Proposed Rule2024-23103
Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2026; and Basic Health Program
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
October 10, 2024
Issuing agencies
Health and Human Services DepartmentCenters for Medicare & Medicaid Services
Abstract
This proposed rule includes payment parameters and provisions related to the HHS-operated risk adjustment and risk adjustment data validation (HHS-RADV) programs, as well as 2026 benefit year user fee rates for issuers that participate in the HHS-operated risk adjustment program and the 2026 benefit year 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 proposed rule also includes proposed requirements related to modifications to the calculation of the Basic Health Program (BHP) payment; and changes to the Initial Validation Audit (IVA) sampling approach and Second Validation Audit (SVA) pairwise means test for HHS- RADV. It also addresses HHS' authority to engage in compliance reviews of and take enforcement action against lead agents of insurance agencies for violations of HHS' Exchange standards and requirements; HHS' system suspension authority to address noncompliance by agents and brokers; an optional fixed-dollar premium payment threshold; proposed reconsideration standards for certification denials; proposed changes to the approach for conducting Essential Community Provider (ECP) certification reviews; a proposal to publicly share aggregated, summary-level Quality Improvement Strategy (QIS) information on an annual basis; and proposed revisions to the medical loss ratio (MLR) reporting and rebate requirements for qualifying issuers that meet certain standards.
Full Text
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<title>Federal Register, Volume 89 Issue 197 (Thursday, October 10, 2024)</title>
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[Federal Register Volume 89, Number 197 (Thursday, October 10, 2024)]
[Proposed Rules]
[Pages 82308-82411]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-23103]
[[Page 82307]]
Vol. 89
Thursday,
No. 197
October 10, 2024
Part II
Department of Health & Human Services
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Centers for Medicare & Medicaid Services
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42 CFR Part 600
45 CFR Parts 153, 155, 156, et al.
Patient Protection and Affordable Care Act; HHS Notice of Benefit and
Payment Parameters for 2026; and Basic Health Program; Proposed Rule
Federal Register / Vol. 89, No. 197 / Thursday, October 10, 2024 /
Proposed Rules
[[Page 82308]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Part 600
Office of the Secretary
45 CFR Parts 153, 155, 156, and 158
[CMS-9888-P]
RIN 0938-AV41
Patient Protection and Affordable Care Act; HHS Notice of Benefit
and Payment Parameters for 2026; and Basic Health Program
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Proposed rule.
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SUMMARY: This proposed rule includes payment parameters and provisions
related to the HHS-operated risk adjustment and risk adjustment data
validation (HHS-RADV) programs, as well as 2026 benefit year user fee
rates for issuers that participate in the HHS-operated risk adjustment
program and the 2026 benefit year 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 proposed rule also includes proposed requirements related to
modifications to the calculation of the Basic Health Program (BHP)
payment; and changes to the Initial Validation Audit (IVA) sampling
approach and Second Validation Audit (SVA) pairwise means test for HHS-
RADV. It also addresses HHS' authority to engage in compliance reviews
of and take enforcement action against lead agents of insurance
agencies for violations of HHS' Exchange standards and requirements;
HHS' system suspension authority to address noncompliance by agents and
brokers; an optional fixed-dollar premium payment threshold; proposed
reconsideration standards for certification denials; proposed changes
to the approach for conducting Essential Community Provider (ECP)
certification reviews; a proposal to publicly share aggregated,
summary-level Quality Improvement Strategy (QIS) information on an
annual basis; and proposed revisions to the medical loss ratio (MLR)
reporting and rebate requirements for qualifying issuers that meet
certain standards.
DATES: To be assured consideration, comments must be received at one of
the addresses provided below, by November 12, 2024.
ADDRESSES: In commenting, please refer to file code CMS-9888-P.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the ``Submit a
comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-9888-P, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-9888-P, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT:
Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace
Bristol, (410) 786-8437, for general information.
Ayesha Anwar, (301) 492-4000, Joshua Paul, (301) 492-4347, or
Debbie Noymer, (301) 448-3755 for matters related to HHS-operated risk
adjustment.
Leanne Scott, (410) 786-1045 or Ayesha Anwar, (301) 492-4000 for
matters related to HHS-operated risk adjustment data validation.
Aaron Franz, (410) 786-8027, for matters related to user fees.
Brian Gubin, (410) 786-1659, for matters related to agent, broker,
and web-broker guidelines.
Zarin Ahmed, (301) 492-4400, for matters related to enrollment of
qualified individuals into QHPs and termination of Exchange enrollment
or coverage for qualified individuals.
Christina Whitefield, (301) 492-4172, for matters related to the
medical loss ratio program.
Preeti Hans, (301) 492-5144, for matters related to Quality
Improvement Strategy.
Ken Buerger, (410) 786-1190, for matters related to certification
standards for QHPs.
Nikolas Berkobien, (667) 290-9903, for matters related to
standardized plan options, non-standardized plan option limits and
exceptions, and financial requirements for issuers of QHPs on the FFEs.
Adelaide Balenger, (667) 414-0691, for matters related to the
Actuarial Value Calculator.
Mary Evans, (470) 890-4113, for matters related to the Failure to
File and Reconcile process.
Chris Truffer, (410) 786-1264, for matters related to the Basic
Health Program (BHP) provision.
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: Comments received before the close
of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post comments received
before the close of the comment period on the following website as soon
as possible after they have been received: <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
Follow the search instructions on that website to view public comments.
CMS will not post on <a href="http://Regulations.gov">Regulations.gov</a> public comments that make threats
to individuals or institutions or suggest that the commenter will take
actions to harm an individual. CMS continues to encourage individuals
not to submit duplicative comments. We will post acceptable comments
from multiple unique commenters even if the content is identical or
nearly identical to other comments.
Plain Language Summary: In accordance with 5 U.S.C. 553(b)(4), a
summary of not more than 100 words in length of this proposed rule, in
plain language, may be found at <a href="https://www.regulations.gov/">https://www.regulations.gov/</a>.
Intention of Future Rulemaking: HHS and the Departments of Labor
and Treasury intend to issue a future notice of proposed rulemaking
address the issues arising out of HIV and Hepatitis Policy Institute et
al. v. U.S. Department of Health and Human Services et al., Civil
Action No. 22-2604 (D.D.C. Sept. 29, 2023), namely, the applicability
of drug manufacturer support to the annual limitation on cost sharing.
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. 42 CFR Part 600--Administration, Eligibility, Essential
Health Benefits, Performance Standards, Service Delivery
Requirements, Premium and Cost Sharing, Allotments, and
Reconciliation
B. 45 CFR Part 153--Standards Related to Reinsurance, Risk
Corridors, and Risk Adjustment
[[Page 82309]]
C. 45 CFR Part 155--Exchange Establishment Standards and Other
Related Standards Under the Affordable Care Act
D. 45 CFR Part 156--Health Insurance Issuer Standards Under the
Affordable Care Act, Including Standards Related to Exchanges
E. 45 CFR Part 158--Issuer Use of Premium Revenue: Reporting and
Rebate Requirements
F. Severability
IV. Collection of Information Requirements
A. Wage Estimates
B. ICRs Regarding the Initial Validation Audit (IVA) Sample--
Enrollees Without HCCs and Neyman Allocation (Sec. 153.630(b))
C. ICRs Regarding Engaging in Compliance Reviews and Taking
Enforcement Actions Against Lead Agents for Insurance Agencies
(Sec. 155.220)
D. ICRs Regarding System Suspension Authority (Sec. 155.220(k))
E. ICRs Regarding Updating the Model Consent Form (Sec.
155.220)
F. ICRs Regarding Notification of Two Year Failure To File and
Reconcile Population (Sec. 155.305)
G. ICRs Regarding General Program Integrity and Oversight
Requirements (Sec. 155.1200)
H. ICRs Regarding Essential Community Provider Certification
Reviews (Sec. 156.235)
I. ICRs Regarding Quality Improvement Strategy Information
(Sec. 156.1130)
J. ICRs Regarding Medical Loss Ratio (Sec. Sec. 158.103,
158.140, 158.240)
K. Summary of Annual Burden Estimates for Proposed Requirements
L. Submission of PRA-Related Comments
M. Response to 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 proposing changes to the provisions and parameters
implemented through prior rulemaking to implement the ACA.\1\ These
proposed requirements are published under the authority granted to the
Secretary by the ACA and the PHS Act.\2\ In this proposed rule, we are
proposing changes related to some of the ACA provisions and parameters
we previously implemented and are proposing new provisions. Our goal
with these proposed requirements is providing quality, affordable
coverage to consumers while minimizing administrative burden and
ensuring program integrity. The changes proposed in this rule are also
intended to help advance health equity, mitigate health disparities,
and alleviate discrimination.
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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 1301, 1302, 1311, 1312, 1313, 1321, 1331, and
1343 of the ACA and sections 2718 and 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 2718 of the PHS Act, as added by the ACA, generally
requires health insurance issuers in the group and individual markets
to submit an annual medical loss ratio (MLR) report to HHS and provide
rebates to enrollees if the issuers do not achieve specified MLR
thresholds.
Section 1301(a)(1)(B) of the ACA directs all issuers of qualified
health plans (QHPs) to cover the EHB package described in section
1302(a) of the ACA, including coverage of the services described in
section 1302(b) of the ACA, adherence to the cost-sharing limits
described in section 1302(c) of the ACA, and meeting the Actuarial
Value (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.
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 1302(d) of the ACA describes the various levels of coverage
based on 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.
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(d)(4)(A) of
the ACA requires the Exchange to implement procedures for the
certification, recertification, and decertification of health plans as
QHPs, consistent with guidelines developed by the Secretary under
section 1311(c) of the ACA. 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
[[Page 82310]]
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.
Section 1312(f)(1)(B) of the ACA provides that an individual shall
not be treated as a qualified individual for enrollment in a QHP if, at
the time of enrollment, the individual is incarcerated, other than
incarceration pending the disposition of charges.
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 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.
Section 1331 of the ACA provides States with an option to establish
a Basic Health Program (BHP). In the States that elect to operate a
BHP, the BHP makes affordable health benefits coverage available for
individuals under age 65 with household incomes between 133 percent and
200 percent of the Federal poverty level (FPL) who are not otherwise
eligible for Medicaid, the Children's Health Insurance Program (CHIP),
or affordable employer-sponsored coverage, or for individuals whose
income is equal to or below 200 percent of FPL but are lawfully present
non-citizens ineligible for Medicaid. For those States that have
expanded Medicaid coverage under section 1902(a)(10)(A)(i)(VIII) of the
Social Security Act (the Act), the lower income threshold for BHP
eligibility is effectively 138 percent of the FPL due to the
application of a required 5 percent income disregard in determining the
upper limits of Medicaid income eligibility (section 1902(e)(14)(I) of
the Act).
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 charges collected from those issuers 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 HHS
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(f) of the ACA requires the Secretary, in consultation
with the Secretary of the Treasury and the Secretary of Homeland
Security, 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 purpose of, and to the extent necessary for,
ensuring 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 1413 of the ACA directs the Secretary to establish, subject
to minimum requirements, a streamlined enrollment process for
enrollment in QHPs and all insurance affordability programs.
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 aged 30 and above qualify to
enroll in
[[Page 82311]]
catastrophic coverage under Sec. Sec. 155.305(h) and 156.155(a)(5).
Section 1902(r)(2)(A) of the Act permits States to apply less
restrictive methodologies than cash assistance program methodologies in
determining eligibility for certain eligibility groups.
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 section 1341 of the ACA (transitional reinsurance
program), section 1342 of the ACA (risk corridors program), and
section 1343 of the ACA (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 risk adjustment methodology
related to community rating States.
<bullet> In the November 6, 2013 Federal Register (78 FR 66653), we
issued a correcting amendment to the 2014 Payment Notice to address how
an enrollee's age for the risk score calculation would be determined
under the HHS 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
establish payment parameters in those programs.
<bullet> In the May 27, 2014 Federal Register (79 FR 30240), we
announced the fiscal year 2015 sequestration rate for the HHS-operated
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 establish 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
establish 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
the 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 error rate methodology
for HHS-RADV adjustments to transfers.
<bullet> In the May 11, 2018 Federal Register (83 FR 21925), we
issued a correction to the 2019 HHS risk adjustment coefficients in the
2019 Payment Notice.
<bullet> On July 27, 2018, consistent with 45 CFR 153.320(b)(1)(i),
we updated the 2019 benefit year final HHS 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). 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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<bullet> In the July 30, 2018 Federal Register (83 FR 36456), we
adopted the 2017 benefit year HHS risk adjustment methodology as
established in the final rules issued in the March 23, 2012 (77 FR
17220 through 17252) and March 8, 2016 (81 FR 12204 through 12352)
editions of the Federal Register. The final rule set forth an
additional explanation of the rationale supporting the use of Statewide
average premium in the State payment transfer formula for the 2017
benefit year, including the reasons why the program is operated by HHS
in a budget-neutral manner. The final rule also permitted HHS to resume
2017 benefit year HHS 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 risk adjustment methodology as
established in the final rules issued 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 State
payment transfer formula for the 2018 benefit year, including the
reasons why the program is operated by HHS 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
the 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 HHS 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 issued the 2021 Benefit Year Final HHS Risk Adjustment Model
Coefficients on the CCIIO website.\6\
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\6\ CMS. (2020). 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
the 2021 benefit year, as well as adopted updates to the HHS risk
adjustment models' hierarchical condition categories (HCCs) to
transition to the 10th revision of the International Statistical
Classification of Diseases (ICD-10) codes, approved the request from
Alabama to reduce HHS risk adjustment transfers by 50 percent in the
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
[[Page 82312]]
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 HHS 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) (part 2
of the 2022 Payment Notice), we finalized a subset of proposals from
the December 4, 2020 Federal Register (85 FR 78572) (the 2022 Payment
Notice proposed rule), including policy and regulatory revisions
related to the HHS-operated risk adjustment program, finalization of
the benefit and payment parameters for the 2022 benefit year, and
approval of the request from Alabama to reduce HHS 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 HHS risk adjustment adult model
coefficients.\7\
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\7\ CMS. (2021). 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 HHS-operated
risk adjustment program, including the benefit and payment parameters
for the 2023 benefit year, HHS risk adjustment model recalibration, and
policies related to the 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 models, beginning with the
2023 benefit year.\8\ We also repealed the ability for States, other
than prior participants, to request a reduction in HHS risk adjustment
State transfers starting with the 2024 benefit year. In addition, we
approved a 25 percent reduction to 2023 benefit year HHS risk
adjustment transfers in Alabama's individual market and a 10 percent
reduction to 2023 benefit year HHS risk adjustment 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.
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\8\ CMS (2022). 2023 Benefit Year Final HHS Risk Adjustment
Model Coefficients. <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> In the April 27, 2023 Federal Register (88 FR 25740) (2024
Payment Notice), we finalized the benefit and payment parameters for
the 2024 benefit year, amended the EDGE discrepancy materiality
threshold and data collection requirements, and reduced the risk
adjustment user fee. For the 2024 benefit year, we approved 50 percent
reductions to HHS risk adjustment transfers for Alabama's individual
and small group markets, and repealed prior participant States' ability
to request reductions of their risk adjustment transfers for the 2025
benefit year and beyond. We finalized several refinements to HHS-RADV
program requirements, such as shortening the window to confirm SVA
findings or file a discrepancy report, changing the HHS-RADV
materiality threshold for random and targeted sampling, and no longer
exempting exiting issuers from adjustments to risk scores and HHS risk
adjustment transfers when they are negative error rate outliers. We
also announced the discontinuance of the Lifelong Permanent Condition
List (LLPC) and Non-EDGE Claims (NEC) in HHS-RADV beginning with the
2022 benefit year.
<bullet> In the April 15, 2024 Federal Register (89 FR 26218) (2025
Payment Notice), we finalized the benefit and payment parameters for
the 2025 benefit year, including the 2025 risk adjustment models and
updated the adjustment factors for the receipt of CSRs for the American
Indian and Alaska Native (AI/AN) subpopulation who are enrolled in zero
and limited cost-sharing plans to improve prediction in the HHS risk
adjustment models. In addition, we finalized that in certain cases, we
may require a corrective action plan (CAP) to address an observation
identified in an HHS risk adjustment program audit.
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'' issued in the August 30, 2013 Federal Register
(78 FR 54069), and the ``second Program Integrity Rule'' issued 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 final rule (2019 Program Integrity Rule) issued in
the December 27, 2019 Federal Register (84 FR 71674).
In the April 27, 2023 Federal Register (88 FR 25740) (2024 Payment
Notice), we finalized a policy to implement improper payment pre-
testing and assessment (IPPTA) requirements for State Exchanges to
ensure adherence to the Payment Integrity Information Act of 2019. In
addition, we finalized allowing additional time for HHS to review
evidence submitted by agents and brokers to rebut allegations
pertaining to Exchange agreement suspensions or terminations. We also
introduced consent and eligibility application documentation
requirements for agents, brokers, and web-brokers that assist Exchange
consumers in FFE and SBE-FP States.
3. Market Rules
In the February 27, 2013 Federal Register (78 FR 13406), we issued
the health insurance market rules, including provisions related to the
single risk pool. We amended requirements related to index rates under
the single risk pool provision in a final rule issued in the July 2,
2013 Federal Register (78 FR 39870). In the October 30, 2013 Federal
Register (78 FR 65046), we clarified when issuers may establish and
update premium rates. In the March 8, 2016 Federal Register (81 FR
12203), we clarified single risk pool provisions related to student
health insurance coverage. We finalized minor adjustments to the single
risk pool regulations in the 2018 Payment Notice, issued in the
December 22, 2016 Federal Register (81 FR 94058).
4. Exchanges
We issued 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 18310) (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
[[Page 82313]]
included implementation of components of the Exchanges and standards
for eligibility for Exchanges, as well as network adequacy and
essential community provider (ECP) certification standards.
In the August 17, 2011 Federal Register (76 FR 51201), we issued a
proposed rule regarding eligibility determinations, including the
regulatory requirement to verify incarceration status. In the March 27,
2012 Federal Register (77 FR 18310) we finalized the regulatory
requirement to verify incarceration attestation using an approved
electronic data source that is current and accurate, and to resolve the
inconsistency when attestations are not reasonably compatible with
information in an approved data source. We also established
requirements regarding accessible communications for individuals with
disabilities and those with LEP.
In the 2014 Payment Notice and the Amendments to the HHS Notice of
Benefit and Payment Parameters for 2014 interim final rule, issued 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, issued 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 the 2018 Payment Notice, issued in the December 22, 2016 Federal
Register (81 FR 94058), we set forth the standards for the request for
reconsideration of denial of certification specific to the FFEs at
Sec. 155.1090.
In an interim final rule, issued 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, issued in the December 22, 2016
Federal Register (81 FR 94058).
In the Market Stabilization final rule, issued in the April 18,
2017 Federal Register (82 FR 18346), we amended standards relating to
special enrollment periods and QHP certification. In the 2019 Payment
Notice, issued 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 2020 Payment Notice
established a new special enrollment period.
In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment
Notice), we finalized revisions to the parameters of special enrollment
periods and the quality rating information display standards for State
Exchanges and amended the periodic data matching requirements.
In the January 19, 2021 Federal Register (86 FR 6138) (part 1 of
the 2022 Payment Notice), we 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 issued part 2 of the 2022 Payment Notice. In
part 3 of the 2022 Payment Notice, issued in the September 27, 2021
Federal Register (86 FR 53412), in conjunction with the Department of
the Treasury, we finalized amendments to certain policies in part 1 of
the 2022 Payment Notice.
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.
In the 2024 Payment Notice, issued in the April 27, 2023 Federal
Register (88 FR 25740), we revised Exchange Blueprint approval
timelines, lowered the user fee rate for QHPs in the FFEs and SBE-FPs,
and amended re-enrollment hierarchies for enrollees. We also finalized
policies to update FFE and SBE-FP standardized plan options; reduced
the risk of plan choice overload on the FFEs and SBE-FPs by limiting
the number of non-standardized plan options that issuers may offer
through Exchanges on the Federal platform to four for PY 2024 and to
two for PY 2025 and subsequent years; and ensure correct QHP
information. In addition, we amended coverage effective date rules,
lengthened the special enrollment period from 60 to 90 days for those
who lose Medicaid coverage, and prohibited QHPs on FFEs and SBE-FPs
from terminating coverage mid-year for dependent children who reach the
applicable maximum age. We also finalized policies on verifying
consumer income and permitting door-to-door assisters to solicit
consumers. To ensure provider network adequacy, we finalized provider
network and ECP policies for QHPs. We revised the failure to file and
reconcile process to ensure enrollees would not lose APTC eligibility
until they or their tax filer failed to file their Federal income taxes
and reconcile APTC for two consecutive tax years.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we required a State seeking to operate a State
Exchange to first operate an SBE-FP for at least one plan year, revised
Exchange Blueprint requirements for States transitioning to a State
Exchange, established additional minimum standards for Exchange call
center operations, required an Exchange to operate a centralized
eligibility and enrollment platform on its website, and finalized
various policies for web-brokers and direct enrollment entities. In
addition, we required State Exchanges and State Medicaid agencies to
remit payment to HHS for their use of certain income data, amended re-
enrollment hierarchies for enrollees enrolled in catastrophic coverage,
revised the parameters around a State Exchange adopting an alternative
open enrollment period, and extended the availability of a special
enrollment period for APTC-eligible qualified individuals with a
projected annual household income no greater than 150 percent of the
Federal Poverty Level (FPL). To ensure provider network adequacy in
State Exchanges and SBE-FPs, we finalized provider network adequacy
policies applicable to such Exchanges for PY 2026 and subsequent plan
years. We also further lowered the user fee rate for QHPs in the FFEs
and SBE-FPs. In addition, we finalized the policy to maintain FFE and
SBE-FP standardized plan option metal levels from the 2024 Payment
Notice and finalized an exceptions process to the limitation on non-
standardized plan options in FFEs and SBE-FPs. We also finalized the
requirement for Exchanges to provide notification to enrollees or their
tax filers who have failed to file their Federal income taxes and
reconcile APTC for one tax year.
5. Essential Health Benefits
We established requirements relating to EHBs in the Standards
Related to Essential Health Benefits, Actuarial Value, and
Accreditation Final Rule, which was issued in the February 25, 2013
Federal Register (78 FR 12834) (EHB Rule). We established at Sec.
156.135(a) that AV is generally to be calculated using the AV
Calculator developed and made available by HHS for a given benefit
year. In the 2015 Payment Notice (79 FR 13743), we established at Sec.
156.135(g) provisions
[[Page 82314]]
for updating the AV Calculator in future plan years. In the 2017
Payment Notice (81 FR 12349), we amended the provisions at Sec.
156.135(g) to allow for additional flexibility in our approach and
options for updating of the AV Calculator.
In the 2025 Payment Notice, issued in the April 15, 2024 Federal
Register (89 FR 26218), we revised Sec. 155.170(a) to codify that
benefits covered in a State's EHB-benchmark plan are not considered in
addition to EHB, even if they had been required by State action taking
place after December 31, 2011, other than for purposes of compliance
with Federal requirements. We finalized three revisions to the
standards for State selection of EHB-benchmark plans for benefit years
beginning on or after January 1, 2026: we revised the typicality
standard at Sec. 156.111 for States to demonstrate that their new EHB-
benchmark plan provides a scope of benefits that is equal to that of a
typical employer plan in the State and removed the generosity standard;
removed the requirement for States to submit a formulary drug list as
part of their application unless they are changing their prescription
drug EHBs; and consolidated the options for States to change their EHB-
benchmark plans. We also removed the regulatory prohibition at Sec.
156.115(d) on issuers from including routine non-pediatric dental
services as an EHB beginning with PY 2027. In addition, we revised
Sec. 156.122 to codify that prescription drugs in excess of those
covered by a State's EHB-benchmark plan are considered EHB. We also
stated that HHS and the Departments of Labor and the Treasury intend to
propose rulemaking that would align the standards applicable to large
group market health plans and self-insured group health plans with
those applicable to individual and small group market plans, so that
all group health plans and health insurance coverage subject to
sections 2711 and 2707(b) of the PHS Act, as applicable, would be
required to treat prescription drugs covered by the plan or coverage in
excess of the applicable EHB-benchmark plan as EHB for purposes of the
prohibition of lifetime and annual limits and the annual limitation on
cost sharing, which would further strengthen the consumer protections
in the ACA.
6. Medical Loss Ratio (MLR)
We issued a request for comment on section 2718 of the PHS Act in
the April 14, 2010 Federal Register (75 FR 19297) and issued an interim
final rule with a 60-day comment period relating to the MLR program on
December 1, 2010 (75 FR 74864). A final rule with a 30-day comment
period was issued in the December 7, 2011 Federal Register (76 FR
76573). An interim final rule with a 60-day comment period was issued
in the December 7, 2011 Federal Register (76 FR 76595). A final rule
was issued in the Federal Register on May 16, 2012 (77 FR 28790). The
MLR program requirements were amended in final rules issued in the
March 11, 2014 Federal Register (79 FR 13743), the May 27, 2014 Federal
Register (79 FR 30339), the February 27, 2015 Federal Register (80 FR
10749), the March 8, 2016 Federal Register (81 FR 12203), the December
22, 2016 Federal Register (81 FR 94183), the April 17, 2018 Federal
Register (83 FR 16930), the May 14, 2020 Federal Register (85 FR
29164), the May 5, 2021 Federal Register (86 FR 24140), and the May 6,
2022 Federal Register (87 FR 27208), and an interim final rule that was
issued in the September 2, 2020 Federal Register (85 FR 54820).
7. Quality Improvement Strategy
We issued regulations in Sec. 155.200(d) to direct Exchanges to
evaluate quality improvement strategies, and Sec. 156.200(b) to direct
QHP issuers to implement and report on a quality improvement strategy
or strategies consistent with section 1311(g) standards as QHP
certification criteria for participation in an Exchange. In the 2016
Payment Notice, issued in the February 27, 2015 Federal Register (80 FR
10749), we finalized regulations at Sec. 156.1130 to establish
standards and the associated timeframe for QHP issuers to submit the
necessary information to implement quality improvement strategy
standards for QHPs offered through an Exchange.
8. Basic Health Program
In the March 12, 2014, Federal Register (79 FR 14111), we issued a
final rule entitled the ``Basic Health Program: State Administration of
Basic Health Programs; Eligibility and Enrollment in Standard Health
Plans; Essential Health Benefits in Standard Health Plans; Performance
Standards for Basic Health Programs; Premium and Cost Sharing for Basic
Health Programs; Federal Funding Process; Trust Fund and Financial
Integrity'' (hereinafter referred to as the BHP final rule)
implementing section 1331 of the ACA, which governs the establishment
of BHPs. The BHP final rule established the standards for State and
Federal administration of BHPs, including provisions regarding
eligibility and enrollment, benefits, cost-sharing requirements and
oversight activities. In the BHP final rule, we specified that the BHP
Payment Notice process would include the annual publication of both a
proposed and final BHP payment methodology.
On October 11, 2017, the Attorney General of the United States
provided HHS and the Department of the Treasury (the Departments) with
a legal opinion \9\ indicating that the permanent appropriation at 31
U.S.C. 1324, from which the Departments had historically drawn funds to
make CSR payments, cannot be used to fund CSR payments to insurers. In
light of this opinion--and in the absence of any other appropriation
that could be used to fund CSR payments--HHS directed CMS to
discontinue CSR payments to issuers until Congress provides for an
appropriation. As a result of this opinion, CMS discontinued CSR
payments to issuers in the States operating a BHP (that is, New York
and Minnesota). The States then sued the Secretary for declaratory and
injunctive relief in the United States District Court for the Southern
District of New York.\10\ On May 2, 2018, the parties filed a
stipulation requesting a stay of the litigation so that HHS could issue
an administrative order revising the 2018 BHP payment methodology.
After consideration of the States' comments on the administrative order
revising the payment methodology, we issued a Final Administrative
Order on August 24, 2018 (Final Administrative Order) setting forth the
payment methodology that would apply to the 2018 BHP program year.
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\9\ Sessions, J. (2017, Oct. 11). Legal Opinion Re: Payments to
Issuers for Cost Sharing Reductions (CSRs). Office of the Attorney
General. <a href="https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf">https://www.hhs.gov/sites/default/files/csr-payment-memo.pdf</a>.
\10\ See New York v. U.S. Dep't of Health & Human Servs., No.
18-cv-00683 (RJS) (S.D.N.Y. filed Jan. 26, 2018).
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In the November 5, 2019 Federal Register (84 FR 59529) (hereinafter
referred to as the November 2019 final BHP Payment Notice), we
finalized the payment methodologies for BHP program years 2019 and
2020.\11\ The 2019 payment methodology is the same payment methodology
described in the Final Administrative Order. The 2020 payment
methodology is the same methodology as the 2019 payment methodology
with one additional adjustment to account for the impact of individuals
selecting different metal tier level plans in the Exchange, referred to
as the Metal Tier Selection Factor
[[Page 82315]]
(MTSF).\12\ In the August 13, 2020 Federal Register (85 FR 49264)
(hereinafter referred to as the August 2020 final BHP Payment Notice),
we finalized the payment methodology for BHP program year 2021. The
2021 payment methodology is the same methodology as the 2020 payment
methodology, with one adjustment to the income reconciliation factor
(IRF). In the July 7, 2021 Federal Register (86 FR 35615) (hereinafter
referred to as the July 2021 final BHP Payment Notice), we finalized
the payment methodology for BHP program year 2022. The 2022 payment
methodology is the same as the 2021 payment methodology, with the
exception of the removal of the Metal Tier Selection Factor.
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\11\ BHP program year means a calendar year for which a standard
health plan provides coverage for BHP enrollees. See 42 CFR 600.5.
\12\ ``Metal tiers'' refer to the different actuarial value plan
levels offered on the Exchanges. Bronze-level plans generally must
provide 60 percent actuarial value; silver-level 70 percent
actuarial value; gold-level 80 percent actuarial value; and
platinum-level 90 percent actuarial value. See 45 CFR 156.140.
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In the December 20, 2022 Federal Register (87 FR 77722) (hereafter
referred to as the 2023 final BHP Payment Notice), we finalized the
payment methodology for BHP program year 2023. The 2023 payment
methodology is the same as the 2022 payment methodology, except for the
addition of a factor to account for a State operating a BHP and
implementing an approved State Innovation Waiver under section 1332 of
the ACA; this is the section 1332 waiver factor (WF). In the 2023 final
BHP Payment Notice (87 FR 77723), we also revised the schedule for
issuance of payment notices and allowed payment notices to be effective
for 1 or multiple program years, as determined by and subject to the
direction of the Secretary, beginning with the 2023 payment
methodology. In the 2025 Payment Notice, issued in the April 15, 2024
Federal Register (89 FR 26218), we finalized that States may start BHP
applicants' effective date of eligibility on the first day of the month
following the date of application. In addition, we finalized that,
subject to HHS approval, a State may establish its own effective date
of eligibility for enrollment policy.
B. Summary of Major Provisions
The regulations outlined in this proposed rule would be codified in
42 CFR part 600 and 45 CFR parts 153, 155, 156, and 158.
1. 42 CFR Part 600
We are proposing changes to the methodology regarding the premium
adjustment factor (PAF), which is used to calculate the adjusted
reference premium (ARP) for BHP payment. We propose maintaining the PAF
value at 1.188 for States that have fully implemented BHP and are using
Second Lowest Cost Silver Plan (SLCSP) premiums from a year in which
BHP was fully implemented. As previously clarified, for States in their
first year of implementing BHP and choosing to use prior year SLCSP
premiums to determine BHP payment, the PAF value would be set to 1.00.
We propose that if a State is using SLCSP premiums from a year in which
BHP was not fully implemented, the PAF is calculated by determining the
CSR adjustment that QHP issuers included in the SLCSP premiums,
reporting the CSR adjustments for the SLCSP for each region in the
State to CMS, and then CMS calculating the PAF as 1.20 divided by 1
plus the adjustment. Additionally, we are proposing a technical
clarification for BHP payment rates in cases of multiple SLCSP premiums
in an area.
2. 45 CFR Part 153
In accordance with the OMB Report to Congress on the Joint
Committee Reductions for Fiscal Year 2025, the HHS-operated risk
adjustment program is subject to the fiscal year 2025
sequestration.\13\ Therefore, the HHS-operated risk adjustment program
will sequester payments made from fiscal year 2025 resources (that is,
funds collected during the 2025 fiscal year) at a rate of 5.7 percent.
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\13\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2025. <a href="https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf">https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf</a>.
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We propose to recalibrate the 2026 benefit year HHS risk adjustment
models using the 2020, 2021, and 2022 benefit year enrollee-level EDGE
data. Starting with the 2026 benefit year, we propose to begin phasing
out the market pricing adjustment to the plan liability associated with
Hepatitis C drugs in the HHS risk adjustment models (see, for example,
84 FR 17463 through 17466). We also are proposing to incorporate pre-
exposure prophylaxis (PrEP) as a separate, new type of factor called an
Affiliated Cost Factor (ACF) in the HHS risk adjustment adult and child
models starting with the 2026 benefit year. We also request information
on whether the HHS-operated risk adjustment program should take into
account the time value of money for the collection and remittance of
State transfers that occur 8 to 10 months after the conclusion of the
benefit year. We also propose a risk adjustment user fee for the 2026
benefit year of $0.18 per member per month (PMPM).
Beginning with the 2025 benefit year of HHS-RADV, we propose to
exclude enrollees without HCCs, which includes enrollees with only
prescription drug categories (RXCs), from the IVA sample, remove the
Finite Population Correction (FPC) from the IVA sampling methodology,
and replace the source of the Neyman allocation data used for HHS-RADV
sampling with the most recent 3 years of consecutive HHS-RADV data. In
addition, beginning with the 2024 benefit year of HHS-RADV, we propose
to modify the SVA pairwise means test, which tests for statistical
differences between the IVA and SVA results, to use a bootstrapped 90
percent confidence interval methodology and to increase the initial SVA
subsample size from 12 enrollees to 24 enrollees.
3. 45 CFR Part 155
We seek comment on how assisters who perform their assister duties
in a hospital and hospital system may, within the bounds of the
statute, refer consumers to programs designed to reduce medical debt.
We address our authority to investigate and undertake compliance
reviews and enforcement actions in response to misconduct or
noncompliance with applicable agent, broker, and web-broker Exchange
requirements or standards occurring at the insurance agency level and
how we intend to hold lead agents of insurance agencies accountable for
such misconduct or noncompliance.
We propose to revise Sec. 155.220(k)(3) to reflect our authority
to suspend an agent's or broker's ability to transact information with
the Exchange in instances where HHS discovers circumstances that pose
unacceptable risk to accuracy of Exchange eligibility determinations,
Exchange operations, applicants, or enrollees, or Exchange information
technology systems, including but not limited to risk related to
noncompliance with the standards of conduct under Sec.
155.220(j)(2)(i), (ii) or (iii) and the privacy and security standards
under Sec. 155.260, until the circumstances of the incident, breach,
or noncompliance are remedied or sufficiently mitigated to HHS'
satisfaction.
We propose to update the Model Consent Form that agents, brokers,
and web-brokers can use to obtain and document consumer consent.\14\
The
[[Page 82316]]
updates would expand the resource to include a standardized form that
agents, brokers, and web-brokers can use to document the consumer's
review and confirmation of the accuracy of information in their
Exchange eligibility application, which is a new standard of conduct
that was also implemented as part of the 2024 Payment Notice (88 FR
25809 through 25814). The proposed updates would also add scripts that
agents, brokers, and web-brokers could utilize to meet the consumer
consent and eligibility application review requirements finalized in
the 2024 Payment Notice via an audio recording. We are not proposing
any regulatory text changes since the use of the updated Model Consent
Form would not be mandatory.
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\14\ CMS. (2022, December 14). CMS Model Consent Form for
Marketplace Agents and Brokers. PRA package (CMS-10840, OMB 0938-
1438). <a href="https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf">https://www.cms.gov/files/document/cms-model-consent-form-marketplace-agents-and-brokers.pdf</a>.
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We propose to amend Sec. 155.305(f)(4) to require Exchanges to
provide notice to consumers and tax filers who have failed to file and
reconcile their APTC for 2 consecutive years.
We propose to add Sec. 155.400(d)(1) to codify HHS' guidance that
requires that, within 60 calendar days after a State Exchange receives
a data inaccuracy from an issuer operating in an State Exchange that
includes a description of an inaccuracy that meets the requirements at
Sec. 156.1210(a)-(c) and all the information that the State Exchange
requires or requests to properly assess the inaccuracy, State Exchanges
must review and resolve the State Exchange issuer's enrollment data
inaccuracies and submit to HHS a description of the resolution of any
inaccuracies described by the State Exchange issuer that the State
Exchange confirms to be inaccuracies in a format and manner specified
by HHS.
We propose to revise Sec. 155.400(g) to allow issuers to adopt a
fixed-dollar payment threshold of $5 or less, adjusted for inflation,
under which issuers would not be required to trigger a grace period or
terminate enrollment for enrollees who fail to pay the full amount of
their portion of premium owed. We propose to limit application of this
fixed-dollar payment threshold to premium payments after coverage is
effectuated. Issuers would be required to apply the fixed-dollar
threshold uniformly to all enrollees and without regard to their health
status. Issuers would be allowed to apply either the fixed-dollar
payment threshold or one of two percentage-based thresholds (one of
which is currently permitted under Sec. 155.400(g), but which we
propose to modify).
We propose revisions to Sec. 155.505(b) to codify an option for
application filers to file appeals on behalf of applicants and
enrollees on the application filer's Exchange application, as this
would streamline the appeals process and ensure operational consistency
between the FFEs and the HHS appeals entity or State Exchange appeals
entity.
We propose to amend Sec. 155.1000 to state explicitly that an
Exchange may deny certification to any plan that does not meet the
general certification criteria at Sec. 155.1000(c). We also propose to
amend Sec. 155.1090 with refinements to the standards for a request
for the reconsideration of a denial of certification specific to the
FFEs.
We propose that in addition to collecting the information and data
currently provided by Exchanges under Sec. 155.1200 to monitor
performance and compliance, we would use the information and data that
Exchanges submit to increase transparency into Exchange operations and
to promote program improvements. We anticipate publicly releasing the
Exchanges annual State-based Marketplace Annual Reporting Tools
(SMARTs), programmatic and financial audits, Blueprint applications,
and additional data points in the Open Enrollment (OE) Data Reports. We
are seeking input on how to best display these data points and how to
best develop a performance measurement tool to assess Exchange quality
and consumer experience.
4. 45 CFR Part 156
We solicit comments on reducing the risk of issuer insolvencies
adversely impacting the integrity of the FFEs.
We propose 2026 benefit year FFE and SBE-FP user fee rates of 2.5
percent and 2.0 percent of total monthly premiums, respectively.
However, if the enhanced PTC subsidies as currently enacted \15\ or at
a higher level are extended through the 2026 benefit year by March 31,
2025, we propose a 2026 benefit year FFE user fee rate range between
1.8 and 2.2 percent of total monthly premiums and a 2026 benefit year
SBE-FP user fee rate range between 1.4 and 1.8 of total monthly
premiums, with each of these ranges to be set at a single rate in the
final rule.
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\15\ ARP, Public Law 117-2 (2021). These enhanced subsidies were
extended under the IRA, Public Law 117-169 (2022) and are scheduled
to expire after the 2025 calendar year.
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We affirm that certain CSR loading practices that are permitted by
State regulators are permissible under Federal law to the extent that
they are reasonable and actuarially justified. We seek comment on
whether we should codify this guidance at Sec. 156.80(d).
We intend to revise the method for updating the AV Calculator,
starting with the 2026 AV Calculator. Under this approach, for a plan
year, we would only release a single, final version of the AV
Calculator. We would also solicit public comments on the AV Calculator
for a plan year generally but would only plan to incorporate this
feedback into the development and release of the following plan year's
AV Calculator.
We propose to make minor updates to the standardized plan option
designs for PY 2026 to ensure these plans continue to have AVs within
the permissible de minimis range for each metal level and to maintain a
high degree of continuity with the approaches to standardized plan
options finalized in the 2023, 2024, and 2025 Payment Notices. In
addition, we propose to amend Sec. 156.201 to require issuers that
offer multiple standardized plan options within the same product
network type, metal level, and service area to meaningfully
differentiate these plans from one another in terms of included
benefits, provider networks, and/or formularies.
We propose to amend Sec. 156.202(b) and (d) to properly reflect
the flexibility that issuers have been operationally permitted since
these requirements were introduced to vary the inclusion of the
distinct adult dental benefit coverage, pediatric dental benefit
coverage, and/or adult vision benefit coverage categories under the
non-standardized plan option limit in accordance with Sec.
156.202(c)(1) through (3).
We propose to conduct ECP certification reviews of plans for which
issuers submit QHP certification applications in FFEs in States
performing plan management functions, beginning in PY 2026.
We propose to share aggregated, summary-level QIS information
publicly on an annual basis beginning on January 1, 2026, with
information QHP issuers submit during the PY 2025 QHP Application
Period.
We propose to amend Sec. 156.1220(a) to introduce a new
materiality threshold for HHS-RADV appeals, such that HHS would rerun
HHS-RADV results and adjust HHS-RADV adjustments to State transfers in
response to a successful appeal when the impact of that appeal to the
filer's HHS-RADV adjustments to State transfers is greater than or
equal to $10,000.
5. 45 CFR Part 158
We propose to amend Sec. 158.140(b)(4)(ii) to allow qualifying
issuers to not adjust incurred claims by the net payments or receipts
related to
[[Page 82317]]
the risk adjustment program for MLR reporting and rebate calculation
purposes beginning with the 2026 MLR reporting year (MLR reports due in
2027). We propose that for qualifying issuers, earned premium would
account for net risk adjustment receipts by simply adding these net
receipts to total premium, without subsequently subtracting them from
adjusted earned premium, such that these net receipts would impact the
MLR denominator rather than MLR numerator. We propose to amend Sec.
158.103 to add a definition of ``qualifying issuer.''
We also propose amendments to Sec. 158.240(c) to add an
illustrative example of how qualifying issuers would calculate the
amount of rebate owed to each enrollee to accurately reflect how such
issuers would incorporate the net risk adjustment transfer amounts into
the MLR and rebate calculations differently from other issuers, as well
as a conforming amendment to clarify that the current illustrative
example in paragraph (c)(2) would apply to issuers that are not
qualifying issuers.
III. Provisions of the Proposed Regulations
A. 42 CFR Part 600 BHP Methodology Regarding the Value of the Premium
Adjustment Factor (PAF)
1. Overview of the Payment Methodology and Calculation of the Payment
Amount
Section 1331(d)(3) of the ACA directs the Secretary to consider
several factors when determining the Federal BHP payment amount, which,
as specified in the statute, must equal 95 percent of the value of the
PTC under section 36B of the Code and CSRs under section 1402 of the
ACA that would have been paid on behalf of BHP enrollees had they
enrolled in a QHP through an Exchange. Thus, the BHP payment
methodology is designed to calculate the PTC and CSRs as consistently
as possible and in general alignment with the methodology used by
Exchanges to calculate advance payments of the PTC (APTC) and CSRs, and
the methodology used to reconcile APTC with the amount of the PTC
allowed for the tax year under section 36B of the Code. In accordance
with section 1331(d)(3)(A)(iii) of the ACA, the final payment
methodology must be certified by the Chief Actuary of CMS, in
consultation with the Office of Tax Analysis (OTA) of the Department of
the Treasury, as having met the requirements of section
1331(d)(3)(A)(ii) of the ACA.
Section 1331(d)(3)(A)(ii) of the ACA specifies that the payment
determination shall take into account all relevant factors necessary to
determine the value of the PTC and CSRs that would have been paid on
behalf of eligible individuals, including but not limited to, the age
and income of the enrollee, whether the enrollment is for self-only or
family coverage, geographic differences in average spending for health
care across rating areas, the health status of the enrollee for
purposes of determining risk adjustment payments and reinsurance
payments that would have been made if the enrollee had enrolled in a
QHP through an Exchange, and whether any reconciliation of APTC and CSR
would have occurred if the enrollee had been enrolled. Under all
previous payment methodologies, the total Federal BHP payment amount
has been calculated using multiple rate cells in each BHP State. Each
rate cell represents a unique combination of age range (if applicable),
geographic area, coverage category (for example, self-only or two-adult
coverage through the BHP), household size, and income range as a
percentage of FPL, and there is a distinct rate cell for individuals in
each coverage category within a particular age range who reside in a
specific geographic area and are in households of the same size and
income range. The BHP payment rates developed are also consistent with
the State's rules on age rating. Thus, in the case of a State that does
not use age as a rating factor on an Exchange, the BHP payment rates
would not vary by age.
Under the methodology finalized in the July 2021 final BHP Payment
Notice, the rate for each rate cell is calculated in 2 parts. The first
part is equal to 95 percent of the estimated PTC that would have been
allowed if a BHP enrollee in that rate cell had instead enrolled in a
QHP in an Exchange. The second part is equal to 95 percent of the
estimated CSR payment that would have been made if a BHP enrollee in
that rate cell had instead enrolled in a QHP in an Exchange. These two
parts are added together and the total rate for that rate cell would be
equal to the sum of the PTC and CSR rates. As noted in the July 2021
final BHP Payment Notice, we currently assign a value of zero to the
CSR portion of the BHP payment rate calculation, because there is
presently no available appropriation from which we can make the CSR
portion of any BHP payment.
The 2023 final BHP Payment Notice provides a detailed description
of the structure of the BHP payments, including the equations, factors,
and the values of the factors used to calculate the BHP payments. We
are proposing one change to the methodology regarding the premium
adjustment factor (PAF).
The PAF is used to calculate the adjusted reference premium (ARP)
that is used to calculate the BHP payment. The adjusted reference
premium (ARP) is used to calculate the estimated PTC that would be
allowed if BHP-eligible individuals enrolled in QHPs through an
Exchange and is based on the premiums for the applicable second lowest
cost silver plan during the applicable plan year. The PAF considers the
premium increases in other States that took effect after we
discontinued payments to issuers for CSRs provided to enrollees in QHPs
offered through Exchanges. Despite the discontinuance of Federal
payments for CSRs, QHP issuers are required to provide CSRs to eligible
enrollees. As a result, many QHP issuers increased the silver-level
plan premiums to account for those additional costs; these premium
adjustments and how they were applied (for example, to only silver-
level plans or to all metal tier plans) varied across States. For the
States operating BHPs in 2018, the increases in premiums were
relatively minor, because the majority of enrollees eligible for CSRs
(and all who were eligible for the largest CSRs) were enrolled in the
BHP and not in QHPs on the Exchanges, and therefore issuers in BHP
States did not significantly raise premiums to cover costs related to
HHS not making CSR payments.
In the Final Administrative Order and the 2019 through 2023 final
BHP Payment Notices, we incorporated the PAF into the BHP payment
methodologies to capture the impact of how other States responded to
HHS ceasing to make CSR payments.\16\ We also reserved the right that
in the case an appropriation for CSR payments is made for a future
year, we would determine whether and how to modify the PAF in the
payment methodology.
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\16\ <a href="https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf">https://www.medicaid.gov/sites/default/files/2019-11/final-admin-order-2018-revised-payment-methodology.pdf</a>.
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Under the Final Administrative Order, we calculated the PAF by
using information sought from QHP issuers in each State and the
District of Columbia and determined the premium adjustment that the
responding QHP issuers made to each silver level plan in 2018 to
account for the discontinuation of CSR payments to QHP issuers. Based
on the data collected, we estimated the median adjustment for silver
level QHPs nationwide (excluding those in the two BHP States). To the
extent that QHP issuers made no adjustment (or the adjustment was
zero), this was counted as zero in determining the median
[[Page 82318]]
adjustment made to all silver level QHPs nationwide. If the amount of
the adjustment was unknown--or we determined that it should be excluded
for methodological reasons (for example, the adjustment was negative,
an outlier, or unreasonable)--then we did not count the adjustment
towards determining the median adjustment.\17\ The median adjustment
for silver level QHPs is referred to as the nationwide median
adjustment.
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\17\ Some examples of outliers or unreasonable adjustments
include (but are not limited to) values over 100 percent (implying
the premiums doubled or more because of the adjustment), values more
than double the otherwise highest adjustment, or non-numerical
entries.
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For each of the two BHP States, we determined the median premium
adjustment for all silver level QHPs in that State, which we refer to
as the State median adjustment. The PAF for each BHP State equaled one
plus the nationwide median adjustment divided by one plus the State
median adjustment for the BHP State. In other words,
PAF = (1 + Nationwide Median Adjustment) / (1 + State Median
Adjustment).
To determine the PAF described above, we sought to collect QHP
information from QHP issuers in each State and the District of Columbia
to determine the premium adjustment those issuers made to each silver
level plan offered through the Exchange in 2018 to account for the end
of CSR payments. Specifically, we sought information showing the
percentage change that QHP issuers made to the premium for each of
their silver level plans to cover benefit expenditures associated with
the CSRs, given the lack of CSR payments in 2018. This percentage
change was a portion of the overall premium increase from 2017 to 2018.
According to our 2018 records, there were 1,233 silver-level QHPs
operating on Exchanges in 2018. Of these 1,233 QHPs, 318 QHPs (25.8
percent) responded to our request for the percentage adjustment applied
to silver-level QHP premiums in 2018 to account for the discontinuance
of HHS making CSR payments. These 318 QHPs operated in 26 different
States, with 10 of those States running State Exchanges (while we
requested information only from QHP issuers in States serviced by an
FFE, many of those issuers also had QHPs in State Exchanges and
submitted information for those States as well). Thirteen of these 318
QHPs were in New York (and none were in Minnesota). Excluding these 13
QHPs from the analysis, the nationwide median adjustment was 20.0
percent. Of the 13 QHPs in New York that responded, the State median
adjustment was 1.0 percent. We believed that this was an appropriate
adjustment for QHPs in Minnesota, as well, based on the observed
changes in New York's QHP premiums in response to the discontinuance of
CSR payments (and the operation of the BHP in that State) and our
analysis of expected QHP premium adjustments for States with BHPs. We
calculated the proposed PAF as (1 + 20%) / (1 + 1%) (or 1.20/1.01),
which results in a value of 1.188.
We set the value of the PAF to 1.188 for all program years for 2018
through 2024, with limited exceptions.\18\ We believe that this value
for the PAF continues to reasonably account for the increase in silver-
level premiums experienced in non-BHP States that took effect after the
discontinuance of the CSR payments.
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\18\ 87 FR 77731, 77737.
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Starting in 2023, we made one limited exception in setting the
value of the PAF as part of the 2023 final BHP Payment Notice.\19\ In
the case of a State in the first year of implementing a BHP, if the
State chooses to use prior year second lowest cost silver plan (SLCSP)
premiums to determine the BHP payment (for example, the 2025 premiums
for the 2026 program year), we set the value of the PAF to 1.00. In
this case, we believe that adjustment to the QHP premiums to account
for the discontinuation of CSR payments would be included fully in the
prior year premiums, and no further adjustment would be necessary.
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\19\ Id. at 77732.
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We propose to make a change to the calculation of the PAF starting
in program year 2026. There are cases in which a State may not have
fully implemented BHP for a full program year. For example, a State may
operate BHP for only a portion of the year (in other words, less than
12 months); there may be other such cases in which a State would be
deemed to have partially implemented BHP for a program year.
For a State that initially only partially implemented BHP, it is
likely that, in the year (or years) when the BHP is only partially
implemented, the percentage adjustment to the premiums for the program
year to account for the discontinuation of CSR payments may be
significantly higher than the 1 percent adjustment we determined for
BHP States in 2018. In these cases, it is probable that QHP issuers
would include a larger premium adjustment (that is, greater than 1
percent) because more individuals would be eligible for CSRs (and
individuals eligible for relatively larger CSRs) would be enrolled in a
QHP on the Exchange, for part or all of the initial implementation
year. If premiums with a larger CSR adjustment are used as a basis for
calculating the BHP payments and the current value of the PAF (1.188)
is used, it is likely that this would ``double count'' a portion of the
adjustment and lead to an effective CSR adjustment over 20 percent.
For example, assume a State implements BHP for only 6 months in a
program year. As a result, QHP issuers may include a 10 percent
adjustment to the premiums to account for the discontinuation of the
CSR for the portion of the year when CSR eligible individuals would
have QHP coverage. The issuers would be liable for roughly half of the
CSR amounts they would have had to provide if there was no BHP in
place. Under the previous BHP payment methodology, if these premiums
that already partially account for CSRs are used to calculate the BHP
payment, we would increase the reference premium by 18.8 percent for
the PAF, leading to an effective increase of 30.68 percent (1.188
multiplied by 1.10 minus 1). This is significantly larger than the 20
percent adjustment we determined as the basis for the PAF for States
that have operated their BHP for more than two full program years.
Under the Secretary's general authority to account for all relevant
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible
individuals now enrolled in BHP coverage \20\ and to avoid such an
overpayment, we propose the following changes to the PAF:
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\20\ Section 1331(d)(3)(A)(ii) of the PHS Act.
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(1) If a State has fully implemented BHP and is using SLSCP
premiums for a year in which the BHP was fully implemented, then the
value of the PAF would remain 1.188, as described above.
(2) If a State is in the first year of implementing a BHP and the
State chooses to use prior year SLCSP premiums to determine the BHP
payment (for example, the 2025 premiums for the 2026 program year), we
set the value of the PAF to 1.00. This is the same approach described
in the 2023 final BHP Payment Notice.
(3) If a State is using SLCSP premiums from a year in which BHP was
not fully implemented, then the PAF is calculated as follows:
First, the State must determine the CSR adjustment that QHP issuers
included in the SLSCP premiums for individual
[[Page 82319]]
market Exchange plans. The State should identify the SLSCP in each
region, as defined for the Exchange. For each SLSCP, the State should
determine the CSR adjustment that the QHP issuer included in the
premium. This may be done by (1) reviewing any materials submitted by
the QHP issuer describing the calculation of the premium; or (2)
requesting that the QHP issuer provide the adjustment, or an estimate
of the adjustment used in calculating the premium. Second, the State
should report the CSR adjustments for the SLCSP for individual market
Exchange plans for each region in the State to CMS. Third, CMS will
take this percentage adjustment and calculate the PAF as 1.20 divided
by 1 plus the adjustment. For example, if the percentage adjustment for
the CSR is 5 percent, the PAF would be (1.20 / 1.05), or 1.143. The
maximum value of the PAF would be 1.188, and the minimum value of the
PAF would be 1.00.
This approach would apply based on the premium year, not
necessarily the program year. If the State has fully implemented BHP
but is using the prior year premiums and BHP was not fully implemented
in that year, this modified approach would still apply. For example, if
a State partially implemented BHP in 2026 and fully implemented BHP in
2027, when determining the BHP payments for 2027, we would then use
1.188 for the value of the PAF if the State elected to use 2027 QHP
premiums to determine the payment; if the State elected to use the 2026
QHP premiums, then we would use the modified PAF calculation described
in this section. CMS would make a determination of whether or not a BHP
was fully implemented based on a review of the Blueprint and provide
that determination to the State.
We considered other approaches to the modified PAF. We considered
whether or not CMS would collect data on the underlying CSR adjustment
in the SLCSP premiums; however, we believe that such activities fall
within States roles as BHP administrators and States are better able to
work with QHP issuers to administer this data collection process. We
also considered if States should survey all QHP issuers (not just those
with the SLSCP premium). We believe that only using the CSR adjustment
from individual market Exchange plans with the SLCSPs would be a more
reasonable approach and would minimize the burden on States and QHP
issuers by only requiring the State to work with one issuer in each
region, as opposed to all issuers in each region. We also considered
whether or not we should make further changes to the PAF, but we
believe that this approach balances maintaining accurate BHP payments
with stability and limited burden for BHP States. We request comments
on this approach or alternative approaches to calculating the PAF.
2. Technical Clarification for Calculation of BHP Payment Rates in
Cases of Multiple Second Lowest Cost Silver Plan Premiums in an Area
The BHP payment rates are based on the second lowest cost silver
plan premium among individual market QHPs operating on the Exchanges in
each rating area (or county) in a State. This is the basis for the
reference premium (or RP) in the BHP payment methodology.
In general, we expect that each county would have a unique second
lowest cost silver plan premium, which is used to calculate the payment
rates for residents of that county for the BHP payment. However, in
some cases, we have found that States may have more than one second
lowest cost silver plan within a county. This may occur in cases where
the State has allowed QHPs to operate in only a portion of the county
instead of the entire county on the Exchange.
In our previous BHP payment methodologies, we do not describe how
such a case would be handled for calculating BHP payments. In our
technical guidance to States, we have instructed States to report the
premiums for the second lowest cost silver plan operating in the
largest part of the county as measured by total population.
Under the Secretary's general authority to account for all relevant
factors necessary to determine the value of the premium and cost-
sharing reductions that would have been provided to eligible
individuals now enrolled in BHP coverage,\21\ for the 2026 payment
methodology and all subsequent years, we propose to clarify that in
cases where there are more than one second lowest cost silver plans in
a county, the BHP payment would be based on the premium of the second
lowest cost silver plan applicable to the largest portion of the county
as measured by total population. We welcome comments on this approach.
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\21\ Section 1331(d)(3)(A)(ii) of the PHS Act.
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B. 45 CFR Part 153--Standards Related to Reinsurance, Risk Corridors,
and Risk Adjustment
In subparts A, B, 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 issuers of lower-than-average risk,
risk adjustment covered plans to issuers of 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.\22\ HHS did not receive any
requests from States to operate risk adjustment for the 2026 benefit
year. Therefore, HHS will operate risk adjustment in every State and
the District of Columbia for the 2026 benefit year.
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\22\ 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 2025, the HHS-operated risk
adjustment program is subject to the fiscal year 2025
sequestration.\23\ The Federal government's 2025 fiscal year will begin
on October 1, 2024. Therefore, the HHS-operated risk adjustment program
will be sequestered at a rate of 5.7 percent for payments made from
fiscal year 2025 resources (that is, funds collected during the 2025
fiscal year).
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\23\ OMB. (2024). OMB Report to the Congress on the BBEDCA 251A
Sequestration for Fiscal Year 2025. <a href="https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.pdf">https://www.whitehouse.gov/wp-content/uploads/2024/03/BBEDCA_251A_Sequestration_Report_FY2025.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 (BBEDCA),\24\ as amended, and the underlying authority for the
HHS-operated risk adjustment program, the funds that are sequestered in
fiscal year 2025 from the HHS-operated risk adjustment program will
become available for payment to issuers in fiscal year 2026 without
further Congressional action. If Congress does not enact deficit
reduction provisions that replace the Joint Committee reductions, the
program would be sequestered in future fiscal years, and any
sequestered funding would become available in the fiscal year following
that in which it was sequestered.
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\24\ Public Law 99-177 (1985).
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Additionally, we note that the Infrastructure Investment and Jobs
Act \25\ amended section 251A(6) of the BBEDCA and extended
sequestration for the HHS-operated risk adjustment
[[Page 82320]]
program through fiscal year 2031 at a rate of 5.7 percent per fiscal
year.\26\
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\25\ Public Law 117-58, 135 Stat. 429 (2021).
\26\ 2 U.S.C. 901a.
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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 State payment transfer formula \27\ that is part of the
HHS Federally certified 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,\28\ and
prescription drug categories (RXCs) beginning with the 2018 benefit
year.\29\ Starting with the 2023 benefit year, we removed the severity
illness factors in the adult models and added interacted HCC count
factors (that is, additional factors that express the presence of a
severity or transplant HCC in combination with a specified number of
total payment HCCs or HCC groups on the enrollee's record) to the adult
and child models \30\ applicable to certain severity and transplant
HCCs.\31\
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\27\ The State payment transfer formula refers to part of the
Federally certified risk adjustment methodology that applies in
States where HHS is responsible for operating the program. The
formula 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). See, for example, 81 FR 94080.
\28\ 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 1 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.
\29\ 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 models. See, for example, 83 FR 16941.
\30\ See table 4 for a list of factors in the adult models, and
table 5 for a list of factors in the child models.
\31\ See 87 FR 27224 through 27228. Also see table 6 below.
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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)
adjustment 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 State payment transfer formula,
which determines the State transfer payment or charge that an issuer
will receive or be required to pay for that plan for the applicable
State market risk pool for a given benefit year. Thus, the HHS risk
adjustment models predict average group costs to account for risk
across plans, in keeping with the Actuarial Standards Board's Actuarial
Standards of Practice for risk classification.
a. Data for HHS Risk Adjustment Model Recalibration for the 2026
Benefit Year
We are proposing to recalibrate the 2026 benefit year HHS risk
adjustment models with the 2020, 2021, and 2022 enrollee-level EDGE
data. Consistent with the approach outlined in the 2020 Payment Notice,
we propose to recalibrate the HHS risk adjustment models for the 2026
benefit year using only enrollee-level EDGE data, and to continue to
use blended, or averaged, coefficients from the 3 years of separately
solved models for the 2026 benefit year model recalibration.\32\
Additionally, as outlined in the 2022 Payment Notice (86 FR 24140,
24152), we propose to use the 3 most recent consecutive years of
enrollee-level EDGE data that are available at the time we estimate the
draft recalibrated coefficients published in the proposed rule for the
applicable benefit year.\33\ We believe this promotes stability, meets
the goal of the HHS-operated risk adjustment program, and allows
issuers more time to incorporate this information when pricing their
plans for the upcoming benefit year.
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\32\ 84 FR 17463 through 17466.
\33\ Although we do receive the next year of enrollee-level EDGE
data prior to the proposed rule, that data must go through several
quality and analysis checks before it is useable for HHS risk
adjustment model recalibration.
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In the 2024 Payment Notice (88 FR 25740 through 25749), we
finalized the use of 2018, 2019 and 2020 benefit year enrollee-level
EDGE data for recalibration of the 2024 benefit year HHS risk
adjustment models for all model coefficients. As explained in the 2024
Payment Notice proposed rule (87 FR 78215 through 78216) and final rule
(88 FR 25749 through 25753), we analyzed the 2020 benefit year data to
identify possible impacts of the COVID-19 Public Health Emergency
(PHE). 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 HHS 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.
Then, in the 2025 Payment Notice (89 FR 26236 through 26238), we
finalized the use of 2019, 2020 and 2021 benefit year enrollee-level
EDGE data for recalibration of the 2025 benefit year HHS risk
adjustment models for all model coefficients. As explained in the 2025
Payment Notice proposed rule (88 FR 82527 through 82529) and final rule
(89 FR 26236 through 26238), we recognized that the COVID-19 PHE was
still in effect throughout the 2021 benefit year.\34\ Therefore,
similar to our analysis of 2020 benefit year data to identify possible
impacts of the COVID-19 PHE, we conducted additional analyses to
determine whether any anomalies in the 2021 benefit year enrollee-level
EDGE data were present beyond expected year-to-year variation and
whether the use of 2 years of PHE-impacted data presented any
additional concerns. Our analysis found that the coefficients for the
2021 benefit year enrollee-level EDGE recalibration data were similar
to the 2019 and 2020 benefit year's coefficients, with levels of
variation consistent with typical changes in coefficients for new years
of data. We did not identify any significant anomalies and incorporated
the 2021 benefit year enrollee-level EDGE data in the 2025 risk
adjustment model recalibration without exception.
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\34\ See, for example, ASPR. (2023, February 9). Renewal of
Determination that a Public Health Emergency Exists. <a href="https://aspr.hhs.gov/legal/PHE/Pages/COVID19-9Feb2023.aspx">https://aspr.hhs.gov/legal/PHE/Pages/COVID19-9Feb2023.aspx</a>.
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Consistent with the approach for use of 2020 and 2021 benefit year
enrollee-level EDGE data, we performed reviews of the 2022 benefit year
enrollee-level EDGE data to identify potential anomalies prior to
incorporating the 2022 benefit year enrollee-level EDGE data as part of
the proposed recalibration of the HHS risk adjustment models for the
2026 benefit year. Our review did not identify systematic anomalies in
the 2022 enrollee-level EDGE data. Therefore, after considering our
analysis of the 2020, 2021 and 2022
[[Page 82321]]
enrollee-level EDGE data, we propose to determine coefficients for the
2026 benefit year HHS risk adjustment models based on a blend of
separately solved coefficients from the 2020, 2021, and 2022 benefit
years' enrollee-level EDGE data, with the costs of services identified
from the data trended between the relevant year of data and the 2026
benefit year.\35\ The draft coefficients listed reflect the use of
trended 2020, 2021, and 2022 benefit year enrollee-level EDGE data, as
well as other HHS risk adjustment model updates proposed in this
proposed rule (including, for example, the proposed phasing out of the
pricing adjustment for Hepatitis C drugs).\36\ However, we note that
the draft coefficients could change between the proposed and final rule
if we identify an error after publication of this proposed rule or if
any proposed models are modified or not finalized in response to
comments. In addition, consistent with Sec. 153.320(b)(1)(i), if we
are unable to finalize the final coefficients in time for publication
in the final rule, we would publish the final coefficients for the 2026
benefit year in guidance soon after the publication of the final rule.
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\35\ As described in the 2016 Risk Adjustment White Paper
(<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>) and the 2017
Payment Notice (81 FR 12218), we subdivide expenditures into
traditional drugs, specialty drugs, medical services, and preventive
services and determine trend factors separately for each category of
expenditure. In determining these trend factors, we consult our
actuarial experts, review relevant Unified Rate Review Template
(URRT) submission data, analyze multiple years of enrollee-level
EDGE data, and consult National Health Expenditure Accounts (NHEA)
data as well as external reports and documents published by third
parties. In this process, we aim to determine trends that reflect
changes in cost of care rather than gross growth in expenditures. As
such, we believe the trend factors we used for each expenditure
category for the proposed 2026 benefit year models are appropriate
for the most recent changes in cost of care that we have seen.
\36\ Additionally, this rulemaking includes a proposal to
incorporate pre-exposure prophylaxis (PrEP) into a separate model
factor in the HHS risk adjustment adult and child models for the
2026 benefit year. Although a separate proposed PrEP risk adjustment
model factor is not included in tables 4 through 9, we do provide a
comprehensive analysis of our considerations and structure for
including a separate PrEP risk adjustment model factor, including
the impact of the proposed addition of a PrEP factor on other model
factors in that section of this rulemaking.
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We seek comment on the proposal to determine 2026 benefit year
coefficients for the HHS risk adjustment models based on a blend of
separately solved coefficients from the 2020, 2021, and 2022 enrollee-
level EDGE data.
b. Pricing Adjustment for the Hepatitis C Drugs
Beginning with the 2026 benefit year, we propose to begin phasing
out the market pricing adjustment \37\ to the plan liability associated
with Hepatitis C drugs in the HHS risk adjustment models and start
trending Hepatitis C drugs consistent with the other drugs \38\ in the
HHS risk adjustment models. Since the 2020 benefit year HHS risk
adjustment models, we have included 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.\39\
The purpose of this market pricing adjustment was to account for
significant pricing changes between the data years used for
recalibrating the models and the applicable benefit year of risk
adjustment as a result of the introduction of new and generic Hepatitis
C drugs.\40\ We have committed to annually reassessing the Hepatitis C
pricing adjustment with additional years of enrollee-level EDGE data as
the data becomes available.
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\37\ For discussion relating to the Hepatitis C Pricing
Adjustment for previous benefit years, see, for example, 89 FR 26237
through 26238.
\38\ See 81 FR 12218 through 12219.
\39\ 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.
\40\ See Milligan, 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 MAVYRETTM (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>. See also Silseth, S., & Shaw, H. (2021). Analysis of
prescription drugs for the treatment of hepatitis C in the United
States [White paper]. Milliman. <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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As part of the 2026 benefit year model recalibration analysis, we
reassessed the cost trend for Hepatitis C drugs using available
enrollee-level EDGE data (including 2022 benefit year data) to consider
whether the pricing adjustment was still needed and, if it is still
needed, whether it should be modified. We found that projected costs
for Hepatitis C drugs have begun to rise alongside the expected cost of
other specialty drugs after many years of decline and stagnation due to
the introduction of new and generic Hepatitis C drugs. Therefore, we
believe that it is appropriate to begin phasing out the market pricing
adjustment for Hepatitis C drugs and start trending the cost of these
drugs consistent with other similar drugs in the HHS risk adjustment
models to ensure that we continue to use the most appropriate estimates
of the average cost of Hepatitis C treatments for recalibration of the
HHS risk adjustment models for the 2026 benefit year and beyond.
To explain further, because the annual recalibration of our risk
adjustment models use the most recent 3 years of enrollee-level EDGE
data available at the time of the proposed rule (in the case of this
proposed rule and the recalibration of the 2026 benefit year models:
the 2020, 2021, and 2022 enrollee-level EDGE data) in our simulation of
plan liability for the applicable benefit year, we apply trend factors
to different categories of medical expenditures, including specialty
drugs, for every calendar year between the applicable benefit year and
each year of enrollee-level EDGE data.<SUP>41 42</SUP> For example, to
project costs for 2026 benefit year risk adjustment, we trend the 2020
enrollee-level EDGE data forward 6 years, the 2021 enrollee-level EDGE
data forward 5 years, and the 2022 enrollee-level EDGE forward four
years. We have previously developed the Hepatitis C market pricing
adjustment by applying a separate annual trend factor to Hepatitis C
drugs in lieu of applying the annual specialty drug trend we apply to
all other specialty drugs. The intent of this adjustment is to track
the projected decrease and stagnation of Hepatitis C drug prices due to
the introduction of new and generic versions of Hepatitis C drugs as
identified in various sources of available market data \43\ and through
consultation with our actuarial experts. As illustrated by table 1,
this proposal would continue to trend Hepatitis C drugs separately from
specialty drugs to project decrease and stagnation of Hepatitis C
treatment pricing changes
[[Page 82322]]
between 2020 and 2021 (for the 2020 EDGE data), between 2021 and 2022
(for the 2020 and 2021 EDGE data), and between 2022 and 2023, between
2023 and 2024, and between 2024 and 2025 for all three data years
(2020, 2021, and 2022 EDGE data) used for recalibration of the 2026
benefit year HHS risk adjustment models. Once we have trended Hepatitis
C costs to reflect no growth from the 2020, 2021, and 2022 enrollee-
level EDGE data to the 2025 benefit year, under this proposal for 2026
benefit year risk adjustment, we would complete the trending of these 3
years of data from the 2025 benefit year to the 2026 benefit year by
applying the specialty drug trend factor, rather than the Hepatitis C
trend factor that reflects the unique market pricing adjustment for
these drugs.
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\41\ See, supra, notes 38 and 39.
\42\ Because EDGE data do not generally account for drug rebates
per the EDGE Business Rules (available at <a href="https://regtap.cms.gov/reg_librarye.php?i=3765">https://regtap.cms.gov/reg_librarye.php?i=3765</a>), for the purposes of risk adjustment
recalibration, we also incorporate assumptions about the incidence
of drug rebates in our trending of prescription drug data.
\43\ See 88 FR 25753-25754. See also, 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>. See also,
Cline, M., Schweitzer, K., Sileth, S., & Wang, M. (2021). Projected
U.S. national hepatitis C treatment costs and estimated reduction to
medical costs. Milliman White Paper. <a href="https://www.milliman.com/-/media/milliman/pdfs/2021-articles/9-22-21-hcv-treatment-and-medical-cost-whitepaper.ashx">https://www.milliman.com/-/media/milliman/pdfs/2021-articles/9-22-21-hcv-treatment-and-medical-cost-whitepaper.ashx</a>. See also, supra, note 35.
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In other words, we propose to adopt a phased approach (See table 1)
to transition the Hepatitis C drugs' trending as part of the annual
recalibration of the HHS risk adjustment models beginning with the 2026
benefit year to move away from the current unique market pricing
adjustment for these drugs and align with the trending approach for
specialty drugs as we expect that the current growth in Hepatitis C
drug costs will continue to be similar to growth in specialty drug
costs in future years. As described above, to begin this transition for
the 2026 benefit year HHS risk adjustment models, we propose to apply
the specialty drug trend to 1 year of trending Hepatitis C treatment
costs (that is, the trend from 2025 to 2026) for all 3 years of
enrollee-level EDGE data used in recalibration (that is, 2020, 2021,
and 2022 enrollee-level EDGE data). These 3 years of enrollee-level
EDGE data would otherwise be trended forward using the lower trend rate
reflecting the market pricing adjustment for Hepatitis C treatments
through the 2025 benefit year. As such, 2026 benefit year recalibration
data for Hepatitis C would reflect 1 year of growth in the cost of
treatment at the same rate as other specialty drugs. To continue the
transition of phasing out the Hepatitis C drug pricing adjustment in
future benefit years' annual model recalibration, under this proposal,
we would annually increase the number of years for which we would use
the specialty drug trend and decrease the number of years that would
use the unique market pricing adjustment for Hepatitis C drugs. For
example, as seen in table 1, for the recalibration of the 2027 benefit
year HHS risk adjustment models, under this proposal, we would apply
the specialty drug trend to 2 years of the trending used in the models
to project growth in Hepatitis C drugs. Specifically, assuming that the
2027 benefit year would use 2021, 2022, and 2023 enrollee-level EDGE
data for the annual model recalibration, we would project Hepatitis C
treatment pricing changes reflecting the unique market pricing
adjustment between 2021 and 2022 (for the 2021 EDGE data), between 2022
and 2023 (for the 2021 and 2022 EDGE data), and between 2023 and 2024
and between 2024 and 2025 for all three data years (2021, 2022, and
2023 EDGE data) used for the recalibration of the 2027 benefit year HHS
risk adjustment models. Again, once we have trended Hepatitis C drug
costs to reflect the unique market pricing adjustment from the 2021,
2022, and 2023 enrollee-level EDGE data to the 2025 benefit year, under
the proposed transitional approach, for recalibration of the 2027
benefit year HHS risk adjustment models, we would complete the trending
of these 3 years of data from the 2025 benefit year to the 2027 benefit
year by applying the specialty drug trend factor between the 2025 and
2026 benefit years and between the 2026 and 2027 benefit years. This
approach would continue until such time as all enrollee-level EDGE data
years used for the recalibration of the HHS risk adjustment models are
from benefit year 2025 or later (See table 1), at which time the
specialty drug cost trend would be fully applied to Hepatitis C drug
costs consistent with other specialty drugs in the HHS risk adjustment
models and we would stop applying the separate market pricing
adjustment for Hepatitis C drugs as part of the annual model
recalibration.
[[Page 82323]]
[GRAPHIC] [TIFF OMITTED] TP10OC24.021
We propose this transitional approach because we continue to
believe a market pricing adjustment specific to Hepatitis C drugs in
the simulation of plan liability as part of the annual recalibration of
the HHS risk adjustment models for benefit years that involve the use
of enrollee-level EDGE data prior to 2025 (for example, for 2026
recalibration, the 2020 through 2022 enrollee-level EDGE data, and the
2023 through 2025 intermediate years of trending) is necessary and
appropriate to account for the lack of growth in Hepatitis C drug
prices relative to other prescription drugs in the market between those
data years and the 2025 benefit year.
We seek comment on our proposal to phase out the market pricing
adjustment and trend Hepatitis C drugs consistent with other specialty
drugs starting with the annual recalibration of the 2026 benefit year
HHS risk adjustment models.
c. Proposed Inclusion of Pre-Exposure Prophylaxis (PrEP) in the HHS
Risk Adjustment Adult and Child Models as an Affiliated Cost Factor
(ACF)
We are proposing to incorporate human immunodeficiency virus (HIV)
pre-exposure prophylaxis (PrEP) as a separate, new type of factor
called an Affiliated Cost Factor (ACF) in the HHS risk adjustment adult
and child models starting with the 2026 benefit year. This proposed
change would reflect an evolution in our approach to defining the
factors used in the HHS risk adjustment models to include a factor that
is not indicative of an active condition and would change our current
policy that models the costs of PrEP alongside all other preventive
services.
Starting with the 2021 benefit year HHS risk adjustment models, as
finalized in the 2021 Payment Notice (85 FR 29185 through 29187), we
incorporated PrEP in the simulation of plan liability in the HHS risk
adjustment adult and child models as a preventive service with zero
cost sharing after careful analysis of preventive drugs that are
recommended at grade A or B by the United States Preventive Services
Task Force (USPSTF), including analysis on when PrEP can used as a
preventive service.\44\ Specifically, in June 2019, the USPSTF
recommended the use of PrEP as a preventive service for persons who are
at high risk of HIV acquisition.\45\ Because Section 2713 of the PHS
Act, as added by Section 1001 of the ACA, requires that non-
grandfathered group health plans and health insurance issuers in the
group and individual markets cover certain recommended preventive
services without imposing cost sharing,\46\ we modified the
[[Page 82324]]
simulation of plan liability as part of the annual recalibration of the
HHS risk adjustment adult and child models to account for the higher
level of cost sharing associated with its status as a preventive
service, similar to how we treat other preventive services.
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\44\ See 85 FR 29185 through 29187.
\45\ See US Preventive Services Task Force. Preexposure
prophylaxis for the prevention of HIV infection: US Preventive
Services Task Force recommendation statement. JAMA.
2019;321(22):2203-2213. The USPSTF issued an updated recommendation
on August 22, 2023. The updated recommendation is available at
<a href="https://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis">https://www.uspreventiveservicestaskforce.org/Page/Document/RecommendationStatementFinal/prevention-of-human-immunodeficiency-virus-hiv-infection-pre-exposure-prophylaxis</a>.
\46\ On March 30, 2023, the United States District Court for the
Northern District of Texas issued a final judgment in the case
Braidwood Management Inc. v. Becerra, Civil Action No. 4:20-cv-
00283-O (N.D. Tex. Mar. 30, 2023) holding that that the USPSTF's
recommendations operating in conjunction with PHS Act section
2713(a)(1) violate the Appointments Clause of Article II of the
United States Constitution and are therefore unlawful. On appeal,
the U.S. Court of Appeals for the Fifth Circuit affirmed the
district court on the merits but held that prospective and
retrospective relief was limited to the named plaintiffs. The case
was remanded to the District Court for further proceedings. On
August 28, 2024, based on the Defendants' intent to file a petition
for writ of certiorari by September 19, 2024, the District Court
issued an order to stay proceedings in the District Court through
the conclusion of proceedings in the United States Supreme Court.
The Departments filed a petition for writ of certiorari on September
19, 2024. Braidwood Mgmt., Inc. v. Becerra, Civil Action No. 23-
10326 (5th Cir. June 21, 2024), petition for cert filed, U.S. Sept.
19, 2024 (24-316).
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As a general principle, we currently incorporate preventive
services into each of the HHS risk adjustment models to ensure that 100
percent of the cost of those services are reflected in the simulation
of plan liability. In the simulation of plan liability, services are
only counted as preventive when they occur in the recommended
circumstances (for example, age) to the extent we can identify such
circumstances from enrollee-level EDGE data. As with other preventive
services, the incorporation of PrEP into the simulation of plan
liability as a preventive service tends to impact the age-sex
coefficients for the population that is most likely to utilize the
given preventive service. For PrEP, this population is typically males
between the ages of 25 and 39, because this group composes the most
frequent utilizers of PrEP in the enrollee-level EDGE data. In addition
to PrEP drugs, like other preventive services,\47\ ancillary services
related to PrEP care (for example, HIV screenings) qualify as
preventive services and as such are also currently calibrated at 100
percent plan liability in the recalibration of the HHS risk adjustment
adult and child models.\48\
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\47\ For example, colonoscopies typically require a combination
of several services between the drugs needed for the colonoscopy and
the professional and institutional claims for the visit and
procedure itself. Likewise, contraception coverage often requires a
doctor's visit to obtain a prescription for the contraception.
\48\ See 86 FR 24164.
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However, as a part of our commitment to consider ways to
continually improve the HHS risk adjustment models, we continued to
monitor and assess different ways to incorporate PrEP in the HHS risk
adjustment models. In this regard, since the adoption of the current
approach beginning with the 2021 benefit year HHS risk adjustment adult
and child models, we have continued to assess the incorporation of PrEP
into these models as we do other preventive services. We have also
continued to receive recommendations from some interested parties that
PrEP be incorporated into the HHS risk adjustment adult models
differently than other preventive services in the calculation of plan
liability due to the high cost of PrEP. We previously considered
changing the treatment of PrEP to incorporate it in the HHS risk
adjustment adult models as an RXC; however, we have always been
concerned with this approach because RXCs are specifically incorporated
as separate factors to impute a missing diagnosis or indicate severity
of a diagnosis.\49\ As such, we did not incorporate PrEP into RXC 1
(Anti-HIV Agents) because PrEP utilization does not indicate an HIV/
AIDS diagnosis or the severity of a diagnosis. We also considered
incorporating the use of PrEP in the HHS risk adjustment models as a
separate HCC, but we did not believe that approach would be appropriate
because the principles for including an HCC into the models require
that each HCC represents well-specified, clinically significant,
chronic or systematic medical conditions.\50\ Because there is no
active chronic medical condition involved, the use of PrEP for
prevention of an HIV infection does not satisfy these criteria either.
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\49\ See the 2018 Payment Notice (81 FR 94074 through 94080).
See also the March 31, 2016, HHS-Operated Risk Adjustment
Methodology Meeting Questions & Answers. June 8, 2016. Available at
<a href="https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf">https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/RA-OnsiteQA-060816.pdf</a>.
\50\ See CMS. (2021). HHS-Operated Risk Adjustment Technical
Paper on Possible Model Changes. Section 1.2.1 (Principles of Risk
Adjustment). <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>.
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Additionally, when we initially incorporated PrEP as a preventive
service in the simulation of plan liability in the HHS risk adjustment
adult and child models, we expected that any risk of adverse selection
regarding PrEP would decrease over time as we expected the costs of
PrEP to decrease due to generics entering the market and gaining market
share. We also expected minimal differences in issuers' populations of
PrEP users because, under Section 2713 of the PHS Act and its
implementing regulations at 45 CFR 147.130, all issuers of risk
adjustment covered plans are required to cover PrEP and its ancillary
services at zero cost sharing, consistent with the applicable USPSTF
recommendation. Thus, we anticipated that the expected similarity
across issuers' PrEP-associated cost sharing parameters would also
mitigate the risk of adverse selection.
More recently, we have continued to analyze PrEP and its usage in
the individual, small group, and merged markets as additional benefit
years of enrollee-level EDGE data became available. Because of PrEP's
high costs relative to other preventive services, and in contrast to
our initial assumptions about pricing decreases, our analysis of 2022
benefit year enrollee-level data \51\ found that PrEP services can pose
a unique risk of adverse selection to the extent that utilization of
PrEP services differs between plans. More specifically, our analysis
found that there are statistically significant, substantial differences
in PrEP prevalence between issuers in rating areas where PrEP use is
most common, indicating that the addition of a PrEP factor in the adult
and child risk adjustment models would be appropriate and would have a
meaningful impact on risk adjustment State transfers. Furthermore, our
analysis also found that other considerations that helped inform the
current approach (such as the expected decrease in costs as generics
entered the market and gained market share) have not addressed the
uniquely high costs of PrEP as a preventive service as we previously
expected. For these reasons, we started to reconsider our approach and
whether it should evolve to address other costs in the market (such as
PrEP) that could impact the assessment of actuarial risk but which do
not indicate the presence of a specific diagnosis.
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\51\ Prior to the 2021 Benefit Year, Plan ID and Rating Area
were not included as part of the enrollee-level data extracted from
issuers' EDGE data submissions. As finalized in the 2023 Payment
Notice (87 FR 27241 through 27251), we now extract these fields as
part of the enrollee-level EDGE dataset and are able to include them
in our analyses. As such, this analysis and proposal reflects our
earliest opportunity to reliably detect differences in prevalence
within rating areas for any medical expenditures, including PrEP.
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We therefore tested incorporating a non-RXC and non-HCC model
factor for PrEP in the HHS risk adjustment adult and child models to
capture differences in costs for PrEP utilizers relative to the average
enrollee. To signify that the potential new factor would not indicate
the presence of a specific active medical condition, we refer to the
potential new type of factor as an ``affiliated cost factor'' (ACF),
thereby distinguishing this new type of potential factor from RXCs and
HCCs.
Generally speaking, similar to our approach when determining the
HCCs and RXCs to be included in the HHS risk adjustment models,\52\ if
adopted, we would rely on a set of principles to guide our decision
making in developing any new ACF variable.
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\52\ See the 2014 Payment Notice Proposed Rule (77 FR 73128).
See, also, the 2018 Payment Notice Proposed Rule (81 FR 61470).
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Principle 1--Like HCCs and RXCs, an ACF should be clinically
meaningful, but in the case of ACFs, such variables
[[Page 82325]]
would be comprised of National Drug Codes (NDCs) or procedure codes
that are not indicative of a diagnosis for a specific serious medical
condition, in contrast to HCCs and RXCs. In other words, an ACF may
refer to a preventive service (as in the case of a potential PrEP ACF),
or to classes of treatments that may be applicable to a wide variety of
disease states and are therefore too general to indicate a specific
diagnosis. Nevertheless, codes included in an ACF should all relate to
a reasonably well-specified pharmacologic, therapeutic or chemical
characteristic that defines the category. The adherence to the
principle of clinical meaningfulness maintains the face validity of the
classification system and the models' interpretability.
Principle 2--Like HCCs and RXCs, ACFs should meaningfully predict
total medical and drug expenditures. Additionally, NDCs and procedure
codes in an ACF should be reasonably homogeneous for their effect on
current year costs, that is, the annual costs associated with NDCs or
procedure codes triggering the ACF should fall within a reasonably
limited range. Relative to the majority of NDCs or procedure codes in a
given ACF, there should not be any extremely low or high cost NDCs or
procedure codes included in the ACF.
Principle 3--Like HCCs and RXCs, because ACFs would affect State
transfers, these factors should have adequate sample sizes to permit
accurate and stable estimates of expenditures. For example, it is
difficult to reliably determine the expected cost of extremely rare
categories.\53\
---------------------------------------------------------------------------
\53\ For example, one extremely rare category that we have
continued to analyze and consider for incorporation in the HHS risk
adjustment models is gene therapy treatments. However, because these
treatments are for rare conditions, and because there is substantial
variation in costs from patient to patient for these treatments,
through our ongoing monitoring and consideration of gene therapy
treatments, we continue to find insufficient sample size and stable
estimates of costs for the purposes of creating a new factor for
these treatments in the HHS risk adjustment models.
---------------------------------------------------------------------------
Principle 4--Like HCCs and RXCs, in creating an individual's
clinical profile, hierarchies should be used to characterize the
person's illness level within each disease process, where appropriate,
while the effects of unrelated disease processes accumulate. Therefore,
related HCCs, RXCs and ACFs should be treated hierarchically such that
the most severe manifestation of a given specific potential disease
process principally defines its impact on costs. As such, the presence
of a relevant HCC or RXC in an enrollee's medical record, which would
indicate the presence of a specific active medical condition, should
preclude the application of a related ACF because ACFs do not indicate
the presence of a specific active medical condition.
Principle 5--As with HCCs and RXCs, issuers should not be penalized
for a provider prescribing additional NDCs or coding additional medical
conditions (monotonicity). This principle has two consequences for
modeling of ACFs: (1) Like HCCs and RXCs, ACFs should not carry a
negative payment weight; and (2) an HCC or RXC, or a relevant
combination of an HCC, RXC, and interaction factor(s), reflecting the
presence of a potential disease process to which the ACF is directly
related should have at least as large a payment weight as the ACF.
Principle 6--Like RXCs, we expect ACFs to primarily be composed of
NDCs or service codes. As such, the classification for ACFs, like RXCs,
should assign NDCs or service codes to only one ACF or RXC variable
(mutually exclusive classification). Because each NDC can map to more
than one RXC or ACF, the classification should map NDCs to the primary
RXC or ACF variable based on considerations such as route of
administration, intended application of the product, ingredient list
identifier, label, dosage form, and strength of the drug.
Principle 7--As with HCCs and RXCs, in evaluating the inclusion of
ACFs, discretionary and noncredible drug or diagnosis categories should
be excluded from payment models. ACFs that are particularly subject to
prescribing variation or inappropriate prescribing by health plans or
providers or to intentional or unintentional discretionary coding, or
that are not clinically or empirically credible as cost predictors,
should not be included.
In developing an ACF variable reflecting PrEP, we are considering
whether PrEP satisfies these principles and what approaches are
necessary to appropriately balance all seven principles. A PrEP ACF
would easily satisfy Principle 1 (clinically meaningful and specific),
Principle 2 (meaningful and predictable costs \54\), Principle 3
(sample size), and Principle 7 (low risk of inappropriate prescribing).
PrEP is a well-defined regimen of medication that is only recommended
to enrollees who meet certain risk factors,\55\ providing clinical
meaningfulness and specificity. Regarding cost, with the exception of
generics,\56\ the commonly available forms of PrEP are expensive and
have similar costs,\57\ making the costs both meaningful and
predictable. Furthermore, there are a sufficient number of enrollees in
the enrollee-level EDGE data to produce a reliable estimate of PrEP
costs for the HHS risk adjustment adult and child models. Finally, for
a preventive service such as PrEP, we consider the uniquely high costs
and low likelihood of over-prescribing to provide clinical and
empirical credibility towards cost prediction, thereby satisfying the
low risk of inappropriate prescribing required by Principle 7.
Specifically, we consider there to be a low likelihood of
overprescribing PrEP due to the high degree of ancillary services
generally required to obtain and maintain access to a PrEP
prescription. For example, as reflected by the U.S. Public Health
Service clinical practice guidelines for PrEP,\58\ patients receiving
oral PrEP generally must see a provider to be tested for HIV and other
sexually transmitted infections every 3 months and have key liver and
kidney function indicators tested every 6 months to 1 year.\59\
Additionally, we suspect \60\ that
[[Page 82326]]
there is a relatively low utilization rate of PrEP services among
specific indicated populations, which would also indicate a low
likelihood that PrEP is being overprescribed.
---------------------------------------------------------------------------
\54\ As discussed later in this section, it may be appropriate
to remove generic drugs to ensure homogeneity of costs within a PrEP
ACF.
\55\ See Centers for Disease Control and Prevention: US Public
Health Service: Preexposure prophylaxis for the prevention of HIV
infection in the United States--2021 Update: a clinical practice
guideline. <a href="https://www.cdc.gov/hiv/pdf/risk/prep/cdc-hiv-prep-guidelines-2021.pdf">https://www.cdc.gov/hiv/pdf/risk/prep/cdc-hiv-prep-guidelines-2021.pdf</a>)
\56\ See, supra, note 54.
\57\ See NADAC (National Average Drug Acquisition Cost) 2024
reference data (available at <a href="https://data.medicaid.gov/dataset/99315a95-37ac-4eee-946a-3c523b4c481e">https://data.medicaid.gov/dataset/99315a95-37ac-4eee-946a-3c523b4c481e</a>) and the NADAC Equivalency
Metrics (available at <a href="https://www.medicaid.gov/medicaid/prescription-drugs/downloads/retail-price-survey/nadac-equiv-metrics.pdf">https://www.medicaid.gov/medicaid/prescription-drugs/downloads/retail-price-survey/nadac-equiv-metrics.pdf</a>). See also <a href="https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf">https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf</a> for estimates of the cost of Long Acting
Injectable PrEP, which is administered by a provider in a clinical
setting and is not available in NADAC data.
\58\ See, supra, note 55.
\59\ The costs of these ancillary services are currently
captured in the age-sex coefficients, but the addition of a PrEP ACF
to the HHS risk adjustment adult and child models would shift the
risk contributed by ancillary services out of the age-sex factors
into the PrEP ACF factor.
\60\ In the enrollee-level EDGE data, we are unable to assess
utilization rates from PrEP indicated populations because we are
generally unable to identify the population of enrollees who would
be eligible for PrEP but who are not utilizing the preventive
service. Additionally, specific estimates of PrEP utilization among
specific indicated populations are difficult to attain from other
data sources at this point in time. The CDC has paused the
publication of estimates of PrEP coverage in indicated populations
and has advised against citing specific data points until June 2025
due to data availability issues. (See Centers for Disease Control
and Prevention. Monitoring selected national HIV prevention and care
objectives by using HIV surveillance data--United States and 6
territories and freely associated States, 2022. HIV Surveillance
Supplemental Report 2024; 29(No. 2). <a href="https://www.cdc.gov/hiv-data/nhss/national-hiv-prevention-and-care-outcomes.html">https://www.cdc.gov/hiv-data/nhss/national-hiv-prevention-and-care-outcomes.html</a>).
---------------------------------------------------------------------------
As mentioned above, we have found that PrEP overall satisfies
Principle 2, having meaningful and predictable costs. In particular,
our analyses found that the utilization patterns of PrEP medications
have been fairly consistent year-over-year, with previously approved
versions of PrEP medications maintaining substantial market share
despite the availability of generic versions and new market entrants
such as Apretude. If ACF medications and services that were commonly
used in 1 year were largely supplanted by different medications or
services in the following year, the cost predictions based on previous
years of data may be inaccurate. Nevertheless, although we will
continue to monitor the market for PrEP drugs, we generally do not
anticipate substantial decrease in costs in the near future for
enrollees taking brand name drugs due to the more convenient drugs and
dose-forms (for example, long-acting injectable forms) coming to market
\61\ and the retention of market share by existing branded drugs.
---------------------------------------------------------------------------
\61\ Long-acting injectable PrEP may be beneficial in
encouraging adherence to a PrEP medication regimen. (See, for
example, <a href="https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf">https://getprepbroward.com/documents/Long-Acting-Injectable-PrEP.pdf</a>). As such, we anticipate that treatment
guidelines may recommend its use over oral PrEP in the future.
---------------------------------------------------------------------------
Despite the overall anticipation that PrEP costs are consistent and
will remain high over the next several years, we have found that there
exists a large disparity in the costs of generic PrEP medication and
the costs of brand name PrEP medication.\62\ Due to this disparity, if
we include all PrEP medications in the definition of an ACF, the
estimated coefficient will likely lead to overprediction for enrollees
receiving generic medications and underprediction for enrollees
receiving brand name medications. As such, it may be appropriate to
exclude generic PrEP medication from the PrEP ACF, if one is adopted,
which would exclude about 50 percent of enrollees with a PrEP
prescription claim from the calculation of a PrEP ACF coefficient
according to 2022 enrollee-level EDGE data. Such a low-cost exclusion
from the ACF may improve predictions for enrollees receiving either
generic or brand name PrEP medication and has precedent in our adoption
of other factors in the HHS risk adjustment models. Specifically, we
previously excluded generic drugs from RXC 9, Immune Suppressants and
Immunomodulators, due to concern over patient access and health plan
selection behavior.\63\ However, we believe that such an exclusion for
a potential PrEP ACF could create incentives for prescribing brand over
generic PrEP and therefore we solicit comments on balancing these
considerations to help inform our consideration of the design of a
potential PrEP ACF variable.
---------------------------------------------------------------------------
\62\ See, supra, note 57.
\63\ See, for example, the 2019 Payment Notice (83 FR 16942).
---------------------------------------------------------------------------
As outlined by our discussion of Principles 1, 2, 3, and 7, our
preliminary testing found minimal empirical concerns with a new PrEP
ACF variable being added to the current HHS risk adjustment adult and
child models, as the sample size for such a variable is reasonable for
both the adult and child models, the clinical specifications are well
defined, costs are generally predictable, and the resulting preliminary
coefficient estimates for PrEP in the adult and child models are
meaningful. However, in assessing Principles 4 (hierarchical factor
definitions), 5 (monotonicity), and 6 (mutually exclusive
classification), we found that the creation of a PrEP ACF variable
would require further careful consideration.
To satisfy Principle 4 (hierarchical factor definitions), the most
severe manifestation of a given specific potential disease process must
principally define its impact on costs. Therefore, related HCCs and
RXCs (in the case of a PrEP ACF, the related HCC 1 for HIV/AIDS, and
RXC 1 for anti-HIV agents) should be treated hierarchically. As such,
in considering PrEP as a potential ACF, the presence of HCC 1 or RXC 1
in an enrollee's medical record should preclude the application of the
PrEP ACF, as the prevention of HIV infection clearly indicates a less
severe manifestation of the specific potential disease process than
treatment of an active HIV infection.
However, the coefficient for HIV/AIDS (HCC 1) in the adult models
\64\ has generally been lower than the coefficient we estimate would be
calculated for a PrEP ACF. As such, without constraints applied to the
HCC 1, RXC 1, and PrEP ACF coefficients, an adult enrollee who was on
PrEP and later tested positive for HIV but did not start anti-
retroviral therapy for treatment within the same benefit year would
have their risk score decrease between the initial application of the
PrEP ACF, and its later replacement with HCC 1, violating monotonicity
(Principle 5). Such enrollees make up a very small proportion of
enrollees with a PrEP prescription claim (approximately 1.9 percent of
enrollees with a PrEP prescription claim in the 2021 enrollee-level
EDGE data). Additionally, this violation of monotonicity is not
expected to take place in the HHS risk adjustment child models, as the
lack of RXCs in the child models causes the coefficient for HCC 1 to be
high enough that a PrEP ACF coefficient would not exceed the HCC for
HIV/AIDS among child enrollees. Nevertheless, for consistency with the
established principles for the HHS-operated risk adjustment program and
the proposed principles to guide development of potential new ACF
variables, we are considering solutions, described below, to the
monotonicity concern for a PrEP ACF in the HHS risk adjustment adult
models should we finalize the adoption of the proposed factor.
---------------------------------------------------------------------------
\64\ Risk associated with HIV infection can be expressed in the
value of HCC 1 or in the value of RXC 1. Because these factors are
highly correlated, the value of each coefficient taken alone may
fluctuate between benefit years. However, the additive value of
these two factors in the HHS risk adjustment adult models is fairly
consistent year-over-year.
---------------------------------------------------------------------------
Additionally, a PrEP ACF could pose issues for mutually exclusive
classification (Principle 6). Specifically, the compounds used in PrEP
medication are also used to treat HIV. As such, NDCs for medications
used for PrEP or the individual compounds alone are not enough to
distinguish between an enrollee receiving PrEP and an enrollee in
treatment for an active HIV infection. However, due to the necessity of
the additional anti-retroviral compounds for HIV infection treatment,
with special considerations and data filtering, we are generally able
to distinguish enrollees that are receiving antiretroviral therapy for
PrEP and those receiving antiretroviral treatment as treatment for HIV/
AIDS for the purposes of calculating plan liability with 100 percent
cost sharing for PrEP and typical cost sharing treatment of HIV
infection.<SUP>65 66</SUP> To address the
[[Page 82327]]
concerns for adherence to Principle 6, we will need to create a
mutually exclusive NDC classification between RXC 1 and a PrEP ACF.
---------------------------------------------------------------------------
\65\ See the 2021 Payment Notice (85 FR 29187).
\66\ The medications used to treat HIV are also used as post-
exposure prophylaxis (PEP). Unlike PrEP, we are unable to
distinguish between prescriptions for HIV treatment and
prescriptions for PEP because the current guidelines for known
exposures to HIV recommend the prescription of the same drugs as are
used in treatment (See for example, <a href="https://stacks.cdc.gov/view/cdc/20711">https://stacks.cdc.gov/view/cdc/20711</a>) <a href="https://stacks.cdc.gov/view/cdc/20711">https://stacks.cdc.gov/view/cdc/20711</a>). However, we note that
PEP requires a 28-day treatment regimen and, as such, has a much
more limited impact on calculations of plan liability and risk than
either treatment for an active HIV infection or PrEP. (See, for
example, https://hivinfo.nih.gov/understanding-hiv/fact-sheets/post-
exposure-prophylaxis-
pep#:~:text=PEP%20stands%20for%20post%2Dexposure,used%20only%20in%20e
mergency%20situations.)
---------------------------------------------------------------------------
To address the HHS risk adjustment adult modeling concerns we
identified regarding Principles 4, 5 and 6, we are considering two
alternative approaches. First, we could modify the current definition
of RXC 1 (Anti-HIV agents) by treating PrEP NDCs as RXC 1 NDCs in
limited circumstances based on individual enrollee characteristics.
Alternatively, we could place the PrEP ACF in a hierarchy with RXC 1
but define no hierarchical restrictions between PrEP and HCC 1 (HIV/
AIDS). We discuss these alternatives in detail below.
Under the first approach, modifying the current definition of RXC
1, we would add PrEP NDCs into RXC 1 (Anti-HIV agents) in limited
circumstances to address situations where the adult enrollee has both a
claim for PrEP and a claim for RXC 1 within the benefit year.
Operationally, to capture these cases, the adult enrollees with a PrEP
prescription claim would receive the RXC 1 flag instead of the ACF only
in cases where the enrollee has both a PrEP prescription claim and an
HIV diagnosis but does not have a typical RXC 1 prescription claim
because the enrollee did not begin treatment for HIV, or because their
treatment medication was provided at no cost to the issuer and
therefore no claim was submitted to EDGE. As such, a PrEP NDC's
classification as RXC 1 or the ACF would be contingent on the presence
of HCC 1 (HIV/AIDS) on an adult enrollee's record. We estimate that
less than 2 percent of adult enrollees with a PrEP prescription claim
would meet these criteria, and that such enrollees would account for
less than 1 percent of enrollees receiving RXC 1. As such, the sample
size of the PrEP ACF would remain high and the impact on the RXC 1
coefficient would be minimal. This approach to defining the
hierarchical relationship between HCC 1, RXC 1, and the PrEP ACF would
ensure that an adult enrollee with a PrEP prescription claim who later
tested positive for HIV would have an increase in their risk score as a
result of the additional diagnosis, satisfying Principles 4
(hierarchical factor definitions) and 5 (monotonicity). Although this
approach would not be strictly consistent with mutually exclusive
classification of diagnosis codes and NDCs into only one variable
(Principle 6), we find this to be acceptable in this limited
circumstance because it would precisely dictate which model factor an
adult enrollee would receive (which satisfies the intent of Principle
6, mutually exclusive classification) and because PrEP medications can
be part of an approved HIV treatment protocol when additional anti-
retroviral drugs are used. Thus, it is not unreasonable to assume that
the few adult enrollees with PrEP prescription claims and an HIV
diagnosis are also receiving the additional medications needed to meet
treatment requirements.\67\
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\67\ It is possible such medications may not appear in the
enrollee-level EDGE data if the issuer cost is completely covered by
rebates or other assistance. In such cases, the cost of the
medication would not influence plan liability calculations and would
not impact the coefficient of a PrEP ACF.
---------------------------------------------------------------------------
Under the alternative approach, we would address the violation of
monotonicity in the HHS risk adjustment adult models by placing the
PrEP ACF below RXC 1 in a hierarchy but defining no hierarchical
relationship between the PrEP ACF and HCC 1 (HIV/AIDS), allowing adult
enrollees without RXC 1 to receive the PrEP ACF along with HCC 1 in
cases where the enrollee has both a PrEP prescription claim and an HCC
1 diagnosis in their medical records for the benefit year. This
approach would also ensure that an adult enrollee with a PrEP
prescription claim who later tested positive for HIV would have an
increase in their risk score as a result of the additional diagnosis,
satisfying Principles 4 (hierarchical factor definitions) and 5
(monotonicity). This alternative PrEP ACF-RXC 1 hierarchy approach
would likewise satisfy the intent of Principle 6 (mutually exclusive
classification) by using similar considerations and filtering steps to
those we currently use in our simulation of plan liability for PrEP. We
solicit comments on addressing these hierarchy, monotonicity, and
mutual exclusivity concerns, and both alternative approaches outlined
above that are designed to address those concerns.
Table 2 below displays our testing of estimated values for the
proposed PrEP ACF for the 2026 benefit year adult models using only
2021 benefit year enrollee-level EDGE data, but otherwise following the
specifications of the 2025 benefit year HHS risk adjustment adult
models.\68\ We also included the values of the adult model factors that
would likely be most impacted by the addition of a PrEP ACF to the 2026
benefit year risk adjustment models in table 2. This helps demonstrate
whether the PrEP ACF would adhere to Principles 4, 5, and 6 described
above. As indicated in the table, the addition of the adult model
coefficients for a PrEP ACF (in each metal level) to the adult models
would only minorly impact other coefficients, with the most impacted
model coefficients being the age-sex coefficients for males between the
ages of 25 and 44, RXC 1 (Anti-HIV Agents), and a small handful of
other HCCs and RXCs. All impacts beyond those displayed in this table
reflect absolute impacts on HHS risk adjustment adult model coefficient
values of less than 0.01. However, we note that these values have not
been subjected to either our normal modeling constraints, nor any of
the constraints discussed in relation to Principles 4, 5 and 6.
---------------------------------------------------------------------------
\68\ For the specifications of the 2025 benefit year HHS risk
adjustment adult and child models, including the Hepatitis C pricing
adjustment and the list of factors included in the models, see the
2025 Payment Notice (89 FR 26238 through 26256).
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Table 3 below displays estimated values for the proposed PrEP ACF
for the 2026 benefit year HHS risk adjustment child models using only
2021 benefit year enrollee-level EDGE data, but otherwise following the
specifications of the 2025 benefit year HHS risk adjustment child
models.\69\ Unlike the adult models, for the HHS risk adjustment child
models, our testing found there are no impacts greater than 0.01 to the
unconstrained coefficients for other child model factors. In this
analysis for the child models, the approximate value of the
---------------------------------------------------------------------------
\69\ Ibid.
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[[Page 82331]]
PrEP ACF coefficient for children for the 2026 benefit year would fall
below the HCC 1 (HIV/AIDS) coefficient for each metal level,\70\
affirming that the identified concerns over Principles 4, 5 and 6 among
the HHS risk adjustment adult models do not apply to the HHS risk
adjustment child models.
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\70\ As compared to the HCC 1 coefficients in table 5.
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Again, the above coefficient values in tables 2 and 3 have been
calculated using the 2021 enrollee-level EDGE data only, with the 2025
benefit year HHS risk adjustment model specifications, and without our
normal modeling constraints nor any of the constraints discussed in
relation to Principles 4, 5 and 6. Although we anticipate that these
values will change slightly when the modeling constraints and the 2026
benefit year risk adjustment model specifications are applied, if the
proposed new PrEP ACF variable is added to the adult and child models,
we believe these offer reliable estimates of the potential impact of
the adoption of the proposed new PrEP ACF variable on other factors and
approximate values for the proposed draft new PrEP ACF coefficients for
the adult and child models. If this proposal is finalized, the final
coefficients will be made available in the final rule or through
subsequent notice-and-comment rulemaking or guidance, as appropriate.
We solicit comments on our proposal to create a new ACF category of
model factors for incorporation into the HHS risk adjustment models to
account for unique medical expenses or services (such as PrEP) that do
not meet the criteria to qualify as HCC or RXC factors, but impact the
actuarial risk presented to issuers of risk adjustment covered plans.
In addition, we solicit comments on our proposal to modify the
treatment of PrEP in the HHS risk adjustment adult and child models
beginning with the 2026 benefit year, as well as how to
methodologically define a potential ACF category of model factors that
accounts for PrEP (or other unique medical expenses or services) and
what other considerations should be part of the analysis and modeling
for this proposed new category of model factors (such as the
availability of drug rebates \71\ or differences in medication
adherence for PrEP). Furthermore, we solicit comments regarding the
principles to guide inclusion of potential ACF factors and the
discussed alternative approaches for defining a PrEP ACF's hierarchical
relationship to HCC 1 and RXC1 to address the concerns related to
hierarchical factor definitions (Principle 4), violations of
monotonicity (Principle 5), and violations of mutually exclusive
classification (Principle 6) in the HHS risk adjustment adult models.
Additionally, we solicit comments on whether generic versions of PrEP
medication should be excluded from the definition of the proposed ACF
for PrEP. Lastly, we solicit comments concerning whether there are any
similar medical expenses or services that we should consider for
potential new ACFs alongside PrEP.
---------------------------------------------------------------------------
\71\ For example, we believe there are likely substantial
rebates for Descovy that are not captured in issuers' EDGE data
submissions. See, for example, Dickson, S., Gabriel, N., and
Hernandez, I. Estimated changes in price discounts for tenofovir-
inclusive HIV treatments following introduction of tenofovir
alafenamide. AIDS. 2022 Dec 1;36(15):2225-2227. doi: 10.1097/
QAD.0000000000003401. See, also, Krakower, D. and Marcus, J.L.
Commercial Determinants of Access to HIV Preexposure Prophylaxis.
JAMA Network Open. 2023;6(11):e2342759. doi:10.1001/
jamanetworkopen.2023.42759. See, also, McManus, K.A., et al.
Geographic Variation in Qualified Health Plan Coverage and Prior
Authorization Requirements for HIV Preexposure Prophylaxis. JAMA
Network Open. 2023;6(11):e2342781. doi:10.1001/
jamanetworkopen.2023.42781.
---------------------------------------------------------------------------
d. Proposed List of Factors To Be Employed in the HHS Risk Adjustment
Models (Sec. 153.320)
The proposed 2026 benefit year HHS risk adjustment model factors
resulting from the equally weighted (averaged) blended factors from
separately solved models using the 2020, 2021, and 2022 enrollee-level
EDGE data are shown in tables 4 through 9.\72\ The HHS risk adjustment
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.\73\ Table 4 contains proposed factors
for each adult model, including the age-sex, HCCs, RXCs, RXC-HCC
interactions, interacted HCC counts, and enrollment duration
coefficients. Table 5 contains the proposed factors for each child
model, including the age-sex, HCCs, and interacted HCC counts
coefficients.\74\ Table 6 lists the proposed HCCs selected for the
interacted HCC counts factors that would apply to the HHS risk
adjustment adult and child models. Table 7 contains the proposed
factors for each HHS risk adjustment infant model. Tables 8 and 9
contain the HCCs included in the HHS risk adjustment infant models'
maturity and severity categories, respectively.
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\72\ See, supra, note 36.
\73\ 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 are not proposing changes to the high-
cost risk pool parameters for the 2026 benefit year. Therefore, we
will maintain the $1 million threshold and 60 percent coinsurance
rate for the 2026 benefit year.
\74\ See, supra, note 36.
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BILLING CODE 4120-01-P
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BILLING CODE 4120-01-C
e. Cost-Sharing Reduction Adjustments
In the 2025 Payment Notice (89 FR 26252 through 26254), we
finalized the updated CSR adjustment factors for American Indian/Alaska
Native (AI/AN) zero-cost sharing and limited cost sharing CSR plan
variant enrollees for the 2025 benefit year, and for all future benefit
years, unless changed through notice-and-comment rulemaking. In the
2025 Payment Notice (89 FR 26252 through 26254), we also finalized
maintaining the existing CSR adjustment factors for silver plan variant
enrollees (70 percent, 73 percent, 87 percent, and 94 percent AV plan
variants) \75\ for the 2025 benefit year and beyond, unless changed
through notice-and-comment rulemaking. Under this approach, we will no
longer republish these factors in future annual HHS notice of benefit
and payment parameter rules unless changes are being proposed.
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\75\ See 83 FR 16930 at 16953; 84 FR 17478 through 17479; 85 FR
29190; 86 FR 24181; 87 FR 27235 through 27236; 88 FR 25772 through
25774; and 89 FR 26252 through 26254.
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For the 2026 benefit year, we are not proposing to change the CSR
adjustment factors as finalized in the 2025 Payment Notice and will
maintain the existing CSR adjustment factors for the 2026 benefit year.
Since we are not proposing any changes to the CSR adjustment factors
for the 2026 benefit year, we are not republishing the CSR adjustment
factors in this rule.\76\
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\76\ See CSR adjustment factors finalized in the 2025 Payment
Notice at 89 FR 26252 through 26254.
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f. Model Performance Statistics
Each benefit year, to evaluate the HHS 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 models 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 would 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 HHS risk adjustment models.\77\ Because we propose to
blend the coefficients from separately solved models based on the 2020,
2021 and 2022 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 proposed
2026 benefit HHS risk adjustment models are shown in table 10.
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\77\ 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 82347]]
[GRAPHIC] [TIFF OMITTED] TP10OC24.042
3. Overview of the HHS Risk Adjustment Methodology: State Payment
Transfer Formula
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 parameters
rules unless changes are being proposed. We are not proposing any
changes to the formula in this rule, and therefore, are not
republishing the formulas in this rule. We therefore would continue to
apply the formula as finalized in the 2021 Payment Notice (86 FR 24183
through 24186) in the States where HHS operates the risk adjustment
program in the 2026 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 are not proposing any changes to the high-cost
risk pool parameters for the 2025 benefit year; therefore, we would
maintain the $1 million threshold and 60 percent coinsurance rate.\78\
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\78\ See 81 FR 94081. See also 84 FR 17467.
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4. Solicitation of Comments--Time Value of Money in HHS-Operated Risk
Adjustment Program
HHS received feedback from some interested parties that, for the
2023 benefit year, issuers of risk adjustment covered plans were
impacted more by the time value of money, for the collection and
remittance of State transfers that occurs 8 to 10 months after the
conclusion of the benefit year,\79\ than in any previous benefit years
of the HHS-operated risk adjustment program. Given that interest rates
were the highest in 2023 than in any year since the passage of the ACA,
the impact of the time value of money has changed and is higher than it
has been historically. We therefore solicit comments on what impact the
time value of money may have on issuers' assessment of actuarial risk
and incentives for adverse selection.
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\79\ Charges are typically sent out in August in the year after
the benefit year and the majority of payments typically made in
September and October in the year after the benefit year; payments
held for sequestration from charges collected prior to October 1st
are released in November of the same year.
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Unlike Medicare Advantage's risk adjustment program, under which
CMS makes risk-adjusted monthly payments to Medicare Advantage
organizations during the coverage year (in advance of each month of
coverage) using interim risk scores and then does a reconciliation to
updated risk scores after the final deadline for submission of all risk
adjustment data, the HHS-operated risk adjustment program for the
individual, small group and merged markets uses a final data submission
deadline 4 months after the end of the benefit year and calculates
issuers' plan liability risk scores and the State transfer amounts 2
months after that, resulting in State transfers being made 8 to 10
months after the end of the benefit year.\80\ HHS typically announces
State transfer amounts no later than June 30 of the year following the
benefit year,\81\ begins to collect charges in August of the year
following the benefit year, and begins to make payments to issuers in
the fall of the year following the applicable benefit year. This
process means that issuers whose enrollees have higher-than-average
actuarial risk do not receive their State transfer payments until the
fall of the year following the benefit year. Over this same time
period, issuers whose enrollees have lower-than-average actuarial risk
are able to benefit from the availability of capital from the
collection of premiums for
[[Page 82348]]
investment that could accrue interest between the benefit year and when
the collection of charges begins in August of the year following the
benefit year, which we refer to as the ``time value of money.''
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\80\ The EDGE data submission deadline is April 30, or if such
date is not a business day, the next applicable business day. See 45
CFR 153.730. We note that the deadline for submission of 2023
benefit year data was extended to provide issuers flexibility in
managing the challenges associated with the Change HealthCare
cybersecurity incident and its impact on risk adjustment covered
plans. See CMS Announcement BY2023 EDGE Data Submission MLR
Extension <a href="https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/by_2023_announcement_edge_data_submission_mlr_extension.pdf">https://www.cms.gov/cciio/resources/regulations-and-guidance/downloads/by_2023_announcement_edge_data_submission_mlr_extension.pdf</a>.
\81\ Risk adjustment transfer amounts are typically announced no
later than June 30, or if such date is not a business day, the next
applicable business day. See 45 CFR 153.310(e). The date for
announcement of transfer amounts for the 2023 benefit year was
extended in recognition of the extension of the deadline for EDGE
data submissions. See supra note 92. After transfer amounts for a
benefit year are announced, collection of charges typically begins
in August with payments beginning in September.
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To continue to ensure appropriate incentives exist in the
individual, small group, and merged markets to cover both healthy and
sick enrollees, we believe that this market dynamic, the time value of
money, and its potential impact on actuarial risk and adverse selection
should be discussed and considered. Consistent with section 1343 of the
ACA, in States where HHS is responsible for operating the program,\82\
we calculate average actuarial risk to assess charges to issuers with
risk adjustment covered plans with lower-than-average actuarial risk
and to make payments to issuers with risk adjustment covered plans with
higher-than-average actuarial risk. The ACA's permanent risk adjustment
program for the individual, small group, and merged markets is intended
to minimize the incentives for adverse selection, to help level the
playing field between insurance companies, and to foster a stable
market in which issuers provide coverage to individuals with higher
health care costs and those who are sick have access to the coverage
they need.
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\82\ Section 1321(c)(1) of the ACA directs the HHS Secretary to
operate the risk adjustment program in any State that fails to elect
to do so. Since the 2017 benefit year, HHS has operated the program
in all 50 States and the District of Columbia.
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The impact of the time value of money has increased to levels
significantly higher than those seen in the initial years after the
passage of the ACA. For example, in January 2016, the annual short-term
Applicable Federal Rate (AFR) interest rate was 0.75 percent, whereas
in January 2023 the AFR interest rate had increased to 4.50
percent.\83\ This increase in the time value of money could impact the
individual, small group, and merged markets by changing the incentives
faced by issuers enrolling lower-than-average risk populations rather
than higher-than-average risk populations, as lower-risk populations
not only have lower claims costs, but could result in potential accrued
interest for their premium revenues, whereas issuers with higher-risk
populations are expected to incur higher claims costs and would
generally not be able to collect the potential accrued interest for
their premium revenues. To further illustrate this issue, in a
hypothetical State market risk pool with only two issuers, where the
risk adjustment issuer with lower-risk enrollees owes a $1,000,000
charge and the risk adjustment issuer with higher-risk enrollees
receives a payment of $1,000,000, the charge issuer may have accrued an
additional $45,000 in interest from the initial $1,000,000, and after
paying the risk adjustment charge, would retain the $45,000, while the
payment issuer is deprived of the same opportunity. Thus, we have
received feedback from interested parties expressing concern about this
scenario in the context of the HHS-operated risk adjustment program and
concerns about how it could create incentives for adverse selection
that could result in issuers that receive State transfer payments
raising premiums to recoup lost opportunity costs from the time value
of money.
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\83\ The IRS publishes all annual short-term AFRs at: <a href="https://www.irs.gov/applicable-federal-rates">https://www.irs.gov/applicable-federal-rates</a>. January 2016 AFR: <a href="https://www.irs.gov/pub/irs-drop/rr-16-01.pdf">https://www.irs.gov/pub/irs-drop/rr-16-01.pdf</a>; January 2023 AFR: <a href="https://www.irs.gov/pub/irs-drop/rr-23-01.pdf">https://www.irs.gov/pub/irs-drop/rr-23-01.pdf</a>.
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For these reasons, we solicit comments on the impact of the time
value of money on the HHS-operated risk adjustment program, including
the impact of the time value of money on issuers' assessment of
actuarial risk and the incentives for adverse selection, and what
possible solutions or mitigating steps we should consider to address
the impact of the time value of money on the HHS-operated risk
adjustment program in future rulemaking.
5. HHS Risk Adjustment User Fee for the 2026 Benefit Year (Sec.
153.610(f))
We propose an HHS risk adjustment user fee for the 2026 benefit
year of $0.18 PMPM. Under Sec. 153.310, if a State is not approved to
operate, or chooses to forgo operating, its own risk adjustment
program, HHS will operate risk adjustment on its behalf. For the 2026
benefit year, HHS will operate risk adjustment in every State and the
District of Columbia. As described in the 2014 Payment Notice (78 FR
15416 through 15417), HHS' operation of the risk adjustment program on
behalf of States is funded through a risk adjustment user fee. Section
153.610(f)(2) provides that, where HHS operates a risk adjustment
program on behalf of a State, an issuer of a risk adjustment covered
plan must remit a user fee to HHS equal to the product of its monthly
billable member enrollment in the plan and the PMPM risk adjustment
user fee specified in the annual HHS notice of benefit and payment
parameters for the applicable benefit year.
OMB Circular No. A-25 established 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.\84\ The HHS-
operated risk adjustment program provides special benefits as defined
in section 6(a)(1)(B) of OMB Circular No. A-25 to issuers of risk
adjustment covered plans because it mitigates the financial instability
associate with potential adverse risk selection.\85\ The HHS-operated
risk adjustment program also contributes to consumer confidence in the
health insurance industry by helping to stabilize premiums across the
individual, merged, and small group markets.
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\84\ See Circular No. A-25 Revised. <a href="https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf">https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf</a>.
\85\ Ibid.
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In the 2025 Payment Notice (89 FR 26218), we calculated the Federal
administrative expenses of operating the HHS risk adjustment program
for the 2025 benefit year to result in a risk adjustment user fee rate
of $0.18 PMPM based on our estimated costs for HHS risk adjustment
operations and estimated billable member months (BMM) for individuals
enrolled in risk adjustment covered plans. For the 2026 benefit year,
HHS proposes to use the same methodology to estimate our administrative
expenses to operate the program. These costs cover development of the
models and methodology, collections, payments, account management, data
collection, data validation, program integrity and audit functions,
operational and fraud analytics, interested parties training,
operational support, and administrative and personnel costs dedicated
to HHS-operated risk adjustment program activities. To calculate the
risk adjustment user fee, we divided HHS' projected total costs for
administering the program on behalf of States by the expected number of
BMM in risk adjustment covered plans in States where the HHS-operated
risk adjustment program will apply in the 2026 benefit year.\86\
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\86\ HHS did not receive any requests from States to operate
risk adjustment for the 2026 benefit year. Therefore, HHS will
operate risk adjustment in every State and the District of Columbia
for the 2026 benefit year.
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We estimate that the total cost for HHS to operate the risk
adjustment program on behalf of States for the 2026 benefit year will
be approximately $65 million, roughly the same as the amount estimated
for the 2025 benefit year.
Similar to prior benefit years, we projected risk adjustment
enrollment scenarios for the 2026 benefit year. For the 2021 through
2025 benefit years, we projected increased enrollment in the
[[Page 82349]]
individual non-catastrophic market risk pool in most States, due to the
enhanced PTC subsidies provided for in the American Rescue Plan Act of
2021 (ARP) <SUP>87 88</SUP> and the extension of the enhanced PTC
subsidies under Section 12001 of the Inflation Reduction Act of 2022
(IRA) through the 2025 benefit year.\89\ For our 2026 user fee
projected enrollment numbers, we considered the impact of the
expiration of the enhanced PTC subsidies established in section 9661 of
the ARP and extended in section 12001 of the IRA through the 2025
benefit year on the enrollment in the individual, small group, and
merged market risk pools for the 2026 benefit year and used those
estimates to project the proposed 2026 benefit year HHS risk adjustment
user fee rate. We also note that if any events such as Congress passing
an extension of enhanced PTC subsidies, resulting in larger than
expected growth in individual on Exchange enrollment or some other
deviation from our expectations of current conditions that would
significantly change our estimates around costs, enrollment
projections, or the finalization of proposed risk adjustment policies
between this proposed rule and the final rule, we may modify the HHS
risk adjustment user fee rate proposed in this rule in the final rule.
Because we project a similar budget to operate the HHS-operated risk
adjustment program and do not estimate increased enrollment in the 2026
benefit year beyond the 2024 benefit year level, we propose an HHS risk
adjustment user fee of $0.18 PMPM for the 2026 benefit year.
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\87\ ARP. Public Law 117-2 (2021).
\88\ CMS. (2023). Summary Report on Permanent Risk Adjustment
Transfers for the 2022 Benefit Year. (p. 8). <a href="https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf">https://www.cms.gov/files/document/summary-report-permanent-risk-adjustment-transfers-2022-benefit-year.pdf</a>.
\89\ Inflation Reduction Act. Public Law 1217-169 (2022).
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We seek comment on the proposed HHS risk adjustment user fee for
the 2026 benefit year.
6. Risk Adjustment Data Validation Requirements When HHS Operates Risk
Adjustment (HHS-RADV) (Sec. Sec. 153.350 and 153.630)
HHS conducts risk adjustment data validation under Sec. Sec.
153.350 and 153.630 in any State where HHS is responsible for operating
the risk adjustment program.\90\ The purpose of risk adjustment data
validation is to ensure issuers are providing accurate high-quality
information to HHS, which is crucial for the proper functioning of the
HHS-operated risk adjustment program. HHS-RADV also ensures that risk
adjustment transfers calculated under the State payment transfer
formula reflect verifiable actuarial risk differences among issuers,
rather than risk score calculations that are based on poor quality
data, thereby helping to ensure that the HHS-operated risk adjustment
program assesses charges to issuers with plans with lower-than-average
actuarial risk while making payments to issuers with plans with higher-
than-average actuarial risk. HHS-RADV consists of an initial validation
audit (IVA) and a second validation audit (SVA). Under Sec. 153.630,
each issuer of a risk adjustment covered plan must engage an IVA
entity. The issuer provides demographic, enrollment, and medical record
documentation for a sample of enrollees selected by HHS to its IVA
entity for data validation. Each issuer's IVA is followed by an SVA,
which is conducted by an entity HHS retains to verify the accuracy of
the findings of the IVA. Based on the findings from the IVA, or SVA (as
applicable), HHS conducts error estimation to calculate an HHS-RADV
error rate. The HHS-RADV error rate is then applied to adjust the plan
liability risk scores of outlier issuers, as well as the risk
adjustment transfers calculated under the State payment transfer
formula for the applicable State market risk pools, for the benefit
year being audited.
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\90\ Since the 2017 benefit year, HHS has operated the risk
adjustment program in all 50 States and the District of Columbia.
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a. Initial Validation Audit (IVA) Sampling Methodology--Enrollees
Without HCCs, Finite Population Correction, and Neyman Allocation
(Sec. 153.630(b))
To better align the IVA sampling methodology with the HHS-RADV
error estimation methodology that estimates hierarchical condition
categories (HCC) error rates and to improve overall sampling precision,
we are proposing to exclude enrollees without HCCs \91\ from IVA
sampling, to remove the Finite Population Correction (FPC), and to
replace the source of the Neyman allocation \92\ data used for IVA
sampling purposes with 3 years of available HHS-RADV data beginning
with benefit year 2025 HHS-RADV.\93\
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\91\ Adult enrollees with only RXCs do not have any HCCs, and
therefore, as further explained in this preamble, would be excluded
from IVA sampling under this proposal.
\92\ Neyman allocation is a method to allocate samples to strata
based on the strata variances. A Neyman allocation scheme provides
the most precision for estimating a population mean given a fixed
total sample size. See <a href="http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml">http://methods.sagepub.com/reference/encyclopedia-of-survey-research-methods/n324.xml</a>.
\93\ Activities related to the 2025 benefit year of HHS-RADV
will generally begin in Spring 2026, when issuers can start
selecting their IVA entity, and IVA entities can start electing to
participate in HHS-RADV for the 2025 benefit year. Changes to the
IVA sampling methodology need to be finalized before HHS-RADV
activities begin; therefore, we are proposing these IVA sampling
changes begin with 2025 benefit year HHS-RADV due to the timing of
this rulemaking. For an example of the typical annual HHS-RADV
timeline, see the 2023 Benefit Year HHS-RADV Activities Timeline.
<a href="https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf">https://regtap.cms.gov/uploads/library/2023_RADV_Timeline_5CR_072424.pdf</a>.
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1. IVA Sampling Background
HHS-RADV IVA sampling policy was originally described in the 2014
Payment Notice (78 FR 15436) where we stated that HHS would choose a
sample size of enrollees for HHS-RADV such that the estimated risk
score errors would be statistically sound, and the enrollee-level risk
score distributions would reflect enrollee characteristics for each
issuer. To implement this approach, in the 2015 Payment Notice (79 FR
13756 through 13758), we finalized two key aspects of the IVA sampling
methodology. First, HHS set the IVA sample size as 200 enrollees per
issuer, as sample size precision analyses performed at the time with
data available from Medicare Advantage RADV (MA-RADV) program, which
utilizes a similar HCC-based methodology as the HHS-RADV methodology,
indicated that a sample size of 200 enrollees would achieve the
targeted precision for an average sized issuer and that there would be
no meaningful improvement in the estimated level of precision with
larger sample sizes. In particular, to establish this 200-enrollee
sample, we set a 10 percent sampling precision target at a two-sided 95
percent confidence level. That is, we aimed to obtain a sample size
such that 1.96 multiplied by the standard error, divided by the
estimated adjusted risk score, equals 10 percent or
less.<SUP>94 95</SUP> To translate this policy to small issuers, we
established an FPC factor to calculate a modified IVA sample size
smaller than 200 enrollees.\96\ If an issuer
[[Page 82350]]
has between 51 and 3,999 enrollees, the issuer's IVA sample size is
calculated by multiplying the FPC factor, which is a factor less than
one, by the standard sample size of 200.\97\ If an issuer has 50 or
fewer enrollees, its sample size is equal to its enrollment. Second,
the policies finalized in the 2015 Payment Notice established that the
IVA sampling methodology would use a simple age and risk score
stratification that categorizes the relevant population into 10 strata,
representing different demographic and risk score bands, and use a
Neyman allocation sampling methodology to select an issuer's IVA sample
for a given benefit year.<SUP>98 99 100</SUP> This stratified design
was intended to ensure adequate sample selection of the higher risk
portion of the enrollee population and the Neyman allocation increases
the likelihood that the sample achieves targeted levels of precision
because strata with greater variance will be sampled more heavily.\101\
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\94\ See 79 FR 13756 through 13758. Also see CMS. (2013).
Affordable Care Act (ACA) HHS-Operated Risk Adjustment Data
Validation (RADV) Process White Paper. (pp. 26-28). <a href="https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ACA_HHS_OperatedRADVWhitePaper_062213_5CR_050718.pdf">https://www.hhs.gov/guidance/sites/default/files/hhs-guidance-documents/ACA_HHS_OperatedRADVWhitePaper_062213_5CR_050718.pdf</a>.
\95\ We established this sampling precision target in the
initial year of HHS-RADV based on a survey of guidance from the OMB,
Internal Revenue Service (IRS), and the HHS-developed Payment Error
Rate Measurement (PERM) program.
\96\ An FPC is traditionally used when sampling without
replacement from a finite population and the sample size, n, is
significant in comparison with the population size, N, so that no
more than 5 percent of the population is sampled. The FPC formula
can be found in Section 2.6: Cochran, William G., Sampling
Techniques, third edition, John Wiley & Sons, 1977.
\97\ See the 2023 Benefit Year PPACA HHS-RADV Protocols. Section
7.2.1.8 (Alternate Sample Sizes) (June 4, 2024) available at:
<a href="https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf">https://regtap.cms.gov/uploads/library/HHS-RADV_2023_Benefit_Year_Protocols_v1_5CR_060424.pdf</a>.
\98\ See 79 FR 13756 through 13758.
\99\ See supra note 92.
\100\ In the initial years of HHS-RADV, we constrained the
``10th stratum'' of the IVA sample--that is, enrollees without HCCs
selected for the IVA sample--to be one-third of the sampled IVA
enrollees. In the 2020 Payment Notice, we finalized the extension of
the Neyman allocation sampling methodology to the 10th stratum to
improve sample precision and permit for a larger portion of the
sample to be allocated to the HCC strata. See 84 FR 17494 through
17495.
\101\ See 78 FR 72332.
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Under the current risk score stratification in IVA sampling, to
align with the HHS-operated risk adjustment program's three separate
models for adult, child, and infants, we group each issuer's enrollee
population into 10 strata based on age group, risk level, and presence
of HCCs and prescription drug factors (RXCs) \102\ as follows:
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\102\ In the 2020 Payment Notice, we finalized piloting the
incorporation of RXCs into the HHS-RADV process in the 2018 benefit
year, which was the first year that RXCs were incorporated into the
risk adjustment models. We also finalized incorporating RXC
validation into HHS-RADV as a method of discovering materially
incorrect EDGE server data submissions in a manner similar to how we
address demographic and enrollment errors discovered during HHS-RADV
beginning with the 2019 benefit year. See 84 FR 17501. We later
extended the pilot years of incorporating RXCs into HHS-RADV to the
2019 and 2020 benefit years of HHS-RADV to increase consistency
between the operations of these benefit years' HHS-RADV and
facilitate the combination of the HHS-RADV adjustments for these
benefit years as we transitioned to a concurrent application of HHS-
RADV results. See 85 FR 77002 through 77005.
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<bullet> Strata 1-3 includes low, medium, and high risk adults with
the presence of at least one HCC or RXC.
<bullet> Strata 4-6 includes low, medium, and high risk children
with the presence of at least one HCC.
<bullet> Strata 7-9 includes low, medium, and high risk infants
with the presence of at least one HCC.
<bullet> Stratum 10 includes the No-HCC and No-RXC population,
which is not further stratified by age group, because we assume this
stratum has a uniformly low risk level.
The current IVA sampling methodology relies on MA-RADV proxy data
to conduct the Neyman allocation, which optimizes stratum sample size
by selecting the number of enrollees to be sampled from each of the 10
strata, listed above, that is proportional to each stratum's
contribution to the total standard deviation of the population.\103\
The Neyman allocation formula for the overall sample size for each
stratum of the issuer's IVA sample (ni,h) is:
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\103\ In the Neyman allocation, risk score error is measured as
the actual difference between enrollee's audit risk scores and EDGE
risk scores and does not reflect the error rate derived in HHS-RADV
error estimation.
[GRAPHIC] [TIFF OMITTED] TP10OC24.043
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Where:
<bullet> Ni,h is the population size of the h<SUP>th</SUP> stratum
of issuer i.
<bullet> ni is the IVA sample size of issuer i.
<bullet> H is the total number of strata.
<bullet> Si,h represents the standard deviation of risk score error
amount for the h<SUP>th</SUP> stratum.
As described in the 2015 Payment Notice (79 FR 13756 through
13758), we use MA-RADV data to calculate the standard deviation of risk
score error (Si,h) across all 10 strata. At the time, we chose to use
MA-RADV data when establishing the Neyman allocation because HHS-RADV
data was not available and the MA-RADV program utilizes a similar HCC-
based methodology. Because MA-RADV data does not have child or infant
age groups, we can only calculate a single standard deviation of risk
score error for each risk-score subgrouping (low, medium and high).
Therefore, to use the MA-RADV data, we assume that the standard
deviation of risk score error within a risk-score subgrouping is the
same for each of the three age groups (adult, child, and infant) in the
HHS-RADV population. Given our assumptions on the strata net risk score
errors and variances from the MA-RADV data, we found that 200 enrollees
would be an appropriate IVA sample size to achieve 10 percent sampling
precision for net risk score error for an average-sized issuer. We also
explained that we intended to test and evaluate HHS-RADV data for use
for this purpose in future years when it became available.\104\
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\104\ See 79 FR 13757.
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HHS-RADV error estimation has been modified over time without
making corresponding changes to the IVA sampling methodology. For
example, in the 2019 Payment Notice (83 FR 16961 through 16965), we
finalized an HCC-failure rate error estimation methodology that adjusts
an issuer's enrollees' risk scores when the issuer's failure rate for a
group of HCCs is statistically different from a national
benchmark.\105\ This methodology specifically calculates IVA-sampled
enrollees' risk scores using their HCCs on EDGE and adjusts the HCC-
portion of enrollees' risk scores based on audit results for issuers
identified as outliers.\106\ In the 2020 Payment Notice, we finalized a
policy to incorporate RXCs beginning with 2018 benefit year HHS-RADV,
and the 2021 Payment Notice finalized treating RXC validations in HHS-
RADV as late-filed discrepancies, similar to demographic and enrollment
errors.<SUP>107 108 109</SUP> In
[[Page 82351]]
addition, in the 2024 Payment Notice, to promote consistency between
the EDGE Server Business Rules and the HHS-RADV Protocols, HHS
discontinued the Lifelong Permanent Conditions List and the policy
permitting the submission of non-EDGE claims in HHS-RADV beginning with
the 2022 benefit year of HHS-RADV.\110\
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[…truncated; see source link]Indexed from Federal Register on October 10, 2024.
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