On March 14, 2014, CMS published the “Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond” proposed rule.

The proposed rule covers 16 requirements applicable to various entities under the Affordable Care Act (“ACA”), nearly all of which were described in the preamble to the final rule titled, HHS Notice of Benefit and Payment Parameters for 2015, published on March 11, 2014 (79 FR 13744) (2015 Payment Notice).

Of interest, the proposed rule addresses: 1) product withdrawal and uniform modification of coverage exceptions to guaranteed renewability requirements; 2) premium stabilization programs; 3) Health Insurance Portability and Accountability Act (“HIPAA”) opt-out for self-funded, nonfederal governmental plans; 4) civil penalties for consumer assistance entities and navigator, non-navigator assistance personnel; and 5) certified application counselor program standards amendments. Each of these is described briefly below.

Product withdrawal and uniform modification of coverage exceptions to guaranteed renewability requirements

Health insurance issuers must guarantee the availability and renewability of coverage unless an exception applies according to sections 2702 and 2703 of the Public Health Service Act as amended by the ACA. The proposed rule suggests “criteria for determining when modifications made by an issuer to the health insurance coverage for a product would and would not constitute the discontinuation of an existing product and the creation of a new product.” Under the proposal, the insurer would be regarded as not having withdrawn a product and issued a new product, if changes were either a modification solely pursuant to Federal or State law requirements (i.e. increased annual limits on cost-sharing) or changes that met all of the following criteria:

  • The product is offered by the same health insurance issuer;
  • The product is offered as the same product type (i.e. PPO or HMO);
  • The product covers a majority of the same counties in its service area;
  • The product has the same cost-sharing structure, except for variation in cost sharing solely related to changes in cost and utilization of medical care, or necessary to maintain the same level of coverage (i.e. bronze, silver, gold, platinum or catastrophic described in the ACA); and
  • The product provides the same covered benefits, except for changes in benefits that cumulatively impact the rate or the product by no more than 2 percent (including changes required by applicable Federal or State law).

Otherwise, if insurers modify a product in a manner different from the above described criteria, it would be considered a withdrawal of an existing product and creation of a new product. In such a case, insurers must provide written notice within 90 days of the discontinuance to each plan sponsor, insured individual and all participants and beneficiaries with group coverage.

According to the proposed notices Centers for Medicare & Medicaid Services (“CMS”) published with the proposed rule, insurers must also send out notices when they withdraw or renew a policy, informing the insured’s employer or individual they need to enroll in a new policy on or before the 15th day of the last month of coverage to ensure continuous coverage.

The definition proposed in the proposed rule would preempt any conflicting State definitions.

Premium stabilization programs

The ACA establishes three programs (risk adjustment, reinsurance, and risk corridors) to protect against adverse population selection in the newly enrolled Affordable Insurance Exchanges (“Exchanges”). The ACA also directs that a transitional reinsurance program be established in each State to help stabilize premiums for coverage by helping to pay the cost of treating high-cost enrollees in the individual market from 2014 through 2016 — $10 billion for 2014, $6 billion for 2015, and $4 billion for 2016; however, the reinsurance program (as well as the risk adjustment program that the Office of Management and Budget report on sequester for FY 2015 suggests will be cut by $247 million) is subject to FY 2015 sequestration, which begins October 1, 2014 at a rate of 7.3 percent. This means a reduction of $731 million from the $10 billion in reinsurance funds that would have been paid in the summer of 2015 for 2014 high-cost claims.

In the proposed rule, CMS states it aims to make payments of sequestered FY 2015 funding as soon as possible in FY 2016. Nevertheless, if Congress fails to pass deficit reductions that replace sequestration, these funds will continue to be sequestered and become available in the following fiscal year, perhaps continuing in this manner for each year under sequestration.

CMS suggests that if contributions collected fall short, the amounts should go first to the reinsurance pool and to cover administrative expenses, and then to the Treasury (after the $10.2 billion due to the reinsurance pool and for the administrative expenses are paid). CMS seeks feedback on this approach and invites comment on alternative allocation plans.

The proposed rule also suggests changes to the limit on allowable administrative costs up to 22 percent and on profits to 5 percent in the risk corridors calculation “in recognition of the ongoing uncertainty and changes in the market in 2015.”

HIPAA opt-out for self-funded, nonfederal governmental plans

The proposed rule offers to amend the individual market provisions in 45 CFR Part 148 to reflect the amendments made by the ACA “for clarity only.”

Under the ACA, self-funded non-federal governmental plans may no longer opt out of limitations on preexisting condition exclusion periods; requirements for special enrollment periods; and prohibitions on health status discriminations. (See CMS guidance.)

Civil penalties for consumer assistance entities and navigator, non-navigator assistance personnel

The proposed rule would provide that CMS may impose civil money penalties (CMPs) against Navigators, non-Navigators assistance personnel, certified-application-counselor-designated organizations, and certified application counselors in federally facilitated exchanges (“FFEs”) if these entities and/or individuals violate Federal requirements in their activities. Such activities include providing false or fraudulent information to consumers, encouraging applicants to do so, or steering consumers to a particular Qualified Health Plan. CMPs would not be assessed against the alleged violators if they show they did not know, or that they would not have known if exercised reasonable diligence, of the violation.

CMS noted that it is “considering implementing an approach that would give the United States Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) concurrent authority with CMS to enforce violations under this section.” CMS went on to explain that given OIG’s expertise in investigating waste, fraud and abuse in the Medicare and Medicaid program, the OIG may be most effective at investigating fraud in the Exchange consumer assistance entity’s program requirements.

Navigator, non-Navigator assistance personnel, and certified application counselor program standards amendments

The proposed rule specifies certain types of State laws applicable to Navigators, non-navigator assistance personnel and certified application counselors that are inconsistent with the Federal law. CMS clarified that “the preemption standards would not preclude a State from establishing or implementing additional State law protections for its consumers, so long as such laws do not prevent the application of Federal requirements for these consumer assistance programs [i.e. make it impossible for assisters to perform their federally required duties].” CMS provided an example: “A State may require these types of Exchange-approved assisters to undergo fingerprinting or background checks before they can operate in a State, so long as a State’s implementation of these additional requirements does not prevent the Exchange from implementing these consumer assistance programs in the State consistent with Federal standards or make it impossible for the assisters to perform their Federally required duties.”

CMS proposed to make those Federal standards applicable to State Exchanges, which would address requirements that otherwise could facially conflict with Federal requirements applicable to assisters that are operating in State Exchanges. CMS further explained that provisions that would not apply in State Exchanges relate “to how the State interacts with an FFE or implements State requirements for the relevant consumer assistance personnel. CMS is soliciting comments on whether all proposed provisions should apply in State Exchanges, and whether there are different types of non-Federal requirements for these types of assisters that may prevent application of this Federal law.

The proposed rule also would prohibit Navigators and non-navigator assisters from charging consumers for their services (certified application counselors are already prohibited by Federal law). Further, Navigator and non-navigators assistance organizations would be prohibited from compensating the Navigators and non-navigator assistants on per-application, per-person assisted, or per-enrollment basis so that adverse incentives are not created to pressure consumers to make quick decisions.

The proposed rule would also prohibit consumer assistance entities and individuals from specified marketing or solicitation activities.

The open comment period will end on April 21, 2014 at 5 pm.

Read the proposed rule in the Federal Register.