Update: March 2, 2020
State Insurance Marketplace Directors Express Concerns Over Potential Changes to Automatic Re-enrollment

Directors representing 15 state-based marketplaces submitted a joint comment to the US Department of Health and Human Services responding to its latest proposed rule governing health insurance markets. Their comments expressed concerns over future changes to automatic re-enrollment policies that may cause considerable consumer confusion and disrupt insurance markets. Their comments are available here.

The Department of Health and Human Services (HHS) recently released its annual proposed rules regulating state health insurance markets and gave states and insurance carriers a brief window – until March 2, 2022 – to comment and react to the department’s significant changes as states simultaneously work on negotiations for coverage in 2021.

The publication of the annual Notice of Benefit and Payment Parameters by the Department of Health and Human Services on Feb. 6, 2020 was the latest release date yet. Its most significant proposed change is an indication that HHS is exploring future policies to eliminate federal tax credits (APTCs) for certain enrollees who use automatic re-enrollment to retain their coverage.

This NASHP chart provides highlights of the changes proposed by HHS.

Read HHS’ Notice of Benefit and Payment Parameters and submit comments here.

Specifically, the changes would target individuals who, after tax credits are applied, pay $0 for their monthly health insurance premiums. The availability of $0 monthly premium insurance plans became more prominent after elimination of federal funding for cost-sharing reduction (CSR) rebates led states and insurers to “silver-load” premiums. Silver-loading, or the practice of building CSR costs into silver-level health plans, led to increased premiums for benchmark plans that serve as the basis for calculation of federal tax credits. (For more on CSRs and silver loading read: How Elimination of Cost-Sharing Reduction Payments Changed Consumer Enrollment in State-Based Marketplaces).

Automatic re-enrollment at renewal is standard practice in the insurance industry and plays a critical role in ensuring continuity of coverage and care. While HHS signaled similar intent to change automatic re-enrollment policies in last year’s insurance rules, ultimately it did not pursue any changes after receiving unanimous comments in support of automatic re-enrollment. In December 2020, Congress further solidified protections for automatic re-enrollment by passing a provision to require automatic re-enrollment in coverage purchased through healthcare.gov for the 2021 plan year.

The policies suggested in the proposed rule would technically preserve the practice of automatic re-enrollment. HHS indicates that policies would serve to address concerns over improper payment of tax credits to consumers who do not actively update their enrollment information. The changes may also address concerns that tax credits make consumers insensitive to price changes, which means they do not shop around for their best coverage option. Many consumers use automatic re-enrollment to seamlessly maintain their coverage from one year to the next. Elimination, or near elimination, of tax credits unless a consumer actively re-enrolls in coverage would put these already low-income consumers at severe financial risk and would likely lead to a decline in coverage.

Outlined below are additional provisions of note in the proposed rule.

Health Plan Management

• Required reporting of state-mandated benefits. This would require states to submit an annual report of state-mandated benefits outside of essential health benefits (EHB). HHS will issue its own report if a state does not submit its own report.
• Wellness and drug considerations for medical loss ratio (MLR) calculations. Requires issuers to deduct prescription drug price concessions, including rebates and incentive payments, from MLR-incurred claims that have been secured and retained by entities providing pharmacy benefit management (PBM) services. To date, such rebates and other drug price concessions retained by PBMs administering an issuer’s pharmacy benefit have not been required to be reflected in the MLR reporting and calculation, only those concessions received directly by the issuer have been explicitly required. This change extends fiduciary responsibility to the PBM through the issuer. (More details to come in a future blog). It also allows insurers to include wellness incentives as part of quality improvement activities used to calculate MLR.
• Inclusion of drug rebates into cost-sharing calculations. It permits, but does not require, insurers to count direct support offered by drug manufacturers (e.g., drug rebates, coupons) toward calculation of an enrollee’s cost-sharing responsibility.
• Encourages value-based insurance design. The proposed rule promotes adoption of value-based insurance design principles consistent with policies supported by the University of Michigan Center for Value-Based Insurance Design, including benefit models that offer high-value services to consumers with little to no cost-sharing. However, the rule does not explicitly mandate or incentivize adoption of these strategies.
• Adjusts factors used for risk adjustment calculations. Under the federal risk adjustment program, the federal government redistributes funds between health insurers that take on lower-risk enrollees, to those with a higher risk mix. Calculations are based on a complicated formula that computes risk based on various disease categories known as Hierarchical Condition Categories (HCCs). The rule updates the HCCs to conform with updated codes used to categorize diseases (international classification of disease or ICD codes). Other changes include recalibration of how hepatitis C treatments factor into risk calculations and inclusion of pre-exposure prophylaxis (PReP), an HIV-prevention drug, as a preventative service. Collectively, these changes intend to ensure that risk adjustment calculations more accurately reflect current medical diagnoses and practices to ensure better assessment of risk taken on by insurers. The impact of these changes will vary by insurer and enrollee population.

Eligibility and Enrollment

• Limits flexibility for consumers eligible for retroactive coverage. A consumer may be incorrectly determined ineligible for coverage, in which case they can appeal the coverage decision. In some of these cases, the person may ultimately be eligible for coverage retroactive to a certain point before the ultimate determination of eligibility was made. A consumer has the choice of whether to start their coverage on the month immediately following the determination, or to start coverage retroactive to a certain date. Currently, consumers are allowed to discard one month of the retroactive coverage they may be eligible for. This gives consumers flexibility to access some coverage retroactively without holding them financially responsible for the entire period of retroactive coverage. The proposed rule would require consumers to either elect prospective coverage or to elect coverage for the entire retroactive period.
• Expedited effective dates for coverage obtained during a special enrollment period (SEP). Would require insurers to effectuate coverage on the first of the month following a plan selection made during an SEP. Currently, if a consumer enrolls in coverage after the 15^th of the month, he or she may have to wait until the first of the month after the enrollment for coverage to be activated.
• Greater flexibility for plan selections during SEPs. Current SEP rules maintain tight restrictions on the types of plans enrollees may elect during a triggering event. This is designed to try and promote consistency for insurers and insurance markets. The rule would grant additional flexibility in the case where a change in income rendered a consumer ineligible for CSR financial assistance, allowing the consumer to switch metal levels (from silver to bronze or gold). The rule would also allow newly eligible consumers to enroll in the same plan as their dependents if they had dependents already enrolled in marketplace coverage.
• New SEP for Qualified Small Employer Health Reimbursement Arrangements (QSEHRAs). Establishes a SEP in the event that a consumer becomes eligible for a QSEHRA outside of the typical calendar year. QSEHRAs are a type of health reimbursement arrangement (HRA) for small businesses whereby employees can use the funds in the HRA to purchase health coverage, including non-APTC-eligible coverage sold through the health insurance marketplaces. For more information on QSEHRAs, read New Federal Health Reimbursement Proposal Adds New Viables to State Health Insurance Markets.

Healthcare.gov User Fee

• Maintains the current user fee for the federal marketplace (FFM). Health insurers will be assessed at a rate of 3 percent to participate on the FFM, also known as healthcare.gov. For states that use a hybrid marketplace model, known as state-based marketplaces on the federal platform (SBM-FPs), HHS will retain 2.5 percent with 0.5 percent available to states to perform functions related to outreach, marketing, and plan management. Thirty-two states used the FFM in 2020, while six were SBM-FPs. (For more on health insurance marketplace models read Where States Stand on Exchanges.)