The Centers for Medicare & Medicaid Services (CMS) and the Department of Health and Human Services (HHS) today issued the Notice of Benefit and Payment Parameters 2023 Proposed Rule, also known as the proposed 2023 payment notice. In addition to lowering health care costs and making coverage options more equitable, the proposal also makes changes to risk adjustment models and HHS-Risk Adjustment Data Validation.
HHS on Tuesday said it would make it easier for millions of consumers to find affordable comprehensive health coverage in 2023 via the proposed 2023 payment notice.
The proposed payment notice advances several policies, including the goal to improve shopping for health care coverage, establish rules to ensure people can access care, and advance health equity for consumers purchasing marketplace coverage.
“Today’s rule is part of the Biden-Harris Administration’s ongoing efforts to ensure an equitable health care system as we continue to make coverage more accessible and affordable,” HHS Secretary Xavier Becerra said in the announcement. “We are building a more competitive, transparent and affordable health care market. At the end of the day, health care should be a right for everyone, not a privilege for some.”
CMS Administrator Chiquita Brooks-LaSure added that the proposal aims to ensure that the marketplaces are “a model for accessible, affordable, inclusive coverage—particularly for eligible individuals who have thought comprehensive coverage was out of reach.”
The proposed 2023 payment notice would:
Require standardized plan options
If approved as proposed, the 2023 payment notice would require all issuers in the federally-facilitated marketplace and state-based marketplaces on the federal platform to offer standardized plan options for every product network type, metal type, and plan classification, as well as in every service area where the issuer will offer marketplace plans.
HHS said because standardized plan options have a uniform cost-sharing structure, they help consumers to make simple and easy-to-understand comparisons across plans to select a plan that meets their needs. A report released by the Office of the Assistant Secretary for Planning & Evaluation, for example, detailed how standardized plans can improve competition and coverage choice.
Implement network adequacy reviews
To help ensure consumers have better access to the right type of provider or facility at the right time and in an accessible location, CMS wants to reestablish federal network adequacy reviews in states that use the federally-facilitated marketplace. The standards used for these reviews would highlight key characteristics like time and distance to care, as well as appointment wait times.
Strengthen access to essential community providers
The proposed rule would help improve access to health care for low-income and medically underserved consumers, particularly through essential community providers (ECPs). Issuers would need to include 35 percent of available ECPs in their network for each plan’s service area. The rule would also add Substance Use Disorder Treatment Centers as eligible ECPs.
Prohibit discriminatory practices & refining health plan designs with clinical evidence
The proposed 2023 payment notice would explicitly prohibit health insurance issuers from discriminating based on sexual orientation and gender identity. Restoring these protections for covered services—previously removed from the list of non-discrimination protections in 2020—can lead to improved health outcomes in the LGBTQI+ community, HHS said in the announcement.
The proposal also refines the Essential Health Benefits nondiscrimination policy by requiring issuers to rely on clinical evidence as a basis of the health plan design. For example, plans could not be designed to burden people managing chronic conditions with inordinately high prescription costs, absent a clinical rationale.
Reduce health care costs and further streamline HealthCare.gov operations
The proposal also streamlines marketplace operations and reduces health care costs. It includes provisions to scale back pre-enrollment verification for special enrollment periods (SEPs) to include only the SEP for loss of minimum essential coverage. In addition, changes to certain individual market plan variants mean subsidized enrollees would see even lower premiums in 2023 and beyond.
Changes to risk adjustment models
Proposed changes to the risk adjustment models would improve prediction in the adult and child models for the lowest-risk enrollees, the highest-risk enrollees, and partial-year enrollees, whose plan liabilities are underpredicted in the current models. Beginning with the 2023 benefit year, CMS proposes the following risk adjustment model changes:
- Adding a two-stage weighted approach to the adult and child models
- Removing the current severity illness factors from the adult models and adding an interacted hierarchical condition category (HCC) count model specification to the adult and child models
- Replacing the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors
A CMS fact sheet also describes the following changes to model recalibration for the 2023 benefit year risk adjustment models:
- Using the 2017, 2018, and 2019 enrollee-level EDGE data for model recalibration
- Applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs
- Using the fourth quarter prescription drug categories (RXC) mapping document for each benefit year of recalibration data, except for 2017 enrollee-level EDGE data
In addition, CMS discusses considerations of the targeted removal of the mapping of hydroxychloroquine sulfate to Immune Suppressants and Immunomodulators (RXC 09) in the 2018 and 2019 benefit year enrollee-level EDGE data used for the 2023 benefit year model recalibration, as well as the targeted removal of Descovy® from mapping to Anti-HIV Agents (RXC 01) in all three benefit year enrollee-level EDGE datasets used for the 2023 benefit year model recalibration.
CMS also proposes to collect and extract through issuers’ EDGE servers five new data elements including ZIP code, race, ethnicity, individual coverage health reimbursement arrangement (ICHRA) indicator, and a subsidy indicator as part of the required risk adjustment data that issuers must make accessible to HHS in states where HHS is operating the risk adjustment program. CMS also proposes to extract three new data elements issuers already provide through their EDGE servers as part of the required risk adjustment data submissions (plan ID, rating area, and subscriber indicator), and to expand the permitted uses of the risk adjustment data and reports. CMS also proposes a risk adjustment user fee for the 2023 benefit year of $0.22 per member per month.
Finally, CMS proposes to repeal the ability for states to request a reduction in risk adjustment state transfers starting with the 2024 benefit year, while proposing to provide an exception for states that previously requested such flexibility. CMS also is seeking feedback on the requests submitted by Alabama to reduce risk adjustment state transfers in the individual (catastrophic and non-catastrophic risk pools) and small group markets for the 2023 benefit year.
Makes refinements to HHS-Risk Adjustment Data Validation (HHS-RADV)
CMS plans to refine the HHS-RADV error rate calculation methodology beginning with the 2021 benefit year and beyond as follows:
- Extend the application of Super HCCs to also apply coefficient estimation groups throughout the HHS-RADV error rate calculation processes
- Specify that the Super HCCs will be defined separately according to the age group model to which an enrollee is subject
- Constrain to zero any outlier negative failure rate in a failure rate groups, regardless of whether the outlier issuer has a negative or positive error rate.
HHS and CMS said that they believe that the proposed changes will better align the calculation and application of error rates with the intent of the HHS-RADV program, and as a result will improve the integrity of HHS-RADV and the HHS-operated risk adjustment program.
Issue premium adjustment percentage and payment parameters
CMS will issue the 2023 benefit year premium adjustment percentage, the maximum annual limitation on cost sharing, reduced maximum annual limitation on cost sharing, and the required contribution percentage (payment parameters) in guidance by January 2022, consistent with policy finalized in the 2022 Payment Notice.
Prohibit inclusion of indirect quality improvement activity expenses in medical loss ratio (MLR)
CMS proposes to specify that quality improvement activity expenses may be included for MLR reporting and rebate calculation purposes are only those expenses that are directly related to activities that improve health care quality. Some issuers appropriately include only direct quality improvement activity expenses, such as salaries of the staff performing those functions, while others allocate indirect expenses, such as a portion of overhead, marketing, office space, IT infrastructure, and vendor profits that have no traceable or quantifiable connection to quality improvement activities.
Advanced payments of the premium tax credit (APTC) proration
Beginning in the 2023 benefit year, CMS proposes that all marketplaces – specifically certain state-based marketplaces that have not done so –must prorate APTC due to issuers when an enrollee is enrolled in a particular policy for less than the full coverage month. This would help prevent APTC overpayment that exceeds an enrollee’s premium tax credit and protect the enrollee from potentially incurring additional income tax liability.
Display explanation of QHP recommendations on web broker websites
CMS plans to require web broker websites to display a prominent and clear explanation of the rational for explicit qualified health plans (QHP) recommendations and the methodology for default display of QHPs on their websites (such as alphabetically based on plan name or from lowest to highest premium) to ensure consumers are better able to make informed decisions and shop for and select the plans that best for their needs.
Prohibit QHP advertising on web broker websites
CMS proposes to ban QHP advertising, or otherwise providing the preferred placement in the display of QHPs on the web broker websites based on compensation an agent, broker, or web-broker receives from QHP issuers.
Editor's note: The proposed 2023 payment notice will be published in the Federal Register on January 5, 2022. Comments will be accepted for 30 days. For more information, click to read the announcement, the fact sheet, or the unpublished rule in its entirety.