By Jeffrey H. Brochin, J.D.
Changes to risk adjustment data validation (RAVD) intended to provide health insurance issuers with greater predictability for upcoming QHP plan years.
HHS has issued a final rule which significantly revises provisions of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) pertaining to risk adjustment and RAVD programs, cost-sharing parameters and cost-sharing reductions, as well as user fees for federally-facilitated Exchanges and state-based exchanges on the federal platform. It also finalizes changes related to essential health benefits and will provide states with additional flexibility in the operation and establishment of exchanges. The effective date of the final rule is July 13, 2020 (Final rule, 85 FR 29164, May 14, 2020).
ACA Exchanges and risk adjustment. American Health Benefit Exchanges (exchanges) are entities established under the ACA through which qualified individuals and qualified employers can purchase health insurance coverage in qualified health plans (QHPs). Many individuals who enroll in QHPs through individual market exchanges are eligible to receive a premium tax credit (PTC) to reduce their costs for health insurance premiums and to receive reductions in required cost-sharing payments to reduce out-of-pocket expenses for health care services.
The ACA also established the risk adjustment program which was intended to increase the workability of the ACA regulatory changes in the individual and small group markets, both on and off exchanges.
Reduction of fiscal burden. On January 20, 2017, the President issued an Executive Order which stated that, to the maximum extent permitted by law, the Secretary of HHS and heads of all other executive departments and agencies with authorities and responsibilities under the ACA should exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the ACA that would impose a fiscal burden on any state, or a cost, fee, tax, or penalty on patients, health care providers, health insurers and others affected by ACA regulatory costs.
Reduction of regulatory burden. In this final rule, HHS has enacted provisions to reduce fiscal and regulatory burdens across different program areas and to provide stakeholders with greater flexibility. In previous rulemakings, HHS established provisions and parameters to implement many ACA requirements and programs, and in this final rule, the agency has amended some of those provisions and parameters with a focus on maintaining a stable regulatory environment. The changes are intended to provide issuers with greater predictability for upcoming plan years, while simultaneously enhancing the role of states in the ACA programs; and, the provisions will also provide states with additional flexibilities, reduce unnecessary regulatory burdens on stakeholders, empower consumers, ensure program integrity, and improve affordability.
Recalibrating risk adjustment models. Risk adjustment continues to be a core program in the individual and small group markets both on and off exchanges, and HHS has finalized proposals to recalibrate the risk adjustment models used in the state payment transfer formula of the HHS-operated risk adjustment methodology. As a refinement to the risk adjustment program, HHS is finalizing changes intended to improve the reliability of RADV.
The HHS risk adjustment models predict plan liability for an average enrollee based on age, sex, and diagnoses (grouped into hierarchical condition categories (HCCs)), thereby producing a risk score. The current structure of those models is described in the 2020 Payment Notice. The HHS risk adjustment methodology utilizes separate models for adults, children, and infants to account for 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, HHS added enrollment duration factors beginning with the 2017 benefit year, and prescription drug categories (RXCs) beginning with the 2018 benefit year. 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.
Moratorium on enforcements. At the time the proposed rule was issued, HHS solicited comments on modifying the automatic re-enrollment process for enrollees who would be automatically re-enrolled with advance payments of the premium tax credit (APTC) that would cover the enrollee’s entire premium. HHS also announced that, pending such future rulemaking, the agency would not take enforcement action against Exchanges that do not implement a random sampling methodology during plan years 2020 and 2021.
In the final rule, HHS has finalized the proposal to not taking enforcement action against exchanges that do not perform random sampling as required by § 155.320(d)(4), when the exchange does not reasonably expect to obtain sufficient verification data as described in § 155.320(d)(2)(i) through (iii), for plan years 2020 and 2021. The agency will also exercise such discretion in anticipation of receiving the results of the employer verification study described in the proposed rule. The final rule has adopted HHS policy as it was proposed.
Other changes. A top priority of HHS in promulgating the final rule continues to be the strengthening of program integrity with respect to subsidy payments in the individual market. Currently, exchanges must verify whether an applicant is eligible for or enrolled in an eligible employer-sponsored plan for the benefit year The rule includes changes related to cost sharing for prescription drugs; notice requirements for excepted benefit health reimbursement arrangements offered by non-federal governmental plan sponsors; exchange eligibility and enrollment; and exemptions from the requirement to maintain coverage.
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