The Centers for Medicare & Medicaid Services (CMS) has proposed 373 pages of regulations that could affect how health plans fund and draw from new, multi-billion-dollar risk-management programs.
The proposed "notice of benefit and payment parameter" regulations also could affect how CMS, an arm of the U.S. Department of Health and Human Services (HHS), handles other responsibilities created by the Patient Protection and Affordable Care Act of 2010 (PPACA), such as running the PPACA individual exchanges, or Web-based health insurance supermarkets, and the health insurance exchange program for small businesses -- the Small Business Health Option Program (SHOP).
One provision would let the SHOP small business exchanges put insurance agent and broker information on their websites, and another provision would require carriers selling coverage through a federal individual or SHOP exchange offer similar producer compensation in the exchange and non-exchange markets.
CMS said HHS might charge a 3.5 percent user fee to fund exchange operations.
CMS has posted a preliminary version of the regulations on the Web today, and it intends to publish them in the Federal Register Dec. 7.
Comments will be due 30 days after the official Federal Register publication date.
Opponents of PPACA are still fighting implementation of the law in the courts and elsewhere.
If the law takes effect on schedule and works as drafters expect, it will require insurers to sell coverage on a guaranteed-issue basis starting in 2014. Insurers will have only a limited ability to take a consumer's age or health into account when setting rates.
Individual consumers and small employers are supposed to be able to use new tax subsidies to buy plans that sell a standardized "essential health benefits" (EHB) package through new PPACA exchanges, or Web-based health insurance supermarkets, starting in late 2013.
A "qualified health plan" (QHP) that sells coverage through an exchange can offer up to four "metal levels" of coverage, ranging from a bronze-level plan, which would cover 60 percent of the actuarial value of the EHB package, to a platinum-level plan, which would cover 90 percent of the actuarial value of the EHB package.
Individuals are supposed to be able to get "advanced payments" of the new premium tax credits while a calendar year is still in progress, long before they file their income tax forms for that year, so that they can use the "refundable credit" cash to pay for health coverage.
At least in the beginning, only employers with fewer than 50 full-time equivalent (FTE) employees will be able to use SHOP exchanges.
States can choose between setting up their own exchange programs, sharing responsibility with HHS, or relying entirely on HHS to provide exchange services for their residents.
States also can choose whether to combine the "Affordable Insurance Exchanges" for individuals with the SHOP exchanges for small businesses or keep the individual exchange programs and SHOP exchange programs separate.
The proposed SHOP regulations released today would apply only to SHOP exchanges run by the federal government, not to state SHOP exchanges.
To give employees as many choices as possible, officials want to require any employer that uses the shop program to simply choose which level of coverage to pay for. The employees could buy any plan available at that metal level.
Some commenters who responded to CMS requests for comments said letting employees choose plans at different metal levels could increase adverse selection risk, or the risk that sicker employees will flock to certain health plans, or certain types of plans.
"There was general agreement among ... commenters that the degree of risk segmentation is small if employee choice is limited to a single metal level of coverage, particularly given the presence of risk adjustment, and increases as employee choice is extended across metal levels of coverage," officials said. "Many commenters suggested that the risk segmentation associated with broad choice across all metal levels may adversely affect premiums."
CMS officials are now asking for comments about how letting employees "buy up" to a plan with a higher metal level would affect risk.
Health policy specialists have suggested that group health plans with low participation rates tend to have high claims costs.
CMS wants to try to manage SHOP exchange risk by setting a minimum SHOP program participation rate of 70 percent.
The minimum participation rate could be higher or lower in states with well-established minimum participation rates other than 70 percent, officials said.
One section of the proposed regulations deals with broker compensation for coverage sold through a federal individual exchange or a federal SHOP small business exchange.
CMS officials note that federal regulators have much less ability to influence health insurance broker compensation than a state has.
In an effort to create a level playing field, CMS is proposing that a federal individual or SHOP exchange will certify a carrier as a QHP only if the QHP offers similar broker compensation to QHPs and non-exchange plans.
"We request comment on whether 'similar health plans' is a sufficient standard and if not, which factors should be considered in identifying 'similar health plans,'" officials said. "We also request comment on how this standard might apply when small group market product commissions are calculated on a basis other than an amount per employee or covered life or a percentage of premium."
The proposed regulations also would let a federal individual or SHOP exchange post the information of agents and brokers registered to do business with the exchange -- and only those producers -- on its website.
"We believe that listing only brokers who have registered with the exchange is in the best interest of the consumer, both because the registration and training helps assure that the agent or broker is familiar with the exchange policies and application process and because the proposed listing will not contain large numbers of licensed brokers who are not active in the market," officials said.
To keep the exchanges and the new underwriting restrictions from leading to severe adverse selection PPACA drafters created three risk-management mechanisms:
- A temporary reinsurance program to be run either by HHS or state regulators is supposed to collect payments from the insurers in a state's market and use the cash collected to support insurers that end up covering a high number of enrollees with high medical costs.
- A temporary "risk corridor" program that will be run by the U.S. Department of Health and Human Services (HHS) is supposed to move cash from plans with medical expenses that are much lower than expected to plans with medical expenses that are much higher than expected.
- A permanent risk-adjustment program to be run either by HHS or state regulators is supposed to use specific enrollee health information to shift cash from plans with unusually low-risk enrollees to plans with unusually high-risk programs.
The proposed risk-management regulations
PPACA calls for CMS to collect $10 billion in reinsurance fees from participating payers in 2014, $6 billion in 2015 and $4 billion.
The program is supposed to contribute $2 billion to the U.S. Treasury in 2014, $2 billion in 2015, and $1 billion in 2016, then to use the rest of the cash for reinsurance payments.
In the preamble to the proposed regulations, CMS said it is thinking about setting the reinsurance program "attachment point," or deductible, at $60,000, in 2014, and the national cap at $250,000.
CMS tried to pick amounts that would lead to the reinsurance program providing about $10 billion in support for insurers with high-cost enrollees without disrupting traditional reinsurance arrangements, which tend to have attachment points in the $250,000 range, officials said.
CMS also talks about the standards it intends to set for states that want to run their own risk-corridor and risk-adjustment programs.
HHS might collect a total of about $20 million in user fees or $1 per enrollee, to run risk-adjustment programs for states that don't run their own risk-adjustment programs, officials said.
The reinsurance program could cost about $60 per enrollee in 2014.
Officials are estimating that the risk-management programs will lower overall health insurance costs by about 10 percent.
Individuals who use the exchanges and earn less than 300 percent of the federal poverty level will be eligible for help with paying coverage premiums through a PPACA "cost-sharing" mechanism.
One portion of the proposed regulations deals with how exchanges would implement the cost-sharing provision, especially when an individual's eligibility changes during the course of a year.
Officials said special coverage cost-sharing rules will apply to American Indians.
In much of PPACA, cost-sharing seems to be something available only to individuals eligible for the premium tax credits, but Indians can get cost-sharing reductions even if they are not eligible for premium tax credits, officials said.
For actuarial firms, data analysis firms and other vendors hoping to win exchange-related contracts, the information collection analyses toward the bottom of the preamble to the proposed regulations may suggest how much work the PPACA risk-management programs and other programs could generate.
Officials are estimating, for example, that about 2,000 payers will have to contribute to the PPACA reinsurance program, and that each will have to take about an hour to reconcile and submit final enrollment counts to HHS.
Uploading risk-adjustment and reinsurance data could take 1,800 payers an average of about $327,600 in total labor and capital costs each, including an average of about $15,000 for a data processing server, during the first year the risk-management programs are in effect, officials said.
A typical payer might have to employ the equivalent of three full-time employees to handle the job, and those employees might earn an average hourly rate of $59.39 per hour, officials said.
The total burden could be about $590 million, officials said.