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Focus on Regulation

HHS Finalizes Technical Parameters for Premium Tax Credits, Cost-Sharing Reductions and Other Benefits and Payments Related to Qualified Health Plans and the Exchanges

The final Notice of Benefit and Payment Parameters for 2014, issued on March 1, 2013, establishes the final standards for a number of policies and programs that implement the Affordable Care Act’s reforms to private individual and small group health insurance markets in 2014. These policies are designed to make health insurance more affordable for consumers, and at the same time ensure stability in those insurance markets. On the same day, to be published in the same issue of the Federal Register, HHS issued an interim final rule with comment, titled Amendments to the HHS Notice of Benefit and Payment Parameters for 2014, which amends the requirements governing the risk corridors program to better align it with the single risk pool requirement established in the final“Health Insurance Market Reforms; Rate Review,” which was published on February 27, 2013. The interim final rule also gives issuers of qualified health plans the option of using an alternate methodology for calculating the value of the cost-sharing reductions provided to certain low-income enrollees.

These rules offer the detailed calculations, formulae, and procedures by which health insurance issuers that offer QHPs on the exchanges will be able to estimate their net premium revenues, taxes and fees, and payments to offset cost-sharing reductions required under the law. Among other things, these rules finalize the technical parameters for:

  • Advance Premium Tax Credits and Cost-Sharing Reductions available to certain low income individuals to help make coverage purchased through an Exchange more affordable;
  • Programs to stabilize premiums in the individual insurance market during the transition to the Exchange marketplaces (i.e., risk corridors and an interim reinsurance program operated by the federal government, and requirements for state reinsurance programs);
  • A permanent risk adjustment program to help spread the risk borne by health insurance plans that provide coverage to higher risk populations );
  • User fees that will be charged to insurance issuers who participate in a Federally-facilitated Exchange, as well as user fees for reinsurance.

For the most part, the final rule adopts the standards set out in the proposed rule that was issued on December 7, 2012, with only minor technical corrections and some additional clarifications. The Amendment further modifies the standards to bring them in line with other recently promulgated rules.

Cost-Sharing Reductions

For example, the final rule follows the same approach to administering the cost-sharing reductions provided under the ACA for individuals with incomes between 100 and 400% of the FPL who enroll in a silver-level plan offered in the individual market through an Exchange. Like the proposed rule, the final rule requires issuers of silver level QHPs to offer “silver plan variations” for individuals with incomes between 100 and 250% of the FPL only (and not individuals with higher incomes) that meet specified actuarial value (AV) standards (with “de minimis variation” of +/- 1%). The plan variations must achieve the AV standards by first reducing an enrollee’s maximum annual out-of-pocket expenditures, and then by reducing deductibles, coinsurance or copays. The final rule also confirms that the cost-sharing reductions only apply to the essential health benefits (EHB)—cost-sharing reductions are not available for benefits that are not part of EHB, such as State-mandated benefits enacted after December 31, 2011. The final rule clarifies that similar to the approach taken for out-of-network services in the EHB/AV final rule published on February 25, 2013, plan issuers have the flexibility to reduce cost-sharing only for in-network services (as long as the required AV levels are achieved). The regulation also provides methodology (and a transitional methodology) for ensuring that QHPs receive funding based on projected cost-sharing reductions that they make available each month, with an annual reconciliation of the actual amounts, much like that which characterizes the low-income subsidies for the Medicare Part D benefit.

The Centers for Medicare & Medicaid Services (CMS) also released a fact sheet summarizing the provisions of the final rule.