The Centers for Medicare and Medicaid Services (CMS) continues to issue new guidance and materials on coronavirus and Affordable Care Act (ACA) implementation. This post summarizes New Hampshire’s application for a waiver under Section 1332, new materials on the risk adjustment program, and additional coronavirus-related delays to ACA programs.
New Hampshire’s Reinsurance Waiver Deemed Complete
On May 13, CMS notified New Hampshire that its application to develop a state-based reinsurance program under Section 1332 was complete. If approved, New Hampshire’s reinsurance program would begin in the 2021 plan year. Comments can be submitted through June 12. Following the comment process, CMS and the Department of Treasury will approve or deny the application within 180 days.
Under Section 1332, states, with federal approval, can waive certain requirements of the ACA so long as the waiver meets certain procedural and substantive standards. To help fund this state innovation, Section 1332 allows the federal government to “pass through” the money that it would have spent on premium tax credits, cost-sharing reductions, and small employer tax credits to the state.
To date, 13 states have approved Section 1332 waivers. All but one approved waiver has been for a state-based reinsurance program. The total amount in federal pass-through funding to these states for 2020 is $1.26 billion, with four states accounting for about 75 percent of the total amount. New Hampshire joins two other states—Georgia and Pennsylvania—with pending applications for a reinsurance program. (Georgia’s waiver also includes much broader changes to the state’s individual market, but consideration of those broader changes remains on hold.)
New Hampshire’s five-year reinsurance program would be administered by an independent nonprofit called the New Hampshire Health Plan (NHHP) and begin with the 2021 plan year. The program is projected to reduce premiums by about 16 percent (relative to what premiums would have been in the absence of the waiver) and increase enrollment in the unsubsidized portion of the individual market by about 6 percent in 2021.
The reinsurance program was established by legislation signed by Republican Governor Chris Sununu in October 2019. The legislation directed the insurance department to work with NHHP to develop a market stabilization program and apply for a waiver following actuarial analysis. New Hampshire explicitly mentions Trump-era health policy changes—the elimination of the mandate penalty, lack of funding for cost-sharing reductions, and expanded access to short-term plans and association health plans—as “put[ting] a strain” on its individual market.
If approved, New Hampshire would have a $46 million reinsurance program for 2021 funded through an assessment on insurers and federal pass-through funding. The assessment amount would be tied to the prior year’s ACA benchmark plan and will thus change every year. (Based on the benchmark plan for 2020, the assessment would be $2.43 per member per month, which will generate about $13 million in assessments.) New Hampshire estimates a federal pass-through rate of 71 percent: of the $46 million, the federal government would contribute nearly $33 million, and the state would contribute $13 million.
Like nearly all states with reinsurance programs, New Hampshire chose to use an overall attachment point model with parameters set annually by the insurance department (based on recommendations from the NHHP and the Commission on the Status of Health Coverage Markets for Individuals and Small Employers). Many states have flexibility to update their attachment point levels each year, but New Hampshire appears to allow these levels to be finalized after claims have come in.
For 2021, the program is tentatively expected to reimburse insurers for 74 percent of claims between $60,000 and $400,000. New Hampshire intends to announce projected parameters each year but will not finalize these parameters until after the total amount of funding is known and insurers have submitted all requests for claims reimbursement. This will give the NHHP the opportunity to adjust the attachment levels—primarily the coinsurance rate but potentially the cap as well—to match the amount of available funding. This avoids the need for additional state funds in the event of a shortfall. New Hampshire will calculate an initial, preliminary payment allocation for each issuer based on EDGE server data maintained by CMS.
Latest On Risk Adjustment: New Resources For 2021; Process Resumes For 2014-2016
Consistent with the final 2021 notice of benefit and payment parameters, CMS published new guidance with final risk adjustment model coefficients for 2021. In the 2021 payment rule, CMS announced that it would, for the first time, blend the three most recent years of enrollee-level EDGE data—from 2016, 2017, and 2018—to recalibrate the risk adjustment models. EDGE server data reflects actual use data from insurers’ individual and small group populations, and CMS hopes the transition to EDGE server data will improve the accuracy of the risk adjustment models.
Because EDGE data from 2018 was not available when the final rule was published, CMS expected to publish the final 2021 coefficients in future guidance. The latest guidance outlines the final coefficients ahead of rate filing deadlines later this summer. CMS also released an updated ICD-10 crosswalk that reflects changes from the final payment notice.
In separate guidance, CMS confirmed that it will resume collecting risk adjustment charges and distributing payments for the 2014 to 2016 benefit years. This process had been on hold in light of ongoing litigation over the validity of part of CMS’s risk adjustment formula. A district court in New Mexico had set aside part of the risk adjustment methodology (the use of the statewide average premium), leading CMS to briefly suspend about $10.4 billion in risk adjustment transfers in July 2018 before resuming the payments later that fall for the 2017 and 2018 benefit years.
The federal government appealed to the Tenth Circuit Court of Appeals, which upheld CMS’s risk adjustment methodology. The three-judge panel concluded that CMS acted reasonably in explaining why it used the statewide average premium in the risk adjustment methodology for 2014 through 2016. CMS will now resume the process of collecting and distributing risk adjustment payments for 2014 through 2016, beginning with the June 2020 payment cycle.
Additional Coronavirus-Related Delays: More On Quality Reporting And Employer Coverage
On April 18, CMS announced that it has suspended quality reporting requirements for qualified health plan (QHP) insurers for the 2021 certification period. This includes collection and reporting requirements for the quality rating system, the QHP enrollee survey, and the quality improvement strategy. As such, insurers were asked to stop collecting clinical quality measure data and survey measure data that would normally be reported between May and June 2020.
CMS posted new two sets of frequently asked questions on quality reporting, one for insurers and the other for QHP enrollee experience survey vendors. The guidance confirms that CMS will not calculate 2020 quality ratings for display in 2021. This means that HealthCare.gov, at a minimum, will not display updated quality rating information for QHPs during the 2021 open enrollment period. CMS expects to issue further guidance on the display of this information (including guidance for state-based exchanges and direct enrollment entities). Further changes may be coming in the final 2020 call letter for the quality rating system and QHP enrollee survey, and CMS extended the comment deadline on the draft call letter by one month to May 20.
Insurers can still collect and use clinical quality measures and survey measure data for internal purposes, but this information will not be submitted to CMS. CMS will consider suspending quality reporting activities for the 2022 plan year but has not yet done so. Additional guidance is expected this fall.
Although CMS is not requiring QHP survey data for 2021, vendors can continue to field the 2020 QHP enrollee survey if their clients (QHP insurers) wish to proceed. Vendors should work closely with insurers on whether to field the survey as planned or modify or suspend survey fielding protocols. CMS will not, however, review or provide oversight for modifications because these collection requirements are suspended. Vendors can prepare quality improvement reports but must specify that those reports do not represent official scores from CMS. The guidance also discusses more technical requirements such as the data that vendors can provide to insurers.
Finally, CMS released a policy to align with a prior joint notice from the Department of Labor, the Treasury Department, and the Internal Revenue Service, and a separate disaster relief notice from the Department of Labor. The joint notice temporarily extended certain timeframes related to employer-sponsored health insurance and provided flexibility to those losing job-based coverage. In particular, the federal government gave extended flexibility to plan participants and beneficiaries to use a special enrollment period, elect to enroll in coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), and make COBRA premium payments, among other changes.
The CMS guidance extends the same enforcement policy to sponsors of non-federal governmental group health plans and insurers offering coverage in connection with a group health plan. To the extent that the SHOP, SHOP insurers, or small businesses participating in the SHOP take advantage of the guidance, those entities will not be considered noncompliant with SHOP rules. CMS also encourages other stakeholders, including states, to adopt the same approach.
