Between March 5 and March 10, 2014, the HHS, via its sub-agency, CMS, and IRS issued hundreds of pages of ACA rules and associated guidance documents. CMS grabbed most headlines by delaying some individual and small group, non-grandfathered plan coverage mandates until after the 2016 Presidential election. Less attention was given to the final IRS rules on employer and plan information reporting. Only true ACA nerds read the 335-page HHS release on “Benefit and Payment Parameters for 2015,” and most of them work for health insurers.
It’s an annual grab-basket of HHS rules that don’t fit well anywhere else and that relate to ACA insurance market reforms. They are painfully arid and complex, the occasional silly sentence being unintended, e.g., “Sections 1402 and 1412 of the Affordable Care Act establish a program for reducing cost sharing for qualified individuals with lower household income and Indians.” So circle your wagons, pilgrims. Here are the top ten highlights that we could simplify and describe without mathematical ∑ymbols.
Average member premiums – i.e., summing the per-member rating (a/k/a/ “list billing”) of a small group’s members to calculate an average member rate – may be done only at the start of the plan year. If so, the average per member rate may be charged for additional enrollees during the plan year. But, so that non-smokers do not bear the cost of smokers, tobacco use ratings may not be included in calculating the average member premium.
The HHS risk adjustment program user fee for individual and small group insurers in states other than Connecticut (which runs its own program) will be $.08 per employee per month. Part-time employee hours will be converted to full time equivalent numbers, as provided by employer mandate rules, to measure whether a group plan is a small or a large group plan for risk adjustment purposes. Risk adjustment validation audit failures will be subject to monetary penalties. Oversight will begin when insurers identify their initial validation auditors to HHS in early 2015.
The 2015 per capita reinsurance fee charged to each “contributing entity” will be $44 annually ($3.67) per month, compared to $63 ($5.25 monthly) for 2014. A contributing entity that submits its enrollment count by November 15, 2014 should get a December invoice, payable in January 2015, for $52.50 of the $63 per capita fee. The remaining $10.50 should be invoiced and paid in late 2015. The 2015 per capita fee of $44 will be split, similarly, $33 and $11.
Self-insured, self-administered plans may rent an insurer’s provider network and may use third party organizations for provider network development, pharmacy benefit management, excepted benefit management, and other ancillary services without sacrificing their “contributing entity” reinsurance fee exemption. This is good news for many union health and welfare funds. It’s marginally bad news for other contributing entities that must pick up that slack.
For 2015, per-enrollee claim cost reinsurance will attach at $70,000, will be capped at $250,000 and will have a 50% co-insurance rate, compared with $45,000 (after downward adjustment), $250,000 and 80% for 2014. Excess reinsurance contributions for a year will be used to increase co-insurance payments (up to 100%) for the same year, before rolling them over to the next year. So-called “transitional plans,” temporarily allowed to survive despite failure to comply with new mandates, are subject to reinsurance fees but are not eligible for program benefits. Audits of 2014 payments will focus on enrollment records of entities that paid reinsurance fees and on identifying entities that should have paid, but didn’t.
Risk corridors data will be collected on the same form as Medical Loss Ratio data, submitted in July, and will be audited along with the MLR data. False submissions may be “claims” under the False Claims Act, but HHS will not assess civil money penalties for them for 2014. Transitional plans will not be deemed covered by the risk corridors program. Only plans that are Exchange QHP’s, or substantially the same as QHP’s, are covered. Based on recurring insurer updates of enrollment data, HHS will make state-by state risk corridor adjustments to try to offset expected adverse risk pool consequences of allowing non-compliant, transitional plans, to survive during 2014. Insurers will be expected to adjust pricing to address any adverse risk pool effects for 2015, except that, due to widespread reports of administrative cost increases caused by the transitional rules, HHS may remove the administrative cost cap through 2015.
Open enrollment for non-grandfathered plans offered through and outside an Exchange will be November 15, 2014 (instead of October 1) through February 15, 2015 (instead of January 15). Enrollment between January 1 and February 15 must effect coverage by March 1.
The premium growth index for 2015 will be 4.213431463%, revised down from the previously-proposed 6%. The new number will be used to raise the cost sharing and deductible caps and the employer mandate “assessable payment amounts.” The 2015 maximum annual limitation on cost sharing will be $6,600 (individual) and $13,200 (family), assuming that HHS decides to round down the nearest $50. The 2015 deductible caps will be $2,050 and $4,100, assuming the same rounding. Plans that use the maximum numbers may nevertheless run afoul of the Minimum Actuarial Value rules. Although it’s for IRS to tell us, we guess that the 2015 § 4980H(a) tax may rise from $2,000 per full time employee to $$2,084 and that the § 4980H(b) tax may rise from $3,00 per certified employee to $3,126.
The 2015 Federally Facilitated Exchange user fee rate will stay at the 2014 rate of 3.5%, even though it is insufficient to offset the government’s cost of running www.healthcare.gov. Each insurer offing a policy through that federal Exchange must remit to HHS each month a payment equal to the user fee rate (3.5%) multiplied by the policy’s monthly premium. In effect, this is a federal sales tax on insurance policies sold through www.healthcare.gov. As in 2014 (though with respect also to new programs taking effect in 2015), HHS will estimate and net payments due to and from insurers, demanding payments from insurers only when it estimates that there is a net amount due to HHS. Insurers must pay each full HHS invoice; a successful insurer appeal will affect only future net calculations. Depending on the frequency and magnitude of errors, this rule might deter insurers that otherwise would exit the Exchange based on their early experiences.
If an insurer sells a plan through an Exchange, it must contract only with hospitals (if 50+ beds) that are CMS-certified to serve Medicare and/or Medicaid patients, and must record each such hospital’s CCN. Additional safety standards will be added in later years.
There are extensive discussions also of how SHOP’s must operate (e.g., no FF-SHOP minimum participation requirement for Stand Alone Dental Plans), how access to them may be gained through agent and broker web sites, data privacy standards, cost-sharing reduction calculations, adopting the amended 2014 AV calculator for 2015, and appeal processes. If you have been digging around for a reputed insurance market reform rule that you can’t find anywhere else, it may be buried here.