Health Reform WK-EDGE HHS final rule lowers premiums for exchange plans and increases market stability
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Wednesday, May 8, 2019

HHS final rule lowers premiums for exchange plans and increases market stability

By Lauren Bikoff, MLS

The rule aims to pass along exchange operations cost-savings, among other efforts to relieve pressures on consumers’ wallets.

The HHS Notice of Benefit and Payment Parameters for 2020 final rule reduces user fees for plans offered on HealthCare.gov, and encourages the use of lower-cost generic drugs, while attempting to improve market stability and consumer choice. According to CMS, the changes finalized in the rule are targeted to further the Trump Administration’s goals of lowering premiums, increasing market stability, reducing regulatory burdens, enhancing the consumer experience, and reducing federal expenditures (Final rule, 84 FR 17454, April 25, 2019).

"The final rule will give consumers immediate premium relief by reducing the exchange user fees in the federally-facilitated exchanges (FFEs) and state-based exchanges (SBEs) using the federal platform for 2020 thanks to successful efforts to improve the efficiency of the exchange," said CMS Administrator Seema Verma. "At CMS we have improved the operations of the exchange to deliver a better consumer experience at a lower cost."

Exchange user fees. For the 2020 benefit year, the user fee rate for qualified health plans (QHPs) sold on the Patient Protection and Affordable Care Act (ACA)-created FFEs will decrease from 3.5 percent to 3.0 percent of the premium cost. The user fee rate for QHPs sold on SBEs that used the federal platform also will decrease from 3.0 percent to 2.5 percent of premiums.

Prescription drugs. In furtherance of the Administration’s priority to reduce prescription drug costs and to align with the President’s American Patients First blueprint, the CMS has finalized a change to the prescription drug benefit, which is designed to encourage enrollees’ use of lower-cost generic drugs. Beginning in 2020, CMS will allow individual market, small group, large group and self-insured group health plans to except from the maximum out-of-pocket limit cost sharing amounts paid using drug manufacturer coupons for specific prescription brand drugs that have an available and medically appropriate generic equivalent.

Risk adjustment. CMS has finalized recalibrating the risk adjustment models for the 2020 benefit year using a blended average from 2015 MarketScan data and 2016 and 2017 enrollee-level EDGE data, which is consistent with prior years’ recalibrations.

Premium adjustment percentage. The premium adjustment percentage is the percentage (if any) by which the average per capita premium for health insurance coverage for the preceding calendar year exceeds such average per capita premium for health insurance for 2013. In the final rule, CMS has changed the premium index for the 2020 benefit year to use CMS Office of the Actuary (OACT) estimates of projected private individual and group market health insurance premiums (excluding expenditures for Medigap and property and casualty insurance). Based on the proposed change in the premium index, CMS finalized a premium adjustment percentage of 1.2895211380, which is an increase in private individual and group market health insurance premiums of approximately 28.9 percent over the period from 2013 to 2019.

Cost sharing limitation. Using the premium adjustment percentage of 1.2895211380 for 2020, and the 2014 maximum annual limitation on cost sharing of $6,350 for self-only coverage which was published by the IRS on May 2, 2013, CMS finalized a maximum annual limitation on cost sharing of $8,150 for self-only coverage and $16,300 for other than self-only coverage for the 2020 benefit year. This represents an approximately 3.16 percent increase above the 2019 parameters of $7,900 for self-only coverage and $15,800 for other than self-only coverage.

The reduced maximum annual limitation on cost sharing is an ACA-required annual calculation to reduce maximum out-of-pocket costs for individuals enrolled in the various cost sharing reduction (CSR) plan variations by the amount prescribed in statute. The 2020 benefit year reduced maximum annual limitation on cost sharing will be $2,700 for self-only coverage and $5,400 for other than self-only coverage for individuals with household incomes between 100-200 percent of the federal poverty level (FPL), and $6,500 for self-only coverage and $13,000 for other than self-only coverage for individuals with household incomes between 200-250 percent FPL.

Required contribution percentage. The required contribution percentage is used to determine whether individuals over the age of 30 qualify for an affordability exemption which would enable them to enroll in catastrophic coverage. For plan years after 2014, the required contribution percentage is the percentage determined by HHS that reflects the excess of the rate of premium growth between the preceding calendar year and 2013, over the rate of income growth for that period. The required contribution percentage for 2020 is 8.24 percent, a decrease of 0.07 percentage points from 2019 (8.23702 – 8.30358).

FederalRegisterIssuances: FinalRules AgencyNews CostSharingNews DrugNews EnrollmentNews HealthInsuranceExchangeNews PremiumNews FedTracker HealthCare

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