The Centers for Medicare & Medicaid Services (CMS) on Wednesday released its proposed annual Notice of Benefit and Payment Parameters for the 2022 benefit year. The proposal, more commonly known as the proposed 2022 Payment Notice, provides a blueprint for the changes CMS plans to make to the risk adjustment program and risk adjustment data validation (RADV) in the Affordable Care Act marketplace.

In a press release announcing the proposed 2022 Payment Notice, CMS said the rule aims to lower premiums and enhance the consumer experience on the federal exchanges. CMS has proposed technical changes to the risk adjustment program for the 2022 benefit year but might not be able to finalize the rule before the Biden administration takes office or the rule might be thrown out, which would require the Biden administration to release a new version, says J. Gabriel McGlamery, J.D., senior health policy consultant, government relations, Florida Blue, and a member of the RISE Risk Adjustment Policy Committee.

The federal law that sets parameters for rulemaking (the Administrative Procedures Act ) requires a comment period, which begins when the rule is published in the Federal Register. McGlamery notes that the proposed notice has not been officially published yet, but CMS seems to believe the comment period has started. 

“Even though CMS pushes the limits of rulemaking with 28-day comment periods, getting this rule finalized before the inauguration will be difficult,” he says. “The fastest time to finalize a Notice of Benefit and Payment Parameters was 83 days from publication of the proposed rule to the final rule, and CMS averages 104 days. There are only about 51 days before Biden is sworn in and bending the rules risks getting the final rule tossed by the courts,” he says.

Here are the changes CMS has proposed:

Risk adjustment data validation (HHS-RADV): After it tried to shift the schedule, CMS now proposes to modify the schedule for its collection of HHS-RADV payments and charges to the same calendar year in which the RADV results are released. CMS had changed the schedule in the 2020 payment rule, but the agency says it now wants to go back to its previous schedule beginning with the 2019 benefit year. Therefore, collection and disbursement of the 2021 benefit year HHS-RADV adjustments would begin in summer or fall of 2023.  

The change to the original schedule is significant because industry stakeholders had expressed concern with CMS’ attempts to shift the schedule, which may have left insurers with unpredictable and potentially outsized RADV adjustments that CMS could then build into future rates.

Risk adjustment model specifications: CMS said it wants to update the model specifications to better predict issuer liability for the healthiest and sickest members. It is proposing technical changes to the current model to include a two-stage specification in the adult and child models and add interacted hierarchical condition category (HCC) counts factors with the 2022 benefit year. CMS also seeks to change enrollment duration factors in the adult models, which could be significant for issuers who have been reluctant to sell plans after the open enrollment period and requested more special enrollment period verification.

CMS is looking for comments on the proposed changes to the enrollment duration factors for the adult models. Specifically, it wants issuers’ feedback on whether the model changes should be implemented with the 2022 benefit year, whether to delay implementation until the 2023 benefit year, or whether it should create the enrollment duration factors for a different lengths of time, such as up to nine months of enrollment instead of up to six months, which CMS has proposed.

In addition, CMS plans risk adjustment reporting requirements for issuers of risk adjustment covered plans that choose to provide temporary premium credits, if permitted by the Department of Health and Human Services (HHS) during a future public health emergency. If the proposal is finalized, issuers must report to their External Data Gathering Environment (EDGE) services the lower-adjusted plan premiums that reflect actual premiums billed to enrollees.

Risk adjustment state flexibility requests: HHS proposes to allow states to request a reduction in risk adjustment state transfers calculated under the HHS methodology by up to 50 percent for up to three benefit years. HHS would have the right to request additional information, terminate, or modify these requests after approval if the circumstances within the applicable state market risk pool materially change during the three-year period.

In a fact sheet, HHS said the proposal may reduce the burden in information submission for states and promote stability in risk adjustment state transfers and rate setting, since issuers in states with approved multi-year requests could depend on the state flexibility request applying for up to three benefit years. The proposed payment notice also details the 2022 benefit year request 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 noncatastrophic risk pools) and the small group market.

Recalibration: Like the changes outlined in the 2020 Payment Notice, CMS will no longer use MarketScan® data for recalibrating the risk adjustment models. Instead, it proposes to continue to recalibrate the risk adjustment models for the 2022 benefit year using only enrollee-level EDGE data. However, it proposes to use the 2016, 2017, and 2018 data to recalibrate the risk adjustment models for the 2022 benefit year. In addition, it wants to continue to use averaged coefficients from the three years of separately solved models for the 2022 benefit year model recalibration.

Risk adjustment user fees: Like last year, CMS proposes the user fee to be set for $0.25 per member per month for the 2022 benefit year to fund the program, which is expected to cost $60 million to operate for the year. However, in the proposed payment notice, the agency said it expects a small decline in billable member months in the individual and small group markets overall in the 2022 benefit year based on the declines that occurred in 2019. CMS said it will continue to examine costs and enrollment projects for the 2022 benefit year, particularly as it receives more information on the impact of COVID-19 public health emergency and will incorporate newly available data to update the final 2022 benefit year risk adjustment user fee rate.

CMS said it will accept comments on the proposal for 30 days after the proposed 2022 Payment Notice is filed for public inspection in the Federal Register. The proposal was filed late Monday so comments will be due by 5 p.m. on Dec. 30th. It is scheduled to be published in the Federal Register on Dec. 4.

To submit comments electrically go to and follow the “submit a comment” instructions. Include file code CMS-9914-P in your comments.