# Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2023 > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/fr%3A2022-09438 ## Record - **Collection:** Federal Register - **Document type:** Rule - **Published:** May 6, 2022 - **Citation:** 87 FR 27208 ## Text DEPARTMENT OF HEALTH AND HUMAN SERVICES 45 CFR Parts 144, 147, 153, 155, 156, and 158 [CMS-9911-F] 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: Final rule. SUMMARY: This final rule includes payment parameters and provisions related to the risk adjustment and risk adjustment data validation programs, as well as 2023 user fee rates for issuers offering qualified health plans (QHPs) through Federally-facilitated Exchanges (FFEs) and State-based Exchanges on the Federal platform (SBE-FPs). This final rule also includes requirements related to guaranteed availability; the offering of QHP standardized plan options through Exchanges on the Federal platform; requirements for agents, brokers, and web-brokers; 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; and re-enrollment. This final rule also responds to comments on how the Department of Health and Human Services (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: These regulations are effective July 1, 2022. FOR FURTHER INFORMATION CONTACT: 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, Jacqueline Wilson, (301) 492-4286, or Leanne Klock, (410) 786-1045, for matters related to risk adjustment or risk adjustment data validation. Aaron Franz, (410) 786-8027, or John Barfield, (301) 492-4433, for matters related to Federally-facilitated Exchange and State-based Exchange on the Federal platform user fees. Nora Simmons, (410) 786-1981, for matters related to advance payment of the premium tax credit 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. Becca Bucchieri, (301) 492-4341, Agata Pelka, (301) 492-4400, or Leigha Basini, (301) 492-4380, for matters related to nondiscrimination based on sexual orientation and gender identity, essential health benefit 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 eligibility standards. Katherine Bentley, (301) 492-5209, or Ariel Kennedy, (301) 492-4306, for matters related to special enrollment period verification. Christina Whitefield, (301) 492-4172, for matters related to the medical loss ratio program. Nidhi Singh Shah, (301) 492-5110, for matters related to quality improvement strategy standards for Exchanges. Dan Brown, (301) 492-5146 for matters related to downstream and delegated entities. Nikolas Berkobien, (301) 492-4400, or Leigha Basini, (301) 492-4380 for matters related to standardized plan options. Erika Melman, (301) 492-4348, Deborah Hunter, (443) 386-3651, Whitney Allen, (667) 290-8748, or Emily Martin, (301) 492-4423, 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. 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: Table of Contents I. Executive Summary II. Background A. Legislative and Regulatory Overview B. Stakeholder Consultation and Input C. Structure of Final Rule III. Provisions of the Final 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 (§ 156.111) I. ICRs Regarding Differential Display of Standardized Plan 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) N. Summary of Annual Burden Estimate for Proposed Requirements V. Regulatory Impact Analysis A. Statement of Need B. Overall Impact C. Impact Estimates of the Payment Notice Provisions and Accounting Table D. Regulatory Alternatives Considered E. Regulatory Flexibility Act F. Unfunded Mandates G. Federalism H. Congressional Review Act Background In the proposed rule, “Patient Protection and Affordable Care Act; HHS Notice of Benefit and Payment Parameters for 2023” (87 FR 584), published in the January 5, 2022 edition of the Federal Register (2023 Payment Notice proposed rule), HHS proposed amendments to certain regulations prohibiting discrimination in health insurance coverage, including discrimination in the design and implementation of health plans, under §§ 147.104(e), 155.120(c), 155.220(j), 156.125(b), 156.200(e), and 156.1230(b) under title 45 of the Code of Federal Regulations (CFR). HHS proposed to amend these regulations to explicitly identify and recognize discrimination on the basis of sexual orientation and gender identity as prohibited forms of discrimination based on sex consistent with the Supreme Court's decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), and HHS nondiscrimination policy that existed prior to the 2020 regulatory amendments HHS made in conformance with the “Nondiscrimination in Health and Health Education Programs or Activities, Delegation of Authority” final rule (85 FR 37160), published in the June 19, 2020 edition of the Federal Register . 1 In connection with discriminatory benefit designs prohibited under § 156.125, HHS also included in the proposed rule an example related to gender-affirming care that was intended to illustrate a health plan design that presumptively discriminates against enrollees based on gender identity. 1 See also 85 FR 37160, 37218 through 21 (the 2020 final rule implementing section 1557 of the ACA revised the following CMS regulations: 45 CFR 147.104, 155.120, 155.220, 156.200, 156.1230). Currently, HHS is developing a proposed rule 2 that also will address prohibited discrimination based on sex in health coverage under section 1557 of the Patient Protection and Affordable Care Act (ACA) 3 (42 U.S.C. 18116). Section 1557 prohibits discrimination on the basis of race, color, national origin, sex, age, or disability in 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 its amendments. Because HHS' proposed rule implementing section 1557 of the ACA will also address issues related to prohibited discrimination based on sex, HHS is of the view that it would be most prudent to address the nondiscrimination proposals related to sexual orientation and gender identity in the 2023 Payment Notice proposed rule at a later time, to ensure that they are consistent with the policies and requirements that will be included in the section 1557 rulemaking. Therefore, HHS will not address in this final rule the nondiscrimination proposals related to sexual orientation and gender identity included in the 2023 Payment Notice proposed rule or the comments submitted in response to those proposals. 2 HHS submitted a draft notice of proposed rulemaking addressing section 1557 of the Patient Protection and Affordable Care Act and its implementing regulations to the Office of Management and Budget on or around March, 22, 2022. See https://www.reginfo.gov/public/do/eoDetails?rrid=234566. 3 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.” HHS is committed to robust civil rights protections in health care for all consumers, including protections to combat discrimination on the basis of gender identity or sexual orientation. 4 Moreover, to the extent that entities subject to the relevant regulations prohibiting discrimination in health insurance coverage are also covered by section 1557, they are already under the statutory obligation not to discriminate on the basis of sex. 5 Consistent with the Supreme Court's decision in Bostock v. Clayton County, 140 S. Ct. 1731 (2020), and the HHS Notice of Interpretation and Enforcement of Section 1557 of the Affordable Care Act and Title IX of the Education Amendments of 1972 (86 FR 27984), published in the May 25, 2021 edition of the Federal Register , HHS will continue to interpret and enforce section 1557 of the ACA and its protections against sex discrimination to prohibit discrimination on the basis of sexual orientation and gender identity in all aspects of health insurance coverage governed by section 1557. 6 Thus, notwithstanding that the Department will address in future rulemaking the proposals related to sexual orientation and gender identity and the example related to gender-affirming care, HHS will continue to scrutinize the activities of covered health plans to root out practices that unlawfully discriminate on the basis of sexual orientation or gender identity. HHS' interpretation of section 1557 will guide HHS in processing complaints and conducting investigations, but does not itself determine the outcome in any particular case or set of facts. In enforcing Section 1557, HHS will comply with the Religious Freedom Restoration Act, 42 U.S.C. 2000bb et seq., and all other legal requirements. 7 4 HHS' proposals related to sexual orientation and gender identity in the 2023 Payment Notice proposed rule resulted, in part, from reviews HHS conducted as directed in President Biden's January 20, 2021, Executive Order 13988 (86 FR 7023), which stated the Administration's policy on preventing and combating discrimination on the basis of gender identity and sexual orientation and the President's conclusion that “[u]nder Bostock 's reasoning, laws that prohibit sex discrimination . . . , along with their respective implementing regulations—prohibit discrimination on the basis of gender identity or sexual orientation, so long as the laws do not contain sufficient indications to the contrary.” 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 construction of the laws, and to consider whether to suspend, revise, or rescind any agency actions that are inconsistent with that policy and construction. 5 See 85 FR 37219 (explaining that section 1557 governs entities established under Title I of the ACA, including Exchanges). 6 See also Hammons v. Univ. of Maryland Med. Sys. Corp., No. 20-cv-2009, 2021WL 3190492, at *17 (D. Md. July 28, 2021) (stating Bostock “made clear that the position stated in HHS's [Bostock Notice] was already binding law”). 7 86 FR 27985. I. Executive Summary American Health Benefit Exchanges, or “Exchanges,” are entities established under the ACA 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. In previous rulemakings, we established provisions and parameters to implement many ACA requirements and programs. In this final rule, we amend some of these provisions and parameters, with a focus on maintaining a stable regulatory environment. These changes are intended to provide issuers with greater predictability for upcoming plan years (PYs), while simultaneously enhancing the role of States in these programs. They will also provide States with additional flexibilities, reduce unnecessary regulatory burdens on stakeholders, empower consumers, ensure program integrity, and improve affordability. Risk adjustment continues to be a core program in the individual, small group, and merged markets both on and off Exchanges. We published a technical paper, the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes 8 in October 2021 (2021 RA Technical Paper), and sought comment on three potential updates to the risk adjustment models. We are finalizing two of the three proposed updates to the HHS risk adjustment models beginning with the 2023 benefit year. Specifically, beginning with the 2023 benefit year, we are finalizing the removal of the current severity illness factors from the adult models and the addition of an interacted hierarchical condition category (HCC) count model specification to the adult and child models. We also are finalizing the replacement of the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors. We are not finalizing the proposed model specification change to add a two-stage weighted approach to the adult and child models. We are finalizing the use of the 2017, 2018, and 2019 enrollee-level External Data Gathering Environment (EDGE) data to recalibrate the 2023 benefit year risk adjustment models. For 2023, we are also finalizing the continued application of 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. 8 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. In addition, we are finalizing 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. 9 We are also finalizing, for the 2024 benefit year and beyond, the proposal 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 will 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 will use the most recent RXC mapping document that was available when we first processed the 2017 enrollee-level EDGE data (that is, Q2 2018). 9 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 are finalizing the proposal to repeal the ability of States, other than prior participants, to request a reduction in risk adjustment State transfers starting with the 2024 benefit year. We are also finalizing the changes that limit a prior participant's ability to request a reduction in risk adjustment transfers under § 153.320(d) to only those that meet the de minimis threshold criteria. In future rulemaking, HHS intends to propose to eliminate the prior participant exception starting with the 2025 benefit year. For the 2023 benefit year, we are announcing approval of Alabama's request to reduce risk adjustment State transfers for its individual and small group markets, but at lower percentages than requested. We approve a 25 percent reduction in Alabama's individual market transfers (including the catastrophic and non-catastrophic risk pools) and a 10 percent reduction in Alabama's small group market transfers for the 2023 benefit year. We are finalizing the 2023 benefit year risk adjustment user fee for States where HHS operates the risk adjustment program of $0.22 per member per month (PMPM). We are also finalizing the proposal to collect and extract five new data elements as part of the enrollee-level EDGE data beginning with the 2023 benefit year. We are also finalizing the proposal to extract three data elements issuers already report to their EDGE servers—plan ID, rating area, and subscriber indicator—as part of the required risk adjustment data. Plan ID and rating area will be extracted beginning with the 2021 benefit year, and subscriber indicator will be extracted beginning with the 2022 benefit year. Finally, we are finalizing 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 will 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 are finalizing as proposed the refinements to the HHS risk adjustment data validation (HHS-RADV) error estimation methodology beginning with the 2021 benefit year to: (1) Extend the application of Super HCCs 10 (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 11 ) 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, except when the child and adult coefficient estimation groups have identical definitions; 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. 10 As finalized in this rule, beginning with the 2021 benefit year of HHS-RADV, a Super HCC will be defined as the aggregate de-duplicated frequencies of EDGE HCCs that share an HCC coefficient estimation group determined based on the enrollees' risk adjustment model. 11 Regulations and Guidance. (2022). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance. The January 7, 2022 version of the DIY software is available at 2021 Benefit Year Risk Adjustment Updated HHS-Developed Risk Adjustment Model Algorithm “Do It Yourself (DIY)” Software. (2022). CMS. As we do every year in the HHS Notice of Benefit and Payment Parameters, we are finalizing updated parameters for the individual and small group markets. For the PY 2023, we are maintaining FFE and SBE-FP user fees at the current PY 2022 rates, 2.75 and 2.25 percent of total monthly premiums, respectively. On December 28, 2021, we released the Premium Adjustment Percentage, Maximum Annual Limitation on Cost Sharing, Reduced Maximum Annual Limitation on Cost Sharing, and Required Contribution Percentage for the 2023 Benefit Year guidance setting forth these parameters for PY 2023. 12 12 Premium Adjustment Percentage. (2021, December 28). CMS. https://www.cms.gov/files/document/2023-papi-parameters-guidance-v4-final-12-27-21-508.pdf. We are not finalizing the proposal to require all Exchanges to prorate premiums and advance payments of the premium tax credit (APTC). After considering the comments received, we are finalizing the policy to clarify the APTC proration methodology which Exchanges on the Federal platform will be subject to under HHS' authority to administer APTC, but we are not finalizing the requirement for State Exchanges to prorate premium or APTC amounts as described in the proposed rule. Rather, beginning in PY 2024, State Exchanges must report to HHS through existing State Exchange oversight mechanisms the methodology the State Exchange will use that does not cause total monthly APTC amounts to exceed an enrollee's monthly PTC eligibility. This will ensure compliance with HHS and Internal Revenue Service (IRS) regulations particularly when an enrollee is enrolled in a 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 finalizing 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 that did not. We also finalize 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 are finalizing 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 also finalize policies to address certain agent, broker, and web-broker practices. These policies will be added as part of the FFE standards of conduct codified at § 155.220(j)(2), improving CMS' ability to enforce existing responsibilities and requirements applicable to agents, brokers, and web-brokers participating in the FFEs and SBE-FPs, while also providing more detail about specific business practices that are prohibited. We are finalizing a revision to 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 are finalizing flexibility under which Exchanges may conduct risk-based employer sponsored coverage verification in connection with eligibility determinations for APTC. This policy will help States more effectively balance the need to prevent improper APTC payments with the costs of verification. We are finalizing amendments to implementing regulations to codify existing MLR policy 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 are also updating the MLR regulations to 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, we are finalizing a technical amendment to the MLR provisions 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 rescinded the provision in a final rule published in the Federal Register on May 5, 2021 (86 FR 24140) (part 2 of the 2022 Payment Notice final rule). With regard to the EHBs, we are finalizing a permanent annual deadline in early-May for EHB-benchmark plan applications by States, as well as the repeal of the ability for States to permit issuers to substitute benefits between EHB categories. In addition, we are finalizing changes to the de minimis thresholds for the 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 finalize the proposal to remove the State annual reporting requirement to report State-required benefits in addition to the EHB to HHS. We are finalizing 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. We will begin implementation of appointment wait time standards in PY 2024. We are also finalizing the requirement for issuers to submit information about whether providers offer telehealth services. For plans with tiered networks, we are finalizing that, to count toward the issuer's satisfaction of the essential community provider (ECP) standards, providers must be contracted within the network tier that results in the lowest cost-sharing obligation. This rule finalizes that the ECP threshold will increase from 20 percent to 35 percent. We are finalizing the proposed amendments to the current HHS regulation that establishes standards for QHP issuer downstream and delegated entities. These changes will 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 solicited 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 finalize the proposal 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 proposed and are finalizing policies related to requirements that issuers of QHPs in FFEs and SBE-FPs offer standardized QHP options through the Exchange beginning in PY 2023. Finally, we solicited 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 and provide responses to the public comments received. 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. 13 13 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) of the ACA establishes 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. 14 14 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 QHPs offered through Exchanges and (2) assist individuals in applying for PTC and CSRs for QHPs 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 15 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. 15 Office of Management and Budget. (2004). Circular A-25 Revised. https://www.whitehouse.gov/wp-content/uploads/2017/11/Circular-025.pdf. 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 QHPs 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. 16 In addition, HHS has previously finalized rules unrelated to section 1557 of the ACA to address populations that have historically been subject to discrimination. 16 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. 17 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). 17 Public Law 115-97, 131 Stat. 2054 (2017). 1. Premium Stabilization Programs The premium stabilization programs refer to the risk adjustment, risk corridors, and reinsurance programs established by the ACA. 18 For past rulemaking, we refer readers to the following rules: 18 See 42 U.S.C. 18061, 18062, and 18063. • In the March 23, 2012 Federal Register (77 FR 17219) (Premium Stabilization Rule), we implemented the premium stabilization programs. • In the March 11, 2013 Federal Register (78 FR 15409) (2014 Payment Notice), we finalized 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. • In the October 30, 2013 Federal Register (78 FR 65046), we finalized the modification to the HHS-operated methodology related to community rating States. • In the November 6, 2013 Federal Register (78 FR 66653), we published a correcting amendment to the 2014 Payment Notice final rule to address how an enrollee's age for the risk score calculation would be determined under the HHS-operated risk adjustment methodology. • In the March 11, 2014 Federal Register (79 FR 13743) (2015 Payment Notice), we finalized the benefit and payment parameters for the 2015 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions and established payment parameters in those programs. • In the May 27, 2014 Federal Register (79 FR 30240), we announced the 2015 fiscal year sequestration rate for the risk adjustment program. • In the February 27, 2015 Federal Register (80 FR 10749) (2016 Payment Notice), we finalized the benefit and payment parameters for the 2016 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions, and established the payment parameters in those programs. • In the March 8, 2016 Federal Register (81 FR 12203) (2017 Payment Notice), we finalized the benefit and payment parameters for the 2017 benefit year to expand the provisions related to the premium stabilization programs, set forth certain oversight provisions and established the payment parameters in those programs. • In the December 22, 2016 Federal Register (81 FR 94058) (2018 Payment Notice), we finalized the benefit and payment parameters for the 2018 benefit year, added the high-cost risk pool parameters to the HHS risk adjustment methodology, incorporated prescription drug factors in the adult models, established enrollment duration factors for the adult models, and finalized policies related to the collection and use of enrollee-level EDGE data. • In the April 17, 2018 Federal Register (83 FR 16930) (2019 Payment Notice), we finalized the benefit and payment parameters for 2019 benefit year, created the State flexibility framework permitting States to request a reduction in risk adjustment State transfers calculated by HHS, and adopted a new methodology for HHS-RADV adjustments to transfers. • In the May 11, 2018 Federal Register (83 FR 21925), we published a correction to the 2019 risk adjustment coefficients in the 2019 Payment Notice final rule. • 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 EDGE dataset. 19 19 Updated 2019 Benefit Year Final HHS Risk Adjustment Model Coefficients. (2018, July 27). CMS. 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 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). The final rule set forth an additional explanation of the rationale supporting the 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. The 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 the publication of the final rule. 20 20 Update on the HHS-operated Risk Adjustment Program for the 2017 Benefit Year. (2018, July 27). https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/2017-RA-Final-Rule-Resumption-RAOps.pdf. • In the December 10, 2018 Federal Register (83 FR 63419), we adopted 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 . In the rule, we set forth an additional explanation of the rationale supporting the 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 April 25, 2019 Federal Register (84 FR 17454) (2020 Payment Notice), we finalized the benefit and payment parameters for 2020 benefit year, as well as the policies related to making the enrollee-level EDGE data available as a limited data set for research purposes and expanding the HHS uses of the enrollee-level EDGE data, approval of the request from Alabama to reduce risk adjustment transfers by 50 percent in the small group market for the 2020 benefit year, and updates to HHS-RADV program requirements. • On May 12, 2020, consistent with 153.320(b)(1)(i), we released 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients to the CCIIO website. 21 21 Final 2021 Benefit Year Final HHS Risk Adjustment Model Coefficients. (2020, May 12). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Final-2021-Benefit-Year-Final-HHS-Risk-Adjustment-Model-Coefficients.pdf. • In the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment Notice), we finalized the benefit and payment parameters for 2021 benefit year, as well as adopted updates to the risk adjustment models' HCCs to transition to ICD-10 codes, approved the request from Alabama to reduce risk adjustment transfers by 50 percent in small group market for the 2021 benefit year, and modified the outlier identification process under the HHS-RADV program. • In the December 1, 2020 Federal Register (85 FR 76979) (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)), we adopted the creation and application of Super HCCs in the sorting step that assigns HCCs to failure rate groups, finalized a sliding scale adjustment in HHS-RADV error rate calculation, and added a constraint for negative error rate outliers with a negative error rate. We 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), we 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. • In the May 5, 2021 Federal Register (86 FR 24140), we issued part 2 of the 2022 Payment Notice final rule containing policy and regulatory revisions related to the risk adjustment program, including finalization of the benefit and payment parameters for the 2022 benefit year and 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. In addition, this 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. • On July 19, 2021, consistent with § 153.320(b)(1)(i), we released Updated 2022 Benefit Year Final HHS Risk Adjustment Model Coefficients on the CCIIO website, announcing some minor revisions to the 2022 benefit year final risk adjustment adult model coefficients. 22 22 Updated 2022 Benefit Year Final HHS Risk Adjustment Model Coefficients. (2021, July 19). CMS https://www.cms.gov/files/document/updated-2022-benefit-year-final-hhs-risk-adjustment-model-coefficients-clean-version-508.pdf. 2. Program Integrity We have finalized program integrity standards related to the Exchanges and premium stabilization programs 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). We also refer readers to the 2019 Patient Protection and Affordable Care Act; Exchange Program Integrity rule published in the December 27, 2019 Federal Register (84 FR 71674). 3. Market Rules For past rulemaking related to the market rules, we refer readers to the following rules: • In the April 8, 1997 Federal Register (62 FR 16894), HHS, with the Department of Labor and Department of the Treasury, published an interim final rule relating to the HIPAA health insurance reforms. In the February 27, 2013 Federal Register (78 FR 13406) (2014 Market Rules), we published the health insurance market rules. • In the May 27, 2014 Federal Register (79 FR 30240) (2015 Market Standards Rule), we published the Exchange and Insurance Market Standards for 2015 and Beyond. • In the December 22, 2016 Federal Register (81 FR 94058), we provided additional guidance on guaranteed availability and guaranteed renewability. • In the April 18, 2017 Federal Register (82 FR 18346) (Market Stabilization final rule), we further interpreted the guaranteed availability provision. • In the in the April 17, 2018 Federal Register (83 FR 17058) (2019 Payment Notice final rule), we clarified that certain exceptions to the special enrollment periods only apply to coverage offered outside of the Exchange in the individual market. • In the June 19, 2020 Federal Register (85 FR 37160) (2020 section 1557 final rule), in which HHS discussed section 1557 of the ACA, HHS removed nondiscrimination protections based on 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 September 27, 2021 Federal Register (86 FR 53412) (part 3 of the 2022 Payment Notice final rule), which was published by HHS and the Department of the Treasury, we 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. In the March 27, 2012 Federal Register (77 FR 18309) (Exchange Establishment Rule), we implemented components of the Exchanges and set forth standards for eligibility for Exchanges, as well as network adequacy and ECP certification standards. In the 2014 Payment Notice and 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. We published the final rule in the May 14, 2020 Federal Register (85 FR 29164) (2021 Payment Notice). In the January 19, 2021 Federal Register (86 FR 6138), we finalized part 1 of the 2022 Payment Notice final rule that finalized only a subset of the proposals in the 2022 Payment Notice proposed rule. In the May 5, 2021 Federal Register (86 FR 24140), we published (part 2 of the 2022 Payment Notice final rule). In the September 27, 2021 Federal Register (86 FR 53412) (part 3 of the 2022 Payment Notice final rule), in conjunction with the Department of the Treasury, we finalized amendments to certain policies in part 1 of the 2022 Payment Notice final rule. In the January 5, 2022 Federal Register (87 FR 584), we published a proposed rule that outlined proposals to maintain the user fee rate for issuers offering plans through the FFEs and maintain the user fee rate for issuers offering plans through the SBE-FPs. We also proposed various policies to address certain agent, broker, and web broker practices and conduct. We also proposed updates to the requirement that all Exchanges conduct special enrollment period verifications. 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. 23 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. 23 Essential Health Benefits Bulletin. (2011, December 16). CMS. 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), an interim final rule that was published in the September 2, 2020 Federal Register (85 FR 54820), and the May 5, 2021 Federal Register (86 FR 24140). 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 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 § 156.1130 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 1302 of the ACA provides for the establishment of an EHB package that includes coverage of EHB and AV requirements. In the February 25, 2013 Federal Register (78 FR 12834), HHS published the “Patient Protection and Affordable Care Act; Standards Related to Essential Health Benefits, Actuarial Value, and Accreditation” final rule, which included nondiscrimination protections. In the 2020 section 1557 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 consulted with stakeholders on policies related to the PHS Act and ACA Federal market reform requirements, including the operation of Exchanges and the risk adjustment program (including HHS-RADV). For example, related to risk adjustment, HHS released the 2021 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes 24 and the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations. 25 We also held a number of meetings with consumers, providers, employers, health plans, advocacy groups, and the actuarial community to gather public input. We 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 and written comments we received in response to the proposed rulemaking as we developed the policies in this final rule. 24 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf. 25 HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations. (2021, December 28). CMS. https://www.cms.gov/files/document/report-summary-results-transfer-simulations.pdf. C. Structure of Final Rule The regulations outlined in this final rule will be codified in 45 CFR parts 144, 147, 153, 155, 156, and 158. The changes to 45 CFR part 144 will remove superfluous language from the definition of a large group market. The changes to 45 CFR part 147 will ensure that issuers cannot refuse to effectuate new coverage based on the failure of an individual or employer to pay premiums owed for prior coverage. The policies relating to 45 CFR part 153 involve recalibration of the 2023 benefit year risk adjustment models using the 2017, 2018, and 2019 enrollee-level EDGE data. We also finalize updates to the adult and child risk adjustment models for 2023 and beyond to better predict plan liability for certain subpopulations. Specifically, beginning with the 2023 benefit year, we will 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 will add an interacted HCC count model specification for 2023 and beyond to the adult and child models. We are not finalizing the proposal to add a two-stage weighted approach to model recalibrations. We are finalizing 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 are finalizing 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. 26 For the 2024 benefit year and beyond, we will 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 are finalizing 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 will use the most recent RXC mapping document that was available when we first processed the 2017 enrollee-level EDGE data (that is, Q2 2018). 26 The same concern was not present for the 2017 enrollee-level EDGE data because hydroxychloroquine sulfate was not included in the RXC crosswalk until 2018. We are finalizing the proposal to collect and extract five new data elements as part of the enrollee-level EDGE data. Beginning with the 2023 benefit year, issuers will be required to populate the ZIP Code and subsidy indicator fields as part of their EDGE data submissions. Issuers will also be required to populate the race, ethnicity, and Individual Coverage Health Reimbursement Arrangement (ICHRA) indicator fields. For the 2023 and 2024 benefit years, we are adopting a transitional period for the race, ethnicity, and ICHRA indicator fields during which time issuers will be required to populate these fields using available data sources. Then, beginning with the 2025 benefit year, issuers that do not have an existing source to populate these fields for particular enrollees will also be required to make a good faith effort to collect and submit race, ethnicity, and ICHRA indicator data elements for these enrollees. We are also finalizing the proposal to extract three data elements—plan ID, rating area, and subscriber indicator—issuers already report to their EDGE servers as part of the required risk adjustment data. We are finalizing the extraction of plan ID and rating area beginning with the 2021 benefit year, and subscriber indicator will be extracted beginning with the 2022 benefit year. Additionally, we finalize the proposal to amend § 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. In part 153, we are finalizing policies related to risk adjustment State flexibility requests. We are finalizing the repeal of the ability of States to request a reduction in risk adjustment State transfers starting with the 2024 benefit year, with an exception for prior participants. We further limit a prior participant's ability to request a reduction in risk adjustment transfers starting with the 2024 benefit year to only those that meet the de minimis threshold criteria. In future rulemaking, HHS intends to propose to eliminate the prior participant exception starting with the 2025 benefit year. For the 2023 benefit year, we approve Alabama's requests to reduce risk adjustment State transfers, but at lower percentages, than the State requested. We approve for the 2023 benefit year a 25 percent reduction in Alabama's individual market (including the catastrophic and non- catastrophic risk pools) transfers and a 10 percent reduction in Alabama's small group market transfers. In part 153, we also finalize the risk adjustment user fee for the 2023 benefit year at $0.22 PMPM. We also finalize the proposed update to 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. We further specify that Super HCCs will be defined separately according to the model (infant, child, adult) to which an enrollee is subject, except for where child and adult coefficient estimation groups have identical definitions. We also finalize the proposal 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. These refinements to the HHS-RADV error rate methodology and processes will apply beginning with the 2021 benefit year. Finally, we adopt the policy 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, we are finalizing the part 153 proposals related to MLR reporting requirements and how issuers should report certain ACA program amounts that could be subject to reconsideration. More specifically, we add references to HHS-RADV adjustments to § 153.710(h) 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. We finalize changes to 45 CFR part 155 to 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. We are codifying the proposed APTC proration methodology as the methodology Exchanges on the Federal platform will continue to use, but we are not finalizing the requirement for State Exchanges to prorate premium or APTC amounts using the methodology described in the proposed rule. Rather, we are finalizing that beginning in PY 2024, State Exchanges will be required to report to HHS their methodology that ensures the amount of APTC applied to an enrollee's monthly premium does not exceed their total monthly APTC. We are also finalizing 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 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. After consideration and review of the comments, we will not finalize § 155.220(j)(2)(ii)(A)( 1 ), which would prohibit agents from entering consumer email addresses with domains that remove email from an inbox after a set period of time. We encourage agents, brokers, and web-broker entities to remain aware of, and avoid using, such temporary email accounts when assisting consumers in obtaining coverage as a best practice and will likely issue future guidance on the matter. Otherwise, we are generally finalizing the changes to the remainder of § 155.220(j)(2)(ii) to clarify the FFE standards of conduct for agents, brokers, and web-brokers, and what it means to provide the Exchange with correct information under section 1411(b) of the ACA. We also finalize the changes to § 155.220(j)(2)(vi) through (viii) to expand the FFE standards of conduct and codify more detail about specific business practices that are prohibited. In 45 CFR part 156, we are finalizing the user fee rates for the 2023 benefit year for all issuers participating on Exchanges that use the Federal platform. We also finalize technical amendments to § 156.50 to conform with the repeal of the Exchange Direct Enrollment (DE) option finalized in part 3 of the 2022 Payment Notice (86 FR 53412 at 53424 through 53429 and 53445). Also, we finalize 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 an appropriation to make CSR payments and voluntary for other issuers. In part 156, we are also finalizing a refinement to the EHB nondiscrimination policy to provide that a nondiscriminatory health plan design that provides EHB is one that is clinically based; a permanent annual deadline in early May for EHB-benchmark plan applications by States, a repeal of States' ability to permit issuers to substitute benefits between EHB categories; changes to the 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 a repeal of the annual requirement for States to report to HHS State-required benefits in addition to the EHB. In part 156, we are also finalizing a requirement that issuers of QHPs in FFEs and SBE-FPs offer through the Exchange standardized QHP options beginning in PY 2023. We are also finalizing an update to the QIS standards to require QHP issuers to address health and health care disparities as a specific topic area within their QIS beginning in 2023. The changes to 45 CFR part 158 codify 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 changes to part 158 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, we finalize 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, 27 and thus deleted in part 2 of the 2022 Payment Notice final rule. 27 City of Columbus, et al. v. Cochran, 523 F. Supp. 3d 731 (D. Md. 2021). III. Provisions of the Final HHS Notice of Benefit and Payment Parameters for 2023 A. Part 144—Requirements Relating to Health Insurance Coverage 1. Definitions (§ 144.103) In the HHS Notice of Benefit and Payment Parameters for 2023 proposed rule (87 FR 584, 594), we proposed to remove the phrase “unless otherwise provided under State law” from the definition of large group market at § 144.103. As discussed in the proposed rule, the phrase has no meaning or application and does not appear in the statutory definition of large group market 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. 28 However, in the 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 section 2791(e) of the PHS Act, 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 proposed to do so in the proposed rule, to align these definitions and make the regulatory definition for large group market consistent with the definition under the ACA. 28 62 FR 16894 and 69 FR 78720. We sought comment on this proposal. After reviewing public comments, we are finalizing this provision as proposed. The removal of the phrase “unless otherwise provided under State law,” will add clarity to the regulatory definition of “large group market,” and align with the current definition under section 2791(e) of the PHS Act. We summarize and respond to public comments received on the definition of large group market below. Comment: We received two comments related to the definition of a large group market. One commenter did not see any adverse consequences to the revision. Another expressed concern that State law definitions of “large group” would be adversely affected by the change in Federal law because each State passes laws tailored to the market in their respective State. Response: As discussed in the proposed rule, we proposed this change to align the regulation with the underlying statutory definition of “large group market,” which does not include the phrase “unless otherwise provided under State law.” In addition, removing this language will not affect State law definitions of large group market to the extent that they do not prevent the application of Federal law. 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 In the HHS Notice of Benefit and Payment Parameters for 2023 proposed rule (87 FR 584, 594 through 595), we proposed 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 when the individual or employer owes past-due premiums for coverage from the same issuer or another issuer in the same controlled group. Under the current interpretation of the guaranteed availability requirement, to the extent permitted by applicable State law, an issuer does not violate the guaranteed availability requirements under § 147.104 when 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. 29 29 82 FR 18346, 18349 through 18353. On January 28, 2021, President Biden issued Executive Order 14009, “Strengthening Medicaid and the Affordable Care Act” (E.O. 14009). 30 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. On April 5, 2022, President Biden issued Executive Order 14070, “Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage” (E.O. 14070). 31 Section 2 of E.O. 14070 directs agencies with responsibilities related to Americans' access to health coverage, in addition to taking the actions directed pursuant to E.O. 14009, to review agency actions to identify ways to continue to expand the availability of affordable health coverage, to improve the quality of coverage, to strengthen benefits, and to help more Americans enroll in quality health coverage. Consistent with section 3(iv) of E.O. 14009 and section 2(a) of E.O. 14070, the re-interpretation of the guaranteed availability requirement is intended to remove an unnecessary barrier and make it easier for consumers to enroll in coverage. 30 Executive Order 14009 on Strengthening Medicaid and the Affordable Care Act. (2021, February 2). See 86 FR 7793. 31 Executive Order 14070 on Continuing to Strengthen Americans' Access to Affordable, Quality Health Coverage, April 5, 2022; see 87 FR 20689. In the proposed rule (87 FR 594), we proposed to re-designate § 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). Based on our experience, we believe that the currently effective interpretation of guaranteed availability has the unintended consequence of creating barriers to health coverage that disproportionately affect low-income individuals. After reviewing the public comments, we are finalizing this provision as proposed. We summarize and respond to public comments received on the proposed re-interpretation of guaranteed availability requirements for the group and individual health insurance markets below. Comment: Many commenters supported the proposal, stating that the current interpretation of the guaranteed availability requirement is inconsistent with the ACA and creates barriers to accessing health care that disproportionately harm persons with low incomes and those experiencing economic hardship. Other commenters in favor of the proposal stated that the current interpretation of the guaranteed availability requirement is a barrier to enrollment that disproportionately impacts people of color, especially women of color, persons with disabilities, lesbian, gay, bisexual, transgender, queer, and intersex (LGBTQI+) people, and immigrants. Some commenters stated that non-payment of past-due premiums is typically not an intentional decision to avoid financial responsibility, and may be the result of a mistake or catastrophic events such as financial hardship, environmental disaster, hospitalization, or lack of awareness of past-due premium debt. Some commenters expressed concern that the current interpretation of the guaranteed availability requirement permits issuers to adopt punitive measures against consumers who, without malice, are unable to satisfy past-due premium debt. Some commenters stated that the current interpretation of the guaranteed availability requirement compounds barriers to enrollment by requiring consumers with past-due premium debt to pay multiple months of premiums on top of a binder payment in order to effectuate coverage. A commenter noted that there is no evidence that individuals are attempting to “game the system” by enrolling in coverage and paying premiums only when care is needed. Other commenters stated that the current interpretation poses a steep barrier to enrollment for consumers responding to catastrophic life events, particularly given that the amount of past-due premiums owed to payors is nominal compared to issuer profits. Other commenters opposed the proposed policy and stated that more research is necessary to determine why individuals and employers fail to pay past-due premiums and questioned whether other coverage options could be made more accessible. Response: We believe finalizing the proposed re-interpretation of the guaranteed availability requirement will alleviate a barrier to enrollment for individuals struggling to access health coverage, which disproportionately affects historically marginalized populations and individuals facing financial hardship. The current interpretation of this policy disincentivizes enrollment by conditioning coverage on the repayment of the past-due premium debt, which may deter individuals who have accrued past-due premium debt from seeking coverage altogether. Conversely, permitting individuals to enroll in coverage, regardless of past-due premium debt, will help ensure continuous access to health care, especially for individuals facing dire economic circumstances. We agree with commenters that enrollees fail to pay premiums for numerous, valid reasons that have nothing to do with exploiting grace periods or special enrollment periods to avoid paying for health coverage. Additionally, many consumers and small businesses face financial challenges. As such, we believe it is prudent to remove barriers to accessing health coverage to ease the enrollment process. While the exact cause of premium non-payment and past-due premium accrual may not be clear in all cases, we are of the view that this should not be a reason to deny individuals coverage. We agree with commenters suggesting that more research is needed to determine why individuals and employers fail to pay past-due premiums, and believe that such research could inform future policies to better support consumers in staying enrolled in coverage. 32 32 Cunningham, P.J., Green, T.L., & Braun, R.T. (2018, February 26). Income Disparities in the Prevalence, Severity, and Costs of Co-Occurring Chronic and Behavioral Health Conditions. Medical Care. Comment: Some commenters recommended limiting the re-interpretation of the guaranteed availability requirement to the individual market and not making it applicable to the group market. One commenter stated that the proposed change could have significant impacts on issuer management of enrollment and billing for group market accounts. Response: Under section 2702 of the PHS Act and § 147.104, the guaranteed availability requirement applies to both the individual and group markets. We believe the same principles underlying this policy should apply equally to both markets, and therefore, decline to adopt this recommendation. Comment: Commenters stated that this proposal restricts issuers' ability to collect past-due premiums or requires them to forgive such debt. Some commenters expressed concern that finalizing the proposal will remove a disincentive that guards against enrollees ceasing to pay premiums during the last 3 months of the plan year, and will leave issuers without adequate redress when faced with non-payment. Some commenters stated that permitting individuals with past-due premium debt to enroll in coverage before repaying past-due premiums will ultimately result in fewer choices and higher premiums, harming consumers with low incomes. One commenter requested that HHS specify other options for issuers besides collections. In contrast, another commenter noted that issuers have largely chosen not to use the flexibility provided under the current interpretation of the guaranteed availability requirement because the implementation of a policy that attributes payments made for new coverage to past-due premiums before effectuating new enrollment would cost more than the past-due premiums the issuer would recoup through such a policy. Other commenters agreed that issuers have other tools for recouping unpaid premiums. Some commenters suggested that issuers should be prohibited from acting to collect past-due premiums. Response: We disagree that this proposal restricts issuers from collecting past-due premiums. Issuers are generally not permitted to forgive the past-due premium debt and have alternative methods to collect past-due premiums (such as pursuing debt collection). We believe this mitigates the risk that some enrollees may take advantage of the guaranteed availability rules. We also believe that the low adoption among issuers of policies that rely on the current interpretation of guaranteed availability demonstrates that there are sufficient avenues for issuers to collect past-due premium debt without having to condition enrollment into new coverage on the payment of past-due premium debt. However, we acknowledge that issuers that implemented a policy of attributing payment made for new coverage to past-due premiums before effectuating enrollment will need to make operational changes as a result of this re-interpretation of the guaranteed availability requirement. Finally, in response to the commenter's suggestion that issuers should be prohibited from acting to collect on debt for past-due premiums, we reiterate that an issuer's forgiveness of premium debt is generally not permissible under our rules. b. Nondiscrimination Based on Sexual Orientation and Gender Identity In the HHS Notice of Benefit and Payment Parameters for 2023 proposed rule (87 FR 584, 595 through 597), we proposed to amend 45 CFR 147.104(e) to explicitly prohibit discrimination based on sexual orientation and gender identity. As we explain in the Supplemental Information section earlier in the preamble, HHS will address this policy, as well as the public comments submitted in response to this proposal, in a future rulemaking. 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. 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. 33 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. 33 See also 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. 34 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). 34 OMB Report to the Congress on the BBEDCA 251A Sequestration for Fiscal Year 2022 . (2021, May 28). White House. 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 the fiscal year 2022 from the risk adjustment program will become available for payment to issuers in the 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 the fiscal year 2030 at a rate of 5.7 percent per fiscal year. 35 35 CARES Act, S.3548. (2020). We received no comments on the FY2022 sequestration rate for risk adjustment. 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 diagnosis is 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. 36 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 or PLRS) 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. 36 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 In the HHS Notice of Benefit and Payment Parameters for 2023 proposed rule (87 FR 584, 598), we proposed to recalibrate the 2023 benefit year risk adjustment models with 2017, 2018, and 2019 enrollee-level EDGE data. We sought comment on this proposal. In the proposed rule, we also sought 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 the 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 years models. 37 Although HHS has not analyzed the 2020 enrollee-level EDGE data yet, we solicited comment on the future use of the 2020 enrollee-level EDGE data for the annual recalibration of the HHS risk adjustment models. 37 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. After reviewing the public comments, we are finalizing, as proposed, the use of the 2017, 2018, and 2019 enrollee-level EDGE data to recalibrate the 2023 benefit year risk adjustment models. We were unable to finalize coefficients in time to publish them in this final rule. Therefore, consistent with § 153.320(b)(1)(i), we will publish the final coefficients for the 2023 benefit year in guidance soon after the publication of this final rule. Additionally, we appreciate comments on the future use of the 2020 enrollee-level EDGE data due to the COVID-19 PHE. We continue to consider how to handle 2020 enrollee-level EDGE data for recalibration of the 2024, 2025, and 2026 benefit year models and will work with stakeholders as we analyze the data. Changes to the established policies for recalibration of the risk adjustment models, including proposals related to the use of 2020 enrollee-level EDGE data for such purposes, would be pursued through notice-and-comment rulemaking. We summarize and respond to public comments received on data for risk adjustment model recalibration for the 2023 benefit year and beyond below. Comment: Many commenters supported the use of the 2017, 2018, and 2019 enrollee-level EDGE data to recalibrate the 2023 risk adjustment models. One commenter noted that the 2017, 2018, and 2019 enrollee-level EDGE data reflect the most recently available health outcomes and recent treatment patterns in the enrollee population. Another commenter supported using the most recent 3 years of EDGE data available in time for publication of the draft coefficients in the proposed rule in order to give the industry the earliest opportunity to model premium rates for the next benefit year. Response: We are finalizing the use of the 2017, 2018, and 2019 enrollee-level EDGE data to recalibrate the 2023 risk adjustment models as proposed. The 2017, 2018, and 2019 enrollee-level EDGE data were the 3 most recent consecutive years of enrollee-level EDGE data that were available at the time we incorporated the data in the draft recalibrated coefficients published in the proposed rule. As discussed in the 2022 Payment Notice, the purpose of using the 3 most recent consecutive years of enrollee-level EDGE data that were available at the time we incorporated the data in the draft recalibrated coefficients published in the proposed rule was to respond to stakeholders' request to provide the draft coefficients in the proposed rule (86 FR 24152). We believe that this approach promotes stability and avoids the delays in publication of the coefficients while continuing to develop blended, or averaged, coefficients from the 3 years of separately solved models for model recalibration. Comment: We received several comments on the use of 2020 enrollee-level EDGE data for recalibration of the 2024, 2025, and 2026 benefit years. Some of these commenters supported the inclusion of 2020 enrollee-level EDGE data in these future benefit year model recalibrations, stating that 2020 data would accurately reflect utilization patterns that can be expected in 2021 and beyond and that the inclusion of 3 years of enrollee-level EDGE data in recalibration would dampen the impact of 2020 data. Another commenter noted that failure to include 2020 data would result in an outdated picture of medical spending. One commenter opposed the inclusion of 2020 enrollee-level EDGE data in model recalibration altogether. Another commenter noted that not relying on 2020 experience to develop risk adjustment coefficients is consistent with industry practice, asserting that the majority of Medicare Advantage and ACA issuers used 2019 data in lieu of 2020 data for 2022 pricing. Several commenters requested HHS develop a technical paper on using 2020 enrollee-level EDGE data in future model recalibrations, with several commenters suggesting that HHS do a comparison of coefficients with and without the 2020 enrollee-level EDGE data to review relative changes in coefficients, and evaluate changes for clinical reasonability and consistency with 2018 and 2019 enrollee-level EDGE data. One commenter requested that HHS release 2020-related statistics and solicit further comment on how to best proceed with 2020 data, including whether to instead use 2017, 2018, and 2019 EGDE data for the 2024 benefit year recalibration of the HHS risk adjustment models. One commenter recommended either assigning 2020 enrollee-level EDGE data lower weight if used to recalibrate the models in the 2024, 2025, and 2026 benefit years, or using four years of enrollee-level EDGE data in the annual model recalibration until 2020 data is no longer included in recalibration. Another commenter recommended that HHS evaluate if it would be better to use 1 or 2 years of data for recalibration of the models in the 2024, 2025, and 2026 benefit years on a transitional basis until only post-2020 data would be used. Response: We appreciate comments on the future use of the 2020 enrollee-level EDGE data for risk adjustment model recalibration and will consider this feedback as we analyze the 2020 enrollee-level EDGE data and consider options for its use for recalibration of the risk adjustment models. b. Risk Adjustment Model Updates In the proposed rule (87 FR 598 through 605), we proposed three modeling updates to the risk adjustment models beginning with the 2023 benefit year. Consistent with the potential model updates discussed in the 2021 RA Technical Paper, we proposed the following model updates, which are the same as those proposed but not finalized in the 2022 Payment Notice: 38 (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. 38 In the 2022 Payment Notice Proposed Rule, we proposed three model specification changes, see 85 FR 78572 at 78583 through 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 through 24162. See also HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf and HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes: Summary Results for Transfer Simulations. (2021, December 28). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . After a review of public comments, we are finalizing two of the three proposed model specification updates. We are not finalizing the proposed addition of a two-stage weighted model specification to the adult and child models. We are finalizing, as proposed, removing the current severity illness factors in the adult models and replacing them with new severity and transplant indicators that interacted with HCC count factors in the adult and child models. We are also finalizing, as proposed, replacing the current enrollment duration factors in the adult models with HCC-contingent enrollment duration factors in the adult models. In the following sections, we describe the proposed model specification changes, as well as summarize and respond to the comments received on each of these proposals. i. Two-Stage Weighted Model Specification We proposed 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 39 ). For a full description of the proposed two-stage weighted model specification see the proposed rule (87 FR 599 through 601). We sought comment on the two-stage weighted model specification proposal. 39 When we refer to the enrollees without HCCs, we are referring to enrollees without payment HCCs. After reviewing the public comments, we are not finalizing the adoption of the two-stage weighted model specification. We summarize and respond to public comments received on the proposed two-stage model specification below. Comment: Several commenters supported the implementation of the proposed two-stage weighted model specification. Some of these commenters generally supported all of the proposed model specification changes, while others specifically noted that the proposed two-stage model improved prediction for the lowest-risk enrollees. Conversely, several other commenters opposed the implementation of the proposed two-stage weighted model specification. Several commenters were concerned that the proposed two-stage weighted model specification would have anti-competitive effects, leading to fewer choices for consumers. These commenters stated that the two-stage weighted model specification would increase premiums on more generous health insurance coverage, incentivize issuers to adopt narrow networks and lower-quality plans, encourage issuers to avoid enrolling consumers with chronic illnesses, and contribute to the creation and use of discriminatory benefit designs. Other commenters did not support a model change that improved risk predictions for certain subpopulations at the expense of the risk adjustment program's ability to mitigate adverse selection for high-cost enrollees. Some commenters stated that the proposed two-stage weighted model specification ignores current market dynamics in which plans are already incentivized to attract the healthiest enrollees. Additionally, some commenters recommended additional analysis of the two-stage weighted model specification, specifically geographic and market-specific considerations, before its adoption. One commenter suggested that if HHS finalizes the two-stage weighted model specification, HHS should pilot or phase-in the implementation based on an analysis of localized market conditions. Response: After consideration of the comments on this proposal, we are not finalizing the proposed two-stage weighted model specification. We pursued the proposed model specification updates to improve the prediction of certain subpopulations in response to feedback from stakeholders and internal analysis where we had observed underprediction in the current models. As we previously reported in the 2018 Payment Notice, our initial analysis found that, based on the commercial MarketScan® data, the HHS risk adjustment models slightly underpredicted risk for the lowest-risk enrollees (81 FR 61472 through 61473 and 81 FR 94082 through 94083). Our subsequent analysis of enrollee-level EDGE data confirmed this preliminary finding. 40 In addition, stakeholders have consistently encouraged HHS to adjust the models to address this underprediction of risk, which affects the PLRSs of plans that enroll more healthy individuals. HHS has therefore been examining these issues, considering different options, and soliciting comments on ways to modify the risk adjustment models to improve prediction for certain subpopulations, including the lowest-risk enrollees, over several years (81 FR 61473 and 85 FR 7101 through 7104). Throughout this process, we consistently emphasized the need to carefully evaluate the impact on and consider the trade-offs that would need to be made in model predictive power among subgroups of enrollees. 40 Section 2. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes . (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . The proposed two-stage weighted model specification was targeted at improving model prediction for lowest-risk enrollees. As previously explained, we believed that by addressing the underprediction of costs associated with lowest-risk enrollees in the adult and child models, we could encourage the offering and retention of plans that enroll a higher proportion of this subpopulation of enrollees. 41 We also recognized that issuers offering these types of plans were at greater risk of exiting the market if transfers calculated under the State payment transfer formula under-compensated for the true plan liability of the lowest-risk enrollees. These concerns, along with stakeholder comments on these issues, prompted the design of the two-stage weighted model specification two years ago. However, we acknowledged that there are trade-offs associated with the adoption of the proposed two-stage weighted model, including that while it would improve prediction for the lowest-risk enrollees it would worsen model prediction along other dimensions, such as reduced R-squared values, less accurate prediction of plan liability by age-sex factor (especially for younger and older women), as well as a less accurate prediction of costs for certain HCCs. 42 Additionally, since developing the proposed two-stage weighted model specification, there have been key shifts in the individual market, including increased enrollment and increased availability of subsidies, 43 that have made the market more attractive to issuers. However, these market shifts have also shown the pressing need to update the adult model enrollment duration factors, which we are also finalizing as part of this rule. 41 Section 2.1. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes . (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . 42 Section 2.3. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes . (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . See also 87 FR 600 through 601. 43 Biden-Harris Administration Announces 14.5 Million Americans Signed Up for Affordable Health Care During Historic Open Enrollment Period . (2022, January 27). CMS. https://www.hhs.gov/about/news/2022/01/27/biden-harris-administration-announces-14-5-million-americans-signed-affordable-health-care-during-historic-open-enrollment-period.html#:~:text=Today%2C%20the%20Biden%2DHarris%20Administration,people%20who%20have%20newly%20gained . While the interacted HCC count model specification and the enrollment duration factor updates finalized in this rule do not improve predictive accuracy for the lowest-risk enrollees as much as they would have if they were combined with the proposed two-stage weighted model specification, we believe the finalized model specifications will still make significant gains in improved predictive accuracy for our target subpopulations, including the lowest-risk enrollees, highest-risk enrollees, and partial-year enrollees. 44 As demonstrated in Chapter 4 of the 2021 RA Technical Paper, our analysis found the proposed interacted HCC counts model specification and the proposed HCC-contingent enrollment duration factors improved prediction for the lowest-risk enrollees, compared with the current adult models, even without accounting for the proposed two-stage weighted model specification. 45 Using 2018 enrollee-level EDGE data, the proposed interacted HCC counts model specification combined with the proposed HCC-contingent enrollment duration factors improves the PR for adult silver-plan enrollees in risk decile 1 from 0.52 to 0.81. 46 This approach of incremental improvements in predictive accuracy aligns with our commitment to continuously analyze and refine the risk adjustment models. After consideration of comments and further evaluation of the trade-offs, we are finalizing the interacted HCC count model specification and enrollment duration factor updates but are not finalizing the proposed two-stage weighted model specification. 44 Figures 4.2, 4.3, and 4.4. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . 45 Ibid. 46 Section 4. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . Since we are not finalizing the proposed two-stage weighted model specification, we do not intend to pursue or otherwise consider pilot or phase-in implementation strategies. Similarly, we do not intend to engage in additional analysis of alternative implementations of the two-stage weighted model specification, including but not limited to an analysis of implementation by geographic or market-specific conditions, at this time. Comment: One commenter that supported the proposed two-stage weighted model specification also encouraged HHS to recalibrate the State payment transfer formula to further ensure that plans do not face excessive risk adjustment charges when enrolling a high proportion of young and healthy enrollees. Another commenter supported the finalization of the two-stage weighted model specification, but noted that it is unclear to what extent these model changes address situations in which risk adjustment charges for some issuers exceed the premium collected for some lower-risk enrollees. Response: We did not propose and are not finalizing changes to the State payment transfer formula. However, we intend to continue analysis of the risk adjustment State payment transfer formula to consider whether changes are needed to it. For example, in Appendix A of the 2021 RA Technical Paper, we discussed options to potentially update the risk adjustment State payment transfer formula to improve prediction for CSR enrollees' plan liability. More specifically, we identified several potential options to update the risk term and one option to update the rating term to more precisely account for CSR plan liability in the State payment transfer formula. 47 We familiarized stakeholders with these options and accepted public comments on the considerations in the 2021 RA Technical Paper. We continue to conduct analyses of these options and will propose any changes in future notice-and-comment rulemaking. 47 Appendix A. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . As part of future analyses, we also intend to assess the impact of the State payment transfer formula on risk adjustment covered plans with lowest-risk enrollees to the extent that our data allows. However, in response to commenters' concerns that risk adjustment charges exceed premiums collected for some of the lowest-risk enrollees, we do not believe that this concern falls within the scope of the proposed two-stage weighted model specification, and we reiterate that we do not believe that adjusting the State payment transfer formula to limit charges to the level of premiums for enrollees is appropriate (86 FR 24140 at 24186). Also, as previously described, we proposed the two-stage weighted model specification to address the underprediction of the lowest risk enrollees, not to address the situation described by the commenter in which risk adjustment charges may exceed premiums collected for some enrollees. As described in the most recent “Summary Report on Permanent Risk Adjustment Transfers for the 2020 Benefit Year,” risk adjustment is working as intended to transfer payments from plans with lower than average actuarial risk to plans with higher than average actuarial risk. 48 Furthermore, we do not believe that limiting risk adjustment charges to the level of enrollee premiums is consistent with the framework set forth in section 1343 of the ACA, which requires the establishment of a risk adjustment program focused on risk differentials at the plan level, not the enrollee level. 49 Risk adjustment transfers under the State payment transfer formula are therefore calculated based on the PLRS and the Statewide average premium, not based on individual enrollees' premiums. 48 Summary Report on Permanent Risk Adjustment Transfers for the 2020 Benefit Year . (2021, June 30). CMS. https://www.cms.gov/CCIIO/Programs-and-Initiatives/Premium-Stabilization-Programs/Downloads/RA-Report-BY2020.pdf . 49 Compare 42 U.S.C. 18063 (establishing the permanent risk adjustment program, which involves an assessment and comparison of the actuarial risk in each issuer's plans in a State market risk pool with the average actuarial risk of all plans in the applicable State market risk pool) and 42 U.S.C. 18061 (establishing the transitional reinsurance program, which involves an assessment of actuarial risk of individual enrollees to identify those that qualify as “high risk.”) Comment: Some commenters requested that if HHS finalizes the proposed two-stage weighted model specification, then HHS should reassess the 14 percent administrative adjustment, which they argue may already address some of the underprediction seen in predictive ratios. Response: We did not propose and are not finalizing changes to the 14 percent administrative cost reduction to the Statewide average premium used in the State payment transfer formula. While HHS is not finalizing the proposed two-stage weighted model specification, we reiterate that the proposed two-stage weighted model specification and administrative cost adjustment to Statewide average premium address separate considerations. Specifically, the 14 percent administrative cost reduction is used in the State payment transfer formula to adjust the Statewide average premium and does not address the predictive accuracy of the risk adjustment models, as described in the 2021 RA Technical Paper. As detailed in the 2018 Payment Notice, the purpose of the administrative cost adjustment to the Statewide average premium is to exclude fixed administrative costs that are not dependent on enrollee risk, such as taxes (81 FR 61488 through 61489 and 81 FR 94099 through 94100). In contrast, and as previously described elsewhere, 50 the proposed two-stage weighted model specification was a targeted refinement aimed at improving the current adult and child models' prediction for the lowest-risk enrollees. Therefore, we do not agree with commenters' assertions that the administrative cost adjustment addresses the same issue as the two-stage weighted model specification, specifically the underprediction of costs in the lowest-risk enrollee subpopulation. 50 Section 2.2. HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes. (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . See also 85 FR 78667 and 86 FR 24283. Comment: Some commenters that opposed the proposed two-stage weighted model specification were concerned it may be resulting in overfitting of the models and may not predict future costs accurately. They also noted that the two-stage weighted model specification is not a standard procedure for risk adjustment and worsens fit in some areas, such as the reduced R-squared values, 51 although the effect is small. 51 We acknowledge three areas where the two-stage weighed model specification worsens fit of the risk adjustment models along other dimensions in Section 2.3 in the HHS-Operated Risk Adjustment Technical Paper on Possible Model Changes . (2021, October 26). CMS. https://www.cms.gov/files/document/2021-ra-technical-paper.pdf . 52 Kautter, J., Pope, G., Ingber, M. J., Freeman, S. E., Patterson, L. J., Cohen, M. A., & Keenan, D. P. (2014). The HHS-HCC risk adjustment model for individual and small group markets under the Affordable Care Act. Medicare & Medicaid Research Review, 4 (3), E1-E46. doi:10.5600/mmrr.004.03.a03. Kautter, J., Pope, G., & Keenan, D. P. (2014). Affordable Care Act risk adjustment: Overview, context, and challenges. Medicare & Medicaid Research Review, 4 (3), E1-E11. doi:10.5600/mmrr.004.03.a02. 53 For information on the use of hierarchies and constraints, see Sections 2.1, 3.7 and 3.8 of the March 2016 Risk Adjustment Methodology White Paper. (2016, March 24). https://www.cms.gov/CCIIO/Resources/Forms-Reports-and-Other-Resources/Downloads/RA-March-31-White-Paper-032416.pdf . See also the June 2019 Potential Updates to HHS-HCCs for the HHS-operated Risk Adjustment Program Technical Paper (2019, June 17). CMS. https://www.cms.gov/CCIIO/Resources/Regulations-and-Guidance/Downloads/Potential-Updates-to-HHS-HCCs-HHS-operated-Risk-Adjustment-Program.pdf . Response: As previously described, we acknowledged that there are trade-offs associated with adoption of the proposed two-stage weighted model, including that it would worsen model prediction along some dimensions, such as reduced R-squared values. We also recognize that the two-stage weighted model specification is not a standard procedure for risk adjustment. After consideration of comments and further evaluation of the trade-offs, we are not finalizing the proposed two-stage weighted model specification update to the adult and child models. In response to commenters' concerns about overfitting, we note that we do not have concerns with respect to overfitting the models for a variety of reasons. First, we estimate the models using 3 years of data and the final model parameters are an average of coefficients across the 3 years. By using 3 years of data, the potential for one unusual year to skew the coefficients is limited. Second, for each model year, the overall sample size is quite large in each adult model, particularly relative to the number of model predictors used in the risk adjustment models. 52 For example, the 2019 recalibration sample alone has 18.7 million adult enrollees whose data are used to fit adult models consisting of 181 predictors for the 2023 benefit year. Additionally, we ensure sample sizes for each coefficient are reasonable through the application of hierarchies, constraints, and similar model design choices. 53 We also note that although the models perfectly predict past experience, this does not guarantee the models will perfectly predict when applied to future payment years, as that will depend, in part, on what happens between the calibration and payment years. However, this does not reflect overfitting. To the extent the calibration years are representative of future payment years, the models are positioned to perform well when used for payment. 54 For all of these reasons, we are not concer [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2022-09438. Public record. Not legal advice.