Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 147, 153, 154, 155, 156, 157, and 158

[CMS-9930-F]

RIN 0938-AT12

Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019

AGENCY:

Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION:

Final rule.

SUMMARY:

This final rule sets forth payment parameters and provisions related to the risk adjustment and risk adjustment data validation programs; cost-sharing parameters; and user fees for Federally-facilitated Exchanges and State Exchanges on the Federal platform. It finalizes changes that provide additional flexibility to States to apply the definition of essential health benefits (EHB) to their markets, enhance the role of States regarding the certification of qualified health plans (QHPs); and provide States with additional flexibility in the operation and establishment of Exchanges, including the Small Business Health Options Program (SHOP) Exchanges. It includes changes to standards related to Exchanges; the required functions of the SHOPs; actuarial value for stand-alone dental plans; the rate review program; the medical loss ratio program; eligibility and enrollment; exemptions; and other related topics.

DATES:

Effective Date:

These regulations are effective on June 18, 2018.

FOR FURTHER INFORMATION CONTACT:

Lindsey Murtagh, (301) 492-4106, Rachel Arguello, (301) 492-4263, Alper Ozinal, (301) 492-4178, or Abigail Walker, (410) 786-1725, for general information.

Krutika Amin, (301) 492-5153, for matters related to risk adjustment, and user fees for Federally-facilitated Exchanges and State-Exchanges on the Federal platform.

Adrianne Patterson, (410) 786-0686, or Abigail Walker, (410) 786-1725, for matters related to sequestration.

Melissa Jaffe, (301) 492-4129, for matters related to risk adjustment data validation, cost-sharing reductions, and the premium adjustment percentage.

Lisa Cuozzo, (410) 786-1746, for matters related to rate review.

Jenny Chen, (301) 492-5156, for matters related to establishing a State Exchange, and State Exchanges on the Federal platform.

Emily Ames, (301) 492-4246, for matters related to Navigators and non-Navigator assistance personnel.

Elissa Dines, (301) 492-4388, for matters related to employer-sponsored coverage verification.

Kendra May, (301) 492-4477, for matters related to the requirement to file an income tax return and reconcile APTC and terminations.

Carolyn Kraemer, (301) 492-4197, for matters related to special enrollment periods under part 155.

Amanda Brander, (202) 690-7892, for matters related to exemptions from the individual shared responsibility payment.

Terence Kane, (301) 492-4449, for matters related to income inconsistencies.

Jacob Schnur, (410) 786-7703, for matters related to direct enrollment.

Laura Eldon, (301) 492-4372, for matters related to the Federally-facilitated SHOP.

Shilpa Gogna, (301) 492-4257, for matters related to SHOP in State Exchanges.

Leigha Basini, (301) 492-4380, Rebecca Zimmermann, (301) 492-4396, or Allison Yadsko, (410) 786-1740, for matters related to standardized options, essential health benefits, stand-alone dental plans and other standards for QHP issuers.

Cam Moultrie Clemmons, (206) 615-2338, for matters related to minimum essential coverage.

Christina Whitefield, (301) 492-4172, for matters related to the medical loss ratio program.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Executive Summary

II. Background

A. Legislative and Regulatory Overview

B. Stakeholder Consultation and Input

C. Structure of Final Rule

III. Provisions of the Proposed Rule and Analysis of and Responses to Public Comments

A. Part 147—Health Insurance Reform Requirements for the Group and Individual Health Insurance Markets

B. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment Under the Affordable Care Act

C. Part 154—Health Insurance Issuer Rate Increases: Disclosure and Review Requirements

D. Part 155—Exchange Establishment Standards and Other Related Standards Under the Affordable Care Act

E. Part 156—Health Insurance Issuer Standards Under the Affordable Care Act, Including Standards Related to Exchanges

F. Part 157—Employer Interactions With Exchanges and SHOP Participation

G. Part 158—Issuer Use of Premium Revenue: Reporting and Rebate Requirements

IV. Collection of Information Requirements

A. Wage Estimates

B. ICRs Regarding State Flexibility for Risk Adjustment

C. ICRs Regarding Risk Adjustment Data Validation

D. ICRs Regarding Health Insurance Issuer Rate Increases: Disclosure and Review Requirements—Applicability

E. ICRs Regarding Rate Increases Subject To Review

F. ICRs Regarding the Small Business Health Options Program

G. ICRs Regarding Essential Health Benefits

H. ICRs Regarding Medical Loss Ratio

I. Summary of Annual Burden Estimates for Final Requirements

J. Submission of PRA-Related Comments

V. Regulatory Impact Analysis

A. Statement of Need

B. Overall Impact

C. Impact Estimates of the Payment Notice Provisions and Accounting Table

D. Regulatory Alternatives Considered

E. Regulatory Flexibility Act

F. Unfunded Mandates

G. Federalism

H. Congressional Review Act

I. Reducing Regulation and Controlling Regulatory Costs

I. Executive Summary

American Health Benefit Exchanges, or “Exchanges” (also called “Marketplaces”) are entities established under the Patient Protection and Affordable Care Act (PPACA) through which qualified individuals and qualified employers can purchase health insurance coverage. Many individuals who enroll in qualified health plans (QHPs) through individual market Exchanges are eligible to receive a premium tax credit (PTC) to reduce their costs for health insurance premiums, and receive reductions in required cost-sharing payments to reduce out-of-pocket expenses for health care services. The PPACA also established the risk adjustment program, which is intended to mitigate the potential impact of adverse selection and stabilize the price of health insurance in the individual and small group markets, both on and off Exchanges.

Over time, issuer exits and increasing insurance premiums have threatened the stability of the individual and small group Exchanges in many geographic areas. In previous rulemaking, we established provisions and parameters to implement many PPACA provisions and programs. In this final rule, we amend these provisions and parameters, with a focus on enhancing the role of States in these programs and providing States with additional flexibilities, reducing unnecessary regulatory burden

on stakeholders, empowering consumers, and improving affordability.

On January 20, 2017, the President issued an Executive Order which stated that, to the maximum extent permitted by law, the Secretary of HHS and heads of all other executive departments and agencies with authorities and responsibilities under the PPACA should exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay the implementation of any provision or requirement of the PPACA that would impose a fiscal burden on any State or a cost, fee, tax, penalty, or regulatory burden on individuals, families, health care providers, health insurers, patients, recipients of health care services, purchasers of health insurance, or makers of medical devices, products, or medications. In this rule, within the limitations of the current statute, we are finalizing policies to reduce fiscal and regulatory burdens across different program areas, and to support innovative health insurance models.

We are finalizing several changes that would significantly expand the role of States in the administration of the PPACA. We received comments on additional ways to support State Exchanges (SBEs) in adopting innovative approaches to operating and sustaining their Exchanges, and to make the State Exchange on the Federal platform (SBE-FP) model a more appealing and viable model for States. We finalize policies under which States assume a larger role in reviewing the QHP certification standards of network adequacy and essential community providers for the Federally-facilitated Exchanges (FFEs). This will confirm States' traditional role in overseeing their health insurance markets, and reduce the issuer burden associated with having to comply with duplicative State and Federal reviews.

This rule also finalizes several policies that will provide States with greater flexibility. For example, this rule provides States with additional flexibility in applying the definition of EHBs to their markets starting with the 2020 plan year. In addition to granting States more flexibility regulating their markets, we believe this change would permit States to modify EHBs to increase affordability of health insurance in the individual and small group markets. This rule also provides States with significantly more flexibility in how they operate a Small Business Health Options Program (SHOP), permitting them to operate these Exchanges more efficiently, and therefore benefitting States, issuers, employers, and employees. These changes would allow for a more efficient SHOP, such that employers and employees could enroll in SHOP coverage by working with a QHP issuer or SHOP-registered agent or broker. Additionally, the finalized policies provide States more flexibility regarding risk adjustment transfers in their markets. We also make it easier for States to apply for and be granted an adjustment to the individual market medical loss ratio (MLR) standard in their State. We believe this change provides States with an additional tool to help stabilize, innovate and provide relief in their individual markets. Additionally, we make other changes to the MLR program to reduce the burden on issuers.

Risk adjustment continues to be a core program for stabilizing the individual and small group markets both on and off Exchanges, and we are finalizing recalibrated parameters for the HHS risk adjustment methodology. We are also finalizing several changes related to the risk adjustment data validation program that are intended to ensure the integrity of the results of risk adjustment, while alleviating issuer burden.

As we do every year in the HHS notice of benefit and payment parameters final rule, we are finalizing updated parameters applicable in the individual and small group markets. We are finalizing the user fee rate for issuers participating on FFEs and SBE-FPs for 2019 to be 3.5 and 3.0 percent of premiums, respectively. We are finalizing the premium adjustment percentage for 2019, which is used to set the rate of increase for several parameters detailed in the PPACA, including the maximum annual limitation on cost sharing for 2019, the required contribution percentage used to determine eligibility for certain exemptions under section 5000A of the Internal Revenue Code of 1986 (the Code), and the assessable payment amounts under section 4980H(a) and (b) of the Code. We are finalizing updates to the maximum annual limitations on cost sharing for the 2019 benefit year for cost-sharing reductions plan variations.

We are finalizing a number of changes related to rate review that are intended to reduce regulatory burden on States and issuers in regard to the rate filing process. Specifically, we are exempting student health insurance coverage from Federal rate review requirements, beginning with coverage effective on or after July 1, 2018. We are also modifying the 10 percent threshold for reasonableness review to a 15 percent default threshold.

Recognizing that Exchanges, including the FFEs, face resource constraints, we are changing the requirements regarding Navigators, and the requirements regarding non-Navigator assistance personnel subject to § 155.215, to enable Exchanges to more easily operate these programs with limited resources. Similarly, we are allowing an agent, broker or issuer participating in direct enrollment to have its selected third-party entity conduct operational readiness reviews, rather than requiring that those reviews be conducted by entities approved by HHS.

We also finalize relatively minor adjustments to our programs and rules as we do each year in the HHS notice of benefit and payment parameters. We are finalizing a number of incremental amendments to our policies around coverage, eligibility, enrollment, and affordability exemptions.

We continue to be very interested in exploring ways to improve Exchange program integrity. In the proposed rule, we sought comment on a number of program integrity items, including whether we should consider shortening the length of time the Exchanges are authorized to obtain enrollee tax information, as well as ways to prompt more timely consumer reporting of changes in circumstances during the benefit year that may impact an individual's eligibility for coverage and financial assistance. In addition, we requested comment on any additional program integrity improvements that were not outlined in the proposed rule, but could be beneficial in a future rulemaking.

Finally, as noted in the proposed rule, we intend to consider proposals in future rulemaking that would help reduce drug costs and promote drug price transparency. We also intend to provide guidance on other aspects of Exchange eligibility in the near future. In particular, we intend to reconsider the appropriate thresholds for changes in income that will trigger a data matching inconsistency, processes for denying eligibility for advance subsidies for individuals who fail to reconcile advance payments of the premium tax credit (APTC) on their Federal income tax return, processes for matching enrollment data with the Medicare and Medicaid programs in order to help consumers avoid duplicate enrollments, and the appropriate manner of recalculating APTC following a midyear change in eligibility, and sought comments on each of these issues as we prepare rulemaking on these topics.

Instituting strong program safeguards to ensure that only individuals who are eligible are enrolled in Exchange coverage, and that they are only

receiving the amount of financial assistance for which they are eligible, is essential to ensuring that the Exchanges operate as intended, and is also a key priority for the Administration. We have already taken action to strengthen safeguards around Exchange eligibility, most recently through the implementation of pre-enrollment verification for special enrollment periods; however, we continue to be interested in exploring ways to further safeguard Federal tax dollars flowing through Exchanges.

II. Background

A. Legislative and Regulatory Overview

The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010. The Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), which amended and revised several provisions of the Patient Protection and Affordable Care Act, was enacted on March 30, 2010. In this final rule, we refer to the two statutes collectively as the “Patient Protection and Affordable Care Act” or “PPACA.”

Subtitles A and C of title I of the PPACA reorganized, amended, and added to the provisions of part A of title XXVII of the Public Health Service Act (PHS Act) relating to group health plans and health insurance issuers in the group and individual markets.

Section 2701 of the PHS Act, as added by the PPACA, restricts the variation in premium rates charged by a health insurance issuer for non-grandfathered health insurance coverage in the individual or small group market to certain specified factors. These factors are family size, rating area, age and tobacco use.

Section 2701 of the PHS Act operates in coordination with section 1312(c) of the PPACA. Section 1312(c) of the PPACA generally requires a health insurance issuer to consider all enrollees in all health plans (except for grandfathered health plans) offered by such issuer to be members of a single risk pool for each of its individual and small group markets. States have the option to merge the individual market and small group market risk pools under section 1312(c)(3) of the PPACA.

Section 2702 of the PHS Act, as added by the PPACA, requires health insurance issuers that offer health insurance coverage in the group or individual market in a State to offer coverage to and accept every employer and individual in the State that applies for such coverage unless an exception applies.

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Before enactment of the Patient Protection and Affordable Care Act, the Health Insurance Portability and Accountability Act of 1996 (HIPAA) amended the PHS Act (formerly section 2711) to generally require guaranteed availability of coverage for employers in the small group market.

Section 2703 of the PHS Act, as added by the PPACA, and sections 2712 and 2741 of the PHS Act, as added by the Health Insurance Portability and Accountability Act of 1996 (Pub. L. 104-191) (HIPAA) prior to the enactment of the PPACA, require health insurance issuers that offer health insurance coverage in the group or individual market to renew or continue in force such coverage at the option of the plan sponsor or individual unless an exception applies.

Section 2718 of the PHS Act, as added by the PPACA, generally requires health insurance issuers to submit an annual MLR report to HHS, and provide rebates to enrollees if the issuers do not achieve specified MLR thresholds.

Section 2794 of the PHS Act, as added by the PPACA, directs the Secretary of HHS (the Secretary), in conjunction with the States, to establish a process for the annual review of “unreasonable increases in premiums for health insurance coverage.”

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The law also requires health insurance issuers to submit to the Secretary and the applicable State justifications for unreasonable premium increases prior to the implementation of the increases. Section 2794(b)(2) of the PHS Act further specifies that beginning with plan years starting in 2014, the Secretary, in conjunction with the States, will monitor premium increases of health insurance coverage offered through an Exchange and outside of an Exchange.

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The implementing regulations in part 154 limit the scope of the requirements under section 2794 of the PHS Act to health insurance issuers offering health insurance coverage in the individual market or small group market. See Rate Increase Disclosure and Review; Final Rule, 76 FR 29964, 29966 (May 23, 2011).

Section 1252 of the PPACA provides that any standard or requirement adopted by a State under title I of the PPACA, or any amendment made by title I of the PPACA, is to be applied uniformly to all health plans in each insurance market to which the standard and requirement apply.

Section 1302 of the PPACA provides for the establishment of an EHB package that includes coverage of EHB (as defined by the Secretary), cost-sharing limits, and actuarial value requirements. The law directs that EHBs be equal in scope to the benefits provided under a typical employer plan, and that they cover at least the following 10 general categories: Ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

Section 1301(a)(1)(B) of the PPACA directs all issuers of QHPs to cover the EHB package described in section 1302(a) of the PPACA, including coverage of the services described in section 1302(b) of the PPACA, to adhere to the cost-sharing limits described in section 1302(c) of the PPACA and to meet the AV levels established in section 1302(d) of the PPACA. Section 2707(a) of the PHS Act, which is effective for plan or policy years beginning on or after January 1, 2014, extends the coverage of the EHB package to non-grandfathered individual and small group health insurance coverage, irrespective of whether such coverage is offered through an Exchange. In addition, section 2707(b) of the PHS Act directs non-grandfathered group health plans to ensure that cost sharing under the plan does not exceed the limitations described in sections 1302(c)(1) of the PPACA.

Section 1302(d) of the PPACA describes the various levels of coverage based on actuarial value (AV). Consistent with section 1302(d)(2)(A) of the PPACA, AV is calculated based on the provision of EHB to a standard population. Section 1302(d)(3) of the PPACA directs the Secretary to develop guidelines that allow for

de minimis

variation in AV calculations.

Section 1311(b)(1)(B) of the PPACA directs that the Small Business Health Options Program assist qualified small employers in facilitating the enrollment of their employees in QHPs offered in the small group market. Sections 1312(f)(1) and (2) of the PPACA define qualified individuals and qualified employers. Under section 1312(f)(2)(B) of the PPACA, beginning in 2017, States have the option to allow issuers to offer QHPs in the large group market through an Exchange.

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Section 1312(a)(2) of the PPACA provides that in a SHOP, a qualified employer may select a level of coverage, and that employees may then, in turn, choose SHOP plans within the level selected by the qualified employer.

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If a State elects this option, the rating rules in section 2701 of the PHS Act and its implementing regulations will apply to all coverage offered in such State's large group market (except for self-insured group health plans) pursuant to section 2701(a)(5) of the PHS Act.

Section 1311(c)(1)(B) of the PPACA requires the Secretary to establish minimum criteria for provider network adequacy that a health plan must meet to be certified as a QHP.

Section 1311(c)(5) of the PPACA requires the Secretary to continue to operate, maintain, and update the internet portal developed under section 1103 of the PPACA to provide information to consumers and small businesses on affordable health insurance coverage options.

Sections 1311(d)(4)(K) and 1311(i) of the PPACA direct all Exchanges to establish a Navigator program.

Section 1311(c)(6)(C) of the PPACA establishes special enrollment periods and section 1311(c)(6)(D) of the PPACA establishes the monthly enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement Act.

Section 1312(e) of the PPACA directs the Secretary to establish procedures under which a State may permit agents and brokers to enroll qualified individuals and qualified employers in QHPs through an Exchange and to assist individuals in applying for financial assistance for QHPs sold through an Exchange.

Section 1321(a) of the PPACA provides broad authority for the Secretary to establish standards and regulations to implement the statutory requirements related to Exchanges, QHPs and other components of title I of the PPACA. Section 1321(a)(1) of the PPACA directs the Secretary to issue regulations that set standards for meeting the requirements of title I of the PPACA with respect to, among other things, the establishment and operation of Exchanges.

Sections 1313 and 1321 of the PPACA provide the Secretary with the authority to oversee the financial integrity of State Exchanges, their compliance with HHS standards, and the efficient and non-discriminatory administration of State Exchange activities. Section 1321 of the PPACA provides for State flexibility in the operation and enforcement of Exchanges and related requirements.

When operating an FFE under section 1321(c)(1) of the PPACA, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the PPACA to collect and spend user fees. In addition, 31 U.S.C. 9701 permits a Federal agency to establish a charge for a service provided by the agency. Office of Management and Budget (OMB) Circular A-25 Revised establishes Federal policy regarding user fees and specifies that a user charge will be assessed against each identifiable recipient for special benefits derived from Federal activities beyond those received by the general public.

Section 1321(c)(2) of the PPACA authorizes the Secretary to enforce the Exchange standards using civil money penalties (CMPs) on the same basis as detailed in section 2723(b) of the PHS Act. Section 2723(b) of the PHS Act authorizes the Secretary to impose CMPs as a means of enforcing the individual and group market reforms contained in Part A of title XXVII of the PHS Act when a State fails to substantially enforce these provisions.

Section 1321(d) of the PPACA provides that nothing in title I of the PPACA should be construed to preempt any State law that does not prevent the application of title I of the PPACA. Section 1311(k) of the PPACA specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations issued by the Secretary.

Section 1343 of the PPACA establishes a permanent risk adjustment program to provide payments to health insurance issuers that attract higher-risk populations, such as those with chronic conditions, funded by payments from those that attract lower-risk populations; thereby, reducing incentives for issuers to avoid higher-risk enrollees.

Section 1402 of the PPACA provides for, among other things, reductions in cost sharing for EHB for qualified low- and moderate-income enrollees in silver level health plans offered through the individual market Exchanges. This section also provides for reductions in cost sharing for Indians enrolled in QHPs at any metal level.

Section 5000A of the Code, as added by section 1501(b) of the PPACA, requires all applicable individuals to maintain minimum essential coverage (MEC) for each month or make an individual shared responsibility payment. Section 5000A(f) of the Code defines MEC as any of the following: (1) Coverage under a specified government sponsored program; (2) coverage under an eligible employer-sponsored plan; (3) coverage under a health plan offered in the individual market within a State; and (4) coverage under a grandfathered health plan. In addition, the HEALTHY KIDS Act amended section 5000A(f)(1)(A)(iii) of the Code to include in the definition of MEC CHIP look-alike plans, which are CHIP buy-in programs that provide benefits that are at least identical to the benefits provided by the title XXI CHIP program.

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Section 5000A(f)(1)(E) of the Code authorizes the Secretary of HHS, in coordination with the Secretary of the Treasury, to designate other health benefits coverage as MEC. Under tax reform legislation that was enacted on December 22, 2017, the individual shared responsibility payment is reduced to $0, effective for months beginning after December 31, 2018.

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Public Law 115-120, 101 (2018).

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Public Law 115-97, 131 Stat. 2054.

The Protecting Affordable Coverage for Employees Act (Pub. L. 114-60) amended section 1304(b) of the PPACA and section 2791(e) of the PHS Act to amend the definition of small employer in these statutes to mean, in connection with a group health plan with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 50 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year. It also amended these statutes to make conforming changes to the definition of large employer, and to provide that a State may treat as a small employer, with respect to a calendar year and a plan year, an employer who employed an average of at least 1 but not more than 100 employees on business days during the preceding calendar year and who employs at least 1 employee on the first day of the plan year.

1. Premium Stabilization Programs

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By “premium stabilization programs,” we are referring to the risk adjustment, risk corridors and reinsurance programs established by the PPACA.

In the July 15, 2011

Federal Register

(76 FR 41929), we published a proposed rule outlining the framework for the premium stabilization programs. We implemented the premium stabilization programs in a final rule, published in the March 23, 2012

Federal Register

(77 FR 17219) (Premium Stabilization Rule). In the December 7, 2012

Federal Register

(77 FR 73117), we published a proposed rule outlining the benefit and payment parameters for the 2014 benefit year to expand the provisions related to the premium stabilization programs and set forth payment parameters in those programs (proposed 2014 Payment Notice). We published the 2014 Payment Notice final rule in the March 11, 2013

Federal Register

(78 FR 15409).

In the December 2, 2013

Federal Register

(78 FR 72321), we published a proposed rule outlining the benefit and payment parameters for the 2015 benefit year to expand the provisions related to the premium stabilization programs, setting forth certain oversight provisions and establishing the payment parameters in those programs (proposed 2015 Payment Notice). We published

the 2015 Payment Notice final rule in the March 11, 2014

Federal Register

(79 FR 13743).

In the November 26, 2014

Federal Register

(79 FR 70673), we published a proposed rule outlining the benefit and payment parameters for the 2016 benefit year to expand the provisions related to the premium stabilization programs, setting forth certain oversight provisions and establishing the payment parameters in those programs (proposed 2016 Payment Notice). We published the 2016 Payment Notice final rule in the February 27, 2015

Federal Register

(80 FR 10749).

In the December 2, 2015

Federal Register

(80 FR 75487), we published a proposed rule outlining the benefit and payment parameters for the 2017 benefit year to expand the provisions related to the premium stabilization programs, setting forth certain oversight provisions and establishing the payment parameters in those programs (proposed 2017 Payment Notice). We published the 2017 Payment Notice final rule in the March 8, 2016

Federal Register

(81 FR 12203).

In the September 6, 2016

Federal Register

(81 FR 61455), we published a proposed rule outlining the benefit and payment parameters for the 2018 benefit year, and to further promote stable premiums in the individual and small group markets. We proposed updates to the risk adjustment methodology, new policies around the use of external data for recalibration of our risk adjustment models, and amendments to the risk adjustment data validation process (proposed 2018 Payment Notice). We published the 2018 Payment Notice final rule in the December 22, 2016

Federal Register

(81 FR 94058).

2. Program Integrity

In the June 19, 2013

Federal Register

(78 FR 37031), we published a proposed rule that proposed certain program integrity standards related to Exchanges and the premium stabilization programs (proposed Program Integrity Rule). The provisions of that proposed rule were finalized in two rules, the “first Program Integrity Rule” published in the August 30, 2013

Federal Register

(78 FR 54069) and the “second Program Integrity Rule” published in the October 30, 2013

Federal Register

(78 FR 65045).

3. Exchanges

We published a request for comment relating to Exchanges in the August 3, 2010

Federal Register

(75 FR 45584). We issued initial guidance to States on Exchanges on November 18, 2010. We proposed a rule in the July 15, 2011

Federal Register

(76 FR 41865) to implement components of the Exchanges, and a rule in the August 17, 2011

Federal Register

(76 FR 51201) regarding Exchange functions in the individual market and SHOP, eligibility determinations, and Exchange standards for employers. A final rule implementing components of the Exchanges and setting forth standards for eligibility for Exchanges was published in the March 27, 2012

Federal Register

(77 FR 18309) (Exchange Establishment Rule).

We established additional standards for SHOP in the 2014 Payment Notice and in the Amendments to the HHS Notice of Benefit and Payment Parameters for 2014 interim final rule, published in the March 11, 2013

Federal Register

(78 FR 15541). The provisions established in the interim final rule were finalized in the second Program Integrity Rule. We also set forth standards related to Exchange user fees in the 2014 Payment Notice. We established an adjustment to the FFE user fee in the Coverage of Certain Preventive Services Under the Affordable Care Act final rule, published in the July 2, 2013

Federal Register

(78 FR 39869) (Preventive Services Rule).

In a final rule published in the July 17, 2013

Federal Register

(78 FR 42823), we established standards for Navigators and non-Navigator assistance personnel in FFEs and for non-Navigator assistance personnel funded through an Exchange establishment grant. This final rule also established a certified application counselor program for Exchanges and set standards for that program.

In an interim final rule, published in the May 11, 2016

Federal Register

(81 FR 29146), we made amendments to the parameters of certain special enrollment periods (2016 Interim Final Rule). We finalized these in the 2018 Payment Notice final rule in the December 22, 2016

Federal Register

(81 FR 94058). In the April 18, 2017 Market Stabilization final rule

Federal Register

(82 FR 18346), we amended standards relating to special enrollment periods and QHP certification.

4. Essential Health Benefits and Actuarial Value

On December 16, 2011, HHS released a bulletin

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(the EHB Bulletin) that outlined an intended regulatory approach for defining EHB, including a benchmark-based framework. HHS also published a bulletin that outlined its intended regulatory approach to calculations of AV on February 24, 2012.

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A proposed rule relating to EHBs and AVs was published in the November 26, 2012

Federal Register

(77 FR 70643). We established requirements relating to EHBs and AVs in the Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation Final Rule, which was published in the February 25, 2013

Federal Register

(78 FR 12833) (EHB Rule). In the April 18, 2017 Market Stabilization final rule (82 FR 18346), we expanded the de minimis range applicable to plan metal levels.

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“Essential Health Benefits Bulletin.” December 16, 2011. Available at

https://www.cms.gov/CCIIO/Resources/Files/Downloads/essential_health_benefits_bulletin.pdf.

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“Actuarial Value and Cost-Sharing Reductions Bulletin.” February 24, 2012. Available at

https://www.cms.gov/CCIIO/Resources/Files/Downloads/Av-csr-bulletin.pdf.

5. Minimum Essential Coverage

In the February 1, 2013

Federal Register

(78 FR 7348), we published a proposed rule that designates other health benefits coverage as MEC and outlines substantive and procedural requirements that other types of coverage must fulfill in order to be recognized as MEC. The provisions were finalized in the July 1, 2013

Federal Register

(78 FR 39494).

In the November 26, 2014

Federal Register

(79 FR 70674), we published a proposed rule seeking comments on whether State high risk pools should be permanently designated as MEC or whether the designation should be time-limited. In the February 27, 2015

Federal Register

(80 FR 10750), we designated State high risk pools established on or before November 26, 2014 as MEC.

6. Market Rules

A proposed rule relating to the 2014 health insurance market rules was published in the November 26, 2012

Federal Register

(77 FR 70584). A final rule implementing the health insurance market rules was published in the February 27, 2013

Federal Register

(78 FR 13406) (2014 Market Rules).

A proposed rule relating to Exchanges and Insurance Market Standards for 2015 and Beyond was published in the March 21, 2014

Federal Register

(79 FR 15808) (2015 Market Standards Proposed Rule). A final rule implementing the Exchange and Insurance Market Standards for 2015 and Beyond was published in the May 27, 2014

Federal Register

(79 FR 30240) (2015 Market Standards Rule). The 2018 Payment Notice final rule in the December 22, 2016

Federal Register

(81 FR 94058) provided additional guidance on guaranteed availability and

guaranteed renewability. In the April 18, 2017 Market Stabilization final rule (82 FR 18346), we released further guidance related to guaranteed availability.

7. Rate Review

A proposed rule to establish the rate review program was published in the December 23, 2010

Federal Register

(75 FR 81003). A final rule with comment period implementing the rate review program was published in the May 23, 2011

Federal Register

(76 FR 29963) (Rate Review Rule). The provisions of the Rate Review Rule were amended in final rules published in the September 6, 2011

Federal Register

(76 FR 54969), the February 27, 2013

Federal Register

(78 FR 13405), the May 27, 2014

Federal Register

(79 FR 30239), the February 27, 2015

Federal Register

(80 FR 10749), the March 8, 2016

Federal Register

(81 FR 12203) and the December 22, 2016

Federal Register

(81 FR 94058).

8. Medical Loss Ratio

We published a request for comment on section 2718 of the PHS Act in the April 14, 2010

Federal Register

(75 FR 19297), and published an interim final rule with a 60-day comment period relating to the MLR program on December 1, 2010 (75 FR 74863). A final rule with a 30-day comment period was published in the December 7, 2011

Federal Register

(76 FR 76573). An interim final rule with a 60-day comment period was published in the December 7, 2011

Federal Register

(76 FR 76595). A final rule was published in the

Federal Register

on May 16, 2012 (77 FR 28790). The medical loss ratio program requirements were amended in final rules published in the March 11, 2014

Federal Register

(79 FR 13743), the May 27, 2014

Federal Register

(79 FR 30339), the February 27, 2015

Federal Register

(80 FR 10749), the March 8, 2016

Federal Register

(81 FR 12203), and the December 22, 2016

Federal Register

(81 FR 94183).

B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the operation of Exchanges, including the SHOP, and the premium stabilization programs. We have held a number of listening sessions with consumers, providers, employers, health plans, and the actuarial community to gather public input. We have solicited input from State representatives on numerous topics, particularly EHB, QHP certification and Exchange establishment. We consulted with stakeholders through regular meetings with the National Association of Insurance Commissioners (NAIC), regular contact with States through the Exchange Establishment grant and Exchange Blueprint approval processes, and meetings with Tribal leaders and representatives, health insurance issuers, trade groups, consumer advocates, employers, and other interested parties. We considered all public input we received as we developed the policies in this final rule.

HHS also received several thousand unique comments in response to a request for information, entitled “Reducing Regulatory Burdens Imposed by the Patient Protection and Affordable Care Act and Improving Healthcare Choices to Empower Patients”, published in the June 12, 2017

Federal Register

(82 FR 26885) (Request for Information). We anticipate continuing to address comments in future rulemaking and guidance.

C. Structure of Final Rule

The regulations outlined in this final rule will be codified in 45 CFR parts 147, 153, 154, 155, 156, 157, and 158.

The final regulations in part 147 amend the rules regarding fair health insurance premiums and guaranteed availability to reflect final changes related to the SHOPs and special enrollment periods.

In connection with part 153, we are recalibrating the risk adjustment models consistent with the methodology finalized for the 2018 benefit year with slight modifications to the drug classes included in the 2019 benefit year adult models and the incorporation of blended MarketScan® and the most recent enrollee-level External Data Gathering Environment (EDGE) data. This final rule addresses the high-cost risk pooling adjustment, where we are finalizing the same parameters that applied to the 2018 benefit year for the 2019 benefit year risk adjustment. The finalized provisions related to part 153 include the risk adjustment user fee and modifications to risk adjustment data validation. We also finalize a policy to provide States flexibility to request reductions in risk adjustment transfers in the small group market starting for the 2020 benefit year and beyond.

The final regulations in part 154 finalize certain modifications to reduce regulatory burden and enhance State flexibility for the rate review program. We are finalizing an exemption for student health insurance coverage from Federal rate review requirements. We are finalizing a proposal to raise the default threshold for review of reasonableness in the rate review process from 10 percent to 15 percent. We also are finalizing a proposal to allow States with Effective Rate Review Programs to set later submission deadlines for rate filings from issuers that offer non-QHPs only. In addition, we are finalizing the change to the notification period for States with Effective Rate Review Programs to provide advance notice to HHS prior to posting rate increases (from 30 days to 5 business days).

The final regulations in part 155 include modifications to the functions of an Exchange, and a new approach to operational readiness reviews for direct enrollment partners which will allow agents, brokers, and issuers to select their own third-party entities for conducting those reviews. We are finalizing modifications to the rules around verification of eligibility. We are also finalizing increased flexibility in the Navigator program by removing the requirement that each Exchange must have at least two Navigator entities, one of which must be a community and consumer focused non-profit, and by removing the standard requiring physical presence of the Navigator entity in the Exchange service area. We are modifying the parameters around certain special enrollment periods. We are modifying the effective date options for enrollee-initiated terminations, at the option of the Exchange, and amending the affordability exemption so that it may be based on the lowest cost Exchange plan if there is no bronze level plan sold through the Exchange in that rating area.

The final regulations in part 156 include changes to EHB and the QHP certification process. The final regulations in part 156 set forth parameters related to cost sharing, including the premium adjustment percentage, the maximum annual limitation on cost sharing, and the reductions in the maximum annual limitation for cost-sharing plan variations for 2019. The regulations at part 156 also include finalized FFE and SBE-FP user fee rates for the 2019 benefit year for all issuers participating on the FFEs or SBE-FPs. The regulations at part 156 also include finalized policies related to actuarial value for stand-alone dental plans (SADPs).

The final amendments to the regulations in parts 155, 156, and 157 include finalized proposals that would provide SHOPs with additional operational flexibility, and would modify the requirements for issuers, employers, and employees interacting with SHOPs.

The final amendments to the regulations in part 158 include revisions related to reporting quality improvement activity expenses as part

of the formula for calculating MLR, and revisions related to State requests for adjustment to the individual market MLR standard.

III. Provisions of the Proposed Rule and Analysis of and Responses to Public Comments

In the November 2, 2017

Federal Register

(82 FR 51052), we published the “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2019” proposed rule (proposed 2019 Payment Notice or proposed rule). We received 416 comments, including 99 comments that were substantially similar to one of four different letters, each regarding the proposals on EHBs, one addressing EHBs and the Navigator program, and one addressing proposals related to EHBs, Navigators, SHOPs and network adequacy. Comments were received from State entities, such as departments of insurance and State Exchanges; health insurance issuers; providers, both individuals and provider groups; consumer groups; industry groups; national interest groups; and other stakeholders. The comments ranged from general support of or opposition to the proposed provisions to specific questions or comments regarding proposed changes. We received a number of comments and suggestions that were outside the scope of the proposed rule that will not be addressed in this final rule.

In this final rule, we provide a summary of each proposed provision, a summary of those public comments received that directly related to the proposals, our responses to them, and a description of the provisions we are finalizing.

Comment:

We received multiple comments criticizing the short comment period, stating that the comment period made it difficult for stakeholders to conduct an in-depth analysis of the proposed rule. Commenters suggested that HHS adopt a comment period of at least 30 days from rule publication, and to fully comply with notice-and-comment requirements under the Administrative Procedure Act.

Response:

The timeline for publication of this final rule accommodates issuer filing deadlines for the 2019 benefit year. A longer comment period would have delayed the publication of this final rule, and created significant challenges for States, Exchanges, issuers, and other entities in meeting deadlines related to implementing these rules. We will continue to try to expand the comment period for the annual HHS notice of benefit and payment parameters while also providing industry and other stakeholders with more time to implement the final rule.

Comment:

We received some comments generally supportive of State flexibility, stating that by removing existing regulatory barriers, issuers will be able to offer a more diverse selection of coverage options that meet both the financial and health coverage needs of consumers while meeting various State needs.

Response:

We agree that State flexibility with respect to oversight of State insurance markets is an important goal, and recognize the traditional role States have as the primary regulators of their insurance markets. States are best positioned to address the specific needs of their consumers, and may be better able than the Federal government to develop policies that are tailored to allow issuers in their State to develop plans that address both the needs and cost concerns of beneficiaries in their State.

Comment:

We received numerous comments cautioning us about making changes that would weaken the PPACA. Some commenters expressed concern that the proposed changes would remove some of the protections afforded by the PPACA, such as the certainty of EHBs.

Response:

Our top priority at HHS is putting consumers first. While we have made great strides forward, there is still work to be done, including ensuring that coverage is affordable to all consumers. We have already taken important steps to streamline our regulations and our operations with the goal of reducing unnecessary burden, increasing efficiencies and improving the consumer experience. Yet, we have recently seen how regulations intended to protect consumers can, instead, undermine consumers' access to affordable health coverage. In this final rule, we finalize policies that are intended to help control costs of coverage in order to make coverage more affordable for consumers, particularly unsubsidized consumers. We will continue to find innovative ways to reduce costs and burdens while meeting the health needs of all Americans. We are continuing to address feedback we receive from stakeholders and the public, and in turn we are making changes that will better serve consumers and allow States to address the unique health needs of their populations.

Comment:

Commenters responded to our request for comment on ideas for future rulemaking about ways to help reduce drug costs and promote drug price transparency. All commenters acknowledged the consumer benefits of lowering drug costs and having more transparent drug pricing; however, commenters cautioned that any changes be done in a thoughtful manner, that considers value in addition to cost, with input from all stakeholders.

Response:

We appreciate the ideas for future rulemaking and will consider these suggestions.

A. Part 147—Health Insurance Reform Requirements for the Group and Individual Health Insurance Markets

1. Fair Health Insurance Premiums (§ 147.102)

As discussed elsewhere in this final rule, we are finalizing substantial changes to the requirements applicable to SHOPs to provide those programs with the flexibility to operate in a leaner fashion, a flexibility that we intend to utilize in the Federally-facilitated Small Business Health Options Program (FF-SHOP). As part of these changes and, as discussed in the preamble to §§ 156.285 and 156.286, we proposed that, effective on the effective date of this rule, the requirement in § 156.285(a)(4)(ii) regarding premium rating standards in the FF-SHOPs would not apply for plan years beginning on or after January 1, 2018. Therefore, we proposed to delete from § 147.102(c)(3)(iii)(D) a reference to § 156.285(a)(4), and to replace the reference to FF-SHOPs with a reference to SHOPs generally, to reflect that, under the proposed approach for SHOPs, some SHOPs may want to prohibit issuers from offering average enrollee premiums.

We did not receive comments on this proposal, and are finalizing the change as proposed, with one minor typographical correction.

We also sought comment on whether issuers offering coverage through SHOPs should always be required to offer average enrollee premiums, or should be required to do so only if required under applicable State law.

Comment:

Comments were mixed regarding whether issuers offering coverage through SHOPs should always be required to offer average enrollee premiums. One commenter stated that issuers offering coverage through SHOPs should always be required to offer average enrollee premiums, while others stated that issuers should be required to do so only if required by applicable State law. One of these commenters further recommended that average premium rating should be permitted only when a SHOP does not allow employees to choose plans among multiple issuers. The commenter stated that average enrollee premiums based

on employees selecting a particular plan could result in illogical rates, such as a richer plan having lower rates than a leaner plan because only younger employees selected the richer plan. Another commenter stated that all issuers, regardless of whether they are offering coverage on or off SHOP, should be allowed to offer average enrollee premiums.

Response:

For purposes of consistency, we believe that issuers offering coverage through a SHOP should be permitted to offer average enrollee premiums to the same extent that issuers may do so off SHOP under existing State rules. Also, given the decrease in issuer participation in the FF-SHOPs, some SHOP employers only have one issuer offering FF-SHOP plans in their area and will not be able to offer their employers a choice of plans across issuers. In addition, historically, a majority of employers have not offered employee choice across different issuers, thus mitigating the risk of variance in average premium rates across plans. Therefore, we do not believe Federal guidance or regulation is currently warranted in this area. Thus, issuers offering coverage through a SHOP may offer average enrollee premiums to the extent required or permitted by the applicable State, and will not be required under Federal law to do so, unless required by the State.

2. Guaranteed Availability of Coverage (§ 147.104)

i. SHOP

As discussed elsewhere in this final rule, we proposed and are finalizing substantial changes to the requirements applicable to SHOPs to provide them with the flexibility to operate in a leaner fashion, a flexibility that we will utilize in the FF-SHOPs. Among those changes, effective on the effective date of this rule, the requirements in § 156.285 will apply for plan years starting before January 1, 2018. New § 156.286 specifies those requirements contained in § 156.285 that, effective on the effective date of this rule, will continue to apply for plan years starting on or after January 1, 2018. Among those requirements is the requirement in § 156.285(e) which permits a QHP offered in the SHOP to apply group participation rules under certain circumstances. This provision will be listed in new § 156.286(e). The marketwide regulations at § 147.104(b)(1)(i)(B) currently reference § 156.285(e), and we proposed to add a reference to § 156.286(e) to clarify that, effective on the effective date of this rule, for plan years that start on or after January 1, 2018, QHPs offered in the SHOP may restrict the availability of coverage, with respect to a group health plan that cannot comply with group participation rules, to an annual enrollment period of November 15 through December 15 of each calendar year. Because we are finalizing new § 156.286(e) as proposed, we are also finalizing the proposal to reference new § 156.286(e) in § 147.104(b)(1)(i)(B).

Comment:

One commenter supported the proposal to add to § 147.104(b)(1)(i)(B) a reference to § 156.286(e). One commenter opposed permitting QHPs to restrict coverage availability when a group health plan cannot comply with group participation rules, while another commenter stated that an employer that fails to comply with such rules should not be afforded guaranteed availability of coverage, either generally or during an annual open enrollment period, either on or off-SHOP.

Response:

As indicated in the section of the preamble discussing the SHOP rule, we are finalizing, as proposed, the proposal to add new § 156.286(e), which would apply, to plan years starting on or after January 1, 2018, the existing regulatory provision that allows QHPs offered in the SHOP to restrict the availability of coverage with respect to a group health plan that cannot comply with group participation rules, to an annual enrollment period of November 15 through December 15 of each calendar year. Thus, we are also finalizing the proposal to reference new § 156.286(e) in § 147.104(b)(1)(i)(B).

We also proposed, and are finalizing, the removal of the small group coverage effective dates that are found in the SHOP regulations at § 155.725 with respect to plan years beginning on or after January 1, 2018, effective on the effective date of this rule. However, there are currently requirements in § 147.104(b)(1)(i)(C) that, by cross-referencing § 155.725, apply those same requirements marketwide, and we did not propose to remove that marketwide requirement. We proposed changes to § 147.104 to reflect the SHOP changes. Specifically, we proposed to eliminate, from § 147.104(b)(1)(i)(C), the cross-reference to § 155.725. We proposed in place of the cross-reference to explicitly specify in § 147.104(b)(1)(i)(C) those same coverage effective dates for coverage in the small group market, and for the large group market if such coverage is offered through a SHOP, that would be eliminated from the SHOP regulations under our proposal for § 155.725. We are finalizing this proposal, but are modifying the language that will replace the cross-reference to clarify that it is permissible for issuers to apply an effective date of coverage that is

before

or on the specified dates. We are also modifying the proposed language so that the effective date of coverage is tied to the date a group enrollment is received, rather than to the date a plan selection is received.

Comment:

All commenters supported in principle the proposal to eliminate, from § 147.104(b)(1)(i)(C), the cross reference to the effective dates of coverage in § 155.725, and in its place explicitly specify in § 147.104(b)(1)(i)(C) those effective dates for coverage in the small group market, and for the large group market if such coverage is offered through a SHOP. However, several commenters noted that our proposal did not import the provisions in § 155.725, describing the coverage effective dates, verbatim into § 147.104(b)(1)(i)(C). They observed that the proposed language in § 147.104(b)(1)(i)(C) tied the coverage effective date to the date a plan selection was received, rather than to the date a group enrollment was received, and that tying the coverage date to the date a group enrollment was received (as in the effective-date-of-coverage language currently set forth in § 155.725) would be more appropriate. Commenters also stated that the language we proposed to add in § 147.104(b)(1)(i)(C), unlike the language in current regulations in § 155.725, would prohibit issuers from applying a coverage effective date that falls

before

the first day of the following month, or

before

the first day of the second following month, as applicable, after the date a group enrollment is received.

Response:

As commenters pointed out, in the language we proposed for § 147.104(b)(1)(i)(C), we tied the coverage effective date to the date a plan selection, rather than a group enrollment, was received. Given that the proposed language we added appears in a section of the rules (§ 147.104) that applies marketwide, and not just in SHOPs, we agree with the commenters that tying the coverage date to a group enrollment, which is a broader term than a plan selection (the latter is a SHOP-specific term), would be more appropriate. We also agree with the commenters that the existing language in § 155.725, which requires issuers to ensure a coverage effective date

of,

rather than

on,

the dates specified in the existing language, permits issuers to apply an enrollment date that falls

before,

rather than only

on,

the first day of the first month or the first day of the second month (as applicable) following the date a group enrollment is received, and that issuers should continue to have

the flexibility to apply an enrollment date that falls

before

those dates. Therefore, in light of those comments, we are finalizing language in § 147.104(b)(1)(i)(C).

ii. Special Enrollment Periods

Section 147.104(b)(2)(i) extends several of the special enrollment periods that apply to issuers on the Exchange, to all issuers in the individual market. Although § 147.104(b)(2)(i) is intended to specify which special enrollment periods offered through the Exchange must also be offered by health insurance issuers with respect to coverage offered outside of an Exchange, the paragraph as currently written could be read to apply the exceptions to any coverage offered by a health insurance issuer in the individual market. We recognize the potential for confusion, as coverage offered through an Exchange is offered by a health insurance issuer in the individual market, but this coverage is subject to the special enrollment rule at § 155.420(d), which is intended to require special enrollment periods for qualifying events including those listed in the exceptions in § 147.104(b)(2)(i). Therefore, we proposed to amend that phrase in § 147.104(b)(2)(i) to clarify that the exceptions in the paragraph only apply with respect to coverage offered outside of the Exchange in the individual market. We received no comments on this proposal, and are finalizing it as proposed.

With respect to the subset of special enrollment periods in § 155.420 that apply off-Exchange, current regulations at § 147.104(b)(2)(ii) state that, in applying § 147.104(b)(2), a reference in § 155.420 to a “QHP” is deemed to refer to a plan, a reference to “the Exchange” is deemed to refer to the applicable State authority, and a reference to a “qualified individual” is deemed to refer to an individual in the individual market. As discussed in the preamble to § 155.420, we are finalizing a change to § 155.420(a)(5) to exempt qualified individuals from the prior coverage requirement that applies to certain special enrollment periods if they lived in a service area where no qualified health plan was available through the Exchange for 1 or more days during the 60 days preceding the qualifying event or during their most recent preceding enrollment period, as specified in §§ 155.410 and 155.420. Section 155.420(a)(5) applies to qualifying individuals seeking off-Exchange coverage through an applicable special enrollment period, so we proposed that this exception for individuals living in a service area where there were no QHPs offered through an Exchange would also apply.

9

However, in this instance the reference to “QHP” should not be deemed to refer to a plan for purposes of applying § 147.104(b)(2). Therefore, we proposed to amend § 147.104(b)(2)(ii) to state that a reference in § 155.420 (other than in § 155.420(a)(5)) to a “QHP” is deemed to refer to a plan, a reference to “the Exchange” is deemed to refer to the applicable State authority, and a reference to a “qualified individual” is deemed to refer to an individual in the individual market. We are finalizing this change as proposed.

9

As stated in the preamble in the proposed rule to § 155.420, the exception to the requirement to have previous coverage is intended to relieve individuals of that requirement when there was no

affordable

coverage (that is, coverage that could be purchased through an Exchange to which APTC might apply) available in their previous service area. We believe affordability is key to this exception, and therefore, that the scope of the exception should apply equally, regardless of whether the individual is seeking to purchase coverage inside

or

outside an Exchange during the special enrollment periods for which this exception applies; that is, the exception should apply if there was no such affordable coverage available in the individual's previous service area (regardless of whether or not any coverage was being actively marketed in that service area outside the Exchange). Also, when an individual sought to purchase coverage outside an Exchange during such a special enrollment period, we believe it might be unreasonably difficult for an issuer to determine if at least one issuer was actively marketing coverage in the individual's previous service area outside the Exchange, as opposed to determining if at least one issuer was making coverage available in that service area specifically through an Exchange. We solicited comments on this approach.

Comment:

All commenters supported this proposal, while some commenters stated more generally that special enrollment periods should be the same, regardless of whether an individual is seeking coverage on or off-Exchange. One commenter suggested that we publish a list of bare counties so that the exemption to the prior-coverage requirement can be properly applied both on and off-Exchange.

Response:

We are finalizing the proposal, consistent with the way in which the amendment to § 155.420(a)(5) is being finalized, and if there are ever any service areas in which no qualified health plans are offered through the Exchange, we will consider publishing a list of them, as the commenter suggested. For a more detailed response to comments regarding the amendment to § 155.420(a)(5), see the preamble to that section.

Among the special enrollment periods in § 155.420 that apply off-Exchange are those specified in § 155.420(d)(2)(i), under which a qualified individual gains a dependent or becomes a new dependent through marriage, birth, adoption, placement for adoption, or placement in foster care, or through a child support order or other court order. We sought comment on whether this special enrollment period should afford an individual's existing dependents an independent opportunity to enroll, off-Exchange, in new coverage or make changes to their existing coverage. As applied to on-Exchange coverage, when a qualified individual gains or becomes a new dependent under the circumstances described in § 155.420(d)(2)(i), the qualified individual is afforded a special enrollment period to enroll in or change Exchange coverage with his or her dependents, including his or her newly-gained dependent, in accordance with any applicable metal level restrictions outlined in § 155.420(a)(4)(i). The new dependent is also afforded an independent special enrollment period under which he or she can enroll in or change Exchange coverage as a subscriber, as opposed to as a dependent of the qualified individual. Under the HIPAA special enrollment provisions that continue to apply to group health plans and health insurance issuers in connection with group health coverage, there are similar special enrollment periods when a child becomes a dependent of the employee through marriage, birth, adoption, or placement for adoption.

10

We sought comment on whether, in the off-Exchange individual market, the special enrollment periods for when an individual gains a dependent or becomes a new dependent under the circumstances described in § 147.104(b)(2), which cross-references § 155.420(d)(2)(i), should continue to operate in the same manner as they do on-Exchange, whether they should operate in a manner consistent with the HIPAA group market regulations, or whether we should adopt some other approach.

10

See § 146.117(b).

With respect to off-Exchange coverage, we are maintaining current policy under which an individual who qualifies for a special enrollment period for gaining a dependent through marriage, birth, adoption, placement for adoption, or placement in foster care, or through a child support order or other court order under § 147.104(b)(2) may enroll in or change coverage along with his or her dependents, including the newly-gained dependent(s) and any existing dependents. The new dependent is also afforded an independent special enrollment period under which he or she can enroll in or change coverage as a subscriber, as opposed to as a dependent of the

individual. This off-Exchange special enrollment period does not otherwise provide to existing dependents an independent opportunity to enroll in new coverage or make changes to their existing coverage.

Comment:

Some commenters stated that existing dependents should be entitled to enroll with other family members who have qualified for the special enrollment period when a qualified individual in their household gains a dependent or becomes a new dependent through marriage, birth, adoption, placement for adoption, or placement in foster care, or through a child support order or other court order, while others believed they should not, stating that allowing this practice would contribute to adverse selection. Some commenters stated that special enrollment periods should apply uniformly on-Exchange and off-Exchange.

Response:

As stated previously, we are continuing to apply the parameters of the special enrollment period for those who have gained or become a new dependent through marriage, birth, adoption, foster care placement, or a child support or other court order off-Exchange in the same manner as applied on-Exchange. We believe the advantages and simplicity of uniformity between on-Exchange and off-Exchange coverage in this instance outweigh the concern about adverse selection.

iii. Technical Changes

We proposed to remove paragraph § 147.104(b)(1)(iii), along with the cross-reference to it in § 147.104(b)(1)(ii), as paragraph (b)(1)(iii) applies to plan selections made in 2013, and is therefore no longer necessary. We received no comments regarding this proposal, and are finalizing these changes as proposed.

B. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment Under the Affordable Care Act

1. Sequestration

In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2018,

11

both the transitional reinsurance program and permanent risk adjustment program are subject to the fiscal year 2018 sequestration. The Federal government's 2018 fiscal year began October 1, 2017. Although the 2016 benefit year was the final year of the transitional reinsurance program, HHS will continue to make reinsurance payments in the 2018 fiscal year, as the second contribution collection deadline for the 2016 benefit year was November 15, 2017. Therefore, the reinsurance program will be sequestered at a rate of 6.6 percent for payments made from fiscal year 2018 resources (that is, funds collected during the 2018 fiscal year). The risk adjustment program will also be sequestered at a rate of 6.6 percent for payments made from fiscal year 2018 resources (that is, funds collected during the 2018 fiscal year).

11

Available at

https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/sequestration_reports/2018_jc_sequestration_report_may2017_potus.pdf

.

HHS, in coordination with the OMB, has determined that, under section 256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, and the underlying authority for the reinsurance and risk adjustment programs, the funds that are sequestered in fiscal year 2018 from the reinsurance and risk adjustment programs will become available for payment to issuers in fiscal year 2019 without further Congressional action. If Congress does not enact deficit reduction provisions that replace the Joint Committee reductions, these programs would be sequestered in future fiscal years, and any sequestered funding would become available in the fiscal year following that in which it was sequestered.

2. Provisions and Parameters for the Risk Adjustment Program

In subparts D and G of part 153, we established standards for the administration of the risk adjustment program. The risk adjustment program is a permanent program created by section 1343 of the PPACA that transfers funds from lower risk, non-grandfathered plans to higher risk, non-grandfathered plans in the individual and small group markets, inside and outside the Exchanges. In accordance with § 153.310(a), a State that is approved or conditionally approved by the Secretary to operate an Exchange may establish a risk adjustment program, or have HHS do so on its behalf. Beginning with the 2017 benefit year, HHS is operating risk adjustment in every State, and did not receive any applications from States to operate risk adjustment for the 2019 benefit year.

a. Overview of the HHS Risk Adjustment Model (§ 153.320)

The HHS risk adjustment model predicts plan liability for an average enrollee based on that person's age, sex, and diagnoses (risk factors), producing a risk score. The HHS risk adjustment methodology utilizes separate models for adults, children, and infants to account for cost differences in each of these age groups. In each of the adult and child models, the relative risk assigned to an individual's age, sex, and diagnoses are added together to produce an individual risk score. Additionally, in the adult models, we added enrollment duration factors beginning for the 2017 benefit year, and prescription drug utilization factors (RXCs) beginning for the 2018 benefit year, in the calculation of enrollees' risk scores. Infant risk scores are determined by inclusion in one of 25 mutually exclusive groups, based on the infant's maturity and the severity of diagnoses. If applicable, the risk score for adults, children or infants is multiplied by a cost-sharing reductions adjustment.

The enrollment-weighted average risk score of all enrollees in a particular risk adjustment covered plan (also referred to as the plan liability risk score) within a geographic rating area is one of the inputs into the risk adjustment payment transfer formula, which determines the payment or charge that an issuer will receive or be required to pay for that plan. Thus, the HHS risk adjustment model predicts average group costs to account for risk across plans, which accords with the Actuarial Standards Board's Actuarial Standards of Practice for risk classification.

b. Final Updates to the Risk Adjustment Model (§ 153.320)

For the 2019 benefit year, we proposed to recalibrate the risk adjustment models using the methodology finalized for the 2018 benefit year, with small modifications to the drug classes included in the 2019 benefit year adult models, and incorporation of the 2016 benefit year enrollee-level EDGE data in the 2019 benefit year risk adjustment model recalibration.

i. Recalibration Using EDGE Data

To recalibrate the 2016, 2017 and 2018 benefit year risk adjustment models, we used the 3 most recent years of Truven MarketScan® data. This approach allowed for using the blended, or averaged, coefficients from 3 years of separately solved models, which promotes stability for the risk adjustment coefficients year-to-year, particularly for rare conditions with small sample sizes. We finalized in the 2018 Payment Notice the collection of enrollee-level EDGE data and the recalibration of the risk adjustment model for the 2019 benefit year using 2016 benefit year EDGE data. We believe that blending the coefficients calculated from the 2016 benefit year enrollee-level EDGE data with MarketScan® data will provide stability within the risk

adjustment program and minimize volatility in changes to risk scores from the 2018 to 2019 benefit years due to differences in the datasets' underlying populations. As such, we proposed blending 3 years of data to recalibrate the coefficients used in the risk adjustment models and, for the 2019 benefit year, blending separately solved coefficients from the 2016 benefit year enrollee-level EDGE data and the 2014 and 2015 MarketScan® data.

Given the timing of the proposed rule, we were not able to incorporate the 2016 benefit year enrollee-level EDGE data in the proposed rule. Instead, we used the 2014 and 2015 MarketScan® data for the coefficients displayed in the proposed rule. We proposed to finalize the 2019 benefit year blended coefficients with the separately solved models from the 2016 benefit year enrollee-level EDGE data, and the 2014 and 2015 MarketScan® data. This is similar to our approach in previous years, in which we updated the final coefficients using data from the most recently available benefit year.

12

We explained that we expected to publish the final risk adjustment model coefficients for the 2019 benefit year in the final rule. However, we sought comment on whether we should publish the final risk adjustment model coefficients in guidance in the spring of 2018, prior to rate setting for the 2019 benefit year, if we needed additional time to analyze the 2016 enrollee-level EDGE data. Under either approach, we proposed that the final risk adjustment model coefficients for the 2019 benefit year would be determined using the methodology that we would finalize in this rule, and would be published prior to the 2019 benefit year rate setting. Additionally, if we found significant demographic or distributional differences in the enrollee-level EDGE data compared to the MarketScan® data, we sought comment on whether we should make adjustments to the risk adjustment recalibration model age-sex, hierarchical condition categories (HCCs), and RXC categories for the 2019 benefit year. In such a case, we proposed we would make adjustments to the models to better align them with the enrollee-level EDGE data, to improve the prediction of plan liability.

12

See, for example, 2018 Payment Notice, 81 FR 94058 (December 22, 2016).

We sought comment on our proposal to determine coefficients based on a blend of 2014 and 2015 MarketScan® data and 2016 enrollee-level EDGE data. We also sought comment on the proposed methodology to equally weight the separately solved model coefficients from the 2014 MarketScan®, 2015 MarketScan®, and 2016 enrollee-level EDGE data for the final coefficients, instead of using only the 2016 enrollee-level EDGE data to recalibrate the risk adjustment model coefficients for the 2019 benefit year.

We are finalizing the approach using equally blended coefficients from separately solved 2014 MarketScan®, 2015 MarketScan®, and 2016 enrollee-level EDGE data to recalibrate the risk adjustment model coefficients for the 2019 benefit year. We are not making any changes to age-sex or HCC categories, because we did not find significant distributional differences, and we will continue to assess whether to propose any specific changes to the categories for future benefit years in future rulemaking. We did not propose and are not making any changes to the enrollment duration categories. Please see the preamble section below on “Prescription Drugs” for a discussion of changes being finalized with respect to the RXC categories. The final risk adjustment model coefficients for the 2019 benefit year risk adjustment program are listed in Tables 2, 4 and 5 of this rule.

Comment:

Commenters supported the use of enrollee-level EDGE data in model recalibration noting the data would more closely reflect the relative risk differences of individuals in the individual and small group markets compared to the MarketScan® data. Most commenters also supported equally blending coefficients from separately solved models using 3 years of data to promote stability year over year, thereby phasing in the use of enrollee-level EDGE data. A few commenters supported overweighting the 2016 enrollee-level EDGE data, with one commenter supporting overweighting of the 2016 data if sample sizes are adequate. A few commenters supported using only the 2016 enrollee-level EDGE data for recalibration, stating that MarketScan® data will have different utilization and risk patterns, and socioeconomic status for enrollees with employer-based coverage than the EDGE data, which directly reflects PPACA individual and small group market enrollees. These commenters also stated that these differences in the underlying data could cause the risk adjustment coefficients to over- or under-predict risk differences. One commenter stated that relying on older data to calibrate the model could lead to significant gaps in the risk adjustment methodology. One commenter requested clarification as to the volatility in changes to risk scores from the 2018 to 2019 benefit years that could occur due to differences in the datasets' underlying populations. Another commenter requested that recalibration using EDGE data be postponed until all States' data is available in the 2017 benefit year.

13

Some commenters requested separate publication of the coefficients from the 2016 enrollee-level EDGE data. One commenter requested clarification as to what weights would be applied in blending coefficients from the 3 years of data. Most commenters also supported HHS finalizing the 2019 benefit year coefficients prior to rate setting in guidance, while a few others requested the coefficients be finalized in the final rule. One commenter noted that delaying publication of the final coefficients past the publication of the final rule would pose challenges in issuers' rate setting timelines, while some commenters suggested that if HHS needs additional time beyond the publication of the final rule, the final coefficients for the 2019 benefit year should be published no later than February 28, 2018.

13

Massachusetts is not included in the 2016 benefit year enrollee-level EDGE data, because Massachusetts operated its own risk adjustment program through the 2016 benefit year.

Response:

For small sample sizes, year-to-year differences in spending due to data anomalies can cause significant differences in a particular solved coefficient. We agree that blending coefficients from multiple years of data can provide stability in changes in the recalibrated model coefficients and provide certainty to issuers, particularly where small sample sizes could lead to volatility in the solved coefficients from year-to-year. Additionally, while there are differences in total spending in MarketScan® compared to enrollee-level EDGE data, we have found that the relative risk differences for age-sex, HCC and RXC categories are generally similar to those in the MarketScan® data, and therefore, do not believe that blending the data will cause significant over- or under-prediction of relative risk scores on average. Enrollee-level EDGE data shows lower spending and relative risk patterns for shorter enrollment durations compared to the MarketScan® data, resulting in smaller enrollment duration coefficients for all 11 months. This result was expected, given that enrollees in large group coverage have longer enrollment duration and a higher proportion of individuals with a full-year of enrollment on average than enrollees in the individual and small group markets, and that the greater number of shorter average enrollment durations in the enrollee-level EDGE

data account for lower relative risk on average.

Additionally, while Massachusetts is not included in the 2016 benefit year enrollee-level EDGE data, the relative risk differences for enrollees in Massachusetts are likely similar on average to those for enrollees in other States. The 2017 benefit year enrollee-level risk EDGE data will not be available until the end of summer 2018, after the 2019 benefit year risk adjustment factors need to be published to support 2019 benefit year benefit design and rate development, and therefore cannot be used for this recalibration effort. We believe that a national dataset of individual and small group market claims experience for the most recent benefit year is the preferable data source—even without the incorporation of one State—compared to only using commercial claims data for risk adjustment model recalibration and risk estimation in the individual and small group markets.

In all, we believe blending the coefficients promotes stability and certainty for issuers in rate setting, smoothing any significant differences as with the EDGE enrollment duration factors, while maintaining the relative average risk differences stakeholders have expected from the MarketScan®-only coefficients. Therefore, we are finalizing our proposal to equally weight coefficients from separately solved models using 2014 MarketScan®, 2015 MarketScan®, and 2016 enrollee-level EDGE data for the final 2019 benefit year risk adjustment model recalibration. We also were able to complete our analysis of the 2016 EDGE data in time to publish the final coefficients blended with 2016 enrollee-level EDGE data in this final rule. The final 2019 benefit year risk adjustment model coefficients listed in Tables 2, 4, and 5 are blended coefficients using equally weighted coefficients solved from the 2014 MarketScan®, 2015 MarketScan®, and 2016 enrollee-level EDGE data.

Comment:

Commenters requested clarification on the analytical dataset development process using the 2016 enrollee-level EDGE data, sample size of the enrollee-level EDGE data, and differences in EDGE and MarketScan® data.

Response:

We arrived at the 2016 enrollee-level EDGE analytical dataset using several criteria. We limited the sample to ages 0-64 to maintain the same age categories as those HHS has used in the MarketScan® data, with which the EDGE coefficients are blended. Currently, we use the age 60-64 factors for those over 65 years of age enrolled in individual and small group market coverage, and will continue to do so for the 2019 benefit year. We will consider whether to propose expanding the age and sex factors to include age groups and associated costs for enrollees ages 65 and above in future model recalibrations. We also excluded derived claims, any newborn diagnoses for infants older than one year of age, anomalous claims (for example, pregnancy diagnoses if sex is male) and those with sex unknown. There were approximately 47 million, 28 million and 31 million total unique enrollees in the 2014 MarketScan®, 2015 MarketScan®, and 2016 enrollee-level EDGE data, respectively. Relative risks were similar in the 2016 enrollee-level EDGE data for most categories in all three adult, infant and child samples. As mentioned above, enrollee-level EDGE data reflected lower spending and relative risk patterns for shorter enrollment duration enrollees compared to MarketScan® data.

Comment:

In case of significant demographic or distributional differences in the EDGE data compared to the MarketScan® data, most commenters supported HHS making adjustments to give greater weight to the EDGE data when recalibrating the model coefficients. However, commenters did not support making changes to the age-sex, HCC, enrollment duration or RXC factors categorizations beyond what was in the proposed rule, and instead supported such changes to be implemented for the 2020 benefit year.

Response:

We did not identify significant differences in the relative risk for enrollees over 65 compared to those in the 60-64 age group in the enrollee-level EDGE data compared to the MarketScan® data, and therefore, are finalizing the risk adjustment model categories as proposed. As noted above, we will continue to assess relative differences in demographic and spending patterns in the EDGE data and will consider amending the risk adjustment model categories in future recalibrations, particularly once we have multiple years of enrollee-level EDGE data.

Comment:

A few commenters requested that HHS limit the scope of enrollee-level EDGE data collection and use, clarify the types of data elements collected in the enrollee-level EDGE data, proceed with caution given the data privacy and trade secret information, and prohibit any other use of the data.

Response:

These comments are outside the scope of the proposed rule. As finalized in the 2018 Payment Notice, HHS is collecting enrollee-level EDGE data, which provides more granular claims data from the individual and small group markets, and is being used to improve the recalibration of HHS programs. Additionally, as noted in the 2018 Payment Notice, HHS recognizes the sensitivity of enrollee-level EDGE data, and is not collecting masked enrollee IDs from issuers' EDGE servers, plan or issuer IDs, rating areas, or State data elements to safeguard the privacy and security of protected health information (PHI) and minimize potential risks to issuers' proprietary information.

ii. Prescription Drugs

In the 2018 Payment Notice, we finalized the inclusion of 12 RXCs that interact with HCCs, or drug-diagnosis (RXC-HCC) pairs, in the adult risk adjustment models for the 2018 benefit year. Ten of the RXC-HCC pairs have three levels of incremental predicted costs (diagnosis-only, prescription drug-only, and both diagnosis and prescription drug), indicating that they can be used to impute a particular diagnosis. The 2018 benefit year risk adjustment adult models also included two RXC-HCC pairs that are used for severity-only—that is, they predict incremental costs for enrollees with the diagnosis-only, or with both the diagnosis and the prescription drug. For enrollees without the associated diagnoses documented for these severity-only RXC-HCC pairs, the presence of the drug alone would not lead to the attribution of additional plan liability costs to the plan.

For the 2019 benefit year, we proposed to remove the two severity-only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics, Loop and Select Potassium-Sparing). Both have low average costs per enrollee per year and were constrained in the 2018 benefit year adult risk adjustment models final coefficients to the average cost of the drugs to avoid overcompensating issuers for these RXCs. Constraining these RXCs removed overprescribing and gaming incentives to prescribe a low-cost drug to receive a much larger risk adjustment payment. However, after constraints, these two severity-only RXCs have extremely small coefficients that no longer predict meaningful incremental plan risk associated with a severe health condition. Therefore, we proposed eliminating these two RXCs from the adult models beginning with the 2019 benefit year. As explained in the proposed rule, we believe the remaining RXCs do not engender significant gaming concerns due to the cost and side-effects of the drugs if prescribed

without cause. As we noted in the 2018 Payment Notice, where the risk of unintended effects on provider prescribing behavior is low, we will continue to include a small number of prescription drug classes as predictors of risk and plan liability. For the remaining RXCs, we explained there is a high rate of presence of a diagnosis code in the associated HCC in the MarketScan® data, indicating a positive predictive value for using these RXCs to impute missing diagnoses. Additionally, we noted that we intend to monitor prescription drug utilization for unintended effects, and may propose to remove drug classes based on such evidence in future rulemaking. We are finalizing the removal of RXC11 and RXC12 from the adult risk adjustment models beginning with the 2019 benefit year. Table 1 contains the final list of prescription drug factors included in the 2019 benefit year risk adjustment adult models. We will continue to evaluate the effects of incorporating prescription drugs in the adult models to determine whether to continue, broaden or reduce the impact of this set of factors.

Comment:

Most commenters supported the removal of the two severity-only RXCs due to their low impact in predicting meaningful differences in risk. Commenters also supported HHS's intention to evaluate the impact of incorporating the prescription drug factors in the model and adding or removing drugs in future model recalibrations as appropriate. Commenters generally supported the inclusion of prescription drug factors in the HHS risk adjustment model, noting the benefit in imputing missing diagnoses. Additionally, we note that commenters on the Request for Information also supported the inclusion of prescription drugs in the risk adjustment methodology. One commenter to the proposed rule suggested HHS should use the MedID for drug classification instead of the RXNorm Concept Unique Identifier (RXCUI) system. The commenter noted MedID would improve stability, accessibility and predictability of the RXCs, as acquiring RXCUI mapping, keeping it up to-date, anticipating changes and ensuring drug inclusion has been a challenge for issuers in determining formularies and often excludes some drugs. Another commenter sought clarification as to whether drugs administered through hospital, office-based or home health settings and found on medical claims would receive credit for the RXC factors, in addition to drugs found on pharmacy claims. One commenter requested HHS release a mapping of RXCUIs to RXC factors for issuers to adequately assess how inclusion and exclusion of drugs will impact risk adjustment, and suggested HHS provide a crosswalk with the RXCUIs mapped to the RXCs prior to January 1, 2018. The commenter also noted that since there is a lag in the data used for recalibration, HHS should consider how to incorporate newer drugs that are approved after the data years and before or during the benefit year. On the other hand, commenters who had a chance to review the draft RXC crosswalk HHS released in September 2017 for the 2018 benefit year risk adjustment adult models suggested that if a drug is included, then all strengths and formulations of that drug ought to be included in the drug class, including the generic or brand name drugs, or requested clarification as to why specific drugs were excluded. A few commenters requested that HHS consider including prescription drugs used by individuals with mental health and substance use disorders in the model, with one suggesting that adding drugs used by those with mental health and substance use disorders to the model may better capture the costs associated with these individuals, and citing a study suggesting that those costs may not be well captured in the associated HCCs in the current model.

14

14

Montz, E., Layton, T., Busch, A.B., Ellis, R.P., Rose, S., & McGuire, T.G. (2016). Risk-adjustment simulation: Plans may have incentives to distort mental health and substance use coverage. Health Affairs, 35(6), 1022-1028.

Response:

We are finalizing our proposal to remove the two severity-only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics, Loop and Select Potassium-Sparing) from the 2019 benefit year risk adjustment adult models. As we explained in the 2018 Payment Notice, we selected the RxNorm tool developed by the U.S. National Library of Medicine because it is frequently updated, reliable, and easily accessible, and issuers commented on the ease of the RxNorm tool in mapping drugs to RXCUIs. As such, we do not see a need to adopt another classification system at this time. HHS posted an RXC to RXCUI draft crosswalk on September 18, 2017,

15

to provide issuers an initial set of RXCUIs that would be included for 2018 benefit year risk adjustment adult models in the HHS-operated risk adjustment program. As we noted in the crosswalk, drugs were excluded based on expert or clinician input as to drugs' cross indications, empirical and statistical analyses that indicated a weak association between the drug and the diagnoses, or if drugs were older or discontinued. Drugs were also excluded in situations where drugs had substantially lower costs compared to other drugs included in the RXC, and therefore these drugs were less likely to be the focus of risk-selection behavior by health plans. In these instances, USP classes contained a mix of newer, more expensive drug treatments, and older, often generic, lower-cost drug treatments. For example, the combined USP classes Immune Suppressants and Immunomodulators encompass a wide range of drugs. They include expensive biologics costing several thousands of dollars each month and drugs like generic methotrexate, a month's supply of which can cost less than $100. Clinician review determined that many of the drugs in this class are substitutable and the general prescribing process would be to first prescribe a cheaper drug, and if the patient does not respond to that then move to a more expensive biologic. However, because concern over patient access and health plan selection behavior (reflected in formulary design) centers around the expensive biologics, the cheaper non-biologics were removed from RXC 9.

15

Creation of the 2018 Benefit Year HHS-Operated Risk Adjustment Adult Models Draft Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs) Crosswalk Memorandum. September 18, 2017. Available at

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Draft-RxC-Crosswalk-Memo-9-18-17.pdf

.

2018 Benefit Year HHS-Operated Risk Adjustment Adult Models Draft Prescription Drug (RXCUIs) to HHS Drug Classes (RXCs) Crosswalk. September 18, 2017. Available at

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/RARx_RxCUIs-Crosswalk-9-6-17.xlsx

.

We review drugs in the United States Pharmacopeia (USP) classification and consult clinicians and experts to ensure relevant drugs are included. However, as some commenters noted in response to the proposed rule, new drugs have been released since we released the draft 2018 benefit year crosswalk and a few drugs that may be eligible under our other criteria were not classified by the USP classification version used for the draft crosswalk. We expect to publish the final 2018 benefit year crosswalk in the spring of 2019, after the conclusion of the 2018 benefit year, so that newly approved drugs released through the end of the year and the latest USP classification are evaluated and included, as appropriate. As such, we intend to make quarterly updates to the 2018 benefit year prescription drug crosswalk, to ensure we are capturing all new drug releases and drug class inclusions or modifications. We are also reviewing drugs administered through clinicians in hospital, office-based, or

home health settings crosswalked to national drug codes (NDCs) to determine whether it is appropriate under our inclusion criteria to include these drugs in the 2018 benefit year crosswalk for 2018 benefit year risk adjustment risk score calculation. However, as these drugs are often more expensive when administered in hospital, office-based, or home health settings, we are not including such drugs in the recalibration of the adult models for the 2019 benefit year to limit gaming incentives. We anticipate the 2019 benefit year drug crosswalk will be published on a similar quarterly schedule, following the final 2018 benefit year crosswalk publication. We also intend to monitor the impact of the drugs included in the adult models on prescribing incentives and will evaluate adding or removing other RXCs as appropriate in future recalibrations for future benefit years. We had previously considered, but did not include, antimanic agents for depression and bipolar disorders due to their low imputation value in identifying the risk solely based on the RXC and low relative cost of the drugs. We are continuing to assess if mental health and substance use disorder treatments should be included in the adult models in future benefit years.

Comment:

One commenter noted that pharmacy claims should not be included in the risk adjustment data validation process as no clinical documentation is available for pharmacy claims, and HHS should not include data that cannot be easily audited in risk adjustment. Another commenter sought clarification as to how HHS intends to conduct risk adjustment data validation for prescription drugs included in the risk adjustment adult models.

Response:

As we noted in the 2018 Payment Notice, HHS does not perform risk adjustment data validation audits with the intent of determining whether a clinician correctly diagnosed a patient. Rather, the goal for the HHS-operated risk adjustment program is to ensure that enrollees' diagnoses on paid claims reflect the appropriately assigned HCCs, and were diagnosed by a licensed clinician. Likewise, in validating pharmacy claims, we intend to validate factors such as whether the prescription was filled and paid by the issuer, and whether the appropriate RXC interaction was assigned. We understand commenters' concerns regarding prescription drug data and intend to closely monitor prescribing behavior in the 2018 benefit year and beyond. We will consider whether additional adjustments to the risk adjustment data validation process are needed for the 2018 benefit year to ensure risk adjustment data validation appropriately audits pharmacy claims submitted to EDGE by issuers.

Table 1—Final Drug-Diagnosis (RXC-HCC) Pairs for the 2019 Adult Model

RXC

RXC label

HCC

HCC label

Final RXC use

RXC 01

Anti-HIV Agents

001

HIV/AIDS

imputation/severity.

RXC 02

Anti-Hepatitis C (HCV) Agents

037C, 036, 035, 034

Chronic Hepatitis C, Cirrhosis of Liver, End-Stage Liver Disease, and Liver Transplant Status/Complications

imputation/severity.

RXC 03

Antiarrhythmics

142

Specified Heart Arrhythmias

imputation/severity.

RXC 04

Phosphate Binders

184, 183, 187, 188

End Stage Renal Disease, Kidney Transplant Status, Chronic Kidney Disease, Stage 5, Chronic Kidney Disease, Severe (Stage 4)

imputation/severity.

RXC 05

Inflammatory Bowel Disease Agents

048, 041

Inflammatory Bowel Disease, Intestine Transplant Status/Complications

imputation/severity.

RXC 06

Insulin

019, 020, 021, 018

Diabetes with Acute Complications; Diabetes with Chronic Complications; Diabetes without Complication, Pancreas Transplant Status/Complications

imputation/severity.

RXC 07

Anti-Diabetic Agents, Except Insulin and Metformin Only

019, 020, 021, 018

Diabetes with Acute Complications, Diabetes with Chronic Complications, Diabetes without Complication, Pancreas Transplant Status/Complications

imputation/severity.

RXC 08

Multiple Sclerosis Agents

118

Multiple Sclerosis

imputation/severity.

RXC 09

Immune Suppressants and Immunomodulators

056, 057, 048, 041

Rheumatoid Arthritis and Specified Autoimmune Disorders, Systemic Lupus Erythematosus and Other Autoimmune Disorders, Inflammatory Bowel Disease, Intestine Transplant Status/Complications

imputation/severity.

RXC 10

Cystic Fibrosis Agents

159, 158

Cystic Fibrosis, Lung Transplant Status/Complications

imputation/severity.

iii. High-Cost Risk Pool Adjustment

HHS finalized a high-cost risk pool adjustment in the 2018 Payment Notice to account for the incorporation of risk associated with high-cost enrollees in the risk adjustment model. Specifically, we finalized adjusting the risk adjustment model for high-cost enrollees beginning for the 2018 benefit year by excluding a percentage of costs above a certain threshold level in the calculation of enrollee-level plan liability risk scores so that risk adjustment factors are calculated without the high-cost risk, because the average risk associated with HCCs and RXCs is better accounted for without the inclusion of the high-cost enrollees. In addition, to account for issuers' risk associated with the high-cost enrollees, issuers will be compensated for a percentage of costs above the threshold. We set the threshold and percentage of costs at a level that would continue to incentivize issuers to control costs while improving the risk prediction of the risk adjustment model. Issuers with high-cost enrollees will receive a payment for the percentage of costs above the threshold in their respective transfers. Using claims data submitted to the EDGE server by issuers of risk adjustment covered plans, HHS will calculate the total amount of paid claims costs for high-cost enrollees based on the threshold and the coinsurance rate. HHS will then calculate a charge as a percentage of the issuers' total premiums in the individual (including catastrophic and non-catastrophic plans and merged

market plans), or small group markets, which will be applied to the total transfer amount in that market, maintaining the balance of payments and charges within the risk adjustment program. In the 2018 Payment Notice, we finalized a threshold of $1 million and a coinsurance rate of 60 percent across all States for the individual (including catastrophic and non-catastrophic plans and merged market plans) and small group markets for the 2018 benefit year.

For the 2019 benefit year, we proposed to maintain the same parameters that apply to the 2018 benefit year. Therefore, we proposed to maintain a $1 million threshold and 60 percent coinsurance rate for the high-cost risk pool for the 2019 benefit year risk adjustment program. We explained that we believe this threshold and coinsurance rate would result in total payments or charges nationally that are very small as a percentage of premiums for issuers, and will prevent States and issuers with very high-cost enrollees from bearing a disproportionate amount of unpredictable risk. We sought comments on alternative methods for reimbursing issuers for exceptionally high-cost enrollees through the high-cost risk pool and improving the calculation of plan liability in the HHS-operated risk adjustment models for future benefit years. We also shared suggestions from stakeholders that the pool be multi-tiered, with multiple thresholds and increased coinsurance as the thresholds increase to account for the reduced number of enrollees at higher thresholds where costs to an issuer are catastrophic.

We are finalizing the high-cost risk pool adjustment parameters for the 2019 benefit year as proposed.

Comment:

Most commenters supported our proposal to maintain the same high-cost risk pool adjustment parameters as those used for the 2018 benefit year and noted that keeping the parameters the same provides stability and certainty in the markets. One commenter questioned why the parameters are not trended for increasing medical costs. Some commenters noted that the $1 million threshold level may be too high to have any meaningful impact on premiums or provide stability in smaller State markets with low claims costs that would have additional charges assessed, which could cause volatility. A few commenters did not support the high-cost risk pool adjustment to transfers, yet one of these commenters supported the removal of these costs from the risk adjustment model recalibration. One commenter did not support the proposal based on what appears to be a misunderstanding that the high-cost risk pool adjustment requires individuals to pay 40 percent of costs above $1 million. Some commenters did not support tiering the high-cost risk pool adjustment program for the 2019 benefit year without the first year of experience with this adjustment, noting it would lead to additional complexity. One commenter supported a tiered approach in parameters with maximum coinsurance rates of 80 to 90 percent phased in over multiple years, and another commenter supported a tiered approach if the approach and parameters result in an equivalent cost and scope as the $1 million threshold and 60 percent coinsurance rate parameters.

Response:

As we noted in the 2018 Payment Notice, removing extremely high costs improves the risk adjustment model's predictive ability. Additionally, the high-cost risk pool adjustment to the transfer formula mitigates issuers' risk selection incentives to avoid high-cost risk enrollees. Because high-cost enrollees are outliers and thus, unpredictable, they have the potential to significantly distort risk in smaller markets. Removing the high-cost risk from the recalibration model and separately adjusting transfers will allow for greater stability in risk scores to compensate issuers for predictable risk and transfers to compensate issuers for unpredictable risk. We will consider whether a tiered approach would improve model prediction and better compensate issuers for high-cost enrollees than the current approach for future benefit years. We are continuing to assess the market impact of tiered approaches nationally on the model's risk prediction and issuers' risk differences, and whether such an approach would meaningfully improve the model in accounting for high-cost enrollees' risk. We continue to believe a $1 million threshold and 60 percent coinsurance rate for the 2019 benefit year are appropriate to incentivize issuers to control costs while improving the risk adjustment model's risk prediction. Additionally, as we noted in the 2018 Payment Notice, if an issuer were to fail the data quality analysis for a risk adjustment transfer and be assessed a default charge under § 153.740(b) on that basis, we would perform additional data quality analysis to determine an issuer's eligibility for high-cost risk pool adjustments.

We are finalizing our proposal to maintain a $1 million threshold and 60 percent coinsurance rate for the high-cost risk pool for the 2019 benefit year risk adjustment program.

c. List of Factors To Be Employed in the Risk Adjustment Model (§ 153.320)

The final factors resulting from the equally weighted blended factors from the 2014 and 2015 MarketScan® data and the 2016 enrollee-level EDGE data separately solved models (with the incorporation of the partial year enrollment adjustment and prescription drugs reflected in the adult models only) are shown in Tables 2, 4, and 5. The adult, child and infant models have been truncated to account for the high-cost enrollee pool payment parameters by removing 60 percent of costs above the $1 million threshold as finalized in this rule. As discussed in the preceding section, we are finalizing our proposal to keep the 2019 benefit year high-cost enrollee risk pool payment parameters the same as those finalized for the 2018 benefit year. The final factors for the adult models also reflect the removal of the two severity-only RXCs (RXC 11: Ammonia Detoxicants, and RXC 12: Diuretics, Loop and Select Potassium-Sparing) discussed above in the preamble section on “Prescription Drugs.” Table 2 contains factors for each adult model, including the age-sex, HCCs, RXCs, HCC-RXC interaction, and enrollment duration coefficients. As we previously noted,

16

some interactions of RXCs and HCCs have negative coefficients; however, this does not mean that an enrollee's risk score decreases due to the presence of an RXC, an HCC, or both.

16

2018 Benefit Year Final HHS Risk Adjustment Model Coefficients. April 18, 2017. Available at

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/2018-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf

.

Table 3 contains the HHS HCCs in the severity illness indicator variable. Table 4 contains the factors for each child model. Table 5 contains the factors for each infant model. Tables 6 and 7 contain the HCCs included in the infant model maturity and severity categories, respectively.

Comment:

A few commenters requested for HHS to separately publish the coefficients solved only from the 2016 enrollee-level EDGE data.

Response:

We are not separately publishing the coefficients from only 1 year of data to avoid any confusion that could be caused from publishing two sets of coefficients in the final rule. However, we note that stakeholders interested in coefficients from the 2016 enrollee-level EDGE data will be able to solve for them based on the proposed and finalized coefficients. We published the model coefficients using equally weighted coefficients solved from the

2014 and 2015 MarketScan® data in the proposed rule. The coefficients finalized in Tables 2, 4 and 5 include the coefficients solved from the 2016 enrollee-level EDGE data without changing the coefficients solved from the 2014 and 2015 MarketScan® data published in the proposed rule, and equally weighted coefficients solved from the 3 years of data.

Table 2—Final Adult Risk Adjustment Model Factors for 2019 Benefit Year

HCC or RXC No.

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

Demographic Factors

Age 21-24, Male

0.167

0.133

0.091

0.051

0.048

Age 25-29, Male

0.153

0.119

0.078

0.037

0.034

Age 30-34, Male

0.186

0.144

0.093

0.043

0.039

Age 35-39, Male

0.236

0.185

0.125

0.063

0.058

Age 40-44, Male

0.292

0.233

0.164

0.093

0.088

Age 45-49, Male

0.346

0.280

0.202

0.121

0.115

Age 50-54, Male

0.455

0.378

0.287

0.192

0.184

Age 55-59, Male

0.511

0.424

0.324

0.217

0.209

Age 60-64, Male

0.573

0.473

0.359

0.235

0.225

Age 21-24, Female

0.269

0.218

0.153

0.088

0.083

Age 25-29, Female

0.304

0.245

0.173

0.098

0.092

Age 30-34, Female

0.410

0.338

0.253

0.167

0.160

Age 35-39, Female

0.491

0.410

0.317

0.226

0.219

Age 40-44, Female

0.545

0.454

0.352

0.249

0.241

Age 45-49, Female

0.553

0.458

0.350

0.237

0.229

Age 50-54, Female

0.616

0.516

0.401

0.278

0.268

Age 55-59, Female

0.601

0.499

0.380

0.252

0.241

Age 60-64, Female

0.616

0.505

0.379

0.240

0.229

Diagnosis Factors

HCC001

HIV/AIDS

0.626

0.529

0.434

0.359

0.352

HCC002

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock

8.000

7.812

7.688

7.731

7.737

HCC003

Central Nervous System Infections, Except Viral Meningitis

5.750

5.666

5.604

5.625

5.626

HCC004

Viral or Unspecified Meningitis

4.396

4.192

4.060

3.989

3.983

HCC006

Opportunistic Infections

6.143

6.060

6.006

5.972

5.968

HCC008

Metastatic Cancer

21.806

21.372

21.040

21.084

21.087

HCC009

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia

12.392

12.068

11.825

11.807

11.804

HCC010

Non-Hodgkin`s Lymphomas and Other Cancers and Tumors

5.575

5.356

5.189

5.117

5.110

HCC011

Colorectal, Breast (Age <50), Kidney, and Other Cancers

4.291

4.074

3.905

3.831

3.823

HCC012

Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors

2.640

2.482

2.356

2.283

2.276

HCC013

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors

1.211

1.084

0.976

0.860

0.849

HCC018

Pancreas Transplant Status/Complications

4.439

4.246

4.114

4.122

4.122

HCC019

Diabetes with Acute Complications

0.603

0.531

0.463

0.389

0.381

HCC020

Diabetes with Chronic Complications

0.603

0.531

0.463

0.389

0.381

HCC021

Diabetes without Complication

0.603

0.531

0.463

0.389

0.381

HCC023

Protein-Calorie Malnutrition

11.438

11.430

11.416

11.494

11.502

HCC026

Mucopolysaccharidosis

2.380

2.280

2.200

2.137

2.132

HCC027

Lipidoses and Glycogenosis

2.380

2.280

2.200

2.137

2.132

HCC029

Amyloidosis, Porphyria, and Other Metabolic Disorders

NA

NA

NA

NA

NA

HCC030

Adrenal, Pituitary, and Other Significant Endocrine Disorders

2.380

2.280

2.200

2.137

2.132

HCC034

Liver Transplant Status/Complications

2.380

2.280

2.200

2.137

2.132

HCC035

End-Stage Liver Disease

10.515

10.418

10.353

10.334

10.331

HCC036

Cirrhosis of Liver

5.696

5.491

5.349

5.341

5.339

HCC037_1

Chronic Viral Hepatitis C

0.707

0.604

0.545

0.509

0.505

HCC037_2

Chronic Hepatitis, Other/Unspecified

0.703

0.584

0.523

0.474

0.469

HCC038

Acute Liver Failure/Disease, Including Neonatal Hepatitis

4.300

4.155

4.055

4.026

4.024

HCC041

Intestine Transplant Status/Complications

28.253

28.206

28.169

28.209

28.209

HCC042

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis

9.718

9.488

9.318

9.328

9.329

HCC045

Intestinal Obstruction

5.510

5.274

5.115

5.104

5.102

HCC046

Chronic Pancreatitis

4.439

4.246

4.114

4.122

4.122

HCC047

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption

2.243

2.085

1.972

1.896

1.888

HCC048

Inflammatory Bowel Disease

2.192

2.011

1.868

1.765

1.755

HCC054

Necrotizing Fasciitis

5.507

5.332

5.200

5.206

5.207

HCC055

Bone/Joint/Muscle Infections/Necrosis

5.507

5.332

5.200

5.206

5.207

HCC056

Rheumatoid Arthritis and Specified Autoimmune Disorders

3.316

3.130

2.980

2.923

2.918

HCC057

Systemic Lupus Erythematosus and Other Autoimmune Disorders

0.993

0.878

0.780

0.666

0.654

HCC061

Osteogenesis Imperfecta and Other Osteodystrophies

2.654

2.477

2.337

2.257

2.249

HCC062

Congenital/Developmental Skeletal and Connective Tissue Disorders

2.654

2.477

2.337

2.257

2.249

HCC063

Cleft Lip/Cleft Palate

1.417

1.266

1.155

1.071

1.065

HCC066

Hemophilia

53.096

52.795

52.549

52.553

52.553

HCC067

Myelodysplastic Syndromes and Myelofibrosis

12.454

12.326

12.228

12.227

12.227

HCC068

Aplastic Anemia

12.454

12.326

12.228

12.227

12.227

HCC069

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn

7.864

7.738

7.636

7.604

7.602

HCC070

Sickle Cell Anemia (Hb-SS)

7.864

7.738

7.636

7.604

7.602

HCC071

Thalassemia Major

7.864

7.738

7.636

7.604

7.602

HCC073

Combined and Other Severe Immunodeficiencies

5.198

5.074

4.982

4.979

4.979

HCC074

Disorders of the Immune Mechanism

5.198

5.074

4.982

4.979

4.979

HCC075

Coagulation Defects and Other Specified Hematological Disorders

2.657

2.572

2.503

2.464

2.461

HCC081

Drug Psychosis

3.804

3.574

3.401

3.278

3.265

HCC082

Drug Dependence

3.804

3.574

3.401

3.278

3.265

HCC087

Schizophrenia

3.057

2.822

2.651

2.559

2.550

HCC088

Major Depressive and Bipolar Disorders

1.624

1.472

1.350

1.231

1.219

HCC089

Reactive and Unspecified Psychosis, Delusional Disorders

1.624

1.472

1.350

1.231

1.219

HCC090

Personality Disorders

1.124

1.010

0.901

0.780

0.769

HCC094

Anorexia/Bulimia Nervosa

2.549

2.397

2.275

2.201

2.194

HCC096

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes

4.019

3.924

3.847

3.789

3.783

HCC097

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes

1.056

0.963

0.880

0.802

0.795

HCC102

Autistic Disorder

1.124

1.010

0.901

0.780

0.769

HCC103

Pervasive Developmental Disorders, Except Autistic Disorder

1.124

1.010

0.901

0.780

0.769

HCC106

Traumatic Complete Lesion Cervical Spinal Cord

9.989

9.853

9.752

9.735

9.732

HCC107

Quadriplegia

9.989

9.853

9.752

9.735

9.732

HCC108

Traumatic Complete Lesion Dorsal Spinal Cord

7.568

7.420

7.310

7.278

7.274

HCC109

Paraplegia

7.568

7.420

7.310

7.278

7.274

HCC110

Spinal Cord Disorders/Injuries

5.212

5.008

4.857

4.816

4.812

HCC111

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease

1.965

1.764

1.620

1.534

1.524

HCC112

Quadriplegic Cerebral Palsy

0.302

0.192

0.120

0.072

0.071

HCC113

Cerebral Palsy, Except Quadriplegic

0.255

0.176

0.120

0.072

0.071

HCC114

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies

0.355

0.300

0.265

0.241

0.236

HCC115

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy

5.262

5.137

5.045

5.027

5.025

HCC117

Muscular Dystrophy

2.064

1.922

1.819

1.720

1.708

HCC118

Multiple Sclerosis

8.436

8.144

7.920

7.895

7.892

HCC119

Parkinson's, Huntington's, and Spinocerebellar Disease, and Other Neurodegenerative Disorders

2.064

1.922

1.819

1.720

1.708

HCC120

Seizure Disorders and Convulsions

1.390

1.248

1.138

1.044

1.035

HCC121

Hydrocephalus

5.922

5.814

5.724

5.696

5.694

HCC122

Non-Traumatic Coma, and Brain Compression/Anoxic Damage

8.310

8.176

8.067

8.059

8.058

HCC125

Respirator Dependence/Tracheostomy Status

26.626

26.590

26.555

26.637

26.644

HCC126

Respiratory Arrest

8.048

7.900

7.794

7.864

7.872

HCC127

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes

8.048

7.900

7.794

7.864

7.872

HCC128

Heart Assistive Device/Artificial Heart

28.421

28.219

28.071

28.120

28.125

HCC129

Heart Transplant

28.421

28.219

28.071

28.120

28.125

HCC130

Congestive Heart Failure

2.800

2.705

2.635

2.624

2.623

HCC131

Acute Myocardial Infarction

8.077

7.789

7.577

7.664

7.672

HCC132

Unstable Angina and Other Acute Ischemic Heart Disease

4.820

4.558

4.388

4.378

4.378

HCC135

Heart Infection/Inflammation, Except Rheumatic

5.473

5.356

5.268

5.237

5.235

HCC142

Specified Heart Arrhythmias

2.467

2.335

2.233

2.158

2.150

HCC145

Intracranial Hemorrhage

7.621

7.366

7.186

7.162

7.159

HCC146

Ischemic or Unspecified Stroke

2.164

2.012

1.918

1.896

1.894

HCC149

Cerebral Aneurysm and Arteriovenous Malformation

3.167

2.994

2.869

2.802

2.796

HCC150

Hemiplegia/Hemiparesis

4.517

4.422

4.355

4.402

4.407

HCC151

Monoplegia, Other Paralytic Syndromes

2.734

2.612

2.525

2.486

2.482

HCC153

Atherosclerosis of the Extremities with Ulceration or Gangrene

9.056

8.976

8.915

9.004

9.013

HCC154

Vascular Disease with Complications

6.714

6.556

6.439

6.424

6.422

HCC156

Pulmonary Embolism and Deep Vein Thrombosis

3.352

3.207

3.101

3.044

3.038

HCC158

Lung Transplant Status/Complications

25.564

25.421

25.310

25.384

25.391

HCC159

Cystic Fibrosis

14.108

13.825

13.596

13.601

13.601

HCC160

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis

0.878

0.776

0.686

0.591

0.582

HCC161

Asthma

0.878

0.776

0.686

0.591

0.582

HCC162

Fibrosis of Lung and Other Lung Disorders

1.869

1.767

1.693

1.639

1.633

HCC163

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections

6.270

6.223

6.188

6.194

6.195

HCC183

Kidney Transplant Status

7.462

7.260

7.119

7.070

7.064

HCC184

End Stage Renal Disease

29.905

29.678

29.495

29.641

29.654

HCC187

Chronic Kidney Disease, Stage 5

1.319

1.263

1.224

1.233

1.235

HCC188

Chronic Kidney Disease, Stage 4

1.319

1.263

1.224

1.233

1.235

HCC203

Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism

1.156

1.011

0.879

0.670

0.648

HCC204

Miscarriage with Complications

1.156

1.011

0.879

0.670

0.648

HCC205

Miscarriage with No or Minor Complications

1.156

1.011

0.879

0.670

0.648

HCC207

Completed Pregnancy With Major Complications

3.329

2.913

2.690

2.416

2.386

HCC208

Completed Pregnancy With Complications

3.329

2.913

2.690

2.416

2.386

HCC209

Completed Pregnancy with No or Minor Complications

3.329

2.913

2.690

2.416

2.386

HCC217

Chronic Ulcer of Skin, Except Pressure

1.988

1.888

1.818

1.798

1.796

HCC226

Hip Fractures and Pathological Vertebral or Humerus Fractures

8.801

8.587

8.428

8.457

8.460

HCC227

Pathological Fractures, Except of Vertebrae, Hip, or Humerus

3.874

3.744

3.644

3.579

3.575

HCC251

Stem Cell, Including Bone Marrow, Transplant Status/Complications

24.334

24.334

24.329

24.357

24.360

HCC253

Artificial Openings for Feeding or Elimination

8.284

8.198

8.131

8.164

8.168

HCC254

Amputation Status, Lower Limb/Amputation Complications

3.486

3.371

3.290

3.313

3.316

Interaction Factors

SEVERE x HCC006

Severe illness x Opportunistic Infections

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC008

Severe illness x Metastatic Cancer

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC009

Severe illness x Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC010

Severe illness x Non-Hodgkin's Lymphomas and Other Cancers and Tumors

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC115

Severe illness x Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC135

Severe illness x Heart Infection/Inflammation, Except Rheumatic

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC145

Severe illness x Intracranial Hemorrhage

7.694

7.897

8.035

8.180

8.193

SEVERE x G06

Severe illness x HCC group G06 (G06 is HCC Group 6 which includes the following HCCs in the blood disease category: 67, 68)

7.694

7.897

8.035

8.180

8.193

SEVERE x G08

Severe illness x HCC group G08 (G08 is HCC Group 8 which includes the following HCCs in the blood disease category: 73, 74)

7.694

7.897

8.035

8.180

8.193

SEVERE x HCC035

Severe illness x End-Stage Liver Disease

1.449

1.541

1.596

1.722

1.733

SEVERE x HCC038

Severe illness x Acute Liver Failure/Disease, Including Neonatal Hepatitis

1.449

1.541

1.596

1.722

1.733

SEVERE x HCC153

Severe illness x Atherosclerosis of the Extremities with Ulceration or Gangrene

1.449

1.541

1.596

1.722

1.733

SEVERE x HCC154

Severe illness x Vascular Disease with Complications

1.449

1.541

1.596

1.722

1.733

SEVERE x HCC163

Severe illness x Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections

1.449

1.541

1.596

1.722

1.733

SEVERE x HCC253

Severe illness x Artificial Openings for Feeding or Elimination

1.449

1.541

1.596

1.722

1.733

SEVERE x G03

Severe illness x HCC group G03 (G03 is HCC Group 3 which includes the following HCCs in the musculoskeletal disease category: 54, 55)

1.449

1.541

1.596

1.722

1.733

Enrollment Duration Factors

1 month of enrollment

0.417

0.365

0.325

0.306

0.305

2 months of enrollment

0.382

0.333

0.293

0.275

0.273

3 months of enrollment

0.327

0.282

0.244

0.227

0.225

4 months of enrollment

0.279

0.240

0.206

0.189

0.188

5 months of enrollment

0.249

0.216

0.185

0.169

0.168

6 months of enrollment

0.207

0.181

0.153

0.138

0.137

7 months of enrollment

0.189

0.165

0.141

0.126

0.125

8 months of enrollment

0.137

0.120

0.102

0.091

0.091

9 months of enrollment

0.097

0.085

0.074

0.067

0.067

10 months of enrollment

0.070

0.065

0.060

0.057

0.057

11 months of enrollment

0.064

0.060

0.057

0.055

0.055

Prescription Drug Factors

RXC 01

Anti-HIV Agents

7.822

7.257

6.830

6.605

6.580

RXC 02

Anti-Hepatitis C (HCV) Agents

39.880

39.337

38.905

39.062

39.075

RXC 03

Antiarrhythmics

0.113

0.113

0.113

0.113

0.113

RXC 04

Phosphate Binders

0.730

0.730

0.730

0.730

0.730

RXC 05

Inflammatory Bowel Disease Agents

2.022

1.842

1.701

1.509

1.487

RXC 06

Insulin

1.498

1.349

1.185

0.993

0.973

RXC 07

Anti-Diabetic Agents, Except Insulin and Metformin Only

0.495

0.430

0.361

0.272

0.264

RXC 08

Multiple Sclerosis Agents

21.141

20.350

19.757

19.731

19.721

RXC 09

Immune Suppressants and Immunomodulators

13.273

12.681

12.240

12.270

12.268

RXC 10

Cystic Fibrosis Agents

13.045

12.712

12.485

12.565

12.574

RXC 01 x HCC001

Additional effect for enrollees with RXC 01 (Anti-HIV Agents) and HCC 001 (HIV/AIDS)

2.459

2.560

2.655

3.010

3.046

RXC 02 x HCC037_1, 036, 035, 034

Additional effect for enrollees with RXC 02 (Anti-Hepatitis C (HCV) Agents) and (HCC 037_1 (Chronic Viral Hepatitis C) or 036 (Cirrhosis of Liver) or 035 (End-Stage Liver Disease) or 034 (Liver Transplant Status/Complications))

2.645

2.838

2.974

3.020

3.025

RXC 03 x HCC142

Additional effect for enrollees with RxC 03 (Antiarrhythmics) and HCC 142 (Specified Heart Arrhythmias)

0.000

0.000

0.000

0.000

0.000

RXC 04 x HCC184, 183, 187, 188

Additional effect for enrollees with RxC 04 (Phosphate Binders) and (HCC 184 (End Stage Renal Disease) or 183 (Kidney Transplant Status) or 187 (Chronic Kidney Disease, Stage 5) or 188 (Chronic Kidney Disease, Severe Stage 4))

0.000

0.000

0.000

0.000

0.000

RXC 05 x HCC048, 041

Additional effect for enrollees with RxC 05 (Inflammatory Bowel Disease Agents) and (HCC 048 (Inflammatory Bowel Disease) or 041 (Intestine Transplant Status/Complications))

−1.192

−1.096

−0.997

−0.888

−0.878

RXC 06 x HCC018, 019, 020, 021

Additional effect for enrollees with RxC 06 (Insulin) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute Complications) or 020 (Diabetes with Chronic Complications) or 021 (Diabetes without Complication))

0.421

0.395

0.456

0.533

0.538

RXC 07 x HCC018, 019, 020, 021

Additional effect for enrollees with RxC 07 (Anti-Diabetic Agents, Except Insulin and Metformin Only) and (HCC 018 (Pancreas Transplant Status/Complications) or 019 (Diabetes with Acute Complications) or 020 (Diabetes with Chronic Complications) or 021 (Diabetes without Complication))

−0.202

−0.184

−0.153

−0.153

−0.155

RXC 08 x HCC118

Additional effect for enrollees with RxC 08 (Multiple Sclerosis Agents) and HCC 118 (Multiple Sclerosis)

−5.507

−4.981

−4.597

−4.422

−4.399

RXC 09 x HCC056 or 057 and 048 or 041

Additional effect for enrollees with RxC 09 (Immune Suppressants and Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or 041 (Intestine Transplant Status/Complications)) and (HCC 056 (Rheumatoid Arthritis and Specified Autoimmune Disorders) or 057 (Systemic Lupus Erythematosus and Other Autoimmune Disorders))

−0.337

−0.352

−0.336

−0.370

−0.375

RXC 09 x HCC056

Additional effect for enrollees with RxC 09 (Immune Suppressants and Immunomodulators) and HCC 056 (Rheumatoid Arthritis and Specified Autoimmune Disorders)

−2.862

−2.632

−2.452

−2.323

−2.307

RXC 09 x HCC057

Additional effect for enrollees with RxC 09 (Immune Suppressants and Immunomodulators) and HCC 057 (Systemic Lupus Erythematosus and Other Autoimmune Disorders)

−0.595

−0.444

−0.322

−0.175

−0.161

RXC 09 x HCC048, 041

Additional effect for enrollees with RxC 09 (Immune Suppressants and Immunomodulators) and (HCC 048 (Inflammatory Bowel Disease) or 041 (Intestine Transplant Status/Complications))

1.128

1.392

1.563

1.764

1.788

RXC 10 x HCC159, 158

Additional effect for enrollees with RxC 10 (Cystic Fibrosis Agents) and (HCC 159 (Cystic Fibrosis) or 158 (Lung Transplant Status/Complications))

29.170

29.398

29.528

29.588

29.594

Table 3—HHS HCCs in the Severity Illness Indicator Variable

Description

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.

Peritonitis/Gastrointestinal Perforation/Necrotizing Enter colitis.

Seizure Disorders and Convulsions.

Non-Traumatic Coma, Brain Compression/Anoxic Damage.

Respirator Dependence/Tracheostomy Status.

Respiratory Arrest.

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes.

Pulmonary Embolism and Deep Vein Thrombosis.

Table 4—Final Child Risk Adjustment Model Factors for 2019 Benefit Year

Factor

Platinum

Gold

Silver

Bronze

Catastrophic

Demographic Factors

Age 2-4, Male

0.200

0.149

0.092

0.042

0.038

Age 5-9, Male

0.138

0.100

0.055

0.018

0.015

Age 10-14, Male

0.193

0.152

0.100

0.060

0.058

Age 15-20, Male

0.258

0.209

0.151

0.099

0.095

Age 2-4, Female

0.153

0.109

0.062

0.025

0.022

Age 5-9, Female

0.102

0.068

0.031

0.005

0.003

Age 10-14, Female

0.182

0.142

0.095

0.059

0.056

Age 15-20, Female

0.281

0.224

0.155

0.091

0.086

Diagnosis Factors

HIV/AIDS

5.368

4.942

4.622

4.506

4.493

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock

13.803

13.633

13.522

13.529

13.530

Central Nervous System Infections, Except Viral Meningitis

8.179

8.020

7.905

7.913

7.913

Viral or Unspecified Meningitis

3.563

3.358

3.225

3.077

3.063

Opportunistic Infections

16.934

16.887

16.848

16.832

16.829

Metastatic Cancer

32.479

32.270

32.092

32.101

32.102

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia

10.021

9.785

9.590

9.509

9.501

Non-Hodgkin's Lymphomas and Other Cancers and Tumors

7.835

7.601

7.411

7.304

7.292

Colorectal, Breast (Age <50), Kidney, and Other Cancers

3.051

2.879

2.737

2.618

2.605

Breast (Age 50+) and Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors

3.051

2.879

2.737

2.618

2.605

Thyroid Cancer, Melanoma, Neurofibromatosis, and Other Cancers and Tumors

1.188

1.057

0.943

0.818

0.805

Pancreas Transplant Status/Complications

22.337

22.078

21.875

21.901

21.904

Diabetes with Acute Complications

2.550

2.234

2.032

1.749

1.721

Diabetes with Chronic Complications

2.550

2.234

2.032

1.749

1.721

Diabetes without Complication

2.550

2.234

2.032

1.749

1.721

Protein-Calorie Malnutrition

12.783

12.694

12.618

12.658

12.661

Mucopolysaccharidosis

7.948

7.723

7.536

7.494

7.489

Lipidoses and Glycogenosis

7.948

7.723

7.536

7.494

7.489

Congenital Metabolic Disorders, Not Elsewhere Classified

7.948

7.723

7.536

7.494

7.489

Amyloidosis, Porphyria, and Other Metabolic Disorders

7.948

7.723

7.536

7.494

7.489

Adrenal, Pituitary, and Other Significant Endocrine Disorders

7.948

7.723

7.536

7.494

7.489

Liver Transplant Status/Complications

22.337

22.078

21.875

21.901

21.904

End-Stage Liver Disease

11.834

11.685

11.584

11.580

11.579

Cirrhosis of Liver

5.782

5.646

5.535

5.507

5.507

Chronic Viral Hepatitis C

6.269

6.114

5.983

5.966

5.967

Chronic Hepatitis, Other/Unspecified

1.200

1.086

0.983

0.923

0.920

Acute Liver Failure/Disease, Including Neonatal Hepatitis

11.636

11.494

11.390

11.392

11.391

Intestine Transplant Status/Complications

22.337

22.078

21.875

21.901

21.904

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis

11.572

11.283

11.063

11.060

11.061

Intestinal Obstruction

4.506

4.310

4.154

4.057

4.049

Chronic Pancreatitis

10.521

10.314

10.163

10.167

10.167

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption

2.265

2.148

2.046

1.948

1.938

Inflammatory Bowel Disease

7.055

6.685

6.402

6.291

6.279

Necrotizing Fasciitis

3.907

3.706

3.544

3.468

3.461

Bone/Joint/Muscle Infections/Necrosis

3.907

3.706

3.544

3.468

3.461

Rheumatoid Arthritis and Specified Autoimmune Disorders

4.282

4.052

3.856

3.762

3.754

Systemic Lupus Erythematosus and Other Autoimmune Disorders

1.092

0.970

0.854

0.726

0.714

Osteogenesis Imperfecta and Other Osteodystrophies

1.402

1.292

1.193

1.110

1.102

Congenital/Developmental Skeletal and Connective Tissue Disorders

1.402

1.292

1.193

1.110

1.102

Cleft Lip/Cleft Palate

1.435

1.260

1.121

0.992

0.980

Hemophilia

61.183

60.705

60.325

60.299

60.296

Myelodysplastic Syndromes and Myelofibrosis

14.718

14.596

14.505

14.474

14.470

Aplastic Anemia

14.718

14.596

14.505

14.474

14.470

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn

6.928

6.714

6.544

6.456

6.448

Sickle Cell Anemia (Hb-SS)

6.928

6.714

6.544

6.456

6.448

Thalassemia Major

6.928

6.714

6.544

6.456

6.448

Combined and Other Severe Immunodeficiencies

5.849

5.705

5.592

5.531

5.526

Disorders of the Immune Mechanism

5.849

5.705

5.592

5.531

5.526

Coagulation Defects and Other Specified Hematological Disorders

4.662

4.542

4.439

4.366

4.359

Drug Psychosis

5.648

5.392

5.211

5.131

5.125

Drug Dependence

5.648

5.392

5.211

5.131

5.125

Schizophrenia

4.819

4.473

4.217

4.086

4.073

Major Depressive and Bipolar Disorders

2.214

2.007

1.833

1.653

1.636

Reactive and Unspecified Psychosis, Delusional Disorders

2.129

1.931

1.762

1.584

1.567

Personality Disorders

0.622

0.517

0.405

0.257

0.243

Anorexia/Bulimia Nervosa

2.657

2.471

2.318

2.238

2.228

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes

2.119

1.961

1.850

1.796

1.790

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes

1.785

1.639

1.526

1.435

1.427

Autistic Disorder

2.017

1.836

1.677

1.511

1.495

Pervasive Developmental Disorders, Except Autistic Disorder

0.686

0.592

0.484

0.349

0.338

Traumatic Complete Lesion Cervical Spinal Cord

11.525

11.463

11.427

11.507

11.514

Quadriplegia

11.525

11.463

11.427

11.507

11.514

Traumatic Complete Lesion Dorsal Spinal Cord

9.265

9.094

8.948

8.933

8.928

Paraplegia

9.265

9.094

8.948

8.933

8.928

Spinal Cord Disorders/Injuries

3.678

3.487

3.339

3.247

3.239

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease

4.952

4.754

4.592

4.506

4.499

Quadriplegic Cerebral Palsy

2.968

2.768

2.638

2.642

2.642

Cerebral Palsy, Except Quadriplegic

0.496

0.392

0.322

0.263

0.261

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies

1.422

1.303

1.209

1.137

1.130

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy

9.749

9.588

9.461

9.440

9.440

Muscular Dystrophy

2.584

2.410

2.280

2.179

2.168

Multiple Sclerosis

10.447

10.104

9.835

9.801

9.797

Parkinson's, Huntington's, and Spinocerebellar Disease, and Other Neurodegenerative Disorders

2.584

2.410

2.280

2.179

2.168

Seizure Disorders and Convulsions

2.004

1.852

1.714

1.567

1.553

Hydrocephalus

4.256

4.146

4.063

4.044

4.042

Non-Traumatic Coma, and Brain Compression/Anoxic Damage

5.714

5.590

5.487

5.444

5.440

Respirator Dependence/Tracheostomy Status

31.959

31.852

31.774

31.912

31.924

Respiratory Arrest

9.776

9.552

9.401

9.366

9.360

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes

9.776

9.552

9.401

9.366

9.360

Heart Assistive Device/Artificial Heart

22.337

22.078

21.875

21.901

21.904

Heart Transplant

22.337

22.078

21.875

21.901

21.904

Congestive Heart Failure

5.773

5.674

5.588

5.545

5.540

Acute Myocardial Infarction

5.179

5.104

5.062

5.048

5.046

Unstable Angina and Other Acute Ischemic Heart Disease

3.842

3.765

3.707

3.676

3.675

Heart Infection/Inflammation, Except Rheumatic

11.892

11.786

11.703

11.684

11.683

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders

4.742

4.584

4.427

4.311

4.301

Major Congenital Heart/Circulatory Disorders

1.345

1.248

1.130

1.012

1.002

Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital Heart/Circulatory Disorders

0.876

0.787

0.684

0.591

0.584

Specified Heart Arrhythmias

3.734

3.576

3.438

3.360

3.353

Intracranial Hemorrhage

12.674

12.462

12.308

12.302

12.303

Ischemic or Unspecified Stroke

5.445

5.367

5.318

5.328

5.331

Cerebral Aneurysm and Arteriovenous Malformation

3.374

3.188

3.056

2.980

2.972

Hemiplegia/Hemiparesis

4.146

4.041

3.967

3.933

3.927

Monoplegia, Other Paralytic Syndromes

3.501

3.373

3.284

3.255

3.254

Atherosclerosis of the Extremities with Ulceration or Gangrene

11.717

11.481

11.305

11.230

11.223

Vascular Disease with Complications

14.161

14.049

13.958

13.980

13.981

Pulmonary Embolism and Deep Vein Thrombosis

13.582

13.475

13.396

13.432

13.436

Lung Transplant Status/Complications

22.337

22.078

21.875

21.901

21.904

Cystic Fibrosis

22.337

22.078

21.875

21.901

21.904

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis

0.375

0.310

0.225

0.134

0.126

Asthma

0.375

0.310

0.225

0.134

0.126

Fibrosis of Lung and Other Lung Disorders

3.073

2.971

2.872

2.801

2.795

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections

8.178

8.122

8.074

8.105

8.108

Kidney Transplant Status

12.436

12.166

11.969

11.943

11.938

End Stage Renal Disease

36.073

35.963

35.872

35.976

35.985

Chronic Kidney Disease, Stage 5

4.148

4.017

3.909

3.812

3.806

Chronic Kidney Disease, Severe (Stage 4)

4.148

4.017

3.909

3.812

3.806

Ectopic and Molar Pregnancy, Except with Renal Failure, Shock, or Embolism

1.061

0.906

0.761

0.532

0.507

Miscarriage with Complications

1.061

0.906

0.761

0.532

0.507

Miscarriage with No or Minor Complications

1.061

0.906

0.761

0.532

0.507

Completed Pregnancy With Major Complications

2.897

2.512

2.294

1.986

1.950

Completed Pregnancy With Complications

2.897

2.512

2.294

1.986

1.950

Completed Pregnancy with No or Minor Complications

2.897

2.512

2.294

1.986

1.950

Chronic Ulcer of Skin, Except Pressure

2.338

2.247

2.159

2.086

2.079

Hip Fractures and Pathological Vertebral or Humerus Fractures

5.437

5.163

4.942

4.830

4.822

Pathological Fractures, Except of Vertebrae, Hip, or Humerus

1.665

1.535

1.404

1.262

1.248

Stem Cell, Including Bone Marrow, Transplant Status/Complications

22.337

22.078

21.875

21.901

21.904

Artificial Openings for Feeding or Elimination

11.371

11.258

11.185

11.294

11.305

Amputation Status, Lower Limb/Amputation Complications

6.737

6.497

6.322

6.207

6.195

Table 5—Final Infant Risk Adjustment Model Factors for 2019 Benefit Year

Group

Platinum

Gold

Silver

Bronze

Catastrophic

Extremely Immature * Severity Level 5 (Highest)

253.927

252.583

251.467

251.462

251.464

Extremely Immature * Severity Level 4

154.510

153.094

151.930

151.820

151.808

Extremely Immature * Severity Level 3

33.920

32.887

32.017

31.768

31.749

Extremely Immature * Severity Level 2

33.920

32.887

32.017

31.768

31.749

Extremely Immature * Severity Level 1 (Lowest)

33.920

32.887

32.017

31.768

31.749

Immature * Severity Level 5 (Highest)

159.462

158.128

157.021

157.005

157.004

Immature * Severity Level 4

72.478

71.132

70.018

69.946

69.937

Immature * Severity Level 3

32.912

31.777

30.841

30.633

30.613

Immature * Severity Level 2

24.333

23.245

22.351

22.082

22.055

Immature * Severity Level 1 (Lowest)

24.333

23.245

22.351

22.082

22.055

Premature/Multiples * Severity Level 5 (Highest)

115.833

114.548

113.499

113.406

113.398

Premature/Multiples * Severity Level 4

27.460

26.234

25.253

25.043

25.026

Premature/Multiples * Severity Level 3

14.214

13.255

12.482

12.044

12.001

Premature/Multiples * Severity Level 2

7.992

7.259

6.638

6.009

5.940

Premature/Multiples * Severity Level 1 (Lowest)

5.323

4.790

4.246

3.652

3.600

Term * Severity Level 5 (Highest)

91.593

90.463

89.524

89.335

89.320

Term * Severity Level 4

14.962

14.042

13.315

12.830

12.788

Term * Severity Level 3

5.857

5.300

4.767

4.150

4.092

Term * Severity Level 2

3.574

3.148

2.666

1.994

1.935

Term * Severity Level 1 (Lowest)

1.546

1.321

0.916

0.449

0.423

Age1 * Severity Level 5 (Highest)

253.927

252.583

251.467

251.462

251.464

Age1 * Severity Level 4

154.510

153.094

151.930

151.820

151.808

Age1 * Severity Level 3

33.920

32.887

32.017

31.768

31.749

Age1 * Severity Level 2

33.920

32.887

32.017

31.768

31.749

Age1 * Severity Level 1 (Lowest)

33.920

32.887

32.017

31.768

31.749

Age 0 Male

159.462

158.128

157.021

157.005

157.004

Age 1 Male

72.478

71.132

70.018

69.946

69.937

Table 6—HHS HCCs Included in Infant Model Maturity Categories

Maturity category

HCC/description

Extremely Immature

Extremely Immature Newborns, Birth weight <500 Grams.

Extremely Immature

Extremely Immature Newborns, Including Birth weight 500-749 Grams.

Extremely Immature

Extremely Immature Newborns, Including Birth weight 750-999 Grams.

Immature

Premature Newborns, Including Birth weight 1,000-1,499 Grams.

Immature

Premature Newborns, Including Birth weight 1,500-1,999 Grams.

Premature/Multiples

Premature Newborns, Including Birth weight 2,000-2,499 Grams.

Premature/Multiples

Other Premature, Low Birth weight, Malnourished, or Multiple Birth Newborns.

Term

Term or Post-Term Singleton Newborn, Normal or High Birth weight.

Age 1

All age 1 infants.

Table 7—HHS HCCs Included in Infant Model Severity Categories

Severity category

HCC

Severity Level 5 (Highest)

Metastatic Cancer.

Severity Level 5

Pancreas Transplant Status/Complications.

Severity Level 5

Liver Transplant Status/Complications.

Severity Level 5

End-Stage Liver Disease.

Severity Level 5

Intestine Transplant Status/Complications.

Severity Level 5

Peritonitis/Gastrointestinal Perforation/Necrotizing Enterocolitis.

Severity Level 5

Respirator Dependence/Tracheostomy Status.

Severity Level 5

Heart Assistive Device/Artificial Heart.

Severity Level 5

Heart Transplant.

Severity Level 5

Congestive Heart Failure.

Severity Level 5

Hypoplastic Left Heart Syndrome and Other Severe Congenital Heart Disorders.

Severity Level 5

Lung Transplant Status/Complications.

Severity Level 5

Kidney Transplant Status.

Severity Level 5

End Stage Renal Disease.

Severity Level 5

Stem Cell, Including Bone Marrow, Transplant Status/Complications.

Severity Level 4

Septicemia, Sepsis, Systemic Inflammatory Response Syndrome/Shock.

Severity Level 4

Lung, Brain, and Other Severe Cancers, Including Pediatric Acute Lymphoid Leukemia.

Severity Level 4

Mucopolysaccharidosis.

Severity Level 4

Major Congenital Anomalies of Diaphragm, Abdominal Wall, and Esophagus, Age <2.

Severity Level 4

Myelodysplastic Syndromes and Myelofibrosis.

Severity Level 4

Aplastic Anemia.

Severity Level 4

Combined and Other Severe Immunodeficiencies.

Severity Level 4

Traumatic Complete Lesion Cervical Spinal Cord.

Severity Level 4

Quadriplegia.

Severity Level 4

Amyotrophic Lateral Sclerosis and Other Anterior Horn Cell Disease.

Severity Level 4

Quadriplegic Cerebral Palsy.

Severity Level 4

Myasthenia Gravis/Myoneural Disorders and Guillain-Barre Syndrome/Inflammatory and Toxic Neuropathy.

Severity Level 4

Non-Traumatic Coma, Brain Compression/Anoxic Damage.

Severity Level 4

Respiratory Arrest.

Severity Level 4

Cardio-Respiratory Failure and Shock, Including Respiratory Distress Syndromes.

Severity Level 4

Acute Myocardial Infarction.

Severity Level 4

Heart Infection/Inflammation, Except Rheumatic.

Severity Level 4

Major Congenital Heart/Circulatory Disorders.

Severity Level 4

Intracranial Hemorrhage.

Severity Level 4

Ischemic or Unspecified Stroke.

Severity Level 4

Vascular Disease with Complications.

Severity Level 4

Pulmonary Embolism and Deep Vein Thrombosis.

Severity Level 4

Aspiration and Specified Bacterial Pneumonias and Other Severe Lung Infections.

Severity Level 4

Chronic Kidney Disease, Stage 5.

Severity Level 4

Hip Fractures and Pathological Vertebral or Humerus Fractures.

Severity Level 4

Artificial Openings for Feeding or Elimination.

Severity Level 3

HIV/AIDS.

Severity Level 3

Central Nervous System Infections, Except Viral Meningitis.

Severity Level 3

Opportunistic Infections.

Severity Level 3

Non-Hodgkin's Lymphomas and Other Cancers and Tumors.

Severity Level 3

Colorectal, Breast (Age <50), Kidney and Other Cancers.

Severity Level 3

Breast (Age 50+), Prostate Cancer, Benign/Uncertain Brain Tumors, and Other Cancers and Tumors.

Severity Level 3

Lipidoses and Glycogenosis.

Severity Level 3

Adrenal, Pituitary, and Other Significant Endocrine Disorders.

Severity Level 3

Acute Liver Failure/Disease, Including Neonatal Hepatitis.

Severity Level 3

Intestinal Obstruction.

Severity Level 3

Necrotizing Fasciitis.

Severity Level 3

Bone/Joint/Muscle Infections/Necrosis.

Severity Level 3

Osteogenesis Imperfecta and Other Osteodystrophies.

Severity Level 3

Cleft Lip/Cleft Palate.

Severity Level 3

Hemophilia.

Severity Level 3

Disorders of the Immune Mechanism.

Severity Level 3

Coagulation Defects and Other Specified Hematological Disorders.

Severity Level 3

Prader-Willi, Patau, Edwards, and Autosomal Deletion Syndromes.

Severity Level 3

Traumatic Complete Lesion Dorsal Spinal Cord.

Severity Level 3

Paraplegia.

Severity Level 3

Spinal Cord Disorders/Injuries.

Severity Level 3

Cerebral Palsy, Except Quadriplegic.

Severity Level 3

Muscular Dystrophy.

Severity Level 3

Parkinson's, Huntington's, and Spinocerebellar Disease, and Other Neurodegenerative Disorders.

Severity Level 3

Hydrocephalus.

Severity Level 3

Unstable Angina and Other Acute Ischemic Heart Disease.

Severity Level 3

Atrial and Ventricular Septal Defects, Patent Ductus Arteriosus, and Other Congenital Heart/Circulatory Disorders.

Severity Level 3

Specified Heart Arrhythmias.

Severity Level 3

Cerebral Aneurysm and Arteriovenous Malformation.

Severity Level 3

Hemiplegia/Hemiparesis.

Severity Level 3

Cystic Fibrosis.

Severity Level 3

Fibrosis of Lung and Other Lung Disorders.

Severity Level 3

Pathological Fractures, Except of Vertebrae, Hip, or Humerus.

Severity Level 2

Viral or Unspecified Meningitis.

Severity Level 2

Thyroid, Melanoma, Neurofibromatosis, and Other Cancers and Tumors.

Severity Level 2

Diabetes with Acute Complications.

Severity Level 2

Diabetes with Chronic Complications.

Severity Level 2

Diabetes without Complication.

Severity Level 2

Protein-Calorie Malnutrition.

Severity Level 2

Congenital Metabolic Disorders, Not Elsewhere Classified.

Severity Level 2

Amyloidosis, Porphyria, and Other Metabolic Disorders.

Severity Level 2

Cirrhosis of Liver.

Severity Level 2

Chronic Pancreatitis.

Severity Level 2

Inflammatory Bowel Disease.

Severity Level 2

Rheumatoid Arthritis and Specified Autoimmune Disorders.

Severity Level 2

Systemic Lupus Erythematosus and Other Autoimmune Disorders.

Severity Level 2

Congenital/Developmental Skeletal and Connective Tissue Disorders.

Severity Level 2

Acquired Hemolytic Anemia, Including Hemolytic Disease of Newborn.

Severity Level 2

Sickle Cell Anemia (Hb-SS).

Severity Level 2

Drug Psychosis.

Severity Level 2

Drug Dependence.

Severity Level 2

Down Syndrome, Fragile X, Other Chromosomal Anomalies, and Congenital Malformation Syndromes.

Severity Level 2

Spina Bifida and Other Brain/Spinal/Nervous System Congenital Anomalies.

Severity Level 2

Seizure Disorders and Convulsions.

Severity Level 2

Monoplegia, Other Paralytic Syndromes.

Severity Level 2

Atherosclerosis of the Extremities with Ulceration or Gangrene.

Severity Level 2

Chronic Obstructive Pulmonary Disease, Including Bronchiectasis.

Severity Level 2

Chronic Ulcer of Skin, Except Pressure.

Severity Level 1 (Lowest)

Chronic Hepatitis.

Severity Level 1

Acute Pancreatitis/Other Pancreatic Disorders and Intestinal Malabsorption.

Severity Level 1

Thalassemia Major.

Severity Level 1

Autistic Disorder.

Severity Level 1

Pervasive Developmental Disorders, Except Autistic Disorder.

Severity Level 1

Multiple Sclerosis.

Severity Level 1

Asthma.

Severity Level 1

Chronic Kidney Disease, Severe (Stage 4).

Severity Level 1

Amputation Status, Lower Limb/Amputation Complications.

Severity Level 1

No Severity HCCs.

d. Cost-Sharing Reductions Adjustments (§ 153.320)

We proposed to continue including an adjustment for the receipt of cost-sharing reductions in the model to account for increased plan liability due to increased utilization of health care services by enrollees receiving cost-sharing reductions (induced demand) in all States where HHS operates risk adjustment. The proposed cost-sharing reductions adjustment factors for the 2019 benefit year were unchanged from those finalized in the 2018 Payment Notice. These adjustments would be effective for 2016, 2017, 2018, and 2019 risk adjustment, and would be multiplied against the sum of the demographic, diagnosis, and interaction factors, and enrollment and prescription drug utilization factors (for the adult models). We are finalizing the cost-sharing reductions adjustment factors as proposed. See Table 8 for the list of final cost-sharing reductions adjustments for the 2019 benefit year.

Comment:

Commenters supported our proposal to use the same cost-sharing reductions adjustment induced demand factors as prior years, noting that the use of these factors would promote stability and certainty in the markets, and supported making updates in 2020 to the induced demand factors based on EDGE enrollee-level data. One commenter requested that HHS maintain the induced demand factors of 1.12 for wrap-around, premium assistance plans for Massachusetts, as established in the 2014 Payment Notice and used by Massachusetts for the 2014, 2015 and 2016 benefit years.

Response:

We are finalizing the cost-sharing reductions adjustment induced demand factors as proposed. We anticipate proposing adjustments to the cost-sharing reductions adjustment induced demand factors in the annual HHS notice of benefit and payment parameters for the 2020 benefit year based on enrollee-level EDGE data. Consistent with the approach outlined in the final 2017 Payment Notice, we will continue to use cost-sharing reductions adjustment factors of 1.12 for all Massachusetts wrap-around plans in the risk adjustment transfers calculation, as all of Massachusetts' cost-sharing plan variations have actuarial values above 94 percent.

Table 8—Cost-Sharing Reductions Adjustment

Household income

Plan AV

Induced

utilization

factor

Silver Plan Variant Recipients

100-150% of FPL

Plan Variation 94%

1.12

150-200% of FPL

Plan Variation 87%

1.12

200-250% of FPL

Plan Variation 73%

1.00

>250% of FPL

Standard Plan 70%

1.00

Zero Cost-Sharing Recipients

<300% of FPL

Platinum (90%)

1.00

<300% of FPL

Gold (80%)

1.07

<300% of FPL

Silver (70%)

1.12

<300% of FPL

Bronze (60%)

1.15

Limited Cost-Sharing Recipients

>300% of FPL

Platinum (90%)

1.00

>300% of FPL

Gold (80%)

1.07

>300% of FPL

Silver (70%)

1.12

>300% of FPL

Bronze (60%)

1.15

e. Model Performance Statistics (§ 153.320)

To evaluate model performance, we examined each model's R-squared statistic and predictive ratios. The R-squared statistic, which calculates the percentage of individual variation explained by a model, measures the predictive accuracy of the model overall. The predictive ratios measure the predictive accuracy of a model for different validation groups or subpopulations. The predictive ratio for each of the HHS risk adjustment models is the ratio of the weighted mean predicted plan liability for the model sample population to the weighted mean actual plan liability for the model sample population. The predictive ratio represents how well the model does on average at predicting plan liability for that subpopulation. A subpopulation that is predicted perfectly would have a predictive ratio of 1.0. For each of the HHS risk adjustment models, the R-squared statistic and the predictive ratios are in the range of published estimates for concurrent risk adjustment models.

17

Because we are blending the coefficients from separately solved models based on 2014 and 2015 MarketScan® data and 2016 enrollee-level EDGE data, we are publishing the R-squared statistic for each model and benefit year separately to verify their statistical validity. The R-squared statistic for each model is shown in Table 9.

17

Winkleman, Ross and Syed Mehmud. “A Comparative Analysis of Claims-Based Tools for Health Risk Assessment.” Society of Actuaries. April 2007.

Table 9—R-Squared Statistic for Final HHS Risk Adjustment Models

Risk adjustment model

R-squared statistic

2014 MarketScan®

2015 MarketScan®

2016

Enroll-level

EDGE

Platinum Adult

0.4221

0.4212

0.4283

Platinum Child

0.293

0.3314

0.3099

Platinum Infant

0.3284

0.3329

0.3239

Gold Adult

0.4179

0.4164

0.4228

Gold Child

0.2883

0.3269

0.3053

Gold Infant

0.3264

0.3309

0.3201

Silver Adult

0.4143

0.4123

0.4181

Silver Child

0.2841

0.3227

0.3013

Silver Infant

0.325

0.3295

0.317

Bronze Adult

0.4117

0.4095

0.4152

Bronze Child

0.2805

0.3188

0.2978

Bronze Infant

0.3247

0.3292

0.3154

Catastrophic Adult

0.4115

0.4094

0.4145

Catastrophic Child

0.2803

0.3186

0.2971

Catastrophic Infant

0.3247

0.3292

0.3151

f. Overview of the Payment Transfer Formula (§ 153.320)

i. Accounting for High-Cost Risk Pool in the Transfer Formula

We previously defined the calculation of plan average actuarial risk and the calculation of payments and charges in the Premium Stabilization Rule. In the 2014 Payment Notice, we combined those concepts into a risk adjustment payment transfer formula. Risk adjustment transfers (total payments and charges including high-cost risk pool payments and charges) will be calculated after issuers have completed risk adjustment data reporting. The payment transfer formula includes a set of cost adjustment terms that require trans

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