Editor’s note: This post was updated on April 12 to conclude with a discussion of an April 11 CMS guidance explaining how the agency will ensure that the ACA risk corridor program remains budget neutral.
With the March 31, 2014 deadline for applying for qualified health plan coverage through the health insurance exchanges behind us, and the April 15, 2014 deadline for completing those applications upon us, Affordable Care Act implementation has quieted considerably. The Centers for Medicare and Medicaid Services have been very active on the Medicare front, releasing in recent days their 2015 Medicare Advantage Rate Announcement and Call Letter and publishing data on Medicare payments to 880,000 Medicare providers. But on the exchange and insurance market reform side, CMS has only one major proposed rule pending at this time, the Exchange and Insurance Market Standards Rule proposed in March, and nothing pending for regulatory review at the Office of Management and Budget.
I am unaware of any major regulatory issuances expected in the immediate future from the Departments of Treasury or Labor, although Treasury does have a number of proposed rules on the table that have yet to be finalized dealing with issues such as minimum value of employer coverage or premium tax credit reporting requirements for exchanges.
Exchange enrollment. On April 10, the media reported two major Health and Human Services developments. First, Secretary of Health and Human Services Kathleen Sebelius announced at a Senate Hearing that 7.5 million Americans have now signed up for health plans through the exchanges. Although opponents of the ACA continue to quibble about how many of these individuals have actually paid their premiums and how many were uninsured previously, the number far exceeds earlier estimates of how many would enroll in health insurance through the exchanges. A recently released Rand survey, which does not fully take into account the late surge that increased exchange enrollment by over 70 percent in the last month, indicates that in fact the ACA has made a significant dent in the number of uninsured in the United States.
Changing of the guard at HHS. The second announcement was of the resignation of Secretary Sebelius herself, and of the nomination of Sylvia Mathews Burwell as her replacement. Secretary Sebelius, who served as the insurance commissioner and governor of Kansas before coming to HHS, had been HHS Secretary since 2009, before the ACA even became law. Much of the media coverage of this event is focused on the dark days of fall 2013, when the much-heralded launch of the exchanges became a debacle. Some of those responsible for the launch certainly seem to have been guilty of deception or delusion, and Sebelius was ultimately in charge.
But Secretary Sebelius must be given credit for many successes as well. The ACA has survived a multitude of near-death experiences since she took the helm at HHS. It was enacted by the narrowest of margins in both houses of Congress and in early 2010, after the Democrats lost supermajority control in the Senate, came very close to miscarriage. The Supreme Court decision in 2012 came much closer than most observers expected to abolishing the entire law, but again the ACA survived. Republican opposition to the legislation has been determined and no-holds-barred, both in Congress (where the House has voted nearly 50 times for repeal) and in Republican-dominated state legislatures, many of which have refused to expand Medicaid and some of which have refused to enforce the law at all. Secretary Sebelius has been a tireless champion of the law in the face of adamant opposition.
She has also presided over successes. The implementation of the 2010 reforms—extension of coverage to adult children up to age 26, the end of lifetime limits and curbing of annual limits, the extension of preventive service coverage, and others—proceeded on time and with largely positive results. The early retirement reinsurance and pre-existing condition high-risk pool programs were also implemented largely according to plan and provided a much-needed bridge to the 2014 reforms. The minimum medical loss ratio and rate review programs brought down insurance premium increases and have put almost $2 billion back in the pockets of insured Americans. And 7.5 million have now signed up for private insurance coverage and millions more for Medicaid.
It is to be hoped that Ms. Burwell, coming from the Office of Management of Budget with a wealth of private management experience, will bring to the office the steady hand and vision needed to complete implementation of the ACA over the remainder of President Obama’s term. There is much that needs yet to be done: readying the exchanges for the 2015 open enrollment period; implementing the premium stabilization programs; ensuring the enforcement of the market reforms; and assisting the Treasury Department in implementing the individual and employer responsibility provisions of the law. There are signs, however, that the law is doing what it was intended to do, and perhaps that the American public is beginning to understand it.
Federally Facilitated Exchange Compliance Priorities. As open enrollment comes to an end, the attention of HHS and of the states is turning to what HHS calls compliance review and what the states call market analysis and market conduct review. On April 10, 2014, CMS published its Key Priorities for FFM [federally facilitated marketplace] Compliance Reviews for the 2014 Benefit Year. CMS has the responsibility for reviewing the compliance with regulatory requirements of qualified health plans that participate in the federal exchanges (including stand-alone dental plans). It has the authority to impose civil money penalties or to decertify, or to refuse to recertify, non-compliant plans, although CMS has indicated that for 2014 it will work with — rather than impose sanctions on — QHPs that are in good faith trying to achieve compliance.
There are no surprises in this list of CMS priorities for compliance review, which is explicitly not exhaustive. Regulatory standards that CMS intends to prioritize for review of compliance include:
- QHP insurer participation standards, including implementation of quality improvement and reporting and enrollee satisfaction survey requirements, non-discrimination standards, and the requirement that insurers pay the same agent/broker commissions inside and outside the exchange;
- Requirements that QHP insurers submit rate increase justifications to the exchange prior to implementation and post those justifications on their websites;
- The prohibition against QHP insurers or their delegated or downstream entities using marketing practices or benefit designs that will discourage enrollment of individuals with significant health needs;
- Requirements that QHP insurers ensure that their appointed agents and brokers are trained, registered, and licensed, execute privacy/security agreements, and use required disclaimers on their non-exchange websites;
- Network adequacy standards requiring access to mental health and substance abuse services, publication of a provider directory, and identification of providers not accepting new patients;
- Essential community provider access standards;
- Requirements that health plan applications and notices be accessible to individuals with disabilities and limited English proficiency;
- The prohibition against QHP insurers charging different premium rates for health plans offered inside or outside the exchange or offered directly or through agents;
- Standards governing enrollment periods and processes for qualified individuals, including requirements for providing readable and accessible enrollment information to enrollees, acknowledging receipt of enrollment information from the exchange, and reconciling enrollment files with the exchange at least monthly;
- Termination of coverage requirements, including provision of payment delinquency notices;
- Accreditation requirements, including release to the exchange and HHS of accreditation information;
- SHOP specific standards; and
- Termination and decertification standards, including those requiring notice of termination and fulfillment of coverage obligations to enrollees.
The guidance also includes a list of QHP insurer regulatory standards monitored through other oversight mechanism, such as those requiring compliance with state laws and regulations, submission of rate and benefit information, payment of user fees, compliance with risk adjustment program requirements, payment of user fees, and proper administration of premium tax credit and cost-sharing reduction payments.
Ensuring that the risk corridor program will be budget neutral. In its proposed 2015 Exchange and Insurance Market Standards rule, CMS stated regarding the ACA risk corridor program, “We intend to implement this program in a budget neutral manner, and may make future adjustments to program parameters, upwards or downwards, as necessary to achieve this goal.” The ACA itself does not require the risk corridor program to be budget neutral; although the program is designed symmetrically so that plans with lower than expected costs pay into the program while plans with higher than anticipated costs draw out of it, there is no necessary reason why these payments should equal each other. In fact, the Medicare Part D risk corridor program on which the ACA program is based has resulted in a revenue gain for the federal government in every year of its operation, and the Congressional Budget Office estimated in February of 2014 that the risk corridor program would result in $8 billion in revenue for the federal government over its three year term of operation. The Exchange and Insurance Market Standards proposed rule would make program payments more generous, however, raising questions of how budget neutrality would be achieved.
On April 11, 2014, CMS published a guidance explaining how it intends to achieve budget neutrality. The solution is straightforward. If the amount collected in any year exceeds the amount paid out, the excess will be carried over to the next year. If the amount collected in the first year is less than the amount paid out, payments will be reduced pro rata to the extent of the shortfall. Amounts collected in the second year will first be used to make up deficits from the first year and then be applied to fund current obligations. Second year shortfalls will be covered by collections in the third year. Future guidance will address what happens if shortfalls remain in the third year, which CMS does not expect.
Because medical loss ratio data are submitted simultaneously with risk corridor data, insurers will not know if there will be risk corridor reductions when they submit their MLR calculations. If risk corridor payments are in fact reduced, an insurer can reflect this in its following year’s MLR calculations. MLR ratios are now calculated based on three-year averaging, which should mitigate any rebate overpayments.