Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2023

DEPARTMENT OF HEALTH AND HUMAN SERVICES

45 CFR Parts 144, 147, 153, 155, 156 and 158

[CMS-9911-P]

RIN 0938-AU65

Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2023

AGENCY:

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

ACTION:

Proposed rule.

SUMMARY:

This proposed rule includes proposed payment parameters and provisions related to the risk adjustment and risk adjustment data validation programs, as well as proposed 2023 user fee rates for issuers offering qualified health plans (QHPs) through federally-facilitated Exchanges and State-based Exchanges on the Federal platform. This proposed rule also proposes requirements related to prohibiting discrimination based on sexual orientation and gender identity; guaranteed availability; the offering of QHP standardized options through Exchanges on the Federal platform; requirements for agents, brokers, web-brokers, and issuers assisting consumers with enrollment through Exchanges that use the Federal platform; verification standards related to employer sponsored coverage; Exchange eligibility determinations during a benefit year; special enrollment period verification; cost-sharing requirements; Essential Health Benefits (EHBs); Actuarial Value (AV); QHP issuer quality improvement strategies; accounting for quality improvement activity (QIA) expenses and provider incentives for medical loss ratio (MLR) reporting and rebate calculation purposes; re-enrollment, and requirements related to a new State Exchange improper payment measurement program. This proposed rule also seeks comment on how HHS can advance health equity through QHP certification standards and otherwise in the individual and group health insurance markets, and how HHS might address plan choice overload in the Exchanges.

DATES:

To be assured consideration, comments must be received at one of the addresses provided below, no later than 5 p.m. on January 27, 2022.

ADDRESSES:

In commenting, please refer to file code CMS-9911-P.

You may submit comments in one of three ways (please choose only one of the ways listed):

1. Electronically. You may submit electronic comments on this regulation to

http://www.regulations.gov.

Follow the “Submit a comment” instructions.

2. By regular mail. You may mail written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9911-P, P.O. Box 8016, Baltimore, MD 21244-8016.

Please allow sufficient time for mailed comments to be received before the close of the comment period.

3. By express or overnight mail. You may send written comments to the following address ONLY: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9911-P, Mail Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.

For information on viewing public comments, see the beginning of the

SUPPLEMENTARY INFORMATION

section.

FOR FURTHER INFORMATION CONTACT:

Jeff Wu, (301) 492-4305, Rogelyn McLean, (301) 492-4229, Grace Bristol, (410) 786-8437, Sara Rosta, (301) 492-4223, or Kaye Wells, (301) 492-4301, for general information.

Cam Moultrie Clemmons, (206) 615-2338, or Anthony Galace, (301) 492-4400, for matters related to past-due premiums.

Allison Yadsko, (410) 786-1740, John Barfield, (301) 492-4433, or Jacqueline Wilson, (301) 492-4286 for matters related to risk adjustment or risk adjustment data validation (HHS-RADV).

Aaron Franz, (410) 786- 8027, or John Barfield, (301) 492-4433, for matters related to federally-facilitated Exchange (FFE) and State-based Exchange on the Federal platform (SBE-FP) user fees.

Nora Simmons, (410) 786-1981, for matters related to advance payment of the premium tax credit (APTC) proration.

Aaron Franz, (410) 786- 8027, or Hi'ilei Haru, 301-492-4363, for matters related to cost-sharing reduction reconciliation.

Josh Van Drei, (410) 786-1659, for matters related to actuarial value (AV).

Becca Bucchieri, (301) 492-4341, for matters related to essential health benefit (EHB)-benchmark plans and defrayal of state-required benefits.

Marisa Beatley, (301) 492-4307, for matters related to employer sponsored coverage verification.

Susan Kalmus, (301) 492-4275, for matters related to agent, broker, and web-broker guidelines. Dena Nelson, 240-401-3535, or Carly Rhyne, 301-492-4188, for matters related to income calculation for eligibility for advance payments of premium tax credits.

Katherine Bentley, (301) 492-5209, or Ariel Kennedy, (301) 492-4306, for matters related to special enrollment period verification.

Leigha Basini, (301) 492-4380, for matters related to nondiscrimination based on sexual orientation and gender identity; and EHB nondiscrimination.

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

Nidhi Singh Shah, (301) 492-5110, for matters related to quality improvement strategy standards for Exchanges.

Erika Ourisman, (301) 492-4170, for matters related to downstream and delegated entities.

Nikolas Berkobien, (301) 492-4400, or Leigha Basini, (301) 492-4380 for matters related to standardized options.

Erika Melman, (301) 492-4348, Deborah Hunter, (443) 386-3651, or Whitney Allen, (667) 290-8748, for matters related to network adequacy and essential community providers.

Linus Bicker, (803) 931-6185, for matters related to State Exchange improper payment measurement.

Phuong Van, (202) 570-5594, for matters related to advancing health equity through qualified health plans (QHPs).

Angelica Torres-Reid, (410) 786-1721, and Robert Yates, (301) 492-5151, for matters related to State Exchange general program integrity and oversight requirements.

Zarah Ghiasuddin, (301) 492-4308, for matters related to re-enrollment in the Exchanges.

SUPPLEMENTARY INFORMATION:

Inspection of Public Comments:

All comments received before the close of the comment period are available for viewing by the public, including any personally identifiable or confidential business information that is included in a comment. We post comments received before the close of the comment period on the following website as soon as possible after they have been received:

http://www.regulations.gov.

Follow the search instructions on that website to view public comments. CMS will not post on

Regulations.gov

public comments that make threats to individuals or institutions or suggest that the individual will take actions to harm the individual. CMS continues to encourage individuals not to submit duplicative comments. We will post acceptable comments from multiple unique commenters even if the content is identical or nearly identical to other comments.

Table of Contents

I. Executive Summary

II. Background

A. Legislative and Regulatory Overview

B. Stakeholder Consultation and Input

C. Structure of Proposed Rule

III. Provisions of the Proposed HHS Notice of Benefit and Payment Parameters for 2023

A. Part 144—Requirements Relating to Health Insurance Coverage

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

C. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment

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

G. Solicitation of Comments Regarding Health Equity and Qualified Health Plans

IV. Collection of Information Requirements

A. Wage Estimates

B. ICRs Regarding State Flexibility for Risk Adjustment (§ 153.320)

C. ICRs Regarding Distributed Data and Risk Adjustment Data Submission Requirements (§§ 153.610, 153.700, and 153.710)

D. ICRs Regarding Ability of States To Permit Agents and Brokers and Web-brokers To Assist Qualified Individuals, Qualified Employers, or Qualified Employees Enrolling in QHPs (§ 155.220)

E. ICRs Regarding Verification of Eligibility for Special Enrollment Periods (§ 155.420)

F. ICRs Regarding General Program Integrity and Oversight Requirements (§ 155.1200)

G. ICRs Regarding State Exchange Improper Payment Measurement program (§§ 155.1500-155.1540)

H. ICRs Regarding State Selection of EHB-Benchmark Plan for Plan Years Beginning on or After January 1, 2020 (§ 156.111)

I. ICR Regarding Differential Display of Standardized Options on the websites of Web-Brokers (§ 155.220) and QHP Issuers (§ 156.265)

J. ICRs Regarding Network Adequacy and Essential Community Providers (§§ 156.230 and 156.235)

K. ICRs Regarding Payment for Cost-Sharing Reductions (§ 156.430)

L. ICRs Regarding Quality Improvement Strategy (§ 156.1130)

M. ICRs Regarding Medical Loss Ratio (§§ 158.140, 158.150, 158.170)

O. Summary of Annual Burden Estimates for Proposed Requirements

P. Submission of PRA-related Comments

V. Response to Comments

VI. 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

I. Executive Summary

American Health Benefit Exchanges, or “Exchanges,” are entities established under the Patient Protection and Affordable Care Act (ACA)

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through which qualified individuals and qualified employers can purchase health insurance coverage in qualified health plans (QHPs). Many individuals who enroll in QHPs through individual market Exchanges are eligible to receive a premium tax credit (PTC) to reduce their costs for health insurance premiums and to receive reductions in required cost-sharing payments to reduce out-of-pocket expenses for health care services. The ACA also established the risk adjustment program, which transfers funds from issuers that attract lower-than-average risk populations to issuers that attract higher-than-average risk populations to reduce incentives for issuers to avoid higher-risk enrollees.

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The Patient Protection and Affordable Care Act (Pub. L. 111-148) was enacted on March 23, 2010. The Healthcare 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 rulemaking, the two statutes are referred to collectively as the “Patient Protection and Affordable Care Act”, “Affordable Care Act”, or “ACA.”

In previous rulemakings, we established provisions and parameters to implement many ACA requirements and programs. In this proposed rule, we propose to amend some of these provisions and parameters, with a focus on maintaining a stable regulatory environment. These proposed changes are intended to provide issuers with greater predictability for upcoming plan years (PYs), while simultaneously enhancing the role of states in these programs. The proposals would provide states with additional flexibilities, reduce unnecessary regulatory burdens on stakeholders, empower consumers, ensure program integrity, and improve affordability.

On January 20, 2021, the President issued an Executive Order which stated the Administration's policy on preventing and combating discrimination on the basis of gender identity and sexual orientation.

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This Executive Order instructed the Secretary of Health and Human Services (Secretary of HHS, or HHS Secretary) to review all existing regulations, guidance documents, and other agency actions to determine whether they are consistent with the aforementioned policy, and to consider whether to suspend, revise, or rescind any agency actions that are inconsistent with it. In consideration of this Executive Order, and as a result of our review of certain regulations, we propose to amend HHS regulations such that Exchanges, issuers, and agents and brokers are prohibited from discriminating based on sexual orientation and gender identity. The provisions in this proposed rule reflect the aspects of the Executive Order 13988 and aligns with the HHS' Notice, released on May 10, 2021, that HHS interprets and enforces section 1557's and Title IX's prohibition on discrimination on the basis of sex to include: (1) Discrimination on the basis of sexual orientation; and (2) discrimination on the basis of gender identity, based on the Supreme Court's decision in

Bostock

v.

Clayton County.

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2

Executive Order 13988 on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation, January 20, 2021,

see

86 FR 7023.

3

U.S. Dep't of Health & Hum. Servs., Notification of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972, 86 FR 27984 (May 25, 2021).

Also see, Bostock

v.

Clayton County,

140 S. Ct. 1731 (2020).

https://www.supremecourt.gov/opinions/19pdf/17-1618_hfci.pdf.

Risk adjustment continues to be a core program in the individual, small group, and merged markets both on and off Exchanges, and we propose recalibrated parameters for the HHS-operated risk adjustment methodology. We published a technical paper, the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes

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in October 2021, and sought comment on potential updates to the risk adjustment models. Consistent with the model changes discussed in the October 2021 Risk Adjustment (RA) Technical Paper, in this rule, we propose the following three updates to the HHS risk adjustment models beginning with the 2023 benefit year: (1) Adding a two-stage weighted approach to the adult and child models; (2) removing the current severity illness factors from the adult models and adding an interacted hierarchical condition category (HCC) count model specification to the adult and child models; and (3) replacing the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors. These proposals are intended to improve prediction in the adult and child risk adjustment models for the lowest-risk enrollees, the highest-risk enrollees, and partial-year enrollees, whose plan liabilities are underpredicted in the

current models. We also propose to recalibrate the 2023 benefit year risk adjustment models using the 2017, 2018, and 2019 enrollee-level External Data Gathering Environment (EDGE) data. We further propose to continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs in the risk adjustment models, consistent with the approach adopted beginning with the 2020 models. We discuss our consideration of the targeted removal of the mapping of hydroxychloroquine sulfate to Immune Suppressants and Immunomodulators (RXC 09) in the 2018 and 2019 benefit year enrollee-level EDGE data used for the 2023 benefit year model recalibration,

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as well as the targeted removal of Descovy® from mapping to Anti-HIV Agents (RXC 01) in all three benefit years' enrollee-level EDGE datasets used for the 2023 benefit year model recalibration. We also propose for the 2024 benefit year and beyond to recalibrate the adult models using the final, fourth quarter (Q4) RXC mapping document that was applicable for each benefit year of data that is included in the current year's model recalibration. We propose to begin to use this approach for recalibration of the 2023 adult risk adjustment models, with the exception of the 2017 enrollee-level EDGE data year, for which we propose to use the most recent RXC mapping document that was available when we first processed the 2017 enrollee-level EDGE data (that is, Q2 2018).

4

Available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf.

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The same concern was not present for the 2016 or 2017 enrollee-level EDGE data because hydroxychloroquine was not included in the crosswalk until 2018.

Additionally, we propose to repeal the ability of states to request a reduction in risk adjustment state transfers starting with the 2024 benefit year, while proposing to provide an exception for states that previously requested a reduction to transfers under § 153.320(d). In addition, we solicit comments on the requests from Alabama to reduce risk adjustment state transfers for the 2023 benefit year in the individual (including the catastrophic and non-catastrophic risk pools) and small group markets.

We also propose the 2023 benefit year risk adjustment user fee for states where HHS operates the risk adjustment program. We also propose to collect and extract five new data elements including ZIP code, race, ethnicity, individual coverage health reimbursement arrangement (ICHRA) indicator, and a subsidy indicator as part of the required risk adjustment data that issuers must make accessible to HHS in states where HHS is operating the risk adjustment program. We also propose to extract three new data elements issuers already provide to HHS as part of the required risk adjustment data submissions (plan ID, rating area, and subscriber indicator) and to expand the permitted uses of the risk adjustment data and reports. Finally, we propose that whenever HHS recoups high-cost risk pool funds as a result of audits of risk adjustment covered plans, actionable discrepancies, or successful appeals, the recouped funds would be used to reduce high-cost risk pool charges for that national high-cost risk pool for the next applicable benefit year for which high-cost risk pool payments have not already been calculated.

We propose further refinements to the HHS-RADV error estimation methodology beginning with the 2021 benefit year to (1) extend the application of Super HCCs (which are currently based on the coefficient estimation groups defined in the applicable benefit year's “Additional Adult Variables” Table of the “Do It Yourself (DIY)” software (Table 6 in the 2021 Benefit Year DIY Software), which is published on the CCIIO website)

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from their current application only in the sorting step that assigns HCCs to failure rate groups to broader application throughout the HHS-RADV error rate calculation process, (2) specify that Super HCCs will be defined separately according to the age group model to which an enrollee is subject, and (3) constrain to zero any failure rate group outlier with a negative failure rate, regardless of whether the outlier issuer has a negative or positive error rate.

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https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance.

The August 3, 2021 version of the 2021 DIY Software Tables is available at

https://www.cms.gov/files/document/cy2021-diy-tables-07092021.xlsx.

As we do every year in the HHS notice of benefit and payment parameters, we propose updated parameters applicable in the individual and small group markets. We propose the PY 2023 user fee rates for issuers offering plans through the Exchanges using the Federal platform. We propose maintaining the Federal-facilitated Exchange (FFE) and State-based Exchange on the Federal platform (SBE-FP) user fees at the current PY 2022 rates, 2.75 and 2.25 percent of total monthly premiums, respectively, in order to preserve and ensure that the FFEs and Federal platform have sufficient funding to cover the cost of all special benefits provided to FFE and SBE-FP issuers during PY 2023. We also note that HHS will issue the 2023 benefit year premium adjustment percentage index and related payment parameters in guidance, consistent with the policy finalized in part 2 of the 2022 Payment Notice.

We also propose to require all Exchanges to prorate premiums and advance payments of the premium tax credit (APTC) when administering APTC for enrollees enrolled in a particular policy for less than the full coverage month, including when the enrollee is enrolled in multiple policies within a month, each lasting less than the full coverage month.

We are proposing changes to clarify that the cost-sharing reduction (CSR) data submission process is mandatory only for those issuers that received CSR payments from HHS for any part of the benefit year, and voluntary for other issuers. We propose a technical correction to the definition of large group market in § 144.103 to delete the concluding phrase “unless otherwise provided under state law.”

We propose new display requirements for web-broker non-Exchange websites, including requirements related to QHP comparative information and standardized disclaimer language; a prohibition on displaying QHP advertisements or otherwise providing favored or preferred display of QHPs based on compensation agents, brokers, or web-brokers receive from QHP issuers; and a requirement to prominently display a clear explanation of the rationale for explicit QHP recommendations and the methodology for the default display of QHPs on web-broker non-Exchange websites to better inform and protect consumers using such websites.

We propose a number of policies to address certain agent, broker, and web-broker practices. These policies would be added as part of the FFE standards of conduct codified at § 155.220(j)(2), improving CMS's ability to enforce existing responsibilities agents, brokers, and web-brokers utilizing the Exchange are required to adhere to without substantially burdening other agents, brokers, and web-brokers, while also providing more detail about specific business practices that are prohibited. We believe the proposed new regulatory text would protect consumers, ensure the efficient operation of the Exchange, minimize the risk of future tax discrepancies, reduce unauthorized enrollments in Exchange coverage, and provide a stronger basis for CMS to take enforcement action against agents, brokers, and web-brokers for violations of these requirements.

We propose revising our interpretation of the guaranteed availability requirement to prohibit

issuers from applying a premium payment to an individual's or employer's past debt owed for coverage and refusing to effectuate enrollment in new coverage. We believe this proposal would have a positive impact on the risk pool by removing barriers to enrollment for low-income individuals who lost prior coverage due to nonpayment of premiums. In addition, this proposal would promote more equitable access to health insurance coverage by ensuring that enrollment is not delayed as a result of non-payment of past-due premiums to the same issuer or control group, regardless of an individual's or employee's status as an APTC recipient.

Stable and affordable Exchanges with healthy risk pools are necessary for ensuring consumers maintain stable access to health insurance options. In order to minimize the potential for adverse selection in the Exchanges, we propose to allow Exchanges to conduct risk-based employer sponsored coverage verification.

We propose to clarify that only those provider incentives and bonuses that are tied to clearly defined, objectively measurable, and well-documented clinical or quality improvement standards that apply to providers may be included in incurred claims for MLR reporting and rebate calculation purposes. We also propose to specify that only expenses directly related to activities that improve health care quality may be included as quality improvement activity (QIA) expenses for MLR reporting and rebate calculation purposes.

In addition, we propose to make a technical amendment to remove a reference to a provision that was vacated by the United States District Court for the District of Maryland in

City of Columbus, et al.

v.

Cochran,

523 F. Supp. 3d 731 (D. Md. 2021), and thus deleted in part 2 of the 2022 Payment Notice final rule.

With regards to the essential health benefits (EHB), we propose an evergreen deadline for EHB-benchmark plan applications by states, as well as proposing to remove the ability for states to permit issuers to substitute benefits between EHB categories. In addition, we propose changed de minimis thresholds for the actuarial value (AV) for plans subject to EHB requirements, as well as narrower de minimis thresholds for individual market silver QHPs and income-based CSR plan variations. We also propose to remove the state annual reporting requirement to report state-required benefits in addition to the EHB to HHS. We believe there may be ways to achieve compliance with the defrayal policy without imposing the rigid submission requirements on states that exist under the annual reporting requirement.

We propose policies to strengthen and clarify our network adequacy standards, including expanding the provider specialty list for time and distance standards and adding appointment wait time standards. For plans with tiered networks, we propose that, to count toward the issuer's satisfaction of the network adequacy and essential community provider (ECP) standards, providers must be contracted within the network tier that results in the lowest cost-sharing obligation. We also propose to require issuers to submit information about whether providers offer telehealth services. We propose to increase the ECP threshold from 20 percent to 35 percent.

We also propose to amend the current regulation, which provides that, notwithstanding any relationship or relationships a QHP issuer may have with delegated or downstream entities, the QHP issuer maintains responsibility for its compliance and the compliance of any of its delegated or downstream entities with all applicable Federal standards related to Exchanges. Specifically, HHS proposes adding a requirement that all agreements between QHP issuers and their downstream and delegated entities include language stating that any Exchange authority, including State Exchanges, may demand and receive records related to the QHP issuers' obligations and compliance with applicable Federal standards related to Exchanges. We also propose other amendments to extend the obligation to oversee compliance of delegated and downstream entities to QHP issuers in all models of Exchange. These proposals would hold QHP issuers in all models of Exchange responsible for their downstream and delegated entities' adherence to applicable Federal standards, and make their oversight obligations, and the obligations of their downstream and delegated entities, explicit. We also propose to amend the title of subpart D of 45 CFR part 156 from “Standards for Qualified Health Plan Issuers on Federally Facilitated Exchanges and State-Based Exchanges on the Federal platform” to “Standards for Qualified Health Plan Issuers on Specific Types of Exchanges” to more accurately reflect the applicability of the regulations within the subpart.

We solicit comments on incorporating the net premium, maximum out-of-pocket (MOOP), deductible, and annual out-of-pocket costs (OOPC) of a plan into the Exchange re-enrollment hierarchy as well as additional criteria or mechanisms HHS could consider to ensure the Exchange hierarchy for re-enrollment aligns with plan generosity and consumer needs, such as, re-enrolling a current bronze QHP enrollee into an available silver QHP with a lower net premium and higher plan generosity offered by the same QHP issuer. We also propose to update the quality improvement strategy (QIS) standards to require QHP issuers to address health and health care disparities as a specific topic area within their QIS beginning in 2023.

We also propose to require issuers of QHPs in FFEs and SBE-FPs to offer through the Exchange standardized QHP options beginning in PY 2023.

Finally, we solicit comments regarding additional ways HHS could incentivize QHP issuers to design plans that improve health equity and health conditions in enrollees' environments, as well as how QHP issuers could address other social determinants of health (SDOH) outside of the QHP certification process.

II. Background

A. Legislative and Regulatory Overview

Title I of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new title XXVII to the Public Health Service Act (PHS Act) to establish various reforms to the group and individual health insurance markets.

These provisions of the PHS Act were later augmented by other laws, including the ACA. Subtitles A and C of title I of the ACA reorganized, amended, and added to the provisions of part A of title XXVII of the PHS Act relating to group health plans and health insurance issuers in the group and individual markets. The term “group health plan” includes both insured and self-insured group health plans.

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The term “group health plan” is used in title XXVII of the PHS Act and is distinct from the term “health plan” as used in other provisions of title I of ACA. The term “health plan” does not include self-insured group health plans.

Section 2702 of the PHS Act, as added by the ACA, establishes requirements for guaranteed availability of coverage in the group and individual markets.

Section 2718 of the PHS Act, as added by the ACA, 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 2791 of the PHS Act defines several terms, including “large group market”.

Section 1301(a)(1)(B) of the ACA directs all issuers of QHPs to cover the EHB package described in section 1302(a) of the ACA, including coverage of the services described in section 1302(b) of the ACA, adherence to the cost-sharing limits described in section 1302(c) of the ACA, and meeting the AV levels established in section 1302(d) of the ACA. Section 2707(a) of the PHS Act, which is effective for plan or policy years beginning on or after January 1, 2014, extends the requirement to cover 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 ACA.

Section 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHBs (as defined by the Secretary of HHS), cost-sharing limits, and AV 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 1302(d) of the ACA describes the various levels of coverage based on their AV. Consistent with section 1302(d)(2)(A) of the ACA, AV is calculated based on the provision of EHB to a standard population. Section 1302(d)(3) of the ACA directs the Secretary of HHS to develop guidelines that allow for de minimis variation in AV calculations. Sections 1302(b)(4)(A) through (D) establish that the Secretary must define EHB in a manner that: (1) Reflects appropriate balance among the 10 categories; (2) is not designed in such a way as to discriminate based on age, disability, or expected length of life; (3) takes into account the health care needs of diverse segments of the population; and (4) does not allow denials of EHBs based on age, life expectancy, disability, degree of medical dependency, or quality of life.

Section 1311(c) of the ACA provides the Secretary the authority to issue regulations to establish criteria for the certification of QHPs. Section 1311(c)(1)(B) of the ACA requires among the criteria for certification that the Secretary must establish by regulation that QHPs ensure a sufficient choice of providers. Section 1311(e)(1) of the ACA grants the Exchange the authority to certify a health plan as a QHP if the health plan meets the Secretary's requirements for certification issued under section 1311(c) of the ACA, and the Exchange determines that making the plan available through the Exchange is in the interests of qualified individuals and qualified employers in the state. Section 1311(c)(6)(C) of the ACA establishes special enrollment periods and section 1311(c)(6)(D) of the ACA establishes the monthly enrollment period for Indians, as defined by section 4 of the Indian Health Care Improvement Act.

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The Indian Health Care Improvement Act (IHCIA), the cornerstone legal authority for the provision of health care to American Indians and Alaska Natives, was made permanent when President Obama signed the bill on March 23, 2010, as part of the Patient Protection and Affordable Care Act.

Section 1311(c)(1)(E) of the ACA specifies that to be certified as a QHP, each health plan must implement a QIS, which is described in section 1311(g)(1) of the ACA. Section 1311(g)(1) of the ACA describes this strategy as a payment structure that provides increased reimbursement or other incentives to improve health outcomes of plan enrollees, to prevent hospital readmissions, improve patient safety and reduce medical errors, promote wellness and health, and reduce health and health care disparities.

Section 1311(d)(3)(B) of the ACA permits a state, at its option, to require QHPs to cover benefits in addition to EHB. This section also requires a state to make payments, either to the individual enrollee or to the issuer on behalf of the enrollee, to defray the cost of these additional state-required benefits.

Section 1312(c) of the ACA generally requires a health insurance issuer to consider all enrollees in all health plans (except 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 and small group market risk pools under section 1312(c)(3) of the ACA.

Section 1312(e) of the ACA provides the Secretary with the authority to establish procedures under which a state may allow agents or brokers to (1) enroll qualified individuals and qualified employers in qualified health plans offered through Exchanges and (2) assist individuals in applying for PTC and CSRs for qualified health plans sold through an Exchange.

Sections 1313 and 1321 of the ACA 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 1313(a)(5)(A) of the ACA provides the Secretary with the authority to implement any measure or procedure that the Secretary determines is appropriate to reduce fraud and abuse in the administration of the Exchanges. Section 1321 of the ACA provides for state flexibility in the operation and enforcement of Exchanges and related requirements.

Section 1321(a) of the ACA 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 ACA, including such other requirements as the Secretary determines appropriate. When operating an FFE under section 1321(c)(1) of the ACA, HHS has the authority under sections 1321(c)(1) and 1311(d)(5)(A) of the ACA to collect and spend user fees. 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(d) of the ACA provides that nothing in title I of the ACA must be construed to preempt any state law that does not prevent the application of title I of the ACA. Section 1311(k) of the ACA specifies that Exchanges may not establish rules that conflict with or prevent the application of regulations issued by the Secretary.

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

Section 1401(a) of the ACA amended the Internal Revenue Code (the Code) to add Section 36B, which, among other things, requires that a taxpayer reconcile APTC for a year of coverage with the amount of the PTC the taxpayer is allowed for the year.

Section 1402 of the ACA provides for, among other things, reductions in cost sharing for EHB for qualified low- and moderate-income enrollees in silver level qualified 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 1411(c) of the ACA requires the Secretary to submit certain information provided by applicants under section 1411(b) of the ACA to other federal officials for verification, including income and family size information to the Secretary of the Treasury. Section 1411(d) of the ACA provides that the Secretary must verify the accuracy of information provided by applicants under section 1411(b) of the ACA for which section 1411(c) does not prescribe a specific verification procedure, in such manner as the Secretary determines appropriate.

Section 1411(f) of the ACA requires the Secretary, in consultation with the Treasury and Homeland Security Department Secretaries and the Commissioner of Social Security, to establish procedures for hearing and making decisions governing appeals of Exchange eligibility determinations. Section 1411(f)(1)(B) of the ACA requires the Secretary to establish procedures to redetermine eligibility on a periodic basis, in appropriate circumstances, including eligibility to purchase a QHP through the Exchange and for APTC and CSRs.

Section 1411(g) of the ACA allows the use of applicant information only for the limited purposes of, and to the extent necessary to, ensure the efficient operation of the Exchange, including by verifying eligibility to enroll through the Exchange and for APTC and CSRs, and limits the disclosure of such information.

Section 1557 of the ACA applies certain long-standing civil rights nondiscrimination requirements to “any health program or activity, any part of which is receiving Federal financial assistance, including credits, subsidies, or contracts of insurance, or under any program or activity that is administered by an Executive agency, or any entity established under” Title I of the ACA (or amendments). It did so by referencing statutes that specify prohibited grounds of discrimination, namely, race, color, national origin, sex, age, or disability, in an array of federally funded and administered programs or activities.

9

In addition, HHS has previously finalized rules unrelated to section 1557 of the ACA to address populations that have historically been subject to discrimination.

9

42 U.S.C. 18116.

Section 5000A of the Code, as added by section 1501(b) of the ACA, requires individuals to have minimum essential coverage (MEC) for each month, qualify for an exemption, or make an individual shared responsibility payment. Under the Tax Cuts and Jobs Act, which was enacted on December 22, 2017, the individual shared responsibility payment is reduced to $0, effective for months beginning after December 31, 2018.

10

Notwithstanding that reduction, certain exemptions are still relevant to determine whether individuals age 30 and above qualify to enroll in catastrophic coverage under §§ 155.305(h) and 156.155(a)(5).

10

Public Law 115-97, 131 Stat. 2054 (2017).

1. Premium Stabilization Programs

In the July 15, 2011

Federal Register

(76 FR 41929), we published a proposed rule outlining the framework for the premium stabilization programs.

11

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 June 19, 2013

Federal Register

(78 FR 37032), we proposed a modification to the HHS-operated methodology related to community rating states. In the October 30, 2013

Federal Register

(78 FR 65046), we finalized the proposed modification to the HHS-operated methodology related to community rating states. We published a correcting amendment to the 2014 Payment Notice final rule in the November 6, 2013

Federal Register

(78 FR 66653) to address how an enrollee's age for the risk score calculation would be determined under the HHS-operated risk adjustment methodology.

11

The term premium stabilization programs refers to the risk adjustment, risk corridors, and reinsurance programs established by the ACA. See 42 U.S.C. 18061, 18062, and 18063.

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 May 27, 2014

Federal Register

(79 FR 30240), the 2015 fiscal year sequestration rate for the risk adjustment program was announced.

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 HHS-RADV process (proposed 2018 Payment Notice). We published the 2018 Payment Notice final rule in the December 22, 2016

Federal Register

(81 FR 94058).

In the November 2, 2017

Federal Register

(82 FR 51042), we published a proposed rule outlining the benefit and payment parameters for the 2019 benefit year, and to further promote stable premiums in the individual and small group markets. We proposed updates to the risk adjustment methodology and amendments to the HHS-RADV process (proposed 2019 Payment Notice). We published the 2019 Payment Notice final rule in the April 17, 2018

Federal Register

(83 FR 16930). We published a correction to the 2019 risk adjustment coefficients in the 2019 Payment Notice final rule in the May 11, 2018

Federal Register

(83 FR 21925). On July 27,

2018, consistent with 45 CFR 153.320(b)(1)(i), we updated the 2019 benefit year final risk adjustment model coefficients to reflect an additional recalibration related to an update to the 2016 enrollee-level External Data Gathering Environment (EDGE) dataset.

12

12

“Updated 2019 Benefit Year Final HHS Risk Adjustment Model Coefficients.” July 27, 2018. Available at

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2019-Updtd-Final-HHS-RA-Model-Coefficients.pdf.

In the July 30, 2018

Federal Register

(83 FR 36456), we published a final rule that adopted the 2017 benefit year risk adjustment methodology as established in the final rules published in the March 23, 2012 (77 FR 17220 through 17252) and March 8, 2016 editions of the

Federal Register

(81 FR 12204 through 12352). That final rule set forth additional explanation of the rationale supporting use of statewide average premium in the HHS-operated risk adjustment state payment transfer formula for the 2017 benefit year, including the reasons why the program is operated in a budget-neutral manner. That final rule also permitted HHS to resume 2017 benefit year risk adjustment payments and charges. HHS also provided guidance as to the operation of the HHS-operated risk adjustment program for the 2017 benefit year in light of publication of the final rule.

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13

“Update on the HHS-operated Risk Adjustment Program for the 2017 Benefit Year.” July 27, 2018. Available at

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf.

In the August 10, 2018

Federal Register

(83 FR 39644), we published a proposed rule seeking comment on adopting the 2018 benefit year risk adjustment methodology in the final rules published in the March 23, 2012 (77 FR 17219) and in the December 22, 2016 editions of the

Federal Register

(81 FR 94058). The proposed rule set forth additional explanation of the rationale supporting use of statewide average premium in the HHS-operated risk adjustment state payment transfer formula for the 2018 benefit year, including the reasons why the program is operated in a budget-neutral manner. In the December 10, 2018

Federal Register

(83 FR 63419), we issued a final rule adopting the 2018 benefit year HHS-operated risk adjustment methodology as established in the final rules published in the March 23, 2012 (77 FR 17219) and the December 22, 2016 (81 FR 94058) editions of the

Federal Register

. That final rule sets forth additional explanation of the rationale supporting use of statewide average premium in the HHS-operated risk adjustment state payment transfer formula for the 2018 benefit year, including the reasons why the program is operated in a budget-neutral manner.

In the January 24, 2019

Federal Register

(84 FR 227), we published a proposed rule outlining updates to the calibration of the risk adjustment methodology, the use of EDGE data for research purposes, and updates to HHS-RADV audits. We published the 2020 Payment Notice final rule in the April 25, 2019

Federal Register

(84 FR 17454).

In the February 6, 2020

Federal Register

(85 FR 7088), we published a proposed rule that included updates to the risk adjustment models' HCCs and a modification HHS-RADV error rate calculation methodology. We published the 2021 Payment Notice final rule in the May 14, 2020

Federal Register

(85 FR 29164).

In the June 2, 2020

Federal Register

(85 FR 33595), we published a proposed rule that proposed updates to various aspects of the HHS-RADV methodologies and processes. We published a final rule titled, the Amendments to the HHS-Operated Risk Adjustment Data Validation Under the Patient Protection and Affordable Care Act's HHS-Operated Risk Adjustment Program (2020 HHS-RADV Amendments Rule) in the December 1, 2020

Federal Register

(85 FR 76979). That final rule revised the failure rate grouping algorithm, finalized a sliding scale adjustment in HHS-RADV error rate calculation, and a constraint on risk score adjustments for low-side failure rate outliers. The final rule also established a transition from the prospective application of HHS-RADV adjustments to apply HHS-RADV results to risk scores from the same benefit year as that being audited.

In the September 2, 2020

Federal Register

(85 FR 54820), HHS issued an interim final rule containing certain policy and regulatory revisions in response to the COVID-19 public health emergency (PHE), wherein we set forth risk adjustment reporting requirements for issuers offering temporary premium credits in the 2020 benefit year (interim final rule on COVID-19).

In the January 20, 2021

Federal Register

(86 FR 6138), HHS issued a final rule containing certain policy and regulatory revisions related to the risk adjustment program (hereinafter referred to as “part 1 of the 2022 Payment Notice final rule”). In the May 5, 2021

Federal Register

(86 FR 24140), HHS issued another final rule containing policy and regulatory revisions related to the risk adjustment program, including approval of the request from Alabama to reduce risk adjustment transfers by 50 percent in the individual and small group markets for the 2022 benefit year (hereinafter referred to as “part 2 of the 2022 Payment Notice final rule”). In addition, part 2 of the 2022 Payment Notice final rule established a revised schedule of collections for HHS-RADV and updated the provisions regulating second validation audit (SVA) and initial validation audit (IVA) entities.

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. Market Rules

An interim final rule relating to the HIPAA health insurance reforms was published in the April 8, 1997

Federal Register

(62 FR 16894). 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 Market Stabilization final rule that was published in the April 18, 2017

Federal Register

(82 FR 18346), we further interpreted the guaranteed availability provision. In the 2019 Payment Notice final rule in the April 17, 2018

Federal Register

(83 FR 17058), we clarified that certain exceptions to the special enrollment periods only apply with respect to coverage offered outside of the Exchange in the individual market.

In the Nondiscrimination in Health and Human Education Programs or Activities final rule on section 1557 of the ACA, published in the June 19, 2020

Federal Register

(85 FR 37160), we removed nondiscrimination protections on the basis of gender identity and sexual orientation from the guaranteed availability regulation.

In part 2 of the 2022 Payment Notice final rule in the May 5, 2021

Federal Register

(86 FR 24140), we made additional amendments to the guaranteed availability regulation regarding special enrollment periods and finalized new special enrollment periods related to untimely notice of triggering events, cessation of employer contributions or government subsidies to COBRA continuation coverage, and loss of APTC eligibility. In the final rule Updating Payment Parameters, Section 1332 Waiver Implementing Regulations, and Improving Health Insurance Markets for 2022 and Beyond published in the September 27, 2021

Federal Register

(86 FR 53412) (part 3 of the 2022 Payment Notice) by HHS and the Department of the Treasury, HHS finalized additional amendments to the guaranteed availability regulations regarding special enrollment periods.

4. 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 Small Business Health Options Program (SHOP), eligibility determinations, and Exchange standards for employers. A final rule implementing components of the Exchanges and setting forth standards for eligibility for Exchanges, as well as network adequacy and ECP certification standards, was published in the March 27, 2012

Federal Register

(77 FR 18309) (Exchange Establishment Rule).

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), we set forth standards related to Exchange user fees. 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 the 2016 Payment Notice, we also set forth the ECP certification standard at § 156.235, with revisions in the 2017 Payment Notice in the March 8, 2016

Federal Register

(81 FR 12203) and the 2018 Payment Notice in the December 22, 2016

Federal Register

(81 FR 94058).

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, published 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. In the 2019 Payment Notice final rule, published in the April 17, 2018

Federal Register

(83 FR 16930), we modified parameters around certain special enrollment periods. In the April 25, 2019

Federal Register

(84 FR 17454), the final 2020 Payment Notice established a new special enrollment period.

In the February 6, 2020

Federal Register

(85 FR 7088), we published a proposed rule (proposal 2021 Payment Notice). We published the final rule in the May 14, 2020

Federal Register

(85 FR 29164) (2021 Payment Notice).

In the December 4, 2020

Federal Register

(85 FR 78572), we issued a proposed rule containing certain policy and regulatory revisions related to user fees (proposed 2022 Payment Notice). In the January 19, 2021

Federal Register

(86 FR 6138), HHS issued a rule finalizing certain of the provisions in the proposed 2022 Payment Notice (part 1 of the 2022 Payment Notice final rule). In the May 5, 2021

Federal Register

(86 FR 24140), HHS published a second final rule addressing the remainder of the proposed provisions (part 2 of the 2022 Payment Notice final rule). In the July 1, 2021

Federal Register

(86 FR 35156), HHS and the Department of the Treasury released a proposed rule proposing to amend certain policies in part 1 of the 2022 Payment Notice final rule, and finalized the rule in the September 27, 2021

Federal Register

(86 FR 53412) (part 3 of the 2022 Payment Notice final rule).

5. Essential Health Benefits

On December 16, 2011, HHS released a bulletin that outlined an intended regulatory approach for defining EHB, including a benchmark-based framework.

14

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

Federal Register

(77 FR 70643). We established requirements relating to EHBs 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 2019 Payment Notice, published in the April 17, 2018

Federal Register

(83 FR 16930), we added § 156.111 to provide states with additional options from which to select an EHB-benchmark plan for PYs 2020 and beyond.

14

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

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

6. Medical Loss Ratio (MLR)

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 MLR 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), the December 22, 2016

Federal Register

(81 FR 94183), the April 17, 2018

Federal Register

(83 FR 16930), the May 14, 2020

Federal Register

(85 FR 29164), and the May 5, 2021

Federal Register

(86 FR 24140), and an interim final rule that was published in the September 2, 2020

Federal Register

(85 FR 54820).

7. Quality Improvement Strategy

We promulgated regulations in 45 CFR 155.200(d) to direct Exchanges to evaluate quality improvement strategies, and 45 CFR 156.200(b) that direct QHP issuers to implement and report on a quality improvement strategy or strategies consistent with section 1311(g) standards as a QHP certification criteria for participation in an Exchange. In the 2016 Payment Notice, published in the February 27, 2015

Federal Register

(80 FR 10749), we finalized

regulations at § 155.1130 to establish standards and the associated timeframe for QHP issuers to submit the necessary information to implement QIS standards for QHPs offered through an Exchange.

8. Nondiscrimination

Section 1311(b) and section 1321(b) of the ACA provide that each state has the opportunity to establish an Exchange. In the July 15, 2011

Federal Register

(76 FR 41866), HHS published the “Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans” proposed rule to implement section 1311(b) and section 1321(b) of the ACA. In the March 27, 2012

Federal Register

(77 FR 18310), HHS published the “Patient Protection and Affordable Care Act; Establishment of Exchanges and Qualified Health Plans; Exchange Standards for Employers” final rule and interim final rule (hereinafter referred to as the “Exchange Standards final rule”), which included nondiscrimination protections.

Section 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHB and actuarial value requirements. In the November 26, 2012

Federal Register

(77 FR 70644), HHS published the “Patient Protections and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation” proposed rule to implement section 1302 of the ACA. In the February 25, 2013

Federal Register

(78 FR 12834), HHS published the “Patient Protections and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation” final rule, which included nondiscrimination protections.

Sections 2701, 2702, and 2703 of the PHS Act and Section 1312(c) of the ACA provide protections to individuals and employers in obtaining health insurance coverage. In the November 26, 2012

Federal Register

(77 FR 70584), HHS published the “Patient Protection and Affordable Care Act; Health Insurance Market Rules; Rate Review” proposed rule to implement sections 2701, 2702, and 2703 of the PHS Act and section 1312(c) of the ACA. In the February 27, 2013

Federal Register

(78 FR 13406), HHS published the “Patient Protections and Affordable Care Act; Health Insurance Market Rules; Rate Review” final rule, which included nondiscrimination protections.

In the HHS Notice of Benefit and Payment Parameters for 2017 proposed rule, published in the December 2, 2015

Federal Register

(80 FR 75488), HHS proposed policies for nondiscrimination protections into the relevant notice of benefit and payment parameters. In the March 8, 2016

Federal Register

(81 FR 12204), HHS published the HHS Notice of Benefit and Payment Parameters for 2017 final rule, which included nondiscrimination protections.

In the Nondiscrimination in Health and Human Education Programs or Activities final rule on section 1557 of the ACA, published in the June 19, 2020

Federal Register

(85 FR 37160), HHS removed nondiscrimination protections on the basis of gender identity and sexual orientation from various CMS nondiscrimination regulations. In the HHS Notice of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972, published in the May 25, 2021

Federal Register

(86 FR 27984), HHS informed the public that HHS will interpret and enforce section 1557's and Title IX's prohibition on discrimination on the basis of sex to include discrimination based on sexual orientation and gender identity.

B. Stakeholder Consultation and Input

HHS has consulted with stakeholders on policies related to the PHS Act federal market reform requirements, the operation of Exchanges and the risk adjustment (including HHS-RADV) program. We have held a number of meetings with consumers, providers, employers, health plans, advocacy groups and the actuarial community to gather public input. We have solicited input from state representatives on numerous topics, particularly EHBs, state mandates, and risk adjustment. We consulted with stakeholders through regular meetings with the National Association of Insurance Commissioners (NAIC), regular contact with states through the Exchange Blueprint approval and general Exchange oversight 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 proposed rule.

C. Structure of Proposed Rule

The regulations outlined in this proposed rule would be codified in 45 CFR parts 144, 147, 153, 155, 156 and 158.

The proposed changes to 45 CFR part 144 would remove superfluous language from the definition of large group market.

The proposed changes to 45 CFR part 147 would prohibit issuers from discriminating against individuals in issuer marketing practices and benefit designs based on sexual orientation and gender identity. We also propose to reinterpret the guaranteed availability requirements in § 147.104 such that issuers could not refuse to effectuate new coverage based on failure of an individual or employer to pay premiums owed for prior coverage.

The proposed changes to 45 CFR part 153 would recalibrate the 2023 benefit year risk adjustment models using the 2017, 2018, and 2019 enrollee-level External Data Gathering Environment (EDGE) data. We also propose to update the adult and child risk adjustment models for 2023 and beyond to better predict plan liability for certain subpopulations. We propose to update the adult risk adjustment models by removing the current severity illness factors and replacing the current enrollment duration factors with enrollment duration factors contingent on the enrollee having at least one HCC. In addition, we propose to update the adult and child risk adjustment models by adding a two-stage weighted approach to model recalibrations and an interacted HCC count model specification for 2023 and beyond. We propose to continue applying a market pricing adjustment to the plan liability associated with Hepatitis C drugs in the risk adjustment models, consistent with the approach adopted beginning with the 2020 models. We discuss removing the mapping of hydroxychloroquine sulfate to RXC 09 (Immune Suppressants and Immunomodulators) in the 2018 and 2019 benefit year enrollee-level EDGE data used for the annual recalibration of the HHS risk adjustment models. We also propose for the 2024 benefit year and beyond to recalibrate the models using the final, fourth quarter (Q4) RXC mapping document that was applicable for each benefit year of data that is included in the current year's model recalibration. We propose using this approach for recalibration of the 2023 adult risk adjustment models with the exception of the 2017 enrollee-level EDGE data year, for which we propose to use the most recent RXC mapping document that was available when we first processed the 2017 enrollee-level EDGE data (that is, Q2 2018).We also propose to collect and extract five new data elements including ZIP code, race, ethnicity, ICHRA indicator, and a subsidy indicator as part of the required risk adjustment data that issuers must make accessible to HHS in states where HHS is operating the risk adjustment program. We also propose to extract three new data elements issuers already

provide to HHS as part of the required risk adjustment data submissions (plan ID, rating area, and subscriber indicator) and to expand the permitted uses of the risk adjustment data and reports. Additionally, we propose an amendment to § 153.730 to address situations when April 30 does not fall on a business day and to provide that when this occurs, the deadline for issuers to submit the required risk adjustment data in states where HHS operates the program would be the next applicable business day.

The proposals in part 153 also relate to risk adjustment state flexibility requests. We propose to repeal the ability of states to request a reduction in risk adjustment transfers calculated by HHS under the state payment transfer formula starting with the 2024 benefit year, while proposing to create an exception for any state that has requested a reduction in prior benefit years. In addition, we solicit comments on the requests from Alabama to reduce risk adjustment state transfers for the 2023 benefit year in the individual (including the catastrophic and non-catastrophic risk pools) and small group markets.

In part 153 we also propose the risk adjustment user fee for the 2023 benefit year and modifications to the error estimation methodology applied in HHS-RADV. We propose updating the HHS-RADV error estimation process to extend the application of Super HCCs beyond the sorting step that assigns HCCs to failure rate groups to also apply throughout the HHS-RADV error rate calculation processes and to specify that Super HCCs will be defined separately according to the model (infant, child, adult) to which an enrollee is subject. We also propose to constrain to zero any failure rate group outlier negative failure rate, regardless of whether the outlier issuer has a negative or positive error rate. Finally, we propose that whenever HHS recoups high-cost risk pool funds as a result of audits of risk adjustment covered plans, an actionable discrepancy, or a successful administrative appeal, the recouped high-cost risk pool funds will be used to reduce high-cost risk pool charges for that national high-cost risk pool beginning for the next benefit year for which a high cost risk pool payment has not already been calculated.

In addition, the proposals regarding part 153 also relate to MLR reporting requirements and clarify how issuers should report certain ACA program amounts that could be subject to reconsideration for MLR reporting purposes. We propose to separately address and reference HHS-RADV adjustments to make clear that HHS expects issuers to report HHS-RADV adjustments as part of their MLR reports in the same manner as they report risk adjustment payment and charge amounts.

The proposed changes to 45 CFR part 155 would allow Exchanges to implement a verification process for enrollment in or eligibility for an eligible employer sponsored plan based on the Exchange's assessment of risk for inappropriate payments of APTC/CSR. In part 155 we also propose to require all Exchanges to prorate when administering APTC for enrollees enrolled in a particular policy for less than the full coverage month, including when the enrollee is enrolled in multiple policies within a month, each lasting less than the full coverage month. We also propose new requirements in part 155 related to the QHP comparative information and standardized disclaimer required to be displayed on web-broker non-Exchange websites, a prohibition on displaying QHP advertisements or otherwise providing favored or preferred placement in the display of QHPs on web-broker non-Exchange websites based on compensation agents, brokers, or web-brokers receive from QHP issuers, and a requirement regarding the prominent display of a clear explanation of the rationale for explicit QHP recommendations and the methodology for the default display of QHPs on web-broker non-Exchange websites to better inform and protect consumers using such websites. We also propose changes to part 155, to clarify the FFE standards of conduct and what it means for agents, brokers, and web-brokers to provide the Exchange with correct information under section 1411(b) of the ACA, including ensuring that accurate consumer information is being entered on Exchange applications. Finally, we propose changes to part 155 to set forth prohibited agent, broker, and web-broker business practices commonly observed by HHS and to create enforceable standards under which HHS may take enforcement action against agents, brokers, and web-brokers when these prohibited business practices are discovered.

In 45 CFR part 156, as we do every year in the HHS notice of benefit and payment parameters, we propose to update the user fee rates for the 2023 benefit year for all issuers participating on the Exchanges using the Federal platform. We note that we intend to publish the 2023 premium adjustment percentage index and related payment parameters in guidance as finalized in part 2 of the 2022 Payment Notice. The proposed changes to part 156 also include technical amendments to § 156.50 to conform the user fee regulations with the repeal of Exchange Direct Enrollment (DE) option finalized in part 3 of the 2022 Payment Notice.

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We are proposing changes to § 156.430 to clarify that the CSR data submission process is mandatory only for those issuers that receive CSR payments from HHS for any part of the benefit year as a result of HHS possessing a valid appropriation to make CSR payments, and voluntary for other issuers.

15

86 FR 53412.

In part 156, we also propose an evergreen deadline for EHB-benchmark plan applications by states, as well as proposing to remove the ability for states to permit issuers to substitute benefits between EHB categories, proposing to change de minimis thresholds for the AV of plans subject to the AV requirements, as well as narrower de minimis thresholds for individual market silver QHPs and income-based CSR plan variations; and proposing to remove the annual reporting requirement on states to report state-required benefits in addition to the EHB to HHS.

In part 156, we also propose to require issuers of QHPs in FFEs and SBE-FPs to offer through the Exchange standardized QHP options beginning in PY 2023. We also propose to update the QIS standards in part 156 to require QHP issuers to address health and health care disparities as a specific topic area within their QIS beginning with PY 2023.

The proposed changes to part 158 would clarify that only those provider incentives and bonuses that are tied to clearly defined, objectively measurable, and well-documented clinical or quality improvement standards that apply to providers may be included in incurred claims for MLR reporting and rebate calculation purposes. The proposed changes to part 158 would also specify that only expenses directly related to activities that improve health care quality may be included as QIA expenses for MLR reporting and rebate calculation purposes. In addition, the proposed changes to part 158 would make a technical amendment to § 158.170(b) to correct an oversight and remove the reference to the percentage of premium QIA reporting option described in § 158.221(b)(8), a provision that was vacated by the United States District Court for the District of Maryland in

City of Columbus, et al.

v.

Cochran,

16

and thus deleted in part 2 of the 2022 Payment Notice final rule.

16

523 F. Supp. 3d 731 (D. Md. 2021).

III. Provisions of the Proposed HHS Notice of Benefit and Payment Parameters for 2023

A. Part 144—Requirements Relating to Health Insurance Coverage

1. Definitions (§ 144.103)

We propose to remove superfluous language from the definition of large group market. The definition currently provides that “Large group market” means the health insurance market under which individuals obtain health insurance coverage (directly or through any arrangement) on behalf of themselves (and their dependents) through a group health plan maintained by a large employer, unless otherwise provided under State law. We propose to amend the definition by deleting the phrase “unless otherwise provided under State law.” The phrase has no meaning or application, and does not appear in the statutory definition of the term in section 2791(e)(3) of the PHS Act. That phrase was initially included in the PHS Act regulatory definitions of large group market, large employer, and small employer adopted by HHS under HIPAA.

17

However, in final rules published on October 30, 2013 (78 FR 65045), we amended the definitions of large employer and small employer to make them consistent with PHS Act section 2791(e), as amended by the ACA, and in so doing, removed that phrase from the definitions. At that time, we inadvertently neglected to delete the phrase from the regulatory definition of large group market, and we now propose to do so, in order to align these definitions and make the regulatory definition for large group market consistent with the definition under the ACA.

17

62 FR 16894 (April 8, 1997) and 69 FR 78720 (Dec. 30, 2004).

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

1. Guaranteed Availability of Coverage (§ 147.104)

a. Past-Due Premiums

We propose to re-interpret the guaranteed availability requirement at section 2702 of the PHS Act and its implementing regulation at § 147.104 to require issuers to accept individuals and employers who apply for coverage, even where the individual or employer owes past-due premiums for coverage from the same issuer or another issuer in the same controlled group. On January 28, 2021, President Biden issued Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act” (E.O. 14009).

18

Section 3 of E.O. 14009 directs HHS, and the heads of all other executive departments and agencies with authorities and responsibilities related to Medicaid and the ACA, to review all existing regulations, orders, guidance documents, policies, and any other similar agency actions to determine whether they are inconsistent with policy priorities described in Section 1 of E.O. 14009, to include protecting and strengthening the ACA and making high-quality health care accessible and affordable for all individuals. Consistent with E.O. 14009, specifically section 3(iv), this proposal intends to remove an unnecessary barrier to individuals and families attempting to enroll into health coverage in the individual market.

18

E.O. 14009; 86 FR 7793 (Feb. 2, 2021).

Specifically, we propose to redesignate § 147.104(i) as § 147.104(j) and add a new § 147.104(i) to specify that a health insurance issuer that denies coverage to an individual or employer due to the individual's or employer's failure to pay premium owed under a prior policy, certificate, or contract of insurance, including by attributing payment of premium for a new policy, certificate, or contract of insurance to the prior policy, certificate, or contract of insurance, violates § 147.104(a). The guaranteed availability provisions require health insurance issuers offering non-grandfathered coverage in the individual or group market to accept every individual and employer in the state that applies for such coverage unless an exception applies. Individuals and employers typically are required to pay the first month's premium to effectuate coverage. Under the current interpretation of the guaranteed availability requirement stated in the Market Stabilization final rule, to the extent permitted by applicable state law, an issuer does not violate the guaranteed availability requirements under § 147.104 where the issuer attributes a premium payment made for new coverage to any past-due premiums owed for coverage from the same issuer or another issuer in the same controlled group within the prior 12-month period before effectuating enrollment in the new coverage. This policy addressed concerns that individuals might take unfair advantage of the rules regarding grace periods.

19

However, in part 3 of the 2022 Payment Notice proposed rule, we stated our intention to reassess this interpretation to analyze whether this policy presents unnecessary barriers to accessing health coverage.

20

19

QHP issuers are required, under § 156.270, to provide a grace period of 3 consecutive months for an enrollee, who, when failing to timely pay premiums, is receiving APTC. If the enrollee exhausts the grace period without paying all outstanding premiums, subject to a premium payment threshold implemented under § 155.400(g), then the QHP issuer must terminate the enrollee's enrollment back to the last day of the first month of the 3-month grace period. As a result, an individual receiving APTC whose coverage is terminated after the exhaustion of a grace period would owe at most 1 month of premiums, net of any APTC paid on their behalf to the issuer; however, an individual who attempts to enroll in new coverage while in a grace period, and whose coverage has not yet been terminated, could owe up to 3 months of premium, net of any APTC paid on their behalf to the issuer.

20

86 FR 35156, 36071.

After reevaluating our interpretation of the guaranteed availability requirement, we propose reinstating our previous interpretation of the guaranteed availability rules with respect to non-payment of premiums.

21

Under this interpretation, an issuer may not apply any premium payment made for new coverage in the same or a different plan or product to any outstanding debt owed from any previous coverage and then refuse to effectuate the new enrollment based on failure to pay premiums. Thus, the guaranteed availability requirement would prohibit issuers from refusing to effectuate new coverage due to failure to pay outstanding premium debt from the previous year.

21

Federally-facilitated Marketplace (FFM) and Federally-facilitated Small Business Health Options Program Enrollment Manual, Section 6.3 Terminations for Non-Payment of Premiums,

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/ENR_FFMSHOP_Manual_080916.pdf

(describing operational requirements effective as of July 19, 2016, which were superseded by subsequent publications).

Based on HHS' experience since we codified the currently-effective interpretation of guaranteed availability, we believe the current policy, has the unintended consequence of creating barriers to health coverage that disproportionately affect low-income individuals, and is therefore inconsistent with the intent of the guaranteed availability statutory requirements. The current policy heightens the risk of economic hardships for low-income individuals enrolled in health insurance coverage with APTC. Individuals stop paying premiums (and lose coverage due to nonpayment of premiums) for a variety of reasons throughout the year. For example, commenters to the Market Stabilization proposed rule stated that individuals who are victims of crime, or those grappling with domestic violence,

medical emergencies, incarceration, or other urgent circumstances are often forced to make difficult financial decisions that may lead to failure to pay their health insurance premiums. Even for some middle-income families, the high cost of health care for multiple family members with chronic health conditions may result in non-payment of premiums.

22

Requiring such individuals to pay back past-due premium plus a binder payment prior to enrollment may present an insurmountable barrier leading to gaps in coverage. For this reason, HHS is of the view that the current interpretation of the guaranteed availability requirement creates unnecessary barriers to accessing health coverage.

22

John Tozzi. (March 2018). “Why Some Americans Are Risking It and Skipping Health Insurance.”

Bloomberg News.

Retrieved from

https://www.bloomberg.com/news/features/2018-03-26/why-some-americans-are-risking-it-and-skipping-health-insurance.

HHS is also concerned that the barriers created by the current interpretation of guaranteed availability disproportionately affect low-income enrollees for whom APTC is paid. Under federal law governing grace periods for enrollees for whom APTC is paid, QHP issuers must provide a 3-month grace period before they are allowed to terminate an enrollee's coverage for non-payment of premiums and must continue to provide coverage during the first month of the grace period. As a result, those enrollees who are unable to satisfy outstanding premium payments by the end of the 3-month grace period generally may owe at least one month of past due premium after their coverage is terminated. In contrast, grace period rules for individuals who are not eligible for APTC are governed by state law. Many state laws allow for termination back to the end of the period for which an enrollee paid premium, in which case an enrollee without APTC whose coverage is terminated for nonpayment would not owe past-due premium when they attempt to enroll in coverage during a subsequent open enrollment or special enrollment period. Enrollees for whom APTC is paid generally may have household incomes as low as 100 percent of the federal poverty level (FPL) (which, for the 2021 benefit year, is $12,760 for a single person household).

23

Thus, premium payment policies that require payment of past-due premiums prior to effectuation of new coverage are likely to disproportionately affect low-income enrollees with APTC, the individuals who may be least able to pay all outstanding premium debt among those seeking coverage in the individual market.

23

See 2021 Poverty Guidelines for the 48 Contiguous States and the District of Columbia, available at

https://aspe.hhs.gov/topics/poverty-economic-mobility/poverty-guidelines/prior-hhs-poverty-guidelines-federal-register-references/2020-poverty-guidelines.

Conditioning health insurance enrollment on the payment of past-due premiums could disincentivize health insurance enrollment altogether, reducing the rate of enrollment for low-income individuals. The economic burden associated with being required to pay past-due premiums prior to enrolling in new coverage may prevent low-income individuals from enrolling in coverage and affect the demographics of the risk pool. Various studies have found that low-income families often struggle to balance out-of-pocket health care costs alongside rent or mortgage payments, and other necessary living expenses.

24

Maintaining the current interpretation of the guaranteed availability rules would uphold barriers to health insurance coverage for low-income individuals, who face a greater risk of poorer health outcomes.

25

Reverting to the previous interpretation of the guaranteed availability rules would ensure individuals who stand to benefit the most from health insurance coverage can enroll in coverage, and would promote more equitable access to health insurance coverage. In addition, the public health and economic crises caused by the COVID-19 pandemic exacerbated the hardships facing low-income individuals and families. The resulting financial and health insecurity caused by the pandemic underscores the critical role that access to continuous health coverage will continue to play during the ongoing and often unpredictable challenges of the pandemic and beyond. Returning to the previous interpretation of the guaranteed availability rule would remove a barrier to accessing health coverage that compounds the economic challenges from the COVID-19 crisis.

24

Tim Thomas, Ph.D.; Jose Hernandez, Ph.D.; et al. (2019). The Evictions Study.

The University of California Berkeley and the University of Washington.

Retrieved from

https://evictions.study/index.html.

25

P.J. Cunningham; T.L. Green; R.T. Braun. (February 2018). Income Disparities in the Prevalence, Severity, and Costs of Co-Occurring Chronic and Behavioral Health Conditions.

Medical Care.

Retrieved from

https://www.commonwealthfund.org/publications/journal-article/2018/feb/income-disparities-prevalence-severity-and-costs-co-occurring.

In the Market Stabilization rule, we noted concern that enrollees with APTC may take advantage of guaranteed availability by declining to make premium payments for coverage at the end of a benefit year without losing coverage. Although this remains possible, we are of the view that the disparate negative impact on low-income populations outweighs the possible deterrent effect on individuals who may try taking advantage of the guaranteed availability rules. We seek comment regarding the frequency of any potential gaming behavior, as well as information on the primary diagnoses and services that may be involved in suspected gaming situations so that we may better assess any contributing causes of such non-payment. For example, non-payment may not be the result of gaming, but could be indicative of contextual challenges individuals face in satisfying payment obligations. We are particularly interested in comments from issuers that have not adopted a premium payment policy that requires payment of past-due premiums prior to effectuating enrollment. In addition, we note that issuers are generally not permitted to forgive past-due premium debt, and can pursue other mechanisms to collect past-due premiums. We believe this mitigates the risk that some enrollees may take advantage of the guaranteed availability rules.

We seek comment on this proposal.

b. Nondiscrimination Based on Sexual Orientation and Gender Identity

We propose to amend 45 CFR 147.104(e) such that its nondiscrimination protections would explicitly prohibit discrimination based on sexual orientation and gender identity. HHS previously codified such nondiscrimination protections at § 147.104(e), but amendments made in 2020 to § 147.104(e) removed any reference to sexual orientation and gender identity. If finalized, this proposal would revert § 147.104(e) to the pre-2020 nondiscrimination protections.

Section 147.104(e) states that a health insurance issuer and its officials, employees, agents, and representatives must not employ marketing practices or benefit designs that would have the effect of discouraging the enrollment of individuals with significant health needs in health insurance coverage or discriminate based on race, color, national origin, present or predicted disability, age, sex, expected length of life, degree of medical dependency, quality of life, or other health conditions. Previously, in the 2014 Market Rules, we finalized § 147.104(e) to also prohibit discrimination based on sexual orientation and gender

identity.

26

However, in the 2020 final rule that revised regulations implementing section 1557 of the ACA, HHS also revised certain CMS regulations, including those at § 147.104(e), by removing sexual orientation and gender identity as bases of discrimination subject to the CMS regulations' nondiscrimination protections.

27

The 2020 section 1557 final rule is the subject of ongoing litigation.

28

26

78 FR 13406 (February 27, 2013).

27

85 FR 37160 (June 19, 2020);

See id.

at 37218-21 (the 2020 section 1557 final rule revised the following CMS regulations: 45 CFR 147.104, 155.120, 155.220, 156.200, 156.1230).

28

The 2020 section 1557 final rule is the subject of several lawsuits and court orders. For more information,

see https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html.

Pursuant to section 1311(c)(1)(A) of the ACA, the HHS Secretary was required to establish by regulation criteria for certification that require QHP issuers to meet marketing requirements and not employ marketing practices or benefit designs that will have the effect of discouraging the enrollment of individuals with significant health needs in QHPs. Under the authority of section 1321(a) of the ACA, which provides the HHS Secretary broad rulemaking authority with respect to the establishment and operation of Exchanges and the offering of QHPs through such Exchanges, in the 2012 Exchange Standards final rule, CMS codified a regulation implementing this requirement at § 156.225. Under the general rulemaking authority in section 2792 of the PHS Act, which provides the HHS Secretary broad rulemaking authority to promulgate regulations as may be necessary or appropriate to carry out the provisions of title XXVII of the PHS Act, the 2014 Market Rules adopted a similar standard in § 147.104(e), applying this requirement to the group and individual health insurance markets. Furthermore, in order to ensure consistency against employing discriminatory marketing practices and benefit designs, HHS finalized § 147.104(e) to align with other prohibitions on discrimination that HHS had already codified at that time with respect to EHB in § 156.125, with respect to standards applicable to QHPs under § 156.200(e) that included protections against discrimination on the basis of sexual orientation and gender identity, and with respect to marketing standards in § 156.225. The 2014 Market Rules further clarified that discriminatory marketing practices or benefit designs represent a failure by issuers to comply with the guaranteed availability requirements in PHS Act section 2702, as such practices or designs can have the effect of discouraging or preventing the enrollment of individuals in health insurance coverage.

In the 2020 section 1557 final rule, HHS revised the section 1557 implementing regulation. Among other things, the rule removed the definition of “on the basis of sex,” which included gender identity, and instead purported to rely upon the “plain meaning” of the word “sex” in the underlying Title IX regulation.

29

However, as HHS noted in the 2020 section 1557 final rule, CMS possesses statutory authority independent of section 1557 of the ACA to prohibit discrimination in the group and individual markets.

30

29

85 FR 37160, 37166 (June 19, 2020). The 2016 and 2020 section 1557 final rules are the subject of several lawsuits and court orders. For more information,

see https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html, https://www.hhs.gov/civil-rights/for-individuals/section-1557/index.html.

30

85 FR 37160, 37219, 37218-21 (June 19, 2020).

Following public posting of the 2020 section 1557 final rule on the agency's website, the Supreme Court held in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), that discrimination on the basis of sex under Title VII of the Civil Rights Act of 1964 includes discrimination on the basis of sexual orientation and gender identity. On January 20, 2021, the President signed Executive Order 13988 stating that it is the Administration's policy to prevent and combat discrimination on the basis of gender identity and sexual orientation, and that under Bostock's reasoning, laws that prohibit sex discrimination also prohibit discrimination on the basis of gender identity and sexual orientation, so long as the laws do not contain sufficient indications to the contrary.

31

The Executive Order (E.O.) also instructed all agency heads, including the HHS Secretary, to review all existing regulations, guidance documents, and other agency actions to determine whether they are consistent with the aforementioned policy, and to consider whether to suspend, revise, or rescind any agency actions that are inconsistent with it. The Department of Justice (DOJ) issued a memorandum on March 26, 2021 that determined the court's reasoning in Bostock applies to Title IX and thus that Title IX's prohibition on discrimination on the basis of sex includes discrimination on the basis of gender identity and sexual orientation.

32

Following the E.O. and DOJ's memorandum, HHS released on May 10, 2021 a Notice that HHS will interpret and enforce section 1557's and Title IX's prohibition on discrimination on the basis of sex to include: (1) Discrimination on the basis of sexual orientation; and (2) discrimination on the basis of gender identity.

33

31

Executive Order 13988 on Preventing and Combating Discrimination on the Basis of Gender Identity or Sexual Orientation, 86 FR 7023 (Jan. 20, 2021).

32

U.S. Dep't of Justice, Memorandum on Application of Bostock v. Clayton County to Title IX of the Education Amendments of 1972 (Mar. 26, 2021),

https://www.justice.gov/crt/page/file/1383026/download

. On June 16, 2021, the Department of Education's Office for Civil Rights issued a similar Notice explaining that it too will enforce Title IX's prohibition on discrimination on the basis of sex to include: (1) Discrimination based on sexual orientation; and (2) discrimination based on gender identity (

available at https://www2.ed.gov/about/offices/list/ocr/docs/202106-titleix-noi.pdf

).

33

86 FR 27984.

Likewise, CMS is not relying on authority from section 1557 of the ACA for the proposal at § 147.104(e) or the parallel proposals to nondiscrimination regulations at §§ 155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b). We will further elaborate in the respective preambles to §§ 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b) the specific ACA authority CMS is relying on to prohibit discrimination in the group and individual markets. CMS proposes to exercise the same authority as it exercised in the 2014 Market Rules to amend § 147.104(e) to again prohibit a health insurance issuer and its officials, employees, agents, and representatives from discriminating in its marketing practices or benefit designs on the basis of sexual orientation and gender identity. Specifically, CMS proposes to again rely on section 2702 of the PHS Act, as well as section 2792 of the PHS Act, which provides the HHS Secretary broad rulemaking authority to promulgate regulations as may be necessary or appropriate to carry out the provisions of title XXVII of the PHS Act. These are the same authorities CMS relies upon for implementation of existing nondiscrimination protections at § 147.104(e). Utilizing these same authorities to again prohibit discrimination based on sexual orientation and gender identity would be consistent with the authority CMS relies upon for those existing protections at § 147.104(e) that currently prohibit discrimination on the basis of race, color, national origin, present or predicted disability, age, sex, expected length of life, degree of medical dependency, quality of life, or other health conditions.

People who identify as part of the lesbian, gay, bisexual, transgender, and

queer (LGBTQI+) community face pervasive health and health care disparities, and are at higher risk for many concomitant conditions, including substance use and

34

mental health disorders, sexually transmitted infections,

35

HIV,

36

cancer, cardiovascular disease, and obesity.

37

Overall, LGBTQI+ people report being in poorer health than non-LGBTQI+ individuals. LGBTQI+ people of all genders are more likely to become disabled at a younger age than heterosexual individuals.

38

In addition to disparities in health outcomes, LGBTQI+ people face barriers to obtaining appropriate health care and transgender people who can access insurance may nonetheless be denied coverage for needed services. For example, nearly half of transgender respondents in one survey said their health insurance company denied them gender affirming surgery,

39

and a similar proportion reported that they were denied coverage for hormone therapy.

40

Beyond health coverage issues, LGBTQI+ people may struggle to access care because of cost barriers. LGBTQI+ people are also more likely than others to report postponing or forgoing health care due to costs, and costs were an even greater obstacle for younger LGBTQI+ people and those who are transgender—especially transgender people of color.

41

34

Hilary Daniel et al, Annals of Internal Med. Position Papers,

Lesbian, Gay, Bisexual, and Transgender Health Disparities: Executive Summary of a Policy Position Paper From the American College of Physicians

(July 21, 2105),

https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim

.

35

Hilary Daniel et al, Annals of Internal Med. Position Papers,

Lesbian, Gay, Bisexual, and Transgender Health Disparities: Executive Summary of a Policy Position Paper From the American College of Physicians

(July 21, 2105),

https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim

.

36

U.S. Dep't of Health & Human Servs., Ctrs. for Disease Control and Prevention,

HIV Surveillance Report, 2019; Vol. 32

(May 2021),

https://www.cdc.gov/hiv/pdf/library/reports/surveillance/cdc-hiv-surveillance-report-2018-updated-vol-32.pdf

.

37

See, for example,

Lesbian, Gay, Bisexual, and Transgender Health, Healthy People 2020,

https://www.healthypeople.gov/2020/topics-objectives/topic/lesbian-gay-bisexual-and-transgender-health#:~:text=Research%20suggests%20that%20LGBT%20individuals,%2C2%2C%203%20and%20suicide;

Hafeez, Hudaisa et al. “Healthcare Disparities Among Lesbian, Gay, Bisexual, and Transgender Youth: A Literature Review.”

Cureus

vol. 9,4 e1184. 20 Apr. 2017, doi:10.7759/cureus.1184 (

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC5478215/

); Fredriksen-Goldsen KI, Kim H-J, Barkan SE, Muraco A and Hoy-Ellis CP (2013) Health disparities among lesbian, gay, and bisexual older adults: Results from a population-based study.

American Journal of Public Health

103, 1802-1809; Billy A. Caceres et al. “A Systematic Review of Cardiovascular Disease in Sexual Minorities”, American Journal of Public Health 107, no. 4 (April 1, 2017): pp. e13-e21.

38

Hilary Daniel et al, Annals of Internal Med. Position Papers,

Lesbian, Gay, Bisexual, and Transgender Health Disparities: Executive Summary of a Policy Position Paper From the American College of Physicians

(July 21, 2105),

https://www.acpjournals.org/doi/full/10.7326/M14-2482?journalCode=aim

.

39

For purposes of this preamble, the term “gender affirming care” means gender affirming care for transgender individuals. This may also be referred to as “transition related care.”

40

Sharita Gruberg et al, Center for American Progress,

The State of the LGBTQ Community in 2020

(Oct. 6, 2020),

https://www.americanprogress.org/issues/lgbtq-rights/reports/2020/10/06/491052/state-lgbtq-community-2020/

.

41

Sharita Gruberg et al, Center for American Progress,

The State of the LGBTQ Community in 2020

(Oct. 6, 2020),

https://www.americanprogress.org/issues/lgbtq-rights/reports/2020/10/06/491052/state-lgbtq-community-2020/

.

We believe that prohibiting discrimination based on sexual orientation or gender identity can lead to improved health outcomes for this community

42

and that the removal of such protections in the 2020 section 1557 final rule frustrated not only guaranteed availability requirements, but also the broader aim of improving health equity. Without protection from discrimination, individuals may continue to face barriers to accessing medically necessary health care. For example, without protection from discrimination, transgender individuals may face barriers or be denied medically necessary gender-affirming care. We believe amending the nondiscrimination protections as proposed at § 147.104(e) to again explicitly prohibit discrimination based on sexual orientation and gender identity is warranted in light of the existing trends in health care discrimination and to better address barriers to health equity for LGBTQI+ individuals.

43

As proposed, such revisions to § 147.104(e) would also support the original objective of ensuring consistency against employing discriminatory marketing practices and benefit designs, as we are proposing parallel changes to nondiscrimination regulations at §§ 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b).

42

Ward, BW, Dahlhamer, JM, Galinsky, AM, and Joestl, SS. Sexual Orientation & Health Among U.S. Adults: National Health Interview Survey, CDC National Health Statistics Report 77, 2014.

43

Nguyen, T.T., Vable, A.M., Glymour, M.M. et al. Trends for Reported Discrimination in Health Care in a National Sample of Older Adults with Chronic Conditions. J GEN INTERN MED 33, 291-297 (2018).

https://doi.org/10.1007/s11606-017-4209-5

.

If any of the provisions at §§ 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b) are held to be invalid or unenforceable by its terms, or as applied to any person or circumstance, it shall be severable from this part and shall not affect the remainder thereof or the application of the provision to other persons not similarly situated or to other dissimilar circumstances. In enforcing the nondiscrimination provisions in the corresponding CMS regulations, HHS will comply with laws protecting the exercise of conscience and religion, including the Religious Freedom Restoration Act (42 U.S.C. 2000bb through 2000bb-4) and all other applicable legal requirements.

We seek comment on this proposal.

C. Part 153—Standards Related to Reinsurance, Risk Corridors, and Risk Adjustment

In subparts A, D, G, and H 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 ACA that transfers funds from lower-than-average risk, risk adjustment covered plans to higher-than-average risk, risk adjustment covered plans in the individual, small group markets, or merged 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.

44

HHS did not receive any requests from states to operate risk adjustment for the 2023 benefit year. Therefore, HHS will operate risk adjustment in every state and the District of Columbia for the 2023 benefit year.

44

Also see 42 U.S.C. 18041(c)(1).

1. Sequestration

In accordance with the OMB Report to Congress on the Joint Committee Reductions for Fiscal Year 2022, the permanent risk adjustment program is subject to the fiscal year 2022 sequestration.

45

The federal government's 2022 fiscal year begins October 1, 2021. Therefore, the risk adjustment program will be sequestered at a rate of 5.7 percent for payments made from fiscal year 2022 resources (that is, funds collected during the 2022 fiscal year).

45

https://www.whitehouse.gov/wp-content/uploads/2021/05/BBEDCA_251A_Sequestration_Report_FY2022.pdf

.

HHS, in coordination with OMB, has determined that, under section 256(k)(6) of the Balanced Budget and Emergency Deficit Control Act of 1985 (Pub. L. 99-177, enacted December 12, 1985), as

amended, and the underlying authority for the risk adjustment program, the funds that are sequestered in fiscal year 2022 from the risk adjustment program will become available for payment to issuers in fiscal year 2023 without further Congressional action. If Congress does not enact deficit reduction provisions that replace the Joint Committee reductions, the program 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.

Additionally, we note that the Coronavirus Aid, Relief, and Economic Security (CARES) Act amended section 251A(6) of the Balanced Budget and Emergency Deficit Control Act of 1985 and extended sequestration for the risk adjustment program through fiscal year 2030 at a rate of 5.7 percent per fiscal year.

46

46

https://www.congress.gov/116/bills/s3548/BILLS-116s3548is.pdf

.

2. HHS Risk Adjustment (§ 153.320)

The HHS risk adjustment models predict plan liability for an average enrollee based on that person's age, sex, and diagnoses (also referred to as hierarchical condition categories (HCCs)), producing a risk score. The HHS risk adjustment methodology utilizes separate models for adults, children, and infants to account for clinical and cost differences in each age group. In 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, to calculate enrollee risk scores in the adult models, we added enrollment duration factors beginning with the 2017 benefit year, and prescription drug categories (RXCs) beginning with the 2018 benefit year.

47

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 CSR factor. 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 state payment transfer formula, which determines the state transfer payment or charge that an issuer will receive or be required to pay for that plan for the applicable state market risk pool. Thus, the HHS risk adjustment models predict average group costs to account for risk across plans, in keeping with the Actuarial Standards Board's Actuarial Standards of Practice for risk classification.

47

For the 2018 benefit year, there were 12 RXCs, but starting with the 2019 benefit year, the two severity-only RXCs were removed from the adult risk adjustment models. See, for example, 83 FR 16941.

a. Data for Risk Adjustment Model Recalibration for 2023 Benefit Year and Beyond

We are proposing to recalibrate the 2023 benefit year risk adjustment models with the 2017, 2018, and 2019 enrollee-level EDGE data. Consistent with the approach outlined in the 2020 Payment Notice to no longer rely upon MarketScan® data for recalibrating the risk adjustment models, we will recalibrate the risk adjustment models for the 2023 benefit year using only enrollee-level EDGE data, and we will continue to use blended, or averaged, coefficients from the 3 years of separately solved models for the 2023 benefit year model recalibration.

48

Additionally, as outlined in the 2022 Payment Notice, we will use the 3 most recent consecutive years of enrollee-level EDGE data that are available at the time we incorporate the data in the draft recalibrated coefficients published in the proposed rule for the applicable benefit year,

49

and will not update the coefficients between the proposed and final rules if an additional year of enrollee-level EDGE data becomes available for incorporation.

50

We believe this promotes stability, better meets the goal of the risk adjustment program, and allows issuers more time to incorporate this information when pricing their plans for the upcoming benefit year.

48

84 FR 17463 through 17466.

49

While we do receive the next year of enrollee-level EDGE data prior to the proposed rule, that data must go through several quality and analysis checks before it is useable for risk adjustment model recalibration.

50

86 FR 24140 at 24152.

As such, we propose to determine coefficients for the 2023 benefit year based on a blend of separately solved coefficients from the 2017, 2018, and 2019 benefit years' enrollee-level EDGE data.

51

The draft coefficients listed in Tables 1 through 6 reflect the use of 2017, 2018, and 2019 benefit year enrollee-level EDGE data, as well as other risk adjustment model updates proposed in this proposed rule (including changes to the model specifications, the pricing adjustment to Hepatitis C drugs, and the removal of the mapping of hydroxychloroquine sulfate to an RXC). However, we note that the coefficients could change if we identify an error or if some or all of the proposed model changes are not finalized or are modified in response to comments. In addition, consistent with § 153.320(b)(1)(i), if we are unable to finalize the final coefficients in time for publication in the final rule, we would publish the final coefficients for the 2023 benefit year in guidance soon after the publication of the final rule. We seek comment on the proposal to determine 2023 benefit year coefficients based on a blend of separately solved coefficients from the 2017, 2018, and 2019 enrollee-level EDGE data.

51

As discussed later in this proposed rule, we propose to remove the mapping of hydroxychloroquine to RXC 09 (Immune Suppressants and Immunomodulators) and the related RXC 09 interactions.

We also solicit comments on the future use of the 2020 enrollee-level EDGE data due to the COVID-19 PHE. Under current policy, 2020 enrollee-level EDGE data would be used in recalibration of the HHS risk adjustment models for the 2024 benefit year and that data would continue to be used for the 2025 and 2026 benefit year models.

52

Although HHS has not analyzed the 2020 enrollee-level EDGE data yet, we solicit comment on the future use of the 2020 enrollee-level EDGE data for the annual recalibration of the HHS risk adjustment models.

52

Consistent with the approach finalized in the 2022 Payment Notice, use of the 3 most recent consecutive years of enrollee-level EDGE data would result in the use of 2018, 2019, and 2020 enrollee-level EDGE data for the recalibration of the 2024 benefit year models; the use of 2019, 2020, and 2021 enrollee-level EDGE data for recalibration of the 2025 benefit year models; and the use of 2020, 2021, and 2022 enrollee-level EDGE data for recalibration of the 2026 benefit year models.

b. Risk Adjustment Model Updates

Beginning with the 2023 benefit year, we are proposing three modeling updates to the risk adjustment models. Consistent with the potential model updates discussed in the 2021 RA Technical Paper, we propose the following model updates, which are the same as those proposed but not finalized in the 2022 Payment Notice:

53

(1) Adding a two-stage weighted model specification to the adult and child models; (2) removing the severity illness factors in the adult models and

replacing them with new severity and transplant indicators interacted with HCC count factors in the adult and child models; and (3) replacing the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors in the adult models.

53

See 85 FR 78572 at 78583-78586. In the 2022 Payment Notice Final Rule, in response to comments, we did not finalize the proposed updates and announced that we would publish a technical paper on the proposed model changes; see 86 FR 24140 at 24151-24162. See also the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

and the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations, available at

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs

.

As described in prior rulemakings and in the 2021 RA Technical Paper, the current HHS-HCC models, which are linear models, underpredict plan liability for enrollees without HCCs and the lowest expected expenditures, underpredict plan liability for enrollees with the highest HCC counts and the highest expected expenditures, and underpredict plan liability for partial-year enrollees with HCCs.

54

The proposals in this proposed rule are intended to improve the risk adjustment adult and child models' prediction for these subpopulations. We released the 2021 RA Technical Paper in response to stakeholder requests for more information on the impacts of these proposals before they were adopted and released simulated transfer estimates reflecting the combination of these proposed changes in December 2021.

55

We continue to believe the combination of these proposed model changes will improve the current models' predictive accuracy for the lowest-risk enrollees, certain partial-year adult enrollees, and the very highest-risk enrollees, while limiting trade-offs in other areas of model performance and complexity. As such, we are re-proposing these combined model specification changes in this rule, and the following sections describe these proposed model specification changes in detail.

54

See, for example, 85 FR 29164 at 29188-29190; 85 FR 78572 at 78583-78586; and 86 FR 24140 at 24151-24162. See also the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

55

See the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

and the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations, available at

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs

. Issuers that participated in the simulation also received issuer-specific data, including risk score and transfer estimates for the simulated results.

i. Two-Stage Weighted Model Specification

We propose to use a two-stage weighted model specification to recalibrate the adult and child risk adjustment models starting with the 2023 benefit year to improve the underprediction of plan liability for the lowest-risk enrollees (that is, enrollees in low risk deciles and enrollees without HCCs).

56

Since approximately 80 percent of enrollees in the individual and small group (or merged) markets do not have HCCs, this underprediction, while small in magnitude, represents a large number of enrollees.

57

56

When we refer to the enrollees without HCCs, we are referring to enrollees without payment HCCs.

57

See Chapter 2 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf,

and the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations, available at

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs

.

To improve prediction for the lowest-risk enrollees, we explored calibrating the adult and child models in two stages to reweight the healthier enrollees more heavily. In the first-stage estimation, the model coefficients would be estimated using the current model specifications; and in the second stage, we would re-estimate the model weighting enrollees in the recalibration sample by the capped reciprocal of the predicted values of relative expenditures from the first step estimation with the same model specification. More specifically, the first stage of this proposed weighted estimation method for the adult models involves a linear regression (weighted by the person-specific eligibility fraction of the number of months enrolled divided by 12) of simulated plan liability

58

on age-sex factors, payment HCC factors, severity illness factors,

59

the enrollment duration factors,

60

and RXCs. For the child models, the first stage of the proposed weighted estimation method involves a linear regression of simulated plan liability on age-sex factors and payment HCC factors.

61

The methodology for conducting the proposed first stage regression would be essentially identical to the current adult and child risk adjustment recalibrations. The second stage of the proposed two-stage weighted model specification involves using recalibration sample enrollees' inverse (also referred to as reciprocal) capped predictions from the first stage as weights for a second linear regression. As such, this step has the material effect of weighting healthier enrollees more heavily so that the statistical model predicts their expenditures more accurately. It also systematically reduces the influence of very expensive enrollees on the final model factors.

58

We simulate plan liability expenditures for each metal level for each enrollee in the recalibration dataset (that is, we apply different standardized benefit design parameters to the same sample for each metal level). See

https://www.cms.gov/mmrr/Downloads/MMRR2014_004_03_a03.pdf

.

59

We are also proposing to remove the current severity illness indicators in the adult models and add new severity and transplant indicators interacted with HCC count factors in the adult and child models, as described elsewhere in this proposed rule.

60

We are also proposing to modify the enrollment duration factors in the adult models, as described elsewhere in this proposed rule.

61

See supra note 58.

To help provide stability to the proposed two-stage weighted model specification, we imposed lower and upper bound caps on the first-stage predictions at the 2.5th and 97.5th percentiles in the adult models, and the 2.5th and 99.5th percentiles in the child models. This capped weighted approach avoids excessively large or small weights for any observations for the second stage estimation, and therefore mitigates the potential to underpredict at the high end for expensive enrollees, as well as any possible low-end overprediction of healthier enrollees. We tested various caps for the weights based on the distribution of costs and found these lower and upper bound caps achieved better prediction on average.

62

62

See Section 2.2 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

. Also see 85 FR at 78667 and 86 FR at 24283.

Additionally, in our consideration of the two-stage weighted model specification, we tested various methods of determining weights for the second stage, including reciprocals of the square root of predictions, log of predictions, and residuals from the first stage estimation, but the reciprocal of the capped predictions from the first stage resulted in better predictive ratios for low-cost enrollees compared to any of these alternative weighting functions.

63

63

Ibid.

Our conceptual reasoning for pursuing the two-stage weighted model specification is to retain the simple linear, additive structure of the current models while forcing the model to better predict lowest-risk enrollees, who our analyses identified as underpredicted in the current adult and child models. Based on analyses using 2018 enrollee-level EDGE data, the two-stage weighted approach significantly improves the predictive ratios (PRs) of the lower deciles and the PRs for enrollees without HCCs compared to the current models.

64

Similar results were also seen when using 2016 and 2017 enrollee-

level EDGE data.

65

In addition, the two-stage weighted approach eliminated the overprediction observed in risk decile 8.

66

We also found that the two-stage weighted approach did not meaningfully change factor coefficients for most HCCs, providing stability to the risk adjustment model factors.

64

See Figure 2.2 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

65

The PRs calculated in the 2021 RA Technical Paper are calculated using the same samples on which the models were calibrated. However, as is common practice in evaluating model fit, we also tested splitting the sample for calibration and validation purposes and the results were unchanged. Further, for purposes of the analysis in the 2021 RA Technical Paper, we calculated PRs for at least three data years and the results always appear the same. We therefore generally only reported results in the 2021 RA Technical Paper from the 2018 data year, which was the most recently available dataset at the time that we ran these analyses in preparation for announcing the proposed model changes in the proposed 2022 Payment Notice.

66

See Figure 2.2 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

At the same time, we also considered whether the two-stage weighted approach worsens the fit of the models along other dimensions, identifying three areas that had minor, negative impacts on the model fit. First, the two-stage weighted approach predicts plan liability by age-sex factor less accurately than the current models, especially for younger and older women. Overall, we considered this to be an acceptable trade-off, because across all age and sex factors, most PRs were within a tolerable threshold of +/−5 percent (for example, 0.95 to 1.05), and the two-stage weighted approach has the major benefit of more accurately predicting the age-sex factors for the enrollees without HCCs, which is a much larger population than enrollees with HCCs. Second, the two-stage weighted approach is somewhat less accurate at predicting certain HCCs, with the two-stage weighted approach worsening adult model silver plan PRs by at least 5 percentage points for 14 (out of 91) ungrouped HCCs and 3 (out of 18) grouped HCCs. For the vast majority of HCCs, the impact is very small and most affected HCCs or HCC groups have small sample sizes.

67

Again, we considered this reduced accuracy to be an acceptable trade-off because most of the PRs for the two-stage weighted approach were within a tolerable threshold of +/−5 percent (for example, 0.95 to 1.05), most enrollees do not have HCCs, and the two-stage weighted approach predicts plan liability better for those no HCC enrollees. Third, the two-stage weighted approach had lower R-squared values compared to the current models. However, the decrease in R-squared is at most 0.1 percentage points for all metal levels, which is a minor reduction in fit across models.

68

Similar to the worsening of the age-sex cell and the HCC PRs, we were not concerned about the lower R-squared as the reduction in fit was minor at all metal levels, the values remained within the range of R-squared statistics of other concurrent models predicting expenditures for commercial insurance enrollees,

69

and the proposed two-stage weighted model specification better predicts plan liability for enrollees with no HCCs, which is the majority of enrollees. After considering the impact of the approach on model performance, we determined that the proposed two-stage weighted model specification does not have material unintended consequences in model performance and achieves the aim of improving the predictive accuracy of the current adult and child models for enrollees in the lowest risk deciles and for enrollees without HCCs. For these reasons, we believe that the two-stage weighted approach can improve prediction for lowest-risk enrollees with limited trade-offs in other parts of the models' performance. Therefore, we are proposing to add the two-stage weighted model specification to the adult and child models beginning with the 2023 benefit year in combination with the proposed interacted HCC counts model specification and the updated adult model enrollment duration factors described later in this proposed rule.

67

For example, only one HCC or HCC group whose PR was identified in our analysis as worsening by at least 5 percentage points was present in greater than 1 percent of the adult silver plan enrollees in the 2018 enrollee-level EDGE dataset (HCC 142

Specified Heart Arrhythmias

). Our analysis found that all other HCCs had recalibration dataset frequencies of less than 0.5 percent of enrollees. See Chapter 2.3 and Table 2.1 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

68

See Figure 2.6 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

69

See Winkelman, R., & Mehmud, S. (2007). A Comparative Analysis of Claims-Based Tools for Health Risk Assessment. Schaumberg, IL: Society of Actuaries.

In the 2021 RA Technical Paper, we explained that we believe that by addressing the underprediction of costs associated with lowest-risk enrollees in the adult and child models, we could further encourage the retention and offering of plans that enroll a higher proportion of this subpopulation of enrollees. We believe issuers offering these types of plans are at greater risk of exiting the market if transfers calculated under the state payment transfer formula undercompensate for the true plan liability of the lowest-risk enrollees. We received stakeholder comments in this regard, noting that the underprediction of the lowest-risk enrollees could disincentivize issuers from attracting healthy enrollees to their plans, thereby undermining the goals of developing a healthy and stable market and encouraging competition on the basis of high quality rather than risk selection. However, other stakeholders have questioned if we should focus model changes on improving prediction for the lowest-risk enrollees when the risk adjustment program is intended to reduce incentives for issuers to avoid enrolling individuals with higher risk.

We also received comments concerned that the two-stage weighted model would be redundant of other elements in the state payment transfer formula, which stated that the administrative cost adjustment to statewide average premium

70

already addresses some of the underprediction of the lowest-risk enrollees in the risk adjustment models. We clarify that the proposed two-stage weighted model specification and existing administrative cost adjustment to statewide average premium are not redundant and address separate considerations. As detailed in the 2018 Payment Notice, the purpose of the administrative cost adjustment to statewide average premium is to exclude fixed administrative costs that are not dependent on enrollee risk, such as taxes.

71

In contrast, and as previously described elsewhere,

72

the purpose of the proposed two-stage weighed model specification is to improve the current adult and child models' prediction for the lowest risk enrollees.

70

81 FR at 94099-94100.

71

See 81 FR at 61488-61489. Also see 81 FR at 94099-94100.

72

See Section 2.2 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

. Also see 85 FR at 78667 and 86 FR at 24283.

We seek comment on the two-stage weighted model specification proposal, specifically regarding whether we should implement the proposed two-stage weighted model specification alone, independent of the other proposed model specification changes outlined in this rule, beginning with the 2023 benefit year; whether we should implement the proposed two-stage weighted model specification in conjunction with these other proposals; or whether we should not implement the two-stage weighted model specification at all. Additionally, given the stakeholder comments we received

questioning the need for this type of model update, we also generally solicit comments on whether we should seek to improve the current models' prediction for the lowest-risk enrollees.

ii. Interacted HCC Counts Model Specification

In addition to the two-stage weighted approach, we are proposing to add an interacted HCC counts model specification to the adult and child risk adjustment models starting with the 2023 benefit year to address the current models' underprediction of plan liability for the very highest-risk enrollees (that is, those in the top risk percentile and those enrollees with the most HCCs). While this highest-risk subpopulation represents a small number of enrollees, it represents a large portion of expenditures. As described in the 2021 RA Technical Paper, enrollees in risk decile 10 represent roughly 74.29 percent of actual plan liability, compared to only 1.36 percent for enrollees in risk decile 1.

73

We found that for enrollees with a high HCC count, there is an increasing, non-linear effect that leads to higher costs than are currently predicted by adding up the incremental effects of each HCC.

73

See Table 4.1 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

Therefore, to address the underprediction of the highest-cost enrollees, we explored the addition of severity and transplant factors interacted with HCC counts in the adult and child models, wherein a factor flagging the presence of at least one severe or transplant payment HCC is interacted with counts of the enrollee's payment HCCs.

74

The purpose of adding severity and transplant factors interacted with HCC count factors to the adult and child models is to address the underprediction of the highest risk enrollees (as the proposed two-stage-weighted model specification addresses the underprediction of the healthiest enrollees) by accounting for the fact that costs of certain HCCs rise significantly when they occur with multiple other HCCs. Specifically, the goals of this approach were to:

74

For HCCs in a coefficient estimation group, the group is counted at most once. These groups of HCCs in the HHS risk adjustment adult and child models are detailed in the HHS-Developed Risk Adjustment Model Algorithm “Do It Yourself (DIY)” Software “Additional Adult Variables” and “Additional Child Variables” table logic (Tables 6 and 7 in the 2021 Benefit Year DIY Software). The August 3, 2021 version of the DIY software is available at

https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance

.

1. Address the non-linearity in costs between enrollees without HCCs or with very low costs and enrollees with multiple HCCs or with high costs;

2. Empirically incorporate the cost impact of multiple complex diseases; and

3. Reduce incentives for coding proliferation to mitigate the gaming concerns with HCC counts models.

In developing this interacted HCC counts approach, we identified common HCCs for enrollees with extremely high costs, as well as HCCs that were being underpredicted in the current risk adjustment adult and child models. We found that many of the HCCs that were flagged as being underpredicted were the current severe illness HCCs, the transplant HCCs, and other HCCs related to the severity of disease. Therefore, we considered dropping the current severity illness factors in the adult models and replacing them with severity and transplant factors interacted with HCC count factors in the adult models, as well as adding the severity and transplant factors interacted with HCC count factors to the child models.

We propose the inclusion of the factors in Tables 1 and 2 as the interacted severity and transplant factors in the adult and child models starting with the 2023 benefit year. We separated out transplant HCCs and severity HCCs into their own separate set of interacted factors, as expressed in Tables 1 and 2, because we found that this approach improved prediction for high-cost enrollees better than an approach that combined severity and transplant HCCs into a single set of factors. Furthermore, under the current risk adjustment models, adult severity illness interaction factors are collapsed into a single binary variable indicating the presence of any severity illness interaction. In contrast, the proposed severity factors would not be collapsed and would instead be separated out by the HCC count with which the severity or transplant illness indicator was interacted.

We defined the new proposed interaction factors such that an enrollee would receive one or more of these factors if they had any HCCs in the severity or transplant indicator groups in Table 3 and according to how many HCCs were recorded in the enrollee's data in total. As such, the proposed severity and transplant interaction factors would express the presence of one or more of the selected severity or transplant HCCs in Table 3. That is, an enrollee must have at least one HCC in the “severity” or “transplant” indicator groups in Table 3 to receive the interacted HCC count factor toward their risk score, but would not receive any additional flags for having more than one of the “severity” or “transplant” HCCs in an indicator group beyond the total HCC count.

The proposed severity-HCC-count-interaction factors were calculated as 10 separate factors for the adult models, and seven separate factors for the child models. In the adult models, the first nine factors specified the presence of (1) an HCC in the severity list in Table 3 and (2) exactly one payment HCC in the enrollee's data, exactly two, exactly three, and so on, up to exactly nine payment HCCs. The tenth factor specified the presence of (1) an HCC in the severity list in Table 3 and (2) ten or more payment HCCs in the enrollee's data. For the child models, the first five factors represented the presence of (1) an HCC in the severity list in Table 3 and (2) exactly one payment HCC in the enrollee's data, exactly two, exactly three, and so on, but the sixth factor represents the presence of (1) an HCC in the severity list in Table 3 and (2) six to seven payment HCCs, and the seventh factor represents the presence of (1) an HCC in the severity list in Table 3 and (2) eight or more payment HCCs in the enrollee's data.

The proposed transplant-HCC-count-interaction factors were calculated similarly. However, the transplant factors were calculated using a different range of HCC counts. In the adult models, five separate transplant interaction factors were created, representing the presence of (1) an HCC in the transplant list in Table 3 and (2) payment HCC counts of exactly four, exactly five, exactly six, exactly seven, and eight or more payment HCCs in the enrollee's data. For the child models, we created only one transplant interaction factor indicating the presence of (1) an HCC in the transplant list in Table 3 and (2) a total of four or more payment HCCs in the enrollee's data. As detailed later in this section, this treatment of transplant-HCC-count-interaction factors stabilized the child model estimates by increasing the sample size used to estimate the factor coefficients.

To illustrate how the proposed severity- (or transplant-) HCC-count-interaction factors would be assigned to an enrollee, consider an adult enrollee with four payment HCCs, one of which is HCC 34 “Liver Transplant Status/Complications”. Because HCC 34 appears in both the severity and transplant indicator groups in Table 3, this enrollee would receive the following factor coefficients toward their risk score in the adult models: (1) The four factor coefficients for their individual HCCs (the three non-transplant HCC factors and the HCC 34

transplant HCC factor), (2) the factor coefficient for the severity-HCC-count-interaction indicating four payment HCCs, and (3) the factor coefficient for the transplant-HCC-count-interaction indicating four payment HCCs.

75

The child model would operate similarly. For a child enrollee with a transplant HCC in the transplant factor group and three other payment HCCs, the following would be used to calculate the enrollee's risk score: (1) The factor coefficients for all four HCCs (that is, the three non-transplant HCCs and the transplant HCC), (2) the factor coefficient for the severity-HCC-count-interaction indicating four payment HCCs, and (3) the factor coefficient for the transplant-HCC-count-interaction indicating four or more payment HCCs.

75

This is in addition to other factors that the adult enrollee has that are used to calculate their risk score (such as the applicable demographic factors, RXCs (if any), and the applicable enrollment duration factors).

To implement the severity- and transplant-HCC-count-interaction factors in the regression model and estimate the value of their factor coefficients, we are proposing to remove the current severity illness factors in the adult models, and add severity- and transplant-HCC-count-interaction factors for the adult and child models beginning with the 2023 benefit year. Although the severity (or transplant) HCC-count-interaction factor coefficients may be estimated as having negative values, the combination of these interaction factor coefficients with the factor coefficient of the HCC that triggered the severity factor will always be positive. For example, the proposed adult silver metal level model factor coefficient for Viral or Unspecified Meningitis (HCC 04), which is proposed as a severe illness HCC, is 6.914, when combined with the proposed severity-HCC-count-interaction factor coefficient for one HCC of −4.603 (indicating that the enrollee only has HCC 04 present in their data), would increase the enrollee's risk score by 2.311. Moreover, an increase in the count of HCCs would lead to a monotonic increase in the enrollee risk score, because the severity-HCC-count-interaction factor coefficients are less negative (and sometimes positive) with a larger number of payment HCCs.

One potential concern with this proposed model specification change is that the severity- and transplant-HCC-count-interaction factor coefficients might be based on small sample sizes. In recognition of this issue, we considered sample sizes of the various interacted HCC count factors when developing this proposal and the proposed factor coefficients. We explored alternative methods of interacting HCC counts with severity and transplant HCCs, including interacting the HCC counts with individual selected severity and transplant HCCs, but found that interacting the HCC counts with a factor indicating the presence of at least one of the selected HCCs in each group produced PR improvements and sufficient sample sizes for reasonably stable factor coefficient estimates. To that end, we analyzed 2016, 2017, and 2018 enrollee-level EDGE data and chose the model specifications that grouped the HCC counts interacted with individual severity and transplant HCCs into two sets of aggregated factors to maximize sample size, reduce concerns of overfitting the model, and reduce the number of factors being added to the models. More specifically, in the adult models, we found that starting with 4+ HCCs for the transplant interacted factors improved predictions of enrollees at the very high end in terms of risk and cost and ending at 8+ HCCs for the transplant interacted factors, instead of 10+ HCCs, addressed the small sample sizes of enrollees with a transplant and 9 or more HCCs. For the child models, we found having one transplant interacted factor for 4+ HCCs provided more stable estimates given the smaller sample sizes for children than those for adults. With the proposed structure for transplant and severity interacted factors in place, the resulting sample sizes for both proposed sets of factors in the child and adult models in the proposed 2022 Payment Notice and in this rule are consistent with the sample sizes used for individual HCCs in the adult and child risk adjustment models.

We also considered potential gaming concerns in developing the proposed interacted HCC counts factors. We believe that the proposal to restrict the incremental risk score adjustment to enrollees with at least one severe illness HCC, which accounts for less than 2 percent of the adult enrollee-level EDGE data population across the 2016, 2017, and 2018 benefit years, helps mitigate the concern that issuers may attempt to inflate HCC counts to influence their transfers under the state payment transfer formula. In other words, the scope for potentially inflating HCC coding frequency under this proposal would be limited to a small fraction of total enrollees, in contrast to an approach that would interact HCC counts for any payment HCC, where a payment HCC is present in approximately 20 percent of the adult enrollee population across the same three benefit years of enrollee-level EDGE data.

76

We also note that enrollees with interacted HCCs are likely to have more HCCs and higher risk scores and therefore are more likely to be sampled and have their risk scores reviewed in the HHS-operated risk adjustment data validation (HHS-RADV) process due to our use of stratified sampling and application of the Neyman allocation.

77

76

This analysis was based on 2016, 2017, and 2018 enrollee-level EDGE data. See Chapter 4.2 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

77

For a discussion of our use of stratified sampling and application of the Neyman allocation, see 79 FR at 13756-13758; and 84 FR at 17494-17495.

Our analysis of the proposed interacted HCC counts factors combined with the proposed HCC-contingent enrollment duration factors in the adult models (discussed in the following section) significantly improves predictions across most deciles and HCC counts for the very highest-risk enrollees, as well as the lowest-risk enrollees without HCCs. Specifically, as described in the 2021 RA Technical Paper, the proposed interacted HCC counts approach improves the PRs for enrollees across most HCC counts, with significant improvements for enrollees with high numbers of HCCs (greater than 6).

78

The proposed interacted HCC counts approach also demonstrated improved R-squared statistics across all metal levels in the adult and child models using 2016, 2017, and 2018 enrollee-level EDGE data.

79

78

See Figure 4.3 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

79

See Figure 4.4 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

Some commenters on the 2021 RA Technical Paper were concerned about potential data bias because of the exclusion of enrollees with capitated claims from the analytic sample used to test the model specification changes. As previously stated in the 2016 RA White Paper,

80

we have historically excluded enrollees with capitated claims from the recalibration sample due to concerns that methods for computing and reporting derived amounts from capitated claims would not result in

reliable data for recalibration or analysis.

81

80

See the March 2016 Risk Adjustment Methodology White Paper (March 24, 2016), available at

https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf

.

81

See Chapter 1.4 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

Beyond the predictive improvements, an additional benefit of the proposed interacted HCC count model specification is that it would not overhaul the existing risk adjustment factors and would instead build upon the current models. Additionally, the factors would remain fairly stable, could be used in combination with other refinements and model updates, and could be easily modified, adjusted, expanded, or constrained in the future to include additional HCCs or to remove HCCs. For all of these reasons, we are proposing to add the proposed interacted HCC counts model specification as outlined above to the adult and child risk adjustment models beginning with the 2023 benefit year.

We seek comment on this proposal, specifically regarding whether we should implement the proposed interacted HCC counts model specification alone, independent of the other proposed model specification changes outlined in this rule, beginning with the 2023 benefit year; whether we should implement the proposed interacted HCC counts model specification in conjunction with these other proposals; or whether we should not implement the proposed interacted HCC counts model specification at all. We also seek comment on the variations on the HCC counts model specification discussed in this section, including whether we should interact severity or transplant factors with individual HCCs, or should interact HCC counts with individual selected severity and transplant HCCs, rather than interacting HCC counts with only an indicator of the presence of severity or transplant HCCs, as proposed. Finally, we seek comment on the proposed list of severity and transplant HCCs in Table 3 that would be used to calculate the proposed interacted HCC count factor coefficients and whether other HCCs should be to added to the proposed list that trigger the interacted HCC count factor coefficients or whether any of the HCCs on the proposed list should be removed.

iii. Changes to the Adult Model Enrollment Duration Factors

82

82

As explained in the 2021 Payment Notice proposed rule, we found that partial year enrollees in the child models did not have the same risk differences as partial year enrollees in the adult models and they tended to have similar risk to full year enrollees in the child models. See 85 FR 7103-7104. In the infant models, we found that partial year infants had higher expenditures on average compared to their full year counterparts; however, the incorporation of enrollment duration factors created interaction issues with the current severity and maturity factors and did not have a meaningful impact on the general predictive accuracy of the infant models. Ibid. We therefore propose to continue to apply enrollment duration factors to the adult models only.

In addition to the proposed two-stage weighted model specification and the interacted HCC counts model specification, we are also proposing to change the enrollment duration factors in the adult risk adjustment models to improve the prediction for partial-year adult enrollees with and without HCCs. Although the value for the factors change from year to year as part of the annual recalibration of the adult models, we have not made changes to the structure of the enrollment duration factors since they were first adopted for the 2017 benefit year. To develop the current enrollment duration factors for the adult models, we reviewed the annualized predicted expenditures, actual expenditures, and PRs by enrollment duration groups (for each: 1 month, 2 months, and so on up to 12 months) for our risk adjustment concurrent modeling sample, which was made up of adults in the 2014 MarketScan® data.

83

This analysis found that actuarial risk for adult enrollees with short enrollment periods tended to be underpredicted in our methodology, and actuarial risk for adult enrollees with full enrollment periods (12 months) tended to be overpredicted. We therefore proposed and finalized in the 2018 Payment Notice that, beginning for the 2017 benefit year, the adult models would include enrollment duration factors that apply to all adults with partial-year enrollment.

84

The value for the enrollment duration factors have generally decreased since they were first introduced in the adult models for the 2017 benefit year, reflecting a reduced impact of enrollment duration on risk scores of partial year enrollees. After a slight increase between 2017 and 2018, the factors have decreased significantly from 2018 to 2021, and in some cases (the 10- and 11-month factors) the factors are now 0.000, relative to a 12-month enrollment baseline.

85

83

See pages 35-39 of the March 2016 Risk Adjustment Methodology White Paper (March 24, 2016), available at

https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf

.

84

81 FR 94058 at 94071-94074.

85

In unconstrained models, these factors are negative; therefore, we constrained them to zero because we do not believe negative enrollment duration factors are appropriate, as this would create inappropriate incentives. See Figure 3.1 in the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

As described in prior rulemakings and the 2021 RA Technical Paper, we have been considering potential adjustments to the enrollment duration factors and our more recent analysis of enrollee-level EDGE data found that the current adult model enrollment duration factors underpredicted plan liability for partial-year adult enrollees with HCCs and overpredicted plan liability for partial-year adult enrollees without HCCs.

86

87

More specifically, our analysis of 2017 and 2018 enrollee-level EDGE data found that the current enrollment duration factors are driven by enrollees with HCCs.

88

That is, partial-year enrollees with HCCs had higher per member, per month (PMPM) expenditures on average as compared to full-year enrollees with HCCs, and partial-year enrollees without HCCs were not significantly different in PMPM expenditures compared to full-year enrollees without HCCs.

89

86

See 85 FR 29164 at 29188-29190.; 86 FR 24140 at 24151-24162.; and the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

87

When we refer to the enrollees with and without HCCs, we are referring to enrollees without payment HCCs.

88

See, for example, Chapters 1.4 and 3.2 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

. Also see 85 FR at 7103-7104 and 85 FR at 78585-78586.

89

See Chapter 1.4 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

Therefore, beginning with the 2023 benefit year, we are proposing to eliminate the current monthly enrollment duration factors of up to 11 months for all enrollees in the adult models, and replace them with new monthly enrollment duration factors of up to 6 months that would apply only to adult enrollees with HCCs. If finalized as proposed, this would mean there would be no enrollment duration factors for adult enrollees without HCCs starting with the 2023 benefit year nor would there be enrollment duration factors for adult enrollees with HCCs and more than 6 months of enrollment.

While we considered other enrollment duration factor structures, we are proposing to limit the enrollment duration factors to 6 months because we found that the monthly average cost variation by number of months enrolled is meaningfully reduced after 6 months for adult enrollees with HCCs, and enrollment duration factors beyond 6 months did not meaningfully improve

prediction for the adult models. As part of our analysis of enrollment duration factor options, we also considered adoption of enrollment duration factors by market, but we did not find a meaningful distinction in relative costs between markets on average once we implemented the proposed enrollment duration factors of up to 6 months for adult enrollees with HCCs.

90

We also considered HCC-type contingent enrollment duration factors. Specifically, we found that the distribution of enrollment duration and PMPM allowed charges by enrollment duration is similar for adults with any acute HCCs versus adults with only chronic HCCs.

91

We therefore determined that, on balance, it would add unnecessary complexity to introduce enrollment duration factors by market type or that are contingent on types of HCCs with little benefit. Therefore, we are not proposing enrollment duration factors for the adult models by market type or that are contingent on types of HCCs at this time.

90

See Chapter 3.3.2 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

91

See Chapter 3.3.3 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

We also considered previous comments we received that expressed concerns that certain issuers—particularly small group market issuers, small issuers, or Medicaid issuers—may have partial-year enrollees with HCCs that are not coded. These commenters expressed concerns that these issuers may have difficulty obtaining diagnoses for these enrollees, creating cases where the issuer may pay claims, and incur costs, for services associated with a condition for the partial-year enrollee, but the issuer's limited time with the partial-year enrollee may not be adequate to capture the diagnosis code associated with the HCC.

92

93

In response to the 2021 RA Technical Paper, we got further comment from stakeholders who questioned whether the HCC-contingent enrollment duration factors would have negative impacts on small group market issuers that offer non-calendar year coverage and take on new business later in the year. As we noted in the 2021 RA Technical Paper, our analysis did not find evidence that issuers are unable to capture cost-meaningful HCCs for partial-year enrollees in the individual or small group (including merged) market.

94

92

See Chapter 3.4 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

93

This issue differs from situations where issuers may not have a complete diagnostic profile for a partial-year enrollee because the services received were not related to the diagnoses that were not captured. For example, if an enrollee received services due to a condition while enrolled with a different issuer, then the current issuer may not have all diagnosis codes for a partial-year enrollee. However, such cases do not have cost implications for the current issuer since the partial-year enrollee received no services associated with that diagnosis.

94

See Chapter 3.4 of the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes, available at

https://www.cms.gov/files/document/2021-ra-technical-paper.pdf

.

We solicit comments on the proposed changes to the enrollment duration factors for the adult models. We also solicit comments regarding whether we should implement the proposed changes to enrollment duration factors alone, independent of the other proposed model specification changes outlined in this rule, beginning with the 2023 benefit year; whether we should implement the proposed changes to enrollment duration factors in conjunction with these other proposals; or whether we should not implement the proposed changes to enrollment duration factors at all and maintain the current structure for these factors.

iv. Combined Impact of the Proposed Model Changes

In sum, we are proposing to modify the HHS risk adjustment model specifications for the adult and child models beginning with the 2023 benefit year by combining a two-stage weighted approach with the removal of the current adult model severe illness interaction factors and the addition of new severe illness and transplant interacted HCC count factors to the adult and child models. We are also proposing to replace the current enrollment duration factors in the adult models. For the two-stage weighted approach, we propose calibrating the adult and child models in two stages. The first stage of the weighted estimation method would involve a linear regression of simulated plan liability on age-sex factors and payment HCC factors for the adult and child models, wit

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