjustment factors, we agree
continued study of the CSR adjustment factors is warranted to further
assess the different options outlined in the 2021 RA Technical Paper
and other potential approaches before pursuing any changes.\56\
However, at this time, we are not planning to publish another technical
paper with additional CSR induced demand analysis prior to pursing
changes to these factors in any future proposed rulemaking. We
anticipate that between the 2021 RA Technical Paper and any future
notice-and-comment rulemaking, sufficient analysis and justification
for any proposed changes would be provided.
---------------------------------------------------------------------------
\56\ Ibid.
---------------------------------------------------------------------------
Additionally, we reiterate the findings from the 2021 RA Technical
Paper that the current CSR adjustment factors are predicting actual
plan liability relatively accurately on average, with the nationally-
approximated risk term predictive ratios for CSR 87 percent and 94
percent variants both within +/-5 percent. We also believe that the
collection and extraction of additional data elements from issuers'
EDGE servers, including plan ID and rating area, will help further
inform our study of the CSR adjustment factors and may allow us to
further consider potential socioeconomic issues in the CSR populations.
Therefore, HHS intends to review the enrollee-level EDGE data with the
plan ID and rating area before proposing any changes to the CSR
adjustment factors in future notice-and-comment rulemaking.
Comment: A few commenters were concerned about the underprediction
of zero and limited sharing CSR plan variants for American Indian/
Alaska Natives (AI/AN) in the risk term of the State payment transfer
formula, as outlined in the 2021 RA Technical Paper,\57\ particularly
in States that have a high percentage of AI/AN enrollment, because
competition for these enrollees may be discouraged by this
underprediction.\58\ These commenters were concerned that this market
dynamic would result in issuers with fewer AI/AN enrollees having the
ability to more aggressively price silver plan premiums, gaining
competitive advantage and depressing premium tax credits for enrollees
in that State's market. One commenter recommended that HHS reframe and
recalibrate the CSR adjustment factors to fully eliminate the
underprediction of liability for AI/AN enrollees to best capture actual
CSR experience and mitigate any existing imbalances in risk adjustment
State transfers across metal and CSR plan variants.
---------------------------------------------------------------------------
\57\ Ibid.
\58\ The CSR adjustment factors for zero cost sharing recipients
(less than 300 percent of FPL) and limited cost sharing recipients
(greater than 300 percent of FPL) for each metal level are included
in Table 7 of this rule.
---------------------------------------------------------------------------
Response: As part of our overall analysis of the CSR adjustment
factors,
[[Page 25774]]
we will also continue to consider options for how to recalibrate and
adjust the CSR adjustment factors for the zero and limited sharing CSR
plan variants for future benefit years. In the 2021 RA Technical Paper,
we provided an analysis that showed the underprediction of zero and
limited sharing CSR plan variants for AI/AN in HHS risk adjustment and
considered a variety of different options to adjust the CSR adjustment
factors.\59\ Because this analysis was conducted at the national level,
we did not observe any trends of particular issuers, States or rating
areas having a higher percentage of AI/AN enrollment as noted by the
commenter. Specifically, we were extracting and using national
enrollee-level EDGE data without issuer or geographic markers.
Therefore, in the past and when we developed the proposed rule, we did
not have the ability to analyze the distribution of the CSR populations
at a more granular level (for example, at the issuer, State or rating
area level) to see, for example, which issuers, States or rating areas
have a high percentage of AI/AN enrollment. However, with policies
finalized in the 2023 Payment Notice (87 FR 27241 through 27243) and
this final rule, we will have the ability to extract and use multiple
years of enrollee-level EDGE data with plan ID and rating area markers
and will be able to further analyze the CSR populations at a more
granular level, including analyzing whether incentives may exist in
certain States with high proportions of AI/AN populations for issuers
with fewer AI/AN enrollees to more aggressively price silver plan
premiums in those States, to further consider potential changes to
these factors for future benefit years. In the meantime, we are
finalizing the CSR adjustment factors as proposed for the 2024 benefit
year to maintain stability and certainty for issuers.
---------------------------------------------------------------------------
\59\ HHS published analysis of CSR population utilization 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>.
---------------------------------------------------------------------------
Comment: We also received several comments in response to a
reference to the American Academy of Actuaries' letter on CSR loading
in a footnote in the proposed rule.\60\ These commenters objected to
HHS considering any method of estimating CSR premium load factors that
involves issuers using experience data or issuer pricing models to
estimate the CSR load for silver plan variants. These commenters stated
that they believed such a methodology is a violation of the ACA's
single risk pool requirement, which requires issuers to treat all
individual market enrollees as part of a single risk pool so that
pricing reflects utilization of essential benefits by a standard
population. These commenters shared their experience from Texas and New
Mexico, where they claim aligning plan prices by AV when regulating the
variation in metal level premiums resulted in large enrollment
increases and enhanced affordability following premium realignment. One
commenter expressed concern about using a nationally weighted CSR
silver load in the rating term of the transfer formula due to
variations in State CSR enrollment mixes or CSR loading requirement
recommending the use of State-specific AV factors, as discussed in the
2021 RA Technical Paper. Another of these commenters suggested that
anticipated premiums should instead reflect the average AV of all CSR
variants.
---------------------------------------------------------------------------
\60\ Bohl, J., Novak, D., & Karcher, J. (2022, September 8).
Comment Letter on Cost-Sharing Reduction Premium Load Factors.
American Academy of Actuaries. <a href="https://www.actuary.org/sites/default/files/2022-09/Academy_CSR_Load_Letter_09.08.22.pdf">https://www.actuary.org/sites/default/files/2022-09/Academy_CSR_Load_Letter_09.08.22.pdf</a>.
---------------------------------------------------------------------------
Response: We appreciate the comments on potential approaches to
change the current CSR adjustment factors and, as previously noted, are
continuing to study these issues for potential updates to these factors
in future benefit years. We did not propose and are not adopting any
changes to the CSR adjustment factors. With policies finalized in the
2023 Payment Notice (87 FR 27241 through 27243), we have the ability to
extract and use enrollee-level EDGE data with plan ID and rating area
markers to further analyze the CSR populations at a more granular level
to further consider potential changes to these factors for future
benefit years, as well as other potential approaches. This includes
consideration of the American Academy of Actuaries letter regarding
accounting for the receipt of CSRs in the HHS-operated risk adjustment
program and plan rating.\61\ As part of this effort, we will also
consider interested parties' analysis and comments on potential
approaches under consideration, including the feedback provided by
these commenters. We are aware of the interaction that potential future
changes to the CSR adjustment factors may have with regard to the ACA's
single risk pool requirement, and confirm that any changes to the CSR
adjustment factors would be designed to align with other applicable
Federal market reforms. We also affirm that interested parties will
have an opportunity to comment on any potential changes to the CSR
adjustment factors for future benefit years, as those updates would be
pursued through notice-and-comment rulemaking.
---------------------------------------------------------------------------
\61\ Ibid.
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f. Model Performance Statistics
Each benefit year, to evaluate risk adjustment model performance,
we examine each model's R-squared statistic and predictive ratios
(PRs). The R-squared statistic, which calculates the percentage of
individual variation explained by a model, measures the predictive
accuracy of the model overall. The PR for each of the HHS risk
adjustment model is the ratio of the weighted mean predicted plan
liability for the model sample population to the weighted mean actual
plan liability for the model sample population. The PR represents how
well the model does on average at predicting plan liability for that
subpopulation.
A subpopulation that is predicted perfectly will have a PR of 1.0.
For each of the current and proposed HHS risk adjustment models, the R-
squared statistic and the PRs are in the range of published estimates
for concurrent risk adjustment models.\62\ Because we are finalizing a
blend of coefficients from separately solved models based on the 2018,
2019, and 2020 benefit years' enrollee-level EDGE data, we are
publishing the R-squared statistic for each model separately to verify
their statistical validity. The R-squared statistics for the 2024
benefit models are shown in Table 8.
---------------------------------------------------------------------------
\62\ Hileman, G., & Steele, S. (2016). Accuracy of Claims-Based
Risk Scoring Models. Society of Actuaries. <a href="https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf">https://www.soa.org/4937b5/globalassets/assets/files/research/research-2016-accuracy-claims-based-risk-scoring-models.pdf</a>.
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[[Page 25775]]
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3. Overview of the HHS Risk Adjustment Methodology (Sec. 153.320)
In part 2 of the 2022 Payment Notice (86 FR 24183 through 24186),
we finalized the proposal to continue to use the State payment transfer
formula finalized in the 2021 Payment Notice for the 2022 benefit year
and beyond, unless changed through notice-and-comment rulemaking. We
explained that under this approach, we will no longer republish these
formulas in future annual HHS notice of benefit and payment parameter
rules unless changes are being proposed. We did not propose any changes
to the formula in the proposed rule, and therefore, are not
republishing the formulas in this rule. We will continue to apply the
formula as finalized in the 2021 Payment Notice (86 FR 24183 through
24186) \63\ in the States where HHS operates the risk adjustment
program in the 2024 benefit year. Additionally, as finalized in the
2020 Payment Notice (84 FR 17466 through 17468), we will maintain the
high-cost risk pool parameters for the 2020 benefit year and beyond,
unless amended through notice-and-comment rulemaking. We did not
propose any changes to the high-cost risk pool parameters for the 2024
benefit year; therefore, we will maintain the $1 million threshold and
60 percent coinsurance rate.
---------------------------------------------------------------------------
\63\ Discussion provided an illustration and further details on
the State payment transfer formula.
---------------------------------------------------------------------------
We summarize and respond to public comments received on the HHS
risk adjustment methodology below.
Comment: A few commenters asserted that using a population's
history of health care utilization, as the HHS-operated risk adjustment
program currently does, entrenches resource disparities and barriers to
health care access, and shifts resources from issuers serving lower-
income communities to issuers serving higher-income communities in the
State of Massachusetts. These commenters also stated that they believe
HHS should include social determinants of health (SDOH) as factors in
the HHS risk adjustment models. The commenters stated that using the
Statewide average premium as a scaling factor in the State payment
transfer formula amplifies the transfer of funds away from issuers with
low-priced provider networks, who disproportionately serve lower-income
communities.
Response: We appreciate these comments, which were based on
findings in a report released by the Massachusetts Attorney General's
Office titled Examination of Health Care Cost Trends and Cost Drivers
2022,\64\ but do not believe that changes to the HHS-operated risk
adjustment program are warranted at this time based on this report, as
the findings do not appear to be applicable to other States. Following
the release of the report, we analyzed available enrollee-level EDGE
data to investigate whether the findings of the report were applicable
in other State markets. We found that the Massachusetts merged market
exhibits a unique combination of characteristics, including a highly
segmented market where some issuers serve primarily CSR enrollees while
other issuers primarily serve off-Exchange enrollees, and a uniquely
healthy CSR population, that create an environment in which issuers
that serve low-income communities can be assessed charges in that
State's market risk pools. In particular, because the HHS-operated risk
adjustment program is intended to transfer funds from lower-than-
average risk plans to higher-than-average risk plans, a plan with a
uniquely healthy population, whether because it has a uniquely healthy
CSR population or a healthy general population, can be assessed a risk
adjustment charge.
---------------------------------------------------------------------------
\64\ See Examination of Health Care Cost Trends and Cost Drivers
2022. Available at <a href="https://www.mass.gov/files/documents/2022/11/02/2022-11-2%20COST-TRENDS-REPORT_PUB_DRAFT4_HQ.pdf">https://www.mass.gov/files/documents/2022/11/02/2022-11-2%20COST-TRENDS-REPORT_PUB_DRAFT4_HQ.pdf</a>.
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No other State exhibits the same combination of unique
characteristics discussed in this section as the State of
Massachusetts. Therefore, we have concerns about proposing changes to
the HHS-operated risk adjustment program, including changes with regard
to the use of the Statewide average premium as a scaling factor in the
State payment transfer formula, based on a report that is Massachusetts
specific and reflects the unique market conditions of a single State.
Furthermore, in light of the unique combination of characteristics of
Massachusetts's CSR population discussed elsewhere in this section, we
believe that under the existing HHS risk adjustment methodology, the
transfer charges and payments assessed in the Massachusetts merged
market risk pool reflect a reasonably accurate estimate for the
relative risk incurred by issuers in that State. We also reiterate that
HHS chose to use Statewide average premium and normalize the risk
adjustment State payment transfer formula to reflect State average
factors so that each plan's enrollment characteristics are compared to
the State average and the calculated payment amounts equal calculated
charges in each State market risk pool.
[[Page 25776]]
Thus, each plan in the risk pool receives a risk adjustment payment or
charge designed to compensate for risk for a plan with average risk in
a budget-neutral manner. This approach supports the overall goals of
the HHS-operated risk adjustment program, which are to encourage
issuers to rate for the average risk in the applicable State market
risk pool, to stabilize premiums, and to avoid the creation of
incentives for issuers to operate less efficiently, set higher prices,
or develop benefit designs or marketing strategies to avoid high-risk
enrollees.\65\
---------------------------------------------------------------------------
\65\ 84 FR 17480 through 17484.
---------------------------------------------------------------------------
We also appreciate the comments on including SDOH as factors in the
HHS risk adjustment models. In the 2023 Payment Notice, HHS solicited
comments on ways to incentivize issuers to design plans that improve
health equity and health conditions in enrollees' environments, as well
as sought comments on the potential future collection and extraction of
z codes (particularly Z55-Z65), a subset of ICD-10-CM encounter reason
codes used to identify, analyze, and document SDOH, as part of the
required EDGE data submissions. We continue to review and consider the
public comments related to the collection and extraction of z codes to
inform analysis and policy development for the HHS-operated risk
adjustment program. In the interim, we note that including SDOH in the
HHS-operated risk adjustment models would require careful consideration
because doing so could actually increase health disparities rather than
reduce them. For example, if individuals who have a particular SDOH
factor in risk adjustment tended to underutilize health care services
relative to their health status, including that factor in the HHS-
operated risk adjustment models could perpetuate, and possibly
exacerbate, the under compensation of issuers for enrollees that
receive that factor in risk adjustment. Such a dynamic may incentivize
risk selecting behavior among issuers. Furthermore, we have concerns
about the reliability of existing data for determining if an enrollee
has SDOH and what documentation would be needed from the issuer to
verify them.\66\ We continue to analyze data in this area, especially
as new enrollee-level EDGE data elements become available, and would
propose any changes to the HHS risk adjustment models or HHS-operated
risk adjustment program through notice-and-comment rulemaking.
---------------------------------------------------------------------------
\66\ See, for example, the analysis of z codes at 87 FR 632.
---------------------------------------------------------------------------
4. Repeal of Risk Adjustment State Flexibility To Request a Reduction
in Risk Adjustment State Transfers (Sec. 153.320(d))
In the HHS Notice of Benefit and Payment Parameters for 2024
proposed rule (87 FR 78206, 78237), we proposed to repeal the
flexibility under Sec. 153.320(d) for prior participant States \67\ to
request reductions of risk adjustment State transfers under the State
payment transfer formula in all State market risk pools for the 2025
benefit year and beyond. We also solicited comment on Alabama's
requests to reduce risk adjustment State transfers in the individual
(including the catastrophic and non-catastrophic risk pools) and small
group markets for the 2024 benefit year. After reviewing public
comments, we are approving Alabama's requests for the 2024 benefit year
and finalizing the proposal to repeal the flexibility for prior
participant States to request transfer reductions for the 2025 benefit
year and beyond.
---------------------------------------------------------------------------
\67\ Alabama is the only State that has previously requested a
reduction in risk adjustment transfers through this flexibility, and
therefore, is the only State considered a ``prior participant
State''.
---------------------------------------------------------------------------
a. Repeal of State Flexibility To Request Transfer Reductions
In the proposed rule (87 FR 78237 through 78238), we proposed to
amend Sec. 153.320(d) to repeal the ability for prior participant
States to request a reduction in risk adjustment State transfers
beginning with the 2025 benefit year. As part of this repeal, we
proposed conforming amendments to the introductory text of Sec.
153.320(d), which currently provides that prior participant States may
request to reduce risk adjustment transfers in all State market risk
pools by up to 50 percent beginning with the 2024 benefit year, to
remove this flexibility for the 2025 benefit year and beyond and limit
the timeframe available for prior participants to request reductions to
the 2024 benefit year only. Similarly, we proposed conforming
amendments to paragraphs (d)(1)(iv) and (d)(4)(i)(B), which describe
the conditions for a prior participant State to request a reduction
beginning with the 2024 benefit year, to also limit these requests to
the 2024 benefit year only and to eliminate the ability for prior
participant States to request a reduction for the 2025 benefit year and
beyond. After reviewing public comments, we are finalizing these
proposals as proposed.
In the 2019 Payment Notice (83 FR 16955 through 16960), we amended
Sec. 153.320 to add paragraph (d) to provide States the flexibility to
request a reduction to the applicable risk adjustment State transfers
calculated by HHS using the State payment transfer formula for the
State's individual (catastrophic or non-catastrophic risk pools), small
group, or merged market risk pool by up to 50 percent in States where
HHS operates the risk adjustment program to more precisely account for
differences in actuarial risk in the applicable State's markets
beginning with the 2020 benefit year. We finalized that any requests we
received would be published in the applicable benefit year's proposed
HHS notice of benefit and payment parameters, and the supporting
evidence provided by the State in support of its request would be made
available for public comment.\68\
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\68\ If the State requests that HHS not make publicly available
certain supporting evidence and analysis because it contains trade
secrets or confidential commercial or financial information within
the meaning of HHS' Freedom of Information Act regulations at 45 CFR
5.31(d), HHS will only make available on the CMS website the
supporting evidence submitted by the State that is not a trade
secret or confidential commercial or financial information by
posting a redacted version of the State's supporting evidence. See
Sec. 153.320(d)(3).
---------------------------------------------------------------------------
In the 2023 Payment Notice (87 FR 27236), we limited this
flexibility by finalizing amendments to Sec. 153.320(d) that repealed
the State flexibility framework for States to request reductions in
risk adjustment State transfer payments for the 2024 benefit year and
beyond, with an exception for prior participants.\69\ We also limited
the options for prior participants to request reductions by finalizing
that beginning with the 2024 benefit year, States submitting reduction
requests must demonstrate that the requested reduction satisfies the de
minimis standard--that is, the premium increase necessary to cover the
affected issuer's or issuers' reduced risk adjustment payments does not
exceed 1 percent in the relevant State market risk pool.\70\ In the
2023 Payment Notice (87 FR 27239 through 27241), we also finalized
conforming amendments to the HHS approval framework in Sec.
153.320(d)(4) to reflect the changes to the applicable criteria (that
is, only retaining the de minimis criterion) beginning with the 2024
benefit year, and we finalized the proposed definition of ``prior
participant'' in Sec. 153.320(d)(5). In
[[Page 25777]]
addition, we indicated our intention to propose in future rulemaking to
repeal the exception for prior participants beginning with the 2025
benefit year.\71\
---------------------------------------------------------------------------
\69\ Section 153.320(d)(5) defines prior participants as States
that submitted a State reduction request in the State's individual
catastrophic, individual non-catastrophic, small group, or merged
market risk pool in the 2020, 2021, 2022, or 2023 benefit year.
\70\ 87 FR 27239 through 27241. See also 83 FR 16957.
\71\ Ibid.
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Since finalizing the ability for States to request a reduction of
risk adjustment transfers in the 2019 Payment Notice (83 FR 16955
through 16960), we received public comments on subsequent proposed
rulemakings requesting that HHS repeal this policy, with several
commenters noting that reducing risk adjustment transfers to plans with
higher-risk enrollees could create incentives for issuers to avoid
enrolling high-risk enrollees in the future by distorting plan
offerings and designs, including by avoiding broad network plans, not
offering platinum plans at all, and only offering limited gold plans.
Commenters further stated that issuers could also distort plan designs
by excluding coverage or imposing high cost-sharing for certain drugs
or services. For example, one commenter stated that the risk adjustment
State payment transfer formula already adjusts for differences in types
of individuals enrolled in different States and aggregate differences
in prices and utilization by using the Statewide average premium as a
scaling factor, so State flexibility to account for State-specific
factors is unnecessary.\72\ In addition, we noted that since
establishing this framework, we have observed a lack of interest from
States in using this policy. Only one State (Alabama) has exercised
this flexibility and requested reductions to transfers in its
individual and/or small group markets.\73\
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\72\ See Fielder, M, & Layton, T. (2020, December 30). Comment
Letter on 2022 Payment Notice Proposed Rule. Brookings. <a href="https://www.brookings.edu/wp-content/uploads/2020/12/FiedlerLaytonCommentLetterNBPP2022.pdf">https://www.brookings.edu/wp-content/uploads/2020/12/FiedlerLaytonCommentLetterNBPP2022.pdf</a>.
\73\ For the 2020 and 2021 benefit years, Alabama submitted a 50
percent risk adjustment transfer reduction request for its small
group market, which HHS approved in the 2020 Payment Notice (84 FR
17454) and in the 2021 Payment Notice (85 FR 29164). For the 2022
and 2023 benefit years, Alabama submitted 50 percent risk adjustment
transfer reduction requests for its individual and small group
markets. HHS approved the State's requests for the 2022 benefit year
in part 2 of the 2022 Payment Notice final rule (86 FR 24140) and
approved a 25 percent reduction for Alabama's individual market
State transfers (including the catastrophic and non-catastrophic
risk pools) and a 10 percent reduction for the State's small group
market transfers for the 2023 benefit year in the 2023 Payment
Notice (87 FR 27208).
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As discussed in the proposed rule, HHS believes the complete repeal
of the option for States to request reductions in risk adjustment State
transfers will align HHS policy with section 1 of E.O. 14009 (86 FR
7793), which prioritizes protecting and strengthening the ACA and
making high-quality health care accessible and affordable for all
individuals. 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. Consistent
with this directive, we reviewed the risk adjustment State flexibility
under Sec. 153.320(d) and determined it is inconsistent with policies
described in sections 1 and 3 of E.O. 14009. We noted that we believe a
complete repeal of Sec. 153.320(d) will prevent the potential negative
outcomes of risk adjustment State flexibility identified through public
comment, including the possibility of risk selection, market
destabilization, increased premiums, smaller networks, and less-
comprehensive plan options, the prevention of which will protect and
strengthen the ACA and make health care more accessible and affordable.
For all of these reasons, we proposed to amend Sec. 153.320(d) to
repeal the flexibility for prior participant States to request
reductions of risk adjustment State transfers calculated by HHS under
the State payment transfer formula in all State market risk pools
beginning with the 2025 benefit year. We noted in the proposed rule
that if these amendments are finalized, no State will be able to
request a reduction in risk adjustment transfers calculated by HHS
under the State payment transfer formula starting with the 2025 benefit
year.
We summarize and respond to public comments received on the
proposal to repeal the flexibility for prior participant States to
request reductions of risk adjustment State transfers calculated by HHS
under the State payment transfer formula in all State market risk pools
beginning with the 2025 benefit year below.
Comment: Several commenters supported the proposal to repeal the
ability for States to request a reduction in risk adjustment State
transfers due to concerns that the reduction in transfers would
contribute to adverse selection, increase premiums, and reduce plan
options. Commenters stated that reducing risk adjustment State
transfers incentivizes issuers to ``cherry-pick'' lower-risk enrollees
as they would not have to contribute the full difference in risk to
support the cost of higher-risk individuals enrolled by other issuers.
Commenters also noted that the HHS risk adjustment methodology already
accounts for differences in State market conditions and that States can
run their own risk adjustment programs if they do not think the HHS-
operated risk adjustment program works for their State. Some commenters
expressed concerns about the potential negative impacts, such as
reduced plan quality and increased risk selection, of allowing transfer
reductions in the prior participant State's markets. One commenter
stated that repealing this flexibility would provide stability and
certainty for the markets.
Conversely, several commenters opposed the proposal, stating that
they support the ability for States to make their own decisions about
how best to address the unique circumstances of their insurance
markets. Some commenters also noted that HHS has the ability to review
and reject these requests, indicating that there are appropriate
guardrails in place such that States should continue to be offered this
flexibility. Additionally, some commenters asserted that other States
may develop the same market dynamics as the one prior participating
State and should have the same ability to request reductions. One
commenter noted concerns with the ability for States to run their own
risk adjustment programs, due to the costs to implement such a program
within a State. Finally, one commenter stated that the prior
participant State had not observed any of the concerns regarding market
destabilization or reduced plan offerings as a result of the requests,
so the prior participant State should continue to be permitted to
request transfer reductions.
Response: We agree with the comments submitted in support of this
proposal and are finalizing as proposed the repeal of the exception for
prior participant States to request a reduction in risk adjustment
State transfers of up to 50 percent in any State market risk pool
beginning with the 2025 benefit year. We reiterate that a strong risk
adjustment program is necessary to support stability and address
adverse selection in the individual and small group markets. We are
concerned that retaining the State flexibility framework could
undermine these goals in the long-term. As explained in 2023 Payment
Notice and the proposed rule, our further consideration of prior
feedback from interested parties, along with consideration of the State
flexibility framework under E.O. 14009 and the very low level of
interest from States since the policy was adopted, resulted in an
evaluation of whether this flexibility should continue and in what
[[Page 25778]]
manner.\74\ In the 2023 Payment Notice, we finalized the proposed
amendments to Sec. 153.320(d) to repeal the State flexibility
framework beginning with the 2024 benefit year, with an exception for
prior participant States.\75\ We also announced our intention to
propose in future rulemaking to repeal the exception for prior
participants beginning with the 2025 benefit year to provide impacted
parties additional time to prepare for the potential elimination of
this flexibility.\76\ After reviewing public comments on the proposed
repeal of the exception for prior participant States, we are finalizing
the repeal of the prior participant exception, as proposed.
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\74\ See 87 FR 27239 through 27241. Also see 87 FR 78237 through
78238.
\75\ 87 FR 27239 through 27241.
\76\ Ibid.
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As noted above and in the proposed rule, we believe that a complete
repeal of the State flexibility framework in Sec. 153.320(d) by
removing the prior participant exception beginning with the 2025
benefit year will prevent the potential negative outcomes of States'
risk adjustment transfer reduction requests identified by several
commenters, including the possibility of risk selection or ``cherry-
picking'' lower-risk enrollees, market destabilization, increased
premiums, smaller networks, and less-comprehensive plan options. The
prevention of these potential negative outcomes would serve to further
protect and strengthen the ACA, protect enrollees from potential
``cherry-picking'' practices, and make health care coverage more
accessible and affordable. As such, despite our ability to review and
reject risk adjustment transfer reduction requests, we are still of the
view that the State flexibility framework is inconsistent with policies
described in sections 1 and 3 of E.O. 14009 and a complete repeal would
better support the goals of the HHS-operated risk adjustment program
and ultimately the ACA.
With respect to the prior participant State, the State experienced
new entrants to the individual market for the 2022 benefit year, but it
has seen issuers both entering and exiting its markets for the 2023
benefit year, so it is not clear that the State has seen market
stabilization or improved plan quality since its reduction requests
have been approved. A more detailed discussion of the prior participant
State's market dynamics appears in the section below regarding
Alabama's 2024 risk adjustment transfer reduction requests.
We agree with commenters who noted that States are best able to
make their own decisions about how to address the unique circumstances
of their insurance markets and remain the primary regulators of their
insurance markets. We also understand that it is possible that other
States may develop the same market dynamics as the one prior
participating State. At the same time, however, States have shown a low
level of interest in submitting requests to reduce transfers calculated
by HHS under the State payment transfer formula. Between the 2020
benefit year and 2023 benefit year, all States had the opportunity to
submit reduction requests under Sec. 153.320(d), and yet only one
State did so.\77\ As discussed in the 2023 Payment Notice (87 FR
27240), we believed it was appropriate to provide a transition for the
prior participant State, starting with the policies and amendments
finalized in the 2023 Payment Notice that apply beginning with the 2024
benefit year. However, we continue to be concerned about the potential
long-term impact of allowing reductions to risk adjustment State
transfers in any State market risk pool, including the potential
negative impacts on the program's ability to mitigate adverse selection
and support stability in the individual and small group (including
merged) markets. We are therefore finalizing a full repeal of the State
flexibility framework (for all States) beginning in the 2025 benefit
year in this final rule.
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\77\ Alabama is the only State that has requested a reduction in
risk adjustment transfers through this flexibility and therefore is
the only State considered a ``prior participant State''.
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Furthermore, since the 2014 benefit year, all States have had the
opportunity to operate their own risk adjustment program and, to date,
only one State has done so.\78\ Despite a broad range of market
conditions across the 50 States and the District of Columbia, only two
States have expressed interest in tailoring risk adjustment to address
the unique circumstances of their insurance markets, which suggests
States generally do not want to operate their own risk adjustment
program. It also offers evidence that the HHS-operated risk adjustment
program works across a broad range of market conditions to mitigate
adverse selection in the individual and small group (including merged)
markets. We also agree with commenters that the HHS risk adjustment
methodology already accounts for differences in State market
conditions. For example, the use of the Statewide average premium in
the risk adjustment State payment transfer formula accounts for
differences in State market conditions by scaling a plan's transfer
amount based on the determination of plan average risk within a State
market risk pool. The State payment transfer formula also includes a
geographic cost factor (GCF), which adjusts at the rating area level
for the many costs, such as input prices and medical care utilization,
that vary geographically and are likely to affect premiums.\79\
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\78\ Massachusetts operated a State-based risk adjustment
program for the 2014 through 2016 benefit years.
\79\ See ``March 31, 2016 HHS-Operated Risk Adjustment
Methodology Meeting Discussion Paper,'' CMS (2016, March 24),
available at https://www.cms.gov/cciio/resources/forms-reports-and-
other-resources/downloads/ra-march-31-white-paper-032416.pdf for
more information on the GCF.
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Commenters are also correct that States continue to have the option
to operate their own risk adjustment program if the State believes the
risk adjustment program for the individual and small group (including
merged) markets should be tailored to capture its State-specific
dynamics. At the same time, we appreciate there are a number of
different factors States consider when weighing whether to operate a
State-based risk adjustment program, including but not limited to the
costs associated with establishing and maintaining such a program. We
stand ready to work with any State that is interested in operating its
own risk adjustment program for the individual and small group
(including merged) markets. Furthermore, now that we are collecting and
extracting additional data elements--like plan ID, Zip Code, and rating
area--from issuers' EDGE servers, as finalized in the 2023 Payment
Notice (87 FR 27244 through 27252), we are better equipped to further
evaluate State market conditions at various levels as we consider
future changes to the HHS-operated risk adjustment program, as
applicable. We also remain committed to working with States and other
interested parties to encourage new market participants, mitigate
adverse selection, and promote stable insurance markets through strong
risk adjustment programs.
b. Requests To Reduce Risk Adjustment Transfers for the 2024 Benefit
Year
For the 2024 benefit year, HHS received requests from Alabama to
reduce risk adjustment State transfers for its individual \80\ and
small group markets by 50 percent. As in previous years, Alabama
asserted that the HHS-operated risk adjustment program does not work
precisely in the Alabama market, clarifying that they do not assert
[[Page 25779]]
that the risk adjustment formula is flawed, only that it produces
imprecise results in Alabama, which has an ``extremely unbalanced
market share.'' The State reported that its review of issuers' 2021
financial data suggested that any premium increase resulting from a
reduction of 50 percent to the 2024 benefit year risk adjustment
payments for the individual market would not exceed one percent, the de
minimis premium increase threshold set forth in Sec. 153.320(d)(1)(iv)
and (d)(4)(i)(B). Additionally, the State reported that its review of
issuers' 2021 financial data also suggested that any premium increase
resulting from a 50 percent reduction to risk adjustment payments in
the small group market for the 2024 benefit year would not exceed the
de minimis threshold of one percent.
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\80\ Alabama's individual market request is for a 50 percent
reduction to risk adjustment transfers for its individual market
non-catastrophic and catastrophic risk pools.
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In the proposed rule (87 FR 782378), we sought comment on Alabama's
requests to reduce risk adjustment State transfers in its individual
and small group markets by 50 percent for the 2024 benefit year. The
request and additional documentation submitted by Alabama were posted
under the ``State Flexibility Requests'' heading at <a href="https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs">https://www.cms.gov/cciio/programs-and-initiatives/premium-stabilization-programs</a> and under the ``Risk Adjustment State Flexibility Requests''
heading at <a href="https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance#Premium-Stabilization-Programs">https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance#Premium-Stabilization-Programs</a>.
After reviewing the public comments, we are approving Alabama's
requests to reduce risk adjustment State transfers in its individual
and small group markets by 50 percent for the 2024 benefit year. We
summarize and respond to public comments received on Alabama's
reduction requests below.
Comment: A few commenters supported Alabama's requests to reduce
risk adjustment State transfers in its individual and small group
markets by 50 percent for the 2024 benefit year. These commenters
stated that the HHS-operated risk adjustment program is not effective
in Alabama due to its extreme market dynamics and that the State has
not seen a loss of broad network, platinum, or gold plans as some
interested parties had feared would result from the reductions in prior
years.
However, other commenters opposed Alabama's 2024 benefit year
reduction requests, stating that the requested reductions would
diminish the effectiveness of the HHS-operated risk adjustment program.
One commenter stated that there was no mathematical reason why the
presence of one large issuer would preclude the HHS-operated risk
adjustment program from functioning appropriately in Alabama.
Some commenters also asserted that the State did not meet its
burden to substantiate the requests under the criteria established in
Sec. 153.320(d). These commenters argued that the State did not
consider in its analysis changes to the risk adjustment models, issuer
participation, market conditions, benefit design offerings, network
breadth, premium changes, or consumer behavior. A few of these
commenters suggested that the State be required to provide more
detailed analysis with its requests about the impact of transfer
reductions on premiums and issuer participation. One of these
commenters provided detailed data it previously submitted in comments
in response to Alabama's reduction requests for the 2023 benefit year,
asserting the requested individual market transfer reduction would
again increase premiums for one impacted Alabama issuer by an amount
greater than the de minimis threshold (that is, more than 1 percent
increase in its premiums) for the 2024 benefit year. This commenter
noted that, based on their experience from the 2022 benefit year (the
first year for which the State requested and HHS approved a 50 percent
reduction in risk adjustment State transfers calculated by HHS for the
individual market), the 50 percent reduction in Alabama individual
market transfers for 2022 led to an approximately 2 percent increase in
their premiums for that year, which exceeds the de minimis threshold
and was approved by the State in the issuer's rate filings.\81\ This
commenter stated that they anticipated the impact for the 2024 benefit
year, were HHS to approve Alabama's requests, would be similar.
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\81\ Blue Cross and Blue Shield of Alabama Comment Letter.
(2023, January 27). CMS. <a href="https://www.regulations.gov/comment/CMS-2022-0192-0100">https://www.regulations.gov/comment/CMS-2022-0192-0100</a>.
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Finally, a few commenters stated that if HHS were to approve
Alabama's requests, it should approve percentage reductions no higher
than what it approved for the 2023 benefit year; that is, 25 percent in
the individual market and 10 percent in the small group market.\82\
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\82\ See 87 FR 27208 at 27236 through 27239.
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Response: We appreciate the comments in support of HHS's approval
of Alabama's 2024 benefit year reduction requests and are approving
Alabama's requests to reduce risk adjustment transfers for the 2024
benefit year in the individual and small group markets by 50 percent,
as Alabama met the criteria set forth in Sec. 153.320(d)(4)(i)(B).
We continue to believe and recognize that risk adjustment is
critical to the proper functioning of the individual and small group
(including merged) markets, and we acknowledge commenters' concerns
that approving requested reductions in risk adjustment transfers could
impact the effectiveness of the HHS-operated risk adjustment program,
which is why we are repealing the exception for prior participant
States to request risk adjustment transfer reductions beginning with
the 2025 benefit year, as discussed in detail in the preamble section
above. However, under existing HHS regulations, Alabama was permitted
to submit a reduction request for the 2024 benefit year,\83\ and they
did so in the manner set forth in Sec. 153.320(d)(1).\84\ As such, we
are obligated to consider Alabama's request consistent with the
regulatory framework applicable for the 2024 benefit year.
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\83\ As explained in the 2023 Payment Notice, we finalized
amendments to Sec. 153.320(d), including the creation of the prior
participant exception following our further consideration of the
State flexibility framework under E.O, 14009. See 87 FR 27240. We
also announced our intention to repeal the prior participant
exception in future rulemaking beginning with the 2025 benefit year
to provide impacted parties additional time to prepare for this
change and potential elimination of this flexibility. Ibid.
\84\ The State's request must also include supporting evidence
and analysis demonstrating the State-specific factors that warrant
any adjustment to more precisely account for the differences in
actuarial risk in the applicable market risk pool, as well as
identify the requested adjustment percentage of up to 50 percent for
the applicable market risk pools. See 45 CFR 153.320(d)(1)(i) and
(ii). In addition, the State must submit the request by August 1 of
the benefit year that is 2 calendar years prior to the applicable
benefit year, in the form and manner specified by HHS. See 45 CFR
153.320(d)(2).
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Our review and approval of the risk adjustment State transfer
reduction requests submitted by Alabama for the 2024 benefit year are
guided by the framework and criteria established in regulation under
Sec. 153.320(d) applicable to prior participants. Consistent with
Sec. 153.320(d)(1)(iv), prior participants are required to demonstrate
their requests satisfy the de minimis impact standard. Under this
standard, the requesting State is required to show that the requested
transfer reduction would not cause premiums in the relevant market risk
pool to increase by more than 1 percent. For the 2024 benefit year,
Sec. 153.320(d)(4) provides that we will approve State reduction
requests if we determine, based on a review of the State's submission,
along with other relevant factors, including the premium impact of the
reduction, and relevant
[[Page 25780]]
public comments, that the requested reduction would have a de minimis
impact on the necessary premium increase to cover the transfers for
issuers that would receive reduced transfer payments.\85\
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\85\ HHS is also required to publish State reduction requests
and to make the State's supporting evidence available to the public
for the comment, with certain exceptions. See 45 CFR 153.320(d)(3).
HHS must also publish any approved or denied State reduction
requests. Ibid.
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The evidence provided by Alabama in support of its requests to
reduce risk adjustment State transfers by 50 percent in its individual
and small group markets was sufficient to justify its request under the
de minimis requirement for HHS approval under Sec.
153.320(d)(4)(i)(B). We further note that Alabama requested that,
consistent with Sec. 153.320(d)(3), HHS not publish certain
information in support of its request because it contained trade
secrets or confidential commercial or financial information. If the
State requests that HHS not make publicly available certain supporting
evidence and analysis because it contains trade secrets or confidential
commercial or financial information within the meaning of the HHS
Freedom of Information Act (FOIA) regulations at 45 CFR 5.31(d), HHS
will only make available on the CMS website the supporting evidence
submitted by the State that is not a trade secret or confidential
commercial or financial information by posting a redacted version of
the State's supporting evidence.\86\ Consistent with the State's
request, we posted a redacted version of the supporting evidence for
Alabama's request. However, when evaluating the State's reduction
requests, we reviewed the State's un-redacted supporting analysis,
along with other data available to HHS and the relevant public comments
submitted within the applicable comment period for the proposed rule.
We conducted a comprehensive analysis of the available information and
found the supporting evidence submitted by Alabama to be sufficient to
support its 2024 benefit year requests.
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\86\ See Sec. 153.320(d)(3).
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We recognize there is some level of uncertainty regarding future
market dynamics, including their potential impact on future benefit
year transfers. However, to align with the annual pricing cycle for
health insurance coverage, the applicable risk adjustment parameters
(including approval or denial of State flexibility reduction requests
for the 2024 benefit year from prior participants) must generally be
finalized sufficiently in advance of the applicable benefit year to
allow issuers to consider such information when setting rates.\87\ As
such, there will always be an opportunity for some uncertainty
regarding the precise impact of future methodological changes (such as
the risk adjustment model changes applicable beginning with the 2023
benefit year) or unforeseen events (such as unwinding and its impact on
enrollment and utilization).
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\87\ See 45 CFR 153.320(d)(2) and (3). Also see the 2019 Payment
Notice (83 FR 16955 through 16960), which explained the timing for
this process was intended to permit plans to incorporate approved
adjustments in their rates for the applicable benefit year.
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With respect to Alabama's 2024 benefit year requests, our review of
the evidence submitted by Alabama in support of its transfer reduction
requests was sufficient, along with other information available to HHS
and timely submitted comments, to confirm the requests meet the
criteria for approval set forth in Sec. 153.320(d)(4)(i)(B).
For the individual market, the State provided information in
support of its 50 percent reduction request, including its analysis
that the reduction requested would have a de minimis impact on
necessary premium increases. In alignment with our approach in previous
years' consideration of the reduction requests, we analyzed the
information provided by the State in support of its req
[…truncated; see source link]Indexed from Federal Register on April 27, 2023.
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.