On June 14, 2013, the Department of Health and Human Services released a notice of proposed rulemaking (NPRM) entitled “Program Integrity: Exchange, SHOP, Premium Stabilization Programs, and Market Standards.” Although the proposed rule does include a number of provisions related to program integrity, it covers a great deal more. It resolves a host of outstanding issues that must be tied up before the exchanges, premium stabilization programs, and market reforms become fully operational in 2014. (The proposal, by the way, uses the term “exchange” throughout rather than “marketplace,” which I have never gotten used to).
In some instances the NPRM modifies existing rules, as when it modifies the exchange final rule of March 2012 to allow states to operate SHOP exchanges only, ceding the individual exchange to the federal government. In many instances, it puts into regulation form guidance that has been issued earlier, such as the May 1, 2013 guidance on agents and brokers and the May 14, 2013 Frequently Asked Questions on Health Insurance Marketplace. It also, however, addresses problems that have only recently been identified, such as the problem of the “unbanked,” persons who will be eligible for premium assistance but are unable to pay premiums with checks because they do not have bank accounts.
The rule begins by clarifying a number of details. Employers with one employee qualify as small groups under the ACA, in contrast to the prior rule of the Health Insurance Portability and Accountability Act, under which at least two employees were required. The principle business address of the policyholder is used for determining the geographic rating area for determining rates for small groups; the address of the policyholder for determining rates for the individual market, regardless of where various employees or family members live. Guaranteed issue and renewability only apply within, and not across group market segments: that is, a health insurance issuer must offer large groups all products available in the large-group market, but not small-group products.
Finally, the NPRM clarifies that as of January 1, 2015 insurance policies in the individual market will be on a calendar year basis. Insurers can renew 2013 policies with expiration dates in 2014 (in which case the 2014 reforms do not apply until a new policy year begins) but all 2014 policies must end at the end of 2014.
Risk-adjustment, reinsurance, and risk-corridor programs. The proposed rule next addresses standards for the risk adjustment and transitional reinsurance and risk corridor programs. Apparently there will be one state-operated risk adjustment and two state-operated reinsurance programs in 2014, but there may be more in future years. In the rest of the country (and in the entire country for the risk corridor program), these programs will be operated by the federal government.
The proposal begins by clarifying that for purposes of the reinsurance program, where a health plan is partially insured and partially self-insured, the group plan rather than the insurer is responsible for the reinsurance contribution unless the insured plan covers an excepted benefit rather than major medical coverage. Where two insurers both provide partial major medical coverage, the plan that accounts for the largest proportion of premiums per covered lives is responsible.
The NPRM next proposes program integrity and administration standards for state reinsurance programs. Reinsurance programs must maintain documents and records for at least ten years and make them available on request to HHS, the Office of Inspector General, the Comptroller General, or their designees. This requirement, driven by the statute of limitations for the federal Civil False Claims Act, is also applied to contractors, subcontractors, and agents of reinsurance programs and to insurers and self-insured plans that contribute to, and insurers who receive contributions from, reinsurance programs. Indeed, it is applied throughout the proposed rule to other entities that participate in the ACA reforms, including state risk-adjustment programs and exchanges and qualified health plans (QHPs).
State reinsurance entities must also keep an accounting for claims, payments, and expenses, and submit to HHS and the public an annual summary report. They must have an annual external audit, the results of which must be submitted to HHS. HHS intends to collect from insurers and self-insured plans 11 cents per capita for reinsurance administrative expenses, half of which will be allocated on a prorated basis to cover the administrative expenses of states that have their own reinsurance programs. “State risk-adjustment programs will be subject to similar record maintenance, accounting, annual reporting, and annual audit requirements.
Insurers that offer risk-adjustment covered plans must also retain records documenting their compliance and make them available on request to HHS, the OIG, or the Comptroller General. HHS may pursue a civil money penalty (CMP) enforcement action against an insurer that fails to comply with risk adjustment and reinsurance program requirements. HHS notes, however, that its goal is to work with insurers to bring them into compliance and avoid imposing penalties that would severely affect their financial condition.
HHS can take other actions as well for dealing with noncompliance, such as refusing reinsurance payments to insurers that violate reinsurance program rules or imposing a default risk adjustment charge on insurers that fail to provide timely access to risk adjustment data. HHS is considering as alternatives for the default charge, a charge based on the highest per-member-per-month charge of any risk adjustment-covered plan in the risk pool in the market in the non-compliant plan’s geographic rating area or a per-member-per-month charge two standard deviations above the mean in the geographic market. HHS affirms again its intention to use “masked” enrollee data for risk adjustment calculations and not to use personally identifiable information except when doing data validation or audit.
The NPRM proposes two changes in the risk adjustment formula to account for family tiering in community-rated states. In most states the formula will account for age-rating within families, but in community-rated states, tiered rating structures (one adult, one adult plus child, etc.) may be used instead, so the formula is modified to accommodate this approach in these states. The proposed rule would also clarify that stand-alone dental plans do not participate in the risk corridor program.
Allowing states to operate only the SHOP exchange. In its 2012 exchange rule, HHS had interpreted the ACA to require states that operated a SHOP exchange to also be required to operate the individual exchange. Utah, however, insisted that it wanted to retain its small business exchange, which antedated the ACA, without establishing an individual exchange. HHS relented, and in the proposed rule reinterprets the ACA (which could be read either way) to permit the establishment of state SHOP-only exchanges (although only if the state has a federally facilitated individual exchange (FFE)). For 2014, however, this will only be permitted in states that had conditional approval as of January 2013. New Mexico might be interested in a temporary variant of this approach.
States that operate only a SHOP exchange can have a navigator program limited to the SHOP and limited to providing outreach and education, leaving other navigator functions to agents and brokers. A state cannot operate only the individual exchange and let HHS operate the SHOP.
The NPRM further clarifies when a health plan outside of the exchange can be a QHP. The ACA contemplates that QHPs can exist both within and outside of the exchange, since it specifies that the premiums charged for a QHP must be the same within and outside of the exchange. However, the risk-corridor program, which applies to QHPs, is intended to protect exchange-based plans. HHS proposes to address this conundrum by providing that a QHP offered outside the exchange must offer the identical benefits package, provider network, service area, and cost-sharing structure to a QHP in the exchange. A plan sold only outside the exchange cannot be QHP (except for stand-alone dental plans). HHS seeks comments on whether this approach is consistent with state regulation.
Agents and brokers. A number of the provisions of the proposed rule deal with agents and brokers. These provisions build on the agent and broker guidance mentioned earlier. Agents and brokers must meet state and federal registration, training, privacy and security standards and execute an agreement with the exchange to assist individuals in enrolling in QHPs and in applying for premium tax credits through the exchange.
Consumer advocates have been particularly concerned about the role of “web brokers” — agents and brokers who use a publicly-facing website — in the exchange. There is a substantial possibility of consumers who use a web broker being not being able to view all available choices and instead being steered to the option that is in the best interests of the web broker. To avoid this, HHS required web brokers to display the same QHP information as the exchange displays on its website. Apparently, however, insurers objected to allowing web brokers to display certain information, such as pricing information, when the broker was not appointed by the insurer.
The proposed revision only requires web brokers to display QHP information provided by the exchange or an insurer. Insurers will apparently be able to deny pricing and rating information to web brokers. Web brokers must still display a list of all QHPs available on the exchange and a link to the exchange web site for additional information, comply with nondiscrimination requirements, and, in the FFE, prominently notify consumers that the web broker’s website is not the exchange website. Agents and brokers who use a web broker’s website in the FFE must also enter into a web broker agreement with the FFE. There is, however, a continuing danger that consumers who use web brokers will be deprived of the full range of choice they will have on the exchange itself.
Agents and brokers must comply with privacy and security standards, and in the FFE train their agents and employees regarding these standards. Agents and brokers must give HHS 30 days notice to terminate an agreement with the FFE. HHS may also terminate an agent or broker’s agreement with the FFE, after notice and a 30-day opportunity to cure, if the agent and broker’s noncompliance or patterns of noncompliance with federal or state standards is sufficiently severe. HHS will also establish an informal process for resolving noncompliance issues and perhaps a process for immediate termination where violations are sufficiently serious. The agent or broker will be able to request reconsideration of a termination decision.
State Departments of Insurance will continue, of course, to regulate agents and brokers and HHS will focus its oversight on exchange-related issues.
The proposed rule also allows insurer customer service representatives, who may not be licensed as agents and brokers, to directly enroll individuals in one of the insurer’s QHPs and to apply for premium tax credits, if they are permitted to do so by state law. Where a QHP issuer directly enrolls an applicant in its QHPs through the exchange it must provide the applicant with an opportunity to view all of its QHPs and provide specified information about the QHPs. It must also inform the qualified individual that other options are available through the exchange.
HHS does not propose, but rather only seeks comments on, requiring a universal disclaimer to be displayed noting that other QHP options are available through the exchange and not all are displayed. Direct enrollment would seem directly contrary to the freedom of choice and insurer competition goals of the exchange, yet insurers apparently insist that HHS allow them to hold enrollees captive.
Privacy and security. The proposed rule emphasizes again the importance of privacy and security in the exchanges. HHS will monitor the FFEs, non-exchange entities associated with the FFEs, and the state exchanges for privacy and security compliance. The state exchanges will monitor non-exchange entities associated with the state exchanges. The proposed rule defines the terms “incident” as “the act of violating an explicit or implied security policy” and “breach” as:
the loss of control, compromise, unauthorized disclosure, unauthorized acquisition, unauthorized access, or any similar term referring to situations where persons other than authorized users and for an other than authorized purpose have access or potential access to personally identifiable information, whether physical or electronic.
Entities in which an incident or breach occurs are responsible for reporting and managing the incident or breach. FFEs, non-exchange entities associated with FFEs, and state exchanges must report incidents and breaches to HHS within one hour of their discovery.
Consumer assistance issues. The proposed rule requires state exchanges to give notice to an applicant who does not provide sufficient information to complete an application of the need for more information and a period of not less than 15 days nor more than 90 to complete the application. If enough information is provided by the applicant for enrollment in a QHP but not for premium tax credit eligibility, the exchange may enroll the applicant in a QHP while it continues to try to establish eligibility. The NPRM proposes that HHS be responsible for verifying applicant eligibility for or enrollment in government programs other than CHIP, Medicaid, or a Basic Health Plan.
If a state exchange facilitates the collection and payment of premiums to QHP issuers and discovers that it has not reduced the premium charged the enrollee sufficiently to account for the premium tax credit due for an enrollee, it must notify the enrollee within 30 days and give the enrollee a refund or apply the amount to the next month’s premium. If a QHP fails to give an enrollee sufficient credit for a premium tax credit, it must also provide a refund or reduce the next month’s premium. If a QHP puts an enrollee in the wrong cost-sharing level and fails to credit an enrollee enough for a cost-sharing reduction payment, it must move the enrollee to the correct cost-sharing level and pay the enrollee or provider the additional amount that should have been paid.
If, on the other hand, the QHP pays too much for a cost-sharing reduction credit, it may not collect back from the enrollee or provider, as it is responsible for ensuring that the amount of the payment is correct. HHS is also considering requiring QHPs to provide HHS with a quarterly report on cost-sharing reduction payment and premium tax credit errors.
The proposed rule creates a new special enrollment period to allow individuals to enroll in or change plans when they were not enrolled in QHP coverage as desired (or in their chosen plan, or for premium tax credits or cost-sharing reduction payments) because of the misconduct of a navigator, consumer assister, agent or broker, insurer customer service representative, or QHP conducting direct enrollment. Inappropriate or incorrect enrollment could be discovered based on a complaint from an enrollee or from an audit or information provided from another source.
Insurers in the SHOP exchange may change their rates as often as quarterly, although an employer locks in a rate for a year once enrolling in a QHP. SHOP exchanges are not required to accept paper or telephone applications, although they may if they choose to. SHOP exchanges must establish uniform procedures for terminating SHOP coverage. The NPRM proposes termination rules for the federally facilitated (FF-SHOP). In the FF-SHOP, the proposal gives employers a 31-day grace period to pay a premium due and then 30 days from the date of termination of coverage to reinstate coverage by paying in full.
Program integrity. The proposed rule establishes program integrity standards for state exchanges. The principles underlying this program are effectiveness, efficiency, integrity, coordination, transparency, and accountability. Program integrity requirements contain the by-now- familiar elements of accounting, reporting, external auditing (which can be done through a state agency), and keeping records for 10 years.
The proposed rule prescribes additional requirements for insurers. Insurers in the individual or in merged individual and small-group markets may only revise their market-wide adjusted index rates and plan-specific pricing once a year to maintain the single-risk pool requirement and avoid adverse selection. As already noted, small-group insurers may change their rates quarterly. QHP issuers in the FFE and FF-SHOP must give a 30-day notice of change of ownership. QHPs must meet program integrity requirements, including 10-year record retention, and be subject to audits and compliance reviews.
QHPs are responsible for compliance with program requirements by their delegated entities (such as agents or brokers) or “downstream” entities — delegated entities of delegated entities. All delegated and downstream entities are subject to program integrity requirements. The NPRM recognizes, however, that the states are primarily responsible for regulating insurers and federal QHP oversight will be focused on exchange standards.
If HHS discovers that QHP issuers are not complying with FFE program standards, it has two remedies: civil money penalties and decertification. HHS may impose civil money penalties, which can amount to up to $100 per day for each individual adversely affected, where a QHP issuer is guilty of misconduct or substantial noncompliance with program standards. HHS can also decertify QHPs for substantially failing to comply with federal laws or regulations or standards; operating in a manner that hinders the efficient and effective operation of the FFE; failing to comply with certification criteria; committing fraudulent or abusive activities; failing to meet standards related to enrollees’ ability to access necessary medical items or services that could have effect of seriously harming enrollees; or when a state recommends decertification.
Under the standard decertification process a QHP will receive 30 days notice. When enrollees’ ability to access medical care is at risk or the integrity of the FFE is seriously compromised, an expedited decertification procedure can be used. The proposed regulations set out procedures for appealing CMP and decertification decisions.
HHS will seek to avoid duplicating the role of state insurance departments in enforcement and will work together with state enforcers to respond to conduct of mutual concern. HHS also seeks to work together collaboratively with insurers to address problems rather than to impose penalties, particularly during 2014. HHS expects decertification to be rare
The NPRM proposes procedures for resolving “cases,” complaints against persons or entities subject to state or federal insurance regulation other than appeals of adverse benefit determinations. A “case” could involve issues such as wait times at an issuer’s call center, the demeanor of customer service personnel, or the failure to receive materials such as the summary of benefits and coverage. These complaints will often be addressed by the state department of insurance, but where they are forwarded by HHS to a QHP issuer, they must be addressed within 15 days, or where there is an urgent medical care issue, within 72 hours. The complainant must be informed of the result as soon as possible but in any event within 7 days.
The proposed rule sets out the ground rules for approval of patient satisfaction survey vendors, anticipating the public reporting of enrollee satisfaction data in 2016 for 2017 enrollment. It also sets out requirements for reconciling advance payments or premium tax credits and cost-sharing reduction payments between the FFE and QHP issuers.
The unbanked. Finally, as noted at the outset, the proposed rule addresses the problem of the “unbanked.” Many people who will be eligible for premium tax credits do not have banking accounts. The preface to the proposed rule states:
We realize that a segment of the population that will seek health insurance coverage through an Exchange will not have bank accounts or credit cards, and we have received numerous questions and comments on this topic. These people should be able to access coverage through an Exchange on the same basis as those with a bank account or credit card and should not be unable to access coverage merely due to the inability to pay their share of the premium. Therefore, we propose to require QHP issuers at a minimum to accept a variety of payment formats, including, but not limited to, paper checks, cashier’s checks, money orders, and replenishable pre-paid debit cards, so that individuals without a bank account will have readily available options for making monthly premium payments. Issuers may also offer electronic funds transfer from a bank account and automatic deduction from a credit or debit card as payment options. We seek comment on this proposal and whether other payment methods should be included.
HHS is to be applauded for addressing this important problem quickly, although the problem of lack of access to consumer banking is in fact a more general problem of being poor in America, and needs a broader solution.
State Rate-Review Funding Opportunities
In older news, on June 6, 2013, the Centers for Medicare and Medicaid Services released a second set of Frequently Asked Questions regarding the Cycle III Funding Opportunity Announcement for state rate review grants. (The first FAQ set is here.) The Affordable Care Act made $250 million available over five years to help the states build effective health insurance rate review programs. During 2010 and 2011, CMS awarded one million dollars to each of 45 states, the five territories, and the District of Columbia in Cycle I rate review grants. From 2011 to 2013, HHS awarded $121 million to about 30 states in two- and three-year Cycle II grants to assist the states in enhancing their rate review authority. On May 8, 2013, CMS announced the availability of approximately $87 million in Cycle III rate review funding, with letters of intent to apply on June 17, 2013 and final applications due August 1, 2013.
While funding continues to be available for states to establish and enhance their rate review capacity, the Cycle III funding focuses on encouraging the establishment of “Data Centers” to collect, analyze, and disseminate health care pricing data to the public. These data centers must be located in existing academic or other nonprofit institutions. Data centers need not be located in the state that receives the grant and may serve multiple states. Indeed, state universities and state agencies other than the insurance regulator can apply for data center funding, although only one grant will be awarded per state except in states where more than one agency regulates health insurance rates.
The data centers are supposed to provide pricing information to aid state health insurance rate regulation, but are also supposed to provide pricing information that will be of use to consumers and employers to understand and perhaps negotiate better prices, as well as to researchers and the general public. New Hampshire’ Health Cost database is offered as an example of what the data centers will look like. State data centers will add to the Medicare pricing information that is becoming more available to shine a light on the heretofore dark world of health care provider pricing to enhance consumer choice and provider competition.