HHS Issues 2023 Notice of Benefits and Payment Parameters Final Rule

May 10, 2022

On April 28, 2022, CMS released the Final Benefit and Payment Parameters for 2023, along with an accompanying fact sheet. The regulations are primarily intended for health insurers and the marketplace but include important information that also affects large employers and self-insured group health plans. The effective date is July 1, 2022.

These annual parameters specify the uniform standards for health plans subject to the Affordable Care Act (ACA). The guidance also describes related regulatory and reporting issues. Accordingly, the guidance can serve as a useful planning tool for insurers and employers.

Overall, the 2023 regulations cover a range of topics, including standardized plan options requirements for issuers in the marketplaces, marketplace network adequacy standards, special enrollment period verifications, a framework for discriminatory benefit design, and indirect quality improvement activity (QIA) exclusions from medical loss ratio (MLR) calculations.

For the standardized plan options requirement, CMS requires issuers in the marketplaces to offer standardized plan options for every product network type, at every metal level, and throughout every service area where they offer non-standardized options in plan year 2023. For example, if an issuer offers a non-standardized gold HMO plan in a particular service area through a marketplace, the issuer needs to also offer a standardized gold HMO plan set by CMS in the same service area. Further, beginning for plan year 2023, CMS will evaluate plans sold in many of the marketplaces for compliance with quantitative network adequacy standards based on time and distance standards. CMS will use this information to add appointment wait time standards in plan year 2024.

Additionally, the 2023 regulations confirmed that issuers’ expenditures for activities that improve health care quality (a.k.a., quality improvement activity (QIA)) that can be included in the MLR formula and that would improve the MLR ratio must be restricted to only direct QIA expenses, such as salaries of the staff performing QIA functions and not indirect expenses, such as issuers’ IT infrastructure expenditures.

CMS did not finalize the proposed changes that would have amended the ACA guaranteed-availability regulations to explicitly bar discrimination based on sexual orientation and gender identity across a range of requirements. Those changes will be deferred to future rulemaking on Section 1557 of the ACA.

Employers may find this annual guidance helpful in designing their plan benefit offerings.

2023 Benefit and Payment Parameters Final Rule »
2023 Benefit and Payment Parameters Fact Sheet »

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HHS Extends Public Health Emergency an Additional 90 Days

April 26, 2022

On April 13, 2022, the HHS renewed the COVID-19 pandemic Public Health Emergency (PHE) for an additional 90 days, effective April 16, 2022. With this extension, the PHE is now set to expire on July 15, 2022. The PHE is being extended for the ninth time since it was initially declared in January 2020, when the coronavirus pandemic began. The Biden Administration has said that it will give states a 60-day notice before the PHE expires. The PHE impacts several important benefits for employer sponsored plans, including coverage of COVID-19 testing and treatment.

Private insurers have been required to cover the full cost of COVID-19 tests and vaccines for the duration of the PHE. Beginning January 15, 2022, this requirement expanded to include up to eight over-the-counter at-home COVID-19 tests authorized or approved by the FDA per covered member per month. Once the PHE is ended, private insurers can charge co-pays or other costs so that COVID-19 tests and vaccines will no longer be free for insureds. The federal government has been paying for tests, vaccines and certain treatments for those covered by its Medicare and Medicaid health insurance programs.

Employers should be aware of the latest PHE extension and monitor the developments as the current July PHE ending date approaches to assess the impacts on their plans, including COVID-19 tests and vaccine coverage.

HHS: Renewal of Determination That a Public Health Emergency Exists »

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Fifth Circuit Upholds ACA Risk-Adjustment Program

April 12, 2022

On March 17, 2022, in Vista Health Plan, Inc. v. US Department of Health & Hum. Servs., the US Court of Appeals for the Fifth Circuit ruled in favor of the Department of Health and Human Services’ (HHS) risk-adjustment program.

The ACA prohibits health insurers from denying coverage or charging higher premiums based on someone’s health status. To disincentivize these prohibited practices, HHS administers the risk-adjustment program by redistributing enrollees’ actuarial risk among health insurers. Plans with healthier enrollees in any given state pay fees into a pool from which funds are distributed to plans insuring sicker individuals in that same state.

Several small health insurers around the country have unsuccessfully argued that risk-adjustment calculation favors larger insurers. In this case, Vista Health Plan, Inc., a small insurer in Texas, was assessed risk-adjustment fees that exceeded its premium revenue, causing it to cease operations in 2019. After Vista sued HHS, this advanced many constitutional, statutory interpretation, and administrative procedure arguments challenging the program.

The Fifth Circuit’s decision to uphold the program serves less as an assessment of HHS’s risk-adjustment calculation but rather more of an analysis of the administrative process the government undertook to implement the program. Although this case is focused on carriers, employers should be aware that the risk-adjustment program will remain a fixture in health insurance markets, having survived yet one more test by judicial review. This is especially important in the small group market, where premiums are community rated and stabilized in part by the risk-adjustment program.

Vista Health Plan, Inc. v. US Department of Health & Human Services »

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IRS Issues Proposed Rule on Affordability of Employer Coverage for Family Members

April 12, 2022

On April 5, 2022, the IRS and Treasury Department announced a proposed rule to fix the “family glitch” in eligibility rules for the ACA premium tax credit (PTC). In a press statement, the Biden administration reported the “family glitch” affects about 5 million people.

A PTC for purchasing health insurance on the ACA’s marketplace is available to people who do not have access to “affordable” coverage through their jobs. Under current regulations, spouses and children are ineligible for the PTC if an employee’s access to employer-sponsored coverage is deemed affordable (for 2022 plan years, less than 9.61% of household income) based on the cost of self-only coverage, without considering any additional cost of family coverage.

To increase access to the PTC for low-income families, the proposed rule applies a separate PTC affordability standard for family members based on the full cost of family coverage. As a result, an employee’s family may qualify for the PTC even if the employee does not. Importantly, the proposed rule does not increase exposure to employer shared responsibility penalties. Penalties will continue to be triggered only by an employee’s receipt of a marketplace PTC, not their spouse’s or dependents’ PTC. However, employers may see an indirect impact with more families dropping employer-sponsored coverage for newly subsidized ACA marketplace coverage.

As part of the rulemaking process, comments may be submitted through June 6, 2022. If finalized, the new PTC affordability standard would take effect on January 1, 2023.

Proposed Rule »
Fact Sheet »

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CMS Extends Nonenforcement of ACA-Compliance for Certain Policies

March 29, 2022

On March 23, 2022, CMS announced an extension of its nonenforcement policy for specific ACA compliance requirements for certain non-grandfathered individual and small group coverage known as “grandmothered” policies. Under the latest extension, states may permit insurers that have continually renewed eligible grandmothered policies since January 1, 2014, to renew that coverage again for a policy year beginning on or before October 1, 2022. The nonenforcement policy remains in effect until the agency announces that coverage renewed under this policy must comply with the relevant requirements.

On November 14, 2013, CMS issued a letter outlining a transitional policy concerning health care reform mandates for coverage in the individual and small group markets. Under the policy, state authorities could allow health insurance issuers to continue certain coverage that would otherwise have been canceled for failure to comply with the ACA requirements.

This initiative allowed individuals and small businesses to elect to re-enroll in such coverage. Specifically, the nonenforcement policy provided relief from the following market reforms:

  • Community rating
  • Guaranteed issue and renewability of coverage
  • Prohibition of coverage exclusions based on pre-existing conditions
  • Nondiscrimination based on health status
  • Nondiscrimination regarding health care providers
  • Comprehensive coverage (i.e., coverage of essential health benefits and the application of maximum out-of-pocket limits)
  • Coverage for participation in clinical trials

Since the initial announcement, the nonenforcement policy has been continually extended, thus permitting grandmothered policies to maintain an exemption from the above-mentioned requirements.

Although the CMS bulletin allows for the temporary continuation of these noncompliant plans at the federal level, it is important to note that the practice must still be approved by state regulators for policies to be available in a particular state. Insurers will then have a choice as to whether to keep offering the policies. The bulletin includes a notice that insurers can use in the event they issue coverage cancellation notices and will now provide the policyholder with the option to continue the coverage.

Accordingly, small employers who are currently covered by such grandmothered policies should be aware of the most recent nonenforcement extension. These employers should work with their advisors and insurers regarding the possible renewal of the coverage.

CMS Bulletin »

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