The Centers for Medicare & Medicaid Services (CMS) on Friday released the second final payment notice, finalizing risk adjustment changes and cost-sharing limits for the Affordable Care Act (ACA) marketplace in 2022.
The second 2022 Notice of Benefit and Payment Parameters final rule (also known as the “2022 payment notice”) makes regulatory changes in the individual and small-group health insurance markets and outlines parameters and requirements issuers need to design plans and set rates for the upcoming plan year. The 473-page notice also includes regulatory standards to help states, the marketplaces, and insurance issuers in the individual and small-group markets to better serve consumer needs.
This year, CMS has finalized the payment notice in multiple phases. The first 2022 payment notice final rule was released in January 2021. The second notice aims to stabilize the ACA marketplace, lowering maximum consumer out-of-pocket costs by $400 (below what CMS proposed in November 2020), and promotes program integrity and reduces regulatory burden. CMS said it anticipates additional rulemaking for the payment notice later this year.
In addition to an announcement about the latest changes, the Department of Health & Human Services (HHS) and CMS also released a fact sheet that addressed the risk adjustment model specifications, reporting and policies, and updates to data used for risk adjustment model recalibration.
Risk adjustment model specifications: HHS said it is not finalizing many of the proposed updates to the model specifications included in the 2022 payment notice proposed rule. Those proposed changes included a two-stage specification in the adult and child models, to replace the existing severity illness indicators in the adult models with new severity and transplant indicators with hierarchical condition category (HCC) counts factors in the adult and child models, and to modify the enrollment duration factors in the adult models. Instead of finalizing those changes, CMS said it will release a technical paper in the future with more data and analysis on the impact of the proposed model specification changes on transfers. Meanwhile, the risk adjustment model specifications finalized in the 2021 payment notice will continue to apply for the 2022 benefit year, with trending adjustments made to project the data used to develop the factors forward to reflect the 2022 benefit year.
Pricing adjustments: HHS continued the pricing adjustment for hepatitis C drugs that has been in place since the 2020 benefit year. HHS said the market pricing adjustment is necessary and appropriate to account for the significant pricing changes associated with the introduction of new and generic Hepatitis C drugs between the data years used for recalibrating the models and the applicable recalibration benefit year. The pricing adjustment is applicable to all three models (adult, child, and infant).
One issue that caught the attention of the RISE Risk Adjustment Policy Committee is that in the discussion of the pricing adjustment for the Hepatitis C drugs, HHS said that it continuously assesses the availability of drugs in the market and the associated mapping of those drugs to RXCs in the adult risk adjustment model and it makes quarterly uptakes to the RXC crosswalk, adding and removing new and old drugs based on approval status, prescribing patterns, and expenditure data. Indeed, the committee noted, in certain instances CMS has tweaked the RXC crosswalk without notice or comment. For example, the final payment notice states that in a recent update, HHS removed hydroxychloroquine from RXC 09 effective March 24, 2021 due to concerns regarding unrepresentative expenditures and off-label prescribing during the COVID-19 public health emergency. Based on pre-2020 data, HHS said its analysis showed that the costs of hydroxychloroquine are much lower than the costs of other drugs that one with HCC 048, 056, or 057 may take. However, hydroxychloroquine still appears in the 2018 enrollee-level EDGE data HHS is otherwise finalizing for use for 2022 benefit year model recalibration. Therefore, it only used 2016 and 2017 enrollee-level EDGE data for the limited purpose of developing the RXC 09 coefficients, RXC 09 HCC related coefficients, and RXC 09 interaction term coefficients for the 2022 benefit year adult models. This approach best aligns the 2022 benefit year adult model coefficients with the removal of hydroxychloroquine from RXC 09 and avoids the undesired impact of diluting the coefficient values for RXC 09 (including the associated interactions), HHS said.
The problem, the committee noted, is that HHS is adding and taking drugs out of the RXC classes after they are published without notice and comment and without recalibrating the risk adjustment model. The committee advocates that HHS offer notice about these changes and allow stakeholders to comment before implementing the change.
Risk adjustment reporting and policies related to temporary premium credits: HHS finalized the reporting requirements for issuers of risk adjustment covered plans that choose to provide temporary premium credits if permitted by HHS during a future public health emergency. Issuers would be required to report to their EDGE servers the lower, adjusted plan premiums that reflect actual premiums billed to enrollees. It also finalized the clarification regarding calculation of HHS risk adjustment payment and charges in light of these premium credits by specifying that, for states where issuers of risk adjustment covered plans provide temporary premium credits when permitted by HHS, the plan average premium and statewide average premium used in the state payment transfer formula would be calculated using issuers’ adjusted premium amounts. Therefore, the actual premiums billed to plan enrollees would be the amounts used in the calculations under the state payment transfer formula. This is consistent with the general approach adopted in the interim final rule on COVID-19 for temporary premium credits in the 2020 benefit year.
Updates to data used for risk adjustment model recalibration: HHS is finalizing the policy to use the three most recent consecutive years of enrollee-level EDGE data that are available. However, it intends to use the 2016, 2017, and 2018 enrollee-level EDGE data (the same years’ data used to recalibrate the 2021 risk adjustment models) to recalibrate the risk adjustment models for the 2022 benefit year. It will also continue to use blended, or averaged, coefficients from the three years of separately solved models for the 2022 benefit year model recalibration.
Collection and payment of HHS Risk Adjustment Data Validation (HHS-RADV) adjustments: HHS said based on stakeholder feedback, it is changing the HHS-RADV collections timeline originally finalized in the 2020 Payment Notice to instead collect charges and disbursement of payments in the calendar year in which HHS-RADV results are released. This timeline more closely aligns to the one that most states and issuers follow.
Risk adjustment user fee: The risk adjustment user fee for the 2022 benefit year will be $0.25 per member per month to operate the risk adjust program. CMS expects it will cost approximately $60 million to operate the risk adjustment program in the 2022 benefit year, the same as estimated for the 2021 benefit year.
Alabama’s 2022 state flexibility request: HHS approved the 2022 benefit year requests submitted by the state of Alabama to reduce risk adjustment state transfers by 50 percent for both the individual market (including both the catastrophic and non-catastrophic risk pools) and the small-group market. HHS reviewed the data submitted by Alabama as part of its requests, in addition to other data and information available to HHS, along with timely submitted public comments, and determined that the requests meet the de minimis standard in both markets as set forth in 45 CFR § 153.320(d).