Biden Administration Finalizes Lower Out-of-pocket Costs for Exchange Plans, Targets Health Equity and Access
The Biden Administration used the annual rulemaking that governs health plans sold on the Affordable Care Act’s exchanges to lower health care costs for consumers and improve access to health care. Part 2 of the Notice of Benefit and Payment Parameters for 2022 Final Rule (the Payment Notice), issued April 30, 2021, is the second in a series of rulemakings addressing exchange plans. The Department of Health and Human Services (HHS) anticipates additional rulemakings on the 2022 Payment Notice later this year. The rulemaking announced changes to out-of-pocket costs, special enrollment periods, risk adjustment, and HHS’s audit and oversight of exchanges, among other things.
According to the agency press release, the Payment Notice will “help consumers more easily distinguish between plan options and increase opportunities to qualify for future special enrollment periods (SEPs), when consumers are eligible to enroll in marketplace plans outside annual open enrollment.”
Select provisions are summarized below:
Out-of-pocket Costs — The Payment Notice rejected the proposed changes to the premium adjustment percentage index, instead opting to use the same measures applied during the 2015-2019 benefit years. As a result, the maximum annual limitation on cost-sharing is $400 lower than what the Trump Administration proposed in November 2020.
Special Enrollment Periods (SEP) — HHS, citing concerns about imposing additional administrative burdens on consumers and states, declined to finalize the proposal that all exchanges conduct verification of SEP eligibility. The Payment Notice also allows exchange enrollees who qualify for a SEP due to loss of advance premium tax credit (APTC) eligibility to select a new plan at any metal level. And individuals with COBRA coverage qualify for a SEP based on the cessation of employer contributions or government subsidies. The Payment Notice also finalized that an exchange error triggers a market-wide SEP.
Risk Adjustment — The Payment Notice declined to finalize several proposed changes to the risk adjustment methodology. Instead, HHS explained it will publish a technical paper with data and analysis of proposed changes. But HHS did continue to apply the market pricing adjustment to plan liability for hepatitis C drugs. HHS believes the market pricing adjustment is necessary and appropriate to account for the significant pricing changes associated with the introduction of new and generic Hepatitis C drugs between the data years used for recalibrating the models and the applicable recalibration benefit year. HHS continues to be cognizant that issuers might seek to influence provider prescribing patterns if a drug claim can trigger a large increase in an enrollee’s risk score that is higher than the actual plan liability of the drug claim, and therefore, make the risk adjustment transfer results more favorable for the issuer. The Payment Notice also finalized how issuers that provide premium credits during a future public health emergency should report premium and how statewide average premium would be calculated. Specifically, issuers that provide temporary premium credits (when permitted by HHS) the issuer’s EDGE servers the average premium and the statewide average premium must take into account the adjusted premium, e. the premium as reduced by the credits.
Flexibility and Transparency — The Payment Notice finalized the proposal to collect prescription drug data directly from PBMs. The data will be confidential and only subject to limited disclosure. HHS will use the data to better identify the true cost of prescription drugs for exchange plans and to assess pharmacy benefit managers’ role in those costs. The Payment Notice also finalized May 6, 2022 as the deadline for states to submit their essential health benefit benchmark plan selections. And HHS approved Alabama’s request for flexibility to lower the risk adjustment transfers by 50% for the individual and small group markets.
Program Integrity — The Payment Notice finalized regulations enabling compliance reviews and audits to ensure compliance with APTC, cost-sharing reduction (CSR), and user fee requirements. The regulations also clarify that HHS may impose civil monetary penalties when enforcing the APTC, CSR, and user fee regulations on any exchange whether operated by a state or HHS. The Payment Notice finalized procedural changes for administrative appeals of civil monetary penalties by health insurance issuers and non-federal governmental plans to align with Departmental Appeals Board practices.
The rulemaking, along with the American Rescue Plan Act of 2021, furthers the Administration’s goals of expanding access to affordable healthcare offered via the exchanges. And it is another stepping stone toward addressing health equity and access. We expect additional Executive action while Congress considers the President’s domestic policy agenda outlined in the American Families Plan, such as permanently expanding the American Rescue Plan’s increases to the ACA’s APTC.
 The first 2022 payment notice final rule was released on January 14, 2021.
 Future rulemaking may propose new QHP issuer user fees rates for the 2022 plan year. HHS also intends to revisit the Exchange Direct Enrollment option for states and the changes to regulations governing State Innovation Waivers under section 1332 of the ACA. Both proposals are intended to protect and strengthen the ACA and make “high-quality health care accessible and affordable for every American.”
 The proposed changes included a two-stage specification in the adult and child models, replacing the existing severity illness indicators in the adult models with new severity and transplant indicators with hierarchical condition category (HCC) counts factors in the adult and child models, and modifying the enrollment duration factors in the adult models.