On November 25, 2020, the Centers for Medicare and Medicaid Services (CMS) released its proposed 2022 Notice of Benefit and Payment Parameters rule. The proposed rule was accompanied by a fact sheet, and a press release. The “payment notice” is issued on an annual basis to adopt a variety of major changes that CMS intends to implement for the next plan year in areas such as the marketplaces, the risk adjustment program, and the market reforms.
A prior post addressed changes that are generally specific to the exchanges. This post addresses changes regarding medical loss ratio (MLR) requirements, the coverage of essential health benefits, special enrollment periods, and reporting of prescription drug information by pharmacy benefit managers (PBMs). A third post considers the proposed changes to the risk adjustment program.
Medical Loss Ratio Requirements
Prescription Drug Rebates
CMS proposes to amend the definition of prescription drug rebates and other price concessions in its MLR formula. As adopted in the 2021 payment rule, insurers must deduct prescription drug rebates and any other drug-related price concessions from incurred claims beginning with the 2022 MLR reporting year. The proposed 2021 payment rule would have defined a price concession broadly to include any instance when an insurer or PBM received something of value related to providing a covered prescription drug. However, in response to comments, CMS did not adopt this definition in the final rule and will instead consider codifying a definition through separate rulemaking.
Now, in the proposed 2022 payment rule, CMS proposes a definition for prescription drug rebates and other price concessions that includes all direct and indirect remuneration received or receivable by an insurer and entities providing PBM services regardless of who receives the remuneration (whether a manufacturer, wholesaler, retail pharmacy, vendor, etc.). CMS would further define direct and indirect remuneration to include discounts, charge backs or rebates, cash discounts, free goods contingent on a purchase agreement, up-front payments, coupons, goods in kind, free or reduced-price services, grants, or other price concessions or similar benefits offered to some or all purchasers. This definition would not include “bona fide service fees” under Section 6005 of the ACA.
This provision would still go into effect for the 2022 MLR reporting year, which CMS believes will provide enough time for insurers to adjust contracts with PBMs as needed.
Temporary Premium Credits
CMS would codify its recent temporary policy of relaxed enforcement and interim final rule regarding temporary premium credits for 2020 coverage. Under this policy, insurers in the individual and small group markets can temporarily reduce monthly premiums for 2020 coverage so long as they meet certain requirements. In the proposed 2022 payment rule, CMS would extend this MLR data reporting and rebate requirement for the 2021 MLR reporting year and beyond for individual and small group market insurers who elect to offer temporary premium credits during a declared public health emergency. This option would only be available when CMS issues guidance announcing a similar policy. Consistent with the interim final rule, a temporary credit would be accurately reflected in MLR reporting requirements because insurers will have to report “adjusted plan premiums.” This refers to the premium amounts that are actually billed to enrollees (including any reduction in premiums because of a premium credit).
Rebates
Insurers that fail to meet a minimum MLR as specified under the ACA—80 percent in the individual and small group markets and 85 percent in the large group market—must rebate excess premium back to enrollees. Rebates can be given in the form of a premium credit, a lump-sum check, or reimbursement to a credit or debit card. Rebates made in a lump-sum check or account reimbursement must be made no later than September 30 while rebates made in a premium credit must be applied to the first month’s premium due on or after September 30.
Given the pandemic and economic crisis, CMS announced a temporary policy of relaxed enforcement to allow insurers to prepay a portion or all of a consumer’s estimated MLR rebate for the 2019 reporting year in the form of a premium credit. This policy was limited to insurers that use a premium credit rebate (and did not extend to insurers that use a lump-sum check or account reimbursement rebate).
Beginning with the 2020 MLR reporting year (i.e., MLR reports filed in 2021), CMS proposes to explicitly allow insurers to prepay estimated rebates for any MLR reporting year regardless of the form in which they are paid and at any time during the year so long as insurers do so for all eligible enrollees in a given state and market in a nondiscriminatory manner. For insurers that provide premium credit rebates, CMS additionally proposes that rebates be applied to premiums due no later than October 30.
CMS also proposes a safe harbor for insurers that would prepay at least 95 percent of the total rebates owed to enrollees in a given state and market in a given MLR reporting year. Insurers that meet this standard could defer (without incurring a penalty or late payment interest) the payment of any remaining rebate until after the MLR rebate payment deadlines the following year. Insurers that fail to meet the 95 percent threshold would still have to provide enrollees with the remaining portion of the rebate owed during the current MLR reporting year. CMS will propose modified standard notices that insurers can use regarding prepaid rebates and update its MLR reporting forms.
Essential Health Benefits
The 2022 proposed payment notice includes no changes regarding the coverage of essential health benefits (EHB) and instead merely lays out timelines for state reporting. The proposed rule builds on a new requirement adopted in the 2021 payment rule that states must annually report on state-imposed benefit mandates that exceed the EHB. Under the ACA, states are required to defray the cost of these types of mandates. The states’ first report is due on July 1, 2021. In states that fail to submit the necessary report, CMS will identify which benefits are in addition to EHB and that identification will become part of the state’s EHB definition. The 2022 proposed payment notice would set a similar deadline for reporting in the following year: states would have to submit the complete reporting package for the second year to CMS by July 1, 2022. This report would reflect any changes made for the 2022 plan year or state action taken by May 2, 2022.
Beyond EHB reporting requirements, states continue to have flexibility to select an EHB-benchmark plan on an annual basis. To take advantage of this option, states must ensure that their proposed EHB-benchmark plan meets federal requirements and hold a public comment period to collect feedback on the proposed changes. CMS also allowed for benefit substitution between benefit categories. As discussed here, very few states have made changes to their EHB-benchmark plans thus far, and where they have, it has been to enhance benefits.
States must generally opt into these changes by informing CMS of the change far in advance. To amend an EHB-benchmark plan or allow benefit substitution between EHB categories for the 2023 plan year, CMS proposes a deadline of May 6, 2022. These deadlines are similar to prior years. States must comply with public notice and comment requirements and receive public feedback on any proposed EHB-benchmark plan changes before submitting a proposal to federal regulators. CMS encourages states to submit their proposal 30 days prior to ensure that applications are complete.
Special Enrollment Periods
CMS proposes a series of changes to special enrollment periods (SEPs) for exchange enrollees who become newly eligible for APTC and for those who are eligible for a SEP but did not receive timely notice of the triggering event. CMS also addresses the cessation of employer contributions to COBRA.
Enrollees Newly Ineligible For APTC
CMS proposes allowing current exchange enrollees and dependents to enroll in a new QHP of a lower metal level if they qualify for a SEP because they became newly ineligible for APTC. The market stabilization rule had generally limited the ability of those eligible for SEPs to switch to a new plan metal level. Here, CMS would allow those who become newly ineligible for APTC (because of, say, a change in income or household size) to enroll in a QHP of a lower metal level. Thus, an enrollee with a gold level QHP that loses eligibility for APTC could enroll in a bronze or silver level QHP (or catastrophic coverage if eligible). The preamble includes several examples of where such a SEP could help ensure that enrollees can switch to a plan with lower premiums and maintain continuous coverage.
CMS seeks comment on how to help minimize consumer confusion, whether this policy could result in adverse selection, and whether it should limit the ability to enroll in a lower metal level tier only to those who lose APTC because of a change in household income or tax family size (versus another reason for the loss of ATPC eligibility). CMS considered allowing eligible enrollees to switch to a higher metal level QHP but opted against proposing this because of the risk of adverse selection.
Untimely Notice Of Triggering Event
CMS proposes allowing an individual, enrollee, or dependent who did not receive timely notice of an SEP triggering event and was otherwise reasonably unaware that a triggering event occurred to select a new plan within 60 days of the date that they knew, or reasonably should have known, about the triggering event. This applies to any type of triggering event for both on- and off-exchange coverage, and individuals could choose the earliest effective date that would have been available if they had received timely notice of the triggering event.
Current SEPs operate with the assumption that individuals will become aware of a triggering event (such as the loss of job-based coverage or the date of gaining a dependent) in time to make a plan selection within the time allotted. But CMS’s experience suggests that this is not always the case and some individuals reasonably may not be aware of an event that triggers special enrollment period eligibility until after the triggering event has occurred. The preamble includes examples where employers failed to pay employee premiums and employees had no reason to know the date of the triggering event—or where an individual qualified for a SEP because nonenrolment in a QHP resulted from an error by the exchange or one of its agents but they found out after it was too late to enroll using a SEP.
Cessation Of Employer Contributions To COBRA
In the event of a layoff or other job loss, some employers will pay all or a portion of their former employee’s health insurance premiums for part or all of the COBRA coverage period. Employees that find themselves in this situation currently qualify for a loss of minimum essential coverage SEP through the FFE or SBE-FP.
However, this SEP may not have been treated as a triggering event by off-exchange insurers or SBEs. Thus, CMS proposes to designate the cessation of employer contributions for COBRA continuation coverage as a triggering event for SEP eligibility throughout the individual market. The triggering event would be the last day of the period for which COBRA continuation coverage was paid for, in whole or in part, by the employer. Former employees would have 60 days before or after the triggering event to enroll in individual market coverage. CMS also includes two examples to show when this proposed SEP would be triggered. This SEP would not apply to SHOP plans.
CMS solicits comment on whether a SEP should be available when an employer reduces, but does not completely cease, its contributions for COBRA continuation coverage. If so, CMS asks whether it should adopt a threshold for the level of reduction to trigger the SEP. The triggering event would occur the last day on which an individual has COBRA continuation coverage that was subsidized at the higher amount.
Prescription Drug Distribution And Cost Reporting By PBMs And QHP Insurers
Section 6005 of the ACA requires PBMs that participate in federal health programs, such as Medicare Part D and the exchanges, to provide certain prescription drug information to the Secretary of the Department of Health and Human Services. Among other information, PBMs must disclose the percentage of prescriptions provided through retail pharmacies compared to mail order pharmacies; the aggregate amount and the type of rebates, discounts, or price concessions attributable to patient utilization, the amount passed through to the plan sponsor, and the total number of dispensed prescriptions; and the aggregate amount of the difference between the amount the health benefits plan pays the PBM and the amount that the PBM pays pharmacies.
In the 2012 exchange final rule, CMS required QHP insurers to report this information and did not specify the responsibilities of PBMs that contract with QHP insurers to report this information. In January 2020 and September 2020, CMS asked for public comment on information collection under this provision.
Now, CMS proposes to codify the responsibilities of PBMs to report the data required under Section 6005. Where a PBM contracts with a QHP insurers to administer prescription drug benefits, the PBM must report the information required under Section 6005. PBMs (rather than QHP insurers) are in a better position to know this data, and CMS expects about 40 PBMs will be subject to this requirement. Although CMS is not aware of any, QHP insurers that do not contract with a PBM would be responsible for reporting the required data. Said another way, QHP insurers would only be responsible for reporting Section 6005 data to CMS if they do not contract with a PBM for their QHP drug benefits.
CMS will also revise its requirements to report certain prescription drug data by pharmacy type. It is not currently possible to report that data because pharmacy type is not a standard classification in industry databases or files. CMS asks for comment on ways to collect data by pharmacy type without creating an unreasonable burden.
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The 2022 Proposed Payment Notice, Part 2: Medical Loss Ratios, Special Enrollment Periods, And More - Health Affairs
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